Sport | Cricket

IPL makes huge impact on the value of television rights

Demand to watch games on TV was revealed through the vast sums of money that broadcasters were prepared to pay.

  • By Ehsan Mani, Special to Gulf News
  • Published: 23:30 July 17, 2009
  • Gulf News

  • Image Credit: AP
  • Kings XI Punjab cheerleaders dance during the IPL Twenty20 in South Africa.

Demand to watch games on TV was revealed through the vast sums of money that broadcasters were prepared to pay.

The year 2007 saw the International Cricket Council (ICC) sign a media deal with ESPN Star Sports for the next eight years at a figure in excess of $1 billion (Dh3.67 billion). This followed a deal by BCCI with Nimbus of over $600 million. The national cricket boards of all countries similarly saw substantial increases in the value of their media rights, often by three or four hundred per cent. These were ground-breaking deals and reflected the demand for cricket by the television broadcasters, fuelled by the growth in economies around the world and, in particular, India.

BCCI launched the Indian Premier League (IPL) in 2008; this caught the imagination of the business houses, private entrepreneurs, and even Bollywood stars, who came together to acquire franchises and become "owners" of teams. This has led to a fundamental change in the structure of the game. While attempts have been made over the years to control cricket by others, such as Kerry Packer, for the first time in the game's history a national cricket board was promoting ownership of teams by the private sector. The concept of following the football model of club ownership had been suggested to the ICC in 2005, but had made little progress. BCCI, advised by IMG, very effectively adapted to develop the IPL.

Never before has cricket seen a large part of the profits from events being channelled through to shareholders rather than being ploughed back into the game.

BCCI astutely retained a substantial part of the income. However, the key attraction for the IPL was the overseas players and their boards would not receive a penny.

The overseas players' values were determined through open auctions and each player would be paid according to their "market value." But no consideration was given to the fact that the players' success and "stardom" was due to the heavy investment made in them by their home boards. Some of the players would be paid more than their boards could afford and would have to choose whether to play for their country or for money. By and large the Australian and English players put their country first; this was certainly not the case with some players from countries such as the West Indies. Players were prepared to retire from "official" cricket so that they would play only in the IPL; they would be financially far better off than if they were playing for their countries. IPL was getting bigger than the game; in the long-term this can only harm the game.

Some of the boards realised that they were caught on the wrong foot and rushed to come to an arrangement with BCCI in an endeavour to "capture" some of the money for themselves. Cricket Australia led this pack and, with South Africa, was invited by BCCI to become equity partners in the Champions League. The England and Wales Cricket Board was sidelined, and others were not considered worthy of being invited. The ICC was totally ignored and seems incapable of providing the leadership to take control. BCCI with the support of Cricket Australia and South Africa had taken another step to take control of world cricket and create a "premier" group of cricketing nations.

The media and sponsorship rights for the Champions League were auctioned by the BCCI to ESPN for $1 billion.

Between the IPL and The Champions League approximately 90 Twenty20 matches will be played annually. The result of this is an oversupply of cricket in India.

This is having an impact on the TV advertising rates that the cricket broadcasters obtain. For example, India's tour of Sri Lanka in July-August 2008 commanded rates of around $4,000 for a ten-second spot; for India's tour to the West Indies these have come down by 25 per cent to $3,000.

A number of media companies who own the rights to broadcast cricket into India have started going back to the rights holders (the cricket boards) asking for a reduction in the rights fees they had agreed to pay.

There are four main factors which are resulting in the reduction of the values of the cricket TV rights in India:

The economic downturn: The first thing national and multinational companies cut in difficult times are their marketing budgets. In India, for example, Maruti has slashed its annual marketing budget by 50 per cent, Pepsi by 40 per cent, Vodafone by 50 per cent, Airtel by 30 per cent. This translates to less available spends across media, including TV. Companies insist on better/lower cost per rating point so the pressure is on the media companies to reduce rates accordingly.

Advent and popularity of Twenty20 cricket: Ever since the IPL launched last year, and ICC introduced the Twenty20 World Cup event, viewership of the Twenty20 format has skyrocketed. Television rating points (TRP) of the Twenty20 matches are double that of one-day internationals. The consumer has clearly caught the Twenty20 bug; this translates to more monies being poured in by corporations to sponsor Twenty20 cricket. Approximately $100 million has been spent by corporations over the last couple of months on IPL2 and the on-going ICC Twenty20 World Cup; leaving considerably less money for other international cricket broadcast rights.

Fragmentation of TV channels: From 150 channels available in India two years ago 450 channels are available to the viewer today - the consumer is spoilt for choice. India is still largely a single TV household, and the choice of channel will be split equally between the female (largely Hindi soaps) and the male (largely cricket). With more than 10 Hindi general entertainment channels available, it's getting tougher and tougher for the Indian male to find his voice.

Surplus of available product: We have seen India playing back-to-back tournaments for the past two years. There is an event practically every month - it is no wonder that viewer, as well as corporate spending fatigue has set in. As TRP's have dropped so has spending levels. Corporations have the option of picking and choosing which India series they will advertise with - they don't have to buy all; as was the case 4-5 years ago when there was less product available.

It is worth remembering that scarcity breeds interest. The BCCI could be killing the proverbial golden goose with oversupply of product.

Ehsan Mani - Former ICC president. From 1989 to 1996, Mani represented the Pakistan Cricket Board (PCB) in the ICC. For the 1996 ICC Cricket World Cup, he was on the advisory committee as the PCB representative. He was also on the same committee during the 1999 ICC Cricket World Cup played in England. In 1996, he was elected by the ICC member nations to the position of chairman of the ICC Finance and Marketing Committee. He held on to this post until it was dissolved in June 2002. After that he took over as the vice-president of the ICC Executive Board.

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