Cricket world cup internet deal

Indiantelevision.com reports that Maruti has taken up a sponsorship deal on ICC Cricket World Cup official website amounting to $1 million.

This is a huge deal as far as Internet advertising in India goes. There might have been larger year-long deals in the near past, but nothing probably comes close to this deal - $1 million for a little over a month, to a site which is unlikely to be as popular as well known cricket Internet destinations such as Cricinfo.

Ban on Tamil channels in Karnataka

Tamil Nadu and Karnataka are locked in a conflict in sharing Cauvery river water. A tribunal was set up in 1990 which gave an interim award in 1991. This resulted in anti-Tamil riots in Bangalore, some people were killed and several driven homeless.

The tribunal has come up with its final verdict this month (5th February 2007). Unlike in 1991, there have not been any riots or murders. But there is still a lingering problem where Tamil television channels have been off air since the announcement of the verdict.

India Television News

I consider this a very disturbing news. India has moved forward substantially from the tribal mindset in the pre-1990 era. Economic growth (though quite lopsided), has brought considerable plurality and appreciation for opposing viewpoints and cultural sensibilities.

Problems between states in a federal set up should not result in linguistic minorities being tortured in one way or the other. A band of Kannada extremists are holding cable TV companies to ransom and are enforcing this 'ban', and an elected government is unable to revoke the ban in a liberal democratic country.

Karnataka people have every reason to be angry at the tribunal's verdict and they should take up all legal measures to push their case ahead. But if the state, intelligentsia and Kannada speaking people allow the Kannada extremist organization to dictate terms on how to treat the linguistic minorities in their state, Karnataka state will remain in dark ages forever.

Cricket rights, BCCI and Neo Sports

Indian cricket allows for brash and innovative deal making. There is a lot of money riding on Indian cricket and poor management at all levels makes it very difficult to decide exactly what the size of the potential is. This results in heavy speculation.

No sports anywhere in the world has seen television rights value multiplying like the way Indian cricket has. A quick update of history here for your consumption. Before Jagmohan Dalmiya and IS Bindra started managing BCCI, Indian cricket matches were broadcast by state owned Doordarshan. Doordarshan made all the money (or none at all) and never thought of actually paying BCCI. Doordarshan probably thought it was its divine right to produce and broadcast cricket (and other sports) staged in the country. On its part, BCCI also did not know that it can ask the telecaster for a rights fee.

In 1993, BCCI for the first time tried getting a private broadcaster to produce matches (Hero Cup) and sell the broadcast to a private channel. This resulted in Doordarshan blocking the coverage by unfair means. Indian Customs was used to block the cameras from being taken inside the country. VSNL (at that time owned by the government), an uplinking company, was forced to not uplink the television signals. This resulted in a court battle, at the end of which it was established firmly that BCCI could sell cricket telecast rights.

India had started on a liberalisation process and private TV channels were coming to India, transmitting through satellite. Large dish antennae and cables strung over lamp posts were used to transmit the signals to homes. ESPN was in India, and so was Star Sports. Both these channels started looking at cricket as a big growth engine and started fighting amongst themselves and jacked up the rights fees.

Then, the two channels merged to create ESPN-Star Sports.

TWI negotiated a deal to bring Indian cricket on cable and satellite (C&S) television ESPN from 1995-1999. The five year deal was valued at approximately USD 5 million. This was also the period that saw Harsha Bhogle fronting cricket commentary for ESPN and technological innovation started coming into Indian cricket production.

ESPN-Star Sports also brought overseas cricket to India, matches involving India as well as matches between other teams.

This was the golden period for Jagmohan Dalmiya as he consolidated his position in BCCI. In between, 1996 World Cup happened, jointly organized by India, Pakistan and Sri Lanka (PILCOM) which was produced by Worldtel of Mark Mascarenhas. (Today Dalmiya is accused of embezzlement during that World Cup and has been stripped off his posts and memberships and is facing criminal prosecution.)

In the meantime, Dalmiya had squeezed himself into a powerful position in ICC as its President and set out his goal of generating money for ICC. Thus, he defined specific events for which ICC will hold rights and created the concept of ICC Championship Trophy (also called mini world cup). The 1999 World Cup held in England did not generate any income for ICC, but the subsequent Wills Knockout in Bangladesh did. Since then ICC events have been generating massive revenue. (The latest ICC global rights have been sold for around $1 billion to ESPN-Star Sports.)

When the Indian cricket rights were up for renewal in 1999, Prasar Bharati emerged as a surprise winner. The state-owned broadcaster agreed to pay the cricket board $54 million (Rs 227 crores) for five years (from Sep 1999 to Apr 2004). ESPN-Star Sports and other private players were beaten, and the rights fee jumped ten fold from $5 to $54 million!

Now Prasar Bharati set out to maximise its revenues. It ran the first series - India vs New Zealand - shoddily. Then, under Rajiv Ratna Shah, set out to generate massive income for the remaining 4.5 years of rights. It broke the rights into two parts - overseas distribution and India airtime rights, for the telecast in Doordarshan channels.

The airtime sales rights were picked up by an associate company of Zee Telefilms called Buddha Films, which bid a massive $120 million (Rs. 450 crores) for the same. Other bidders were TWI-Stracon and Nimbus.

TWI-Stracon, however won the overseas distribution contract by bidding $43.75 million.

Thus, within six months, Prasar Bharati turned the $54 million contract around for more than $160 million.

TWI, for its part, wrote into the contract just about everything it could, and created a funny thing called "multimedia rights" which was so poorly defined. Prasar Bharati thought it still had the "Internet rights" which it could sell further.

Prasar Bharati decided to offer non-exclusive Internet rights for all comers at "an annual license fee of Rs. 25 lakh" which included "scoreboard, analysis, graphics, stills (up to 30 frames per minute from the live signal) and interviews with players (this may include pitch report, weather report, interview on the captains, players and experts)." But it added, "if the license-holder, however, desires to have live and delayed streaming audio and video after obtaining the Internet rights from Prasar Bharati, it will have to approach Stracon-TWI who hold the multimedia rights.

In the end, none of the Internet portals bought the Internet rights from Prasar Bharati. But TWI found a sucker in PCCW's now.com and sold a bunch of things to them including live video streaming, some kind of extended highlights for their TV operation etc. for something amounting well over $26 million.

Then, when PCCW sort of collapsed, TWI brokered a deal selling the rights held by Now.com to ESPN-Star Sports. This resulted in ESPN-Star Sports running extended highlights for India matches (which ran for well over 3 hours for each day!). This resulted in Prasar Bharati suing them, and getting an injunction in the courts preventing ESPN-Star Sports from broadcasting these extended highlights.

TWI also ensured that PCCW's streaming rights (outside of whatever Prasar Bharati thought) were exploited properly, by teaming up with Wisden.com to offer serious commercial cricket streaming.

It was clear that when this set of rights came to an end, BCCI will look at getting even more from its rights and the fight for the rights will be acrimonious.

That is what happened, and a period of chaos ensued.

Dalmiya still had control over the BCCI. He was in charge of rights negotiations. ESPN-Star Sports was the front runner. Prasar Bharati was not going to get involved in the bidding game in a big way as it was pushing the government to come up with a legislation for any winning bidder to share the terrestrial rights with Prasar Bharati on a revenue-sharing basis. Sony Entertainment Television had acquired ICC rights during this period for a whopping sum. Zee was aggressively looking at expanding into DTH space. Both were going to bid. Ten Sports, another sports channel was also in the fray.

The BCCI bid document was quite harsh as it demanded substantial experience in showing International cricket in its channels for two years. In the end, Zee bid $260 million (Rs 1200 crores) for four years. ESPN had bid $230 million, Sony TV at $140 million and Ten Sports at $115 million. But the story did not end there. BCCI disqualified Zee's bid on technical grounds and invited ESPN for further negotiations.

This resulted in Zee going to court against ESPN and BCCI. Nothing happened for the next year or so. The courts ruled that till the cases were disposed off, Prasar Bharati will show the matches in Doordarshan and will keep an account of the money.

In between, a further rebid happened, further lawsuits, further chaos.

Then, a palace coup happened and Dalmiya was removed from BCCI, Sharad Pawar, a Union Minister won, and took control of BCCI. This resulted all earlier bids being withdrawn and a new bidding process put in place. Various cases were withdrawn.

In the meantime, the government had come up with broadcast regulation rules which stated that any private channel having telecast rights to any cricket event (whether staged within India or outside) must share the clean feed with Prasar Bharati for terrestrial broadcast on a revenue-sharing basis. Ten Sports contested this in courts and kept winning. Still, everyone thought the BCCI rights values will be lower because of government rules.

However, Nimbus came from nowhere to bid a massive $612 million for the next four years (March 1, 2006 to March 31, 2010) during which time there was a guarantee of 22 Tests and 55 ODIs to be played.

Thus, in three successive terms, the rights fee has jumped from $5 million (5 years) to $54 million (5 years) to $612 million (4 years).

Nimbus has taken a massive punt in bidding so high. The first series was shown on Sahara TV, a free-to-air channel. Subsequently, Nimbus launched its own channel called Neo Sports (and Neo Sports Plus), and showed the next two series there.

In the meantime, the government came up with an ordinance forcing private broadcasters to share the matches with Doordarshan. Nimbus refused and offered only a time-delayed (7 minutes) feed to Doordarshan. This prompted the government to issue a show-cause notice to Nimbus. On the other hand, TRAI - the broadcasting regulator attacked Nimbus' pricing policies. Four metro cities were being moved into CAS (Conditional Access System), where TRAI had mandated that each channel must be priced only at Rs. 5 (whether it is a sports channel or a movie channel or a nothing channel!), and in non-CAS areas, the pricing must be discussed with TRAI first and only with the approval of TRAI, the pricing can be enforced.

Nimbus had, in the meantime, done a deal with Star distribution to distribute its channels, and Star had promised a minimum guarantee of approximately Rs. 600 crores to Nimbus for the four-year period. The two channels were priced at Rs. 58.50 but TRAI hads slashed them to Rs 37.25 for non-CAS areas and Rs. 5 each for CAS areas. This is going to seriously impact Star and Nimbus' revenues. Another thing that will impact Nimbus' advertising revenues will be whether the government's ordinance can withstand judicial review.

The government is also trying to talk to BCCI and the channels in sorting out the sports broadcast ordinance. But BCCI will mostly side with Nimbus and sports channels on this one. A lot will depend on the judiciary now.

BCCI has, in the meantime, also created a new set of overseas rights, where it will conduct matches in neutral venues like Malaysia, USA, Dubai and so on. Telecast rights for such matches have been sold off to Zee for $ 219.15 million for five years (April 1, 2006 to Mar 31, 2011), during which time at least25 matches will be conducted.

BCCI and ICC have made a lot of money from Indian television channels. It is not clear whether the numbers can be justified in the long run though.

Vodafone's Hutch purchase

Vodafone has come out as a winner in acquiring the stake in Hutch held by HTIL, Hong Kong. HTIL is a publicly listed company which invests in various telecom companies across the world. Main shareholder of HTIL is Hutchison Whampoa group of Li-Ka Shing.

HTIL and Essar group of India have 67% and 33% respectively in Hutchison Essar Ltd. which runs mobile phone services across India under the brand Hutch. Hutch is one of the leading mobile phone companies in India, at the fourth position in terms of subscriber numbers after Bharti, Reliance and govt. owned BSNL.

About three months back, HTIL surprisingly decided to pull out of the venture and put up its stake for sale. The Indian operation amounts to a significant part of HTIL. Apparently HTIL felt that the telecom investments were turning out to be quite high in the competitive Indian environment. I think the main reason is HTIL's relationship with Essar which was going nowhere.

Hutchison Essar was supposed to go to the stock markets but that didn't happen because of internal fight between HTIL and Essar. The required investment for further growth could have easily come from the stock markets. The enterprise value at which Vodafone has acquired the stakes is about 18 billion USD or about Rs. 81,000 crores. A dilution of around 15% would have resulted in well over 10,000 crores from the markets for further investment. (This is the kind of number Vodafone is indicating it will spend. Bharti too will be spending only of this order.)

Essar is a difficult company to understand. Suddenly it seems to be flush with cash. It is into shipping, steel, telecom and what not. Essar even suggested that it will buy the 67% from HTIL. It still seems to claim it has matching rights to the stake held by HTIL, and if Vodafone doesn't agree to certain terms for the new shareholder agreement, Essar may invoke the matching rights clause or fight a legal battle. HTIL claims there is no matching rights clause in the shareholder agreement!

Vodafone may find dealing with Essar a difficult proposition. Essar does not seem to have a clear telecom strategy or the money and capability to execute on plans. If at all possible, Vodafone should try to buy out Essar completely, find some financial investors in India, and go IPO in Indian stock markets (since there is a limit of foreign holding in telecom companies in India).

Besides Bharti and Reliance Infocomm which are listed, Idea (of Aditya Birla group) has just now listed. Spice Telecom (operating in Karnataka and Punjab) has filed a draft red herring prospectus. BSNL, after a merger with MTNL, may also list.

Vodafone's purchase would also mean a complete rebranding. Hutch as a brand will go completely out of the country and Vodafone will enter India (and in my handset too!).

The battle for free newspapers

N. introduces free paper - International Herald Tribune

We in Chennai are used to free neighbourhood newspapers like Mylapore Times, Mambalam Times, Anna Nagar Times, Adyar Times and so on. They are usually weeklies, about 8-16 pages, tabloid, usually short of news, mostly advertisements and some odd columns here and there. The useful things they have are local event diary and local advertisements.

However, in London, particularly around tube stations, a full-fledged daily newspaper called Metro is available, entirely free. When I explained this to my wife, she was quite surprised as to how such a thing was even possible.

In UK, the cost of a newspaper, in local currency is about 50p at most. For that, you will get as many as 30-40 tabloid pages. The cost of the raw material can easily be covered by the cover price, but in most cases, the effort made in collecting the money will be huge. If one can get decent advertisement revenue, then one can look at foregoing the cover price. Metro did precisely that.

Metro's content is not unique or out of the world. It is just newswire stories and photos, rehashed and neatly packaged. A team of 3-4 editorial staff can easily put that together. Metro probably does not have its own reporters to visit the scene and report directly. It does not have any exclusive columnists. The advertisement and distribution teams are probably larger than the editorial team.

But, as a newspaper, Metro is doing an adequate job, and it is free to boot.

Now, Associated Newspapers is launching an evening newspaper - also free - called London Lite. This will also be available near tube stations in London.

Simultaneously, Rupert Murdoch's News Corporation is also launching a free evening paper called Thelondonpaper, and will also distribute the same near the tube stations. Now, people have a choice. Which one they will subscribe to, we will have to wait and watch.

The cost of the paper in the Indian Rupee term is quite high. Even though Deccan Chronicle in Chennai and The Times of India or Hindustan Times elsewhere have tried Rs. 1 per day, they have quickly upped the price. The Hindu charges more than Rs. 3 each day. Even at Rs. 10, one can't cover the cost of the paper.

However, I can't see anyone trying out a free newspaper here. It may be possible to look at a high quality weekly magazine on a free basis, supported purely by advertisements.

Hutch - Essar spat

Essar calling off the sale of BPL Mumbai circle operation to Hutch does not make much sense. Hutch has contested the decision and the Mumbai High Court has asked them to go for arbitration. So something amicable may be worked out here.

Essar is, after all, a partner of Hutch in the joint venture. Essar's attempts therefore looks more like an attempt by a peeved partner to cause serious hurt to Hutch, rather than well measured business decision.

In the mobile space in India, Bharti and Reliance have zoomed ahead. Bharti has had the least of problems. Reliance had trouble when Mukesh and Anil Ambani fought amongst themselves. Now that there is some degree of resolution there, Reliance is forging ahead.

If Hutch had worked out an aggressive strategy it could have reached number two position. Instead, now, it is in a distant fourth position (with BSNL/MTNL combo at number 3), and Idea, Tata Telecom both hot on its heels behind. Others including Maxis owned Aircel will be aggressively snapping up the new users in the 'C' circles.

Essar who has substantial stakes in Hutch Essar JV should realise that a stronger Hutch Essar, when it goes IPO will offer higher premium per share in the stock markets. You don't get a premium when you are number 4. Both number 1 & 2 are listed entities. Idea and Tata Telecom are well funded, but not strong enough brands compared to Hutch. But if Essar continues to harm the JV, Hutch will be left behind, thereby robbing Essar of valuble wealth.

Economic Times on banks lending to rural folks via moneylenders

Today's The Economic Times has an article titled Banks eye money lenders to give cheaper credit to farmers.

The article suggests that Banks cannot easily lend to the rural people because they do not reach the rural folks. What was unstated was also that Banks are afraid of lack of securitisation. So they are looking at village moneylenders, whose combined reach is great. So the banks are looking at somehow regulating them. Apparently a group has been constitued comprising of "six senior RBI officials and a senior bureaucrat each from of Bihar, Rajasthan and Andhra Pradesh" to take a look into using the moneylenders as conduits for reaching money to the needy farmers.

But then moneylenders are known to charge atrocious interest. "However, the money lenders have to be regulated so that they do not overcharge farmers" says one member of the group, according to ET.

I do not know whether this is a good method. Indian central bankers need not have to look at this solution at all. Grameen Bank in Bangladesh has already demonstrated over two decades, what can be achieved by direct micro and mini credit without any mortgage or security whatsoever. Grameen Bank is reaching millions of people - more than 90% are women. Grameen Bank has been successful in cutting out the local moneylenders who are basically exploitative.

How can regulation help change the moneylenders' behaviour overnight? Why should the moneylenders take money from banks and offer the same at low interest to the farmers (and others) when such a business will be entirely against their existing business where they are making substantial income, by charging 10% or more interest per month?

India has not bothered to copy a successful model such as Grameen. Instead we are offering a pale imitation in the form of Self Help Groups (SHGs) where the group is forced to save money first and then borrow from within that group fund so collected. There may be minimal topping-up over the savings at best. The banks do not care much about the SHGs. That job is left to various NGOs. The state governments step in and pay some compensation to the NGOs for starting up new groups.

From what little I have learnt about the SHGs in India, they are in no way comparable to the Grameen experiment.

I would suggest that what India needs is three or four banks in the mould of Grameen Bank, operating in various parts of the country. One each for each zone - perhaps. The Banks can simply be identical copies of Grameen Bank. Like in the case of the Grameen Bank, it is advisable to keep the Government out of the Bank so that Government does not get into one of its debt write-offs every once in a while for the sake of votes. Government, at best, should have only 20-25% equity in such a bank. The rest of the equity should be with the participating women, and other funders. There is also enough of an opportunity for private banks to start this kind of a venture.

It would be better to stay away from using the moneylenders.

Lok Sabha question on sporting telecast rights to Doordarshan

Minister of I&B Priya Ranjan Dasmunshi, while answering a written question in Lok Sabha has said as below:

The Government has no proposal to set up a Regulatory Authority to monitor and regulate the earnings through telecasting of sporting events. However, the Government is contemplating the establishment of an autonomous authority to regulate Broadcasting sector.

Also there is no proposal to give Doordarshan the sole right of telecasting the sports events organised in the country. However, the Government has issued an order on 5th April, 2006 vide which live feeds of a number of specified sporting events of national importance held in India or abroad are required to be shared with Prasar Bharati with immediate effect by sports channels/sports management companies having television broadcasting rights for broadcast on their terrestrial and DTH networks. In case of cricket events, these shall include all matches featuring India and the finals and semi finals of international events.

It is however surprising that the Minister did not inform the members of the Parliament that Doordarshan and Ministry of I&B have been taken to the judiciary a few times and the judiciary has found no reason to uphold the Government Order of 5th April 2006.

It is also surprising that there were no follow-up questions on why such an executive order was sent out rather than contemplating a proper legislation, what the Ministry is proposing to do about the Ten Sports issue, whether the GO is fair or not, what have the International sporting bodies - in particular the ICC - conveyed to the Ministry of I&B etc.

This is the quality of debate in Lok Sabha. This is the quality of our representatives in the Parliament.

Ten Sports continues to defy the Indian Government

Ten Sports has been the only channel consistently taking on the Government of India and Prasar Bharati, the Govt. controlled television channel, when it comes to sharing of sporting telecast rights.

In November 2005, the Ministry of Information and Broadcasting issued a policy guideline for Cable operators and Television Channels operating in India that certain notified sports events must be shared with the Govt. owned Doordarshan, only on a revenue sharing basis. Worse, the guidelines were applicable to several events for which the telecast rights were acquired long back.

This was done primarily because Doordarshan was losing out on the lucrative cricket rights. While Doordarshan knows it can make a lot of money from cricket, it doesn't have the ability and money to compete fair and squarely in the rights market. So it used a backdoor method.

This infringes heavily on the rights of private Telecasters and their ability to make money. However other channels did not care much. ESPN - Star Sports, Zee Sports and various other rights holders including Nimbus did not take the Govt. head on.

Only Ten Sports did. Ten Sports owns cricket broadcast rights to events happening in Pakistan, West Indies and Sri Lanka. Ten Sports consistently challenged the Ministry and Prasar Bharati. In the case of Indian tour of Pakistan in early 2006, Doordarshan backed out of Tests but the ODIs were telecast across both the channels after Doordarshan was forced by the Courts to pay a fixed fee for showing the 'dirty feed' (namely the Ten Sports feed with all the Ten Sports advertisements and logo) without any alterations whatsoever.

Basically the Courts called Doordarshan's bluff on 'public service'. Doordarshan kept claiming that its intentions were noble and not money, and that it wanted maximum number of people to receive the broadcasts. So the Courts ruled that Doordarshan shall show the Ten Sports feed without any alteration and not make money out of any advertisements. Doordarshan also tried showing a pre-match, post-match show, which was also stopped by Ten Sports by going to Courts.

Thus, badly mauled by the legal set-up in India, Doordarshan stayed away during the Indian tour of West Indies. Public service did not come in to the picture, since the matches were in the middle of night.

Now that matches are being held in Sri Lanka in broad daylight and prime time, Doordarshan has dusted and brought back to life 'public service'. Ten Sports, as usual, went to Supreme Court, where the bench is finding Ten Sports' claims perfectly valid.

The impugned guidelines from Ministry of I&B are so pathetic, the Courts are repeatedly smashing them. It has become so much of an embarassment for the Government. The Govt. has avoided bringing a legislation and has used the Ministerial guidelines to impose something as major as controlling the event telecast rights and curtailing the freedom of operation of private enterprises. Even if they try a legislation, there may not be a sensible debate on this issue. Majority in the Parliament will be used to force a 'bad law', forcing the private enterprises to fight in the Courts again.

But, there are ways by which a legislation in Parliament can control events held in India, and forcing the event organizers to sell or offer virtually for free, terrestrial rights to Doordarshan. For events held outside the country, no such thing is possible. It does not happen in UK, or Australia, but in both these countries Terrestrial channels must be offered rights for certain events held in the country. India can look at building such a legislation than coming up with patently unfair policy guidelines.

PS Krishnan on Social Justice and Reservation

PS Krishnan, Retd. IAS, is a former secretary to the Government of India and former member secretary of the National Commission for Backward Classes. He was the Secretary in-charge during VP Singh's time resurrecting the Mandal Commission Report.

He was recently in Chennai to give a lecture on "Social Justice and Reservation" organized by the Chennai based Indian School of Social Sciences.

I have recorded the lecture and the subsequent Q&A session and am making it available here. This is a mildly edited version. I have removed one mindless question unconnected with the reservation issue (in the Q&A section), a few word repetitions, coughs, cellphone rings and other such noises.

[Links changed, 1st May 2008]

1. Sashi Kumar of Asian College of Journalism introduces PS Krishnan, followed by Krishnan's lecture on Social Justice and Reservation., 58.43 min, 26.8 MB, 64kbps MP3 file

2. Questions and answers that followed the lecture, 42.37 min, 19.5 MB, MP3 file

Quite a bit of what PS Krishnan said in the lecture appears in an article he wrote in Frontline, Apr. 22 - May 05, 2006.