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Star India’s sports biz moving towards profitability


24 May 2015
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Star India’s sports biz moving towards profitability

Star India’s sports business is moving in the direction of profitability. There are three reasons for this. First, the investment losses in building the business have peaked. Second, monetisation of cricket rights is getting much stronger. Thirdly, the Pro Kabaddi League is showing strong growth.

“The total sports investments for us in terms of the investment losses in establishing the sports business have peaked. Whether or not the total cost base of sports in the long term is over is a question of what the size of revenue is. So I would say that the investment losses in creating the sports business have peaked and we’re seeing the business move towards profitability,”21st Century Fox CEO James Murdoch told analysts. Murdoch underlined that the company’s India subsidiary has not only hit a jackpot with Pro Kabaddi League (PKL) but the cricket monetisation is also beginning to show better returns. “We’re extremely pleased with how sports investments are going, particularly with kabaddi and cricket. Kabaddi is a new sport that’s growing very well. We will be investing in expanding that season and growing that sport. Also, monetisation of cricket rights is actually getting much stronger for a variety of reasons,” Murdoch said. When queried about the impeding Indian Premier League (IPL) media rights that is coming up for renewal next year, Murdoch said that the company was not really focused on incremental rights at this point. The property also has to fit in the company’s growth strategy. “With respect to India, I don’t think we’re really focused at this point on incremental rights, but in all of our sports businesses, not just India, we always seek a balance and we have to see when new rights come available, how they fit, how they would be monetised or other rights things that you would give up to pay for those. And you have to create a balance of investment there that you think is delivering the right value for customers and the right value for the distributor,” Murdoch explained. In the same breath, he also noted that the company might invest in new rights or let go others to avoid incremental investments. “So I certainly don’t think given the performance of the business, there is any necessity to have incremental rights on top of where we are today. But from time to time, we may invest in new rights and let other rights go or find ways to monetise new rights, so that it’s not necessarily an incremental investment. But we love the sports business and the cricket business is strong. From a monetisation point of view, it’s very strong right now for Star and it’s a sport that we’re obviously very committed to,” he added.

The IPL, the rights of which are with Sony Pictures Networks India, is a strategic media property that every sports broadcaster aspires to have. It has a stable viewership year on year, which helps in monetising the property through advertisements. Unlike other cricket properties, the IPL is not shared with the national broadcaster, which brings in the exclusivity factor. This gives the IPL a distribution heft to negotiate better deals with distribution platforms.

Star India CEO Uday Shankar had earlier told Business Standard that the IPL deal is heavily loaded in favour of Sony, the incumbent broadcast rights holder for South Asia. Sony, Shankar had said, has the first right of negotiation, first right to make an offer and is entitled to a counter offer. He had told the business daily that the broadcaster would make a bid if the property came up for grabs in the market. On the sports business, 21st Century Fox CFO John Nallen had said that Star invested nearly all of its $300 million profit from the entertainment business in sports, which is a growing yet loss-making business for the network.

“We’ve launched the sports business, where in 2015 we took almost entirely the profits we generated on the entertainment side, which was nearly $300 million, and invested it in the sports business, to launch the sports business. And what you’re now seeing, as I said earlier, is that the peak investment is gone, the entertainment trajectory continues and now sports is continuing to grow,” he noted. Star’s sports business comprises eight channels comprising Star Sports 1, 2, 3, 4 and their HD versions. It also runs an online destination called starsports.com. Star Sports, which is a subsidiary of Star India, has broadcast rights to the cricket boards of India, England and Australia. It also has rights to telecast ICC matches, including the World Cups. It strategically did away with the loss-making Champions League T20 rights since the property was not showing any audience popularity. It paid $420 million for terminating the rights to CL T20. In football, the sportscaster has retained the English Premier League (EPL) for a lesser amount. The EPL value has fallen to $99 million for three years compared to $145 million in the previous cycle. While parting ways with Serie A and La Liga, the sportscaster made up for that loss by acquiring Bundesliga rights.

Star has a big play in the local sports leagues arena where it owns properties like Pro Kabaddi League (PKL), Indian Super League (ISL), Indian Badminton League (IBL) and Hockey India League (HIL).

It has gone beyond media rights acquisition by actually becoming a stakeholder in at least two properties, PKL and ISL. It has acquired majority stake in Mashal Sports, the organiser of PKL. In case of ISL, it has formed a JV with IMG Reliance.

As reported earlier, Star’s over-the-top (OTT) service is launching a premium sports service. Earlier, it had launched a premium service for English entertainment content. Star India has a target to reach $500 million EBITDA in 2018 and $1 billion in 2020.

Read more at: Star India’s sports biz moving towards profitability | TelevisionPost.com | TelevisionPost.com


26 Mar 2012
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Bro please highlight imp point.it is too long to read.
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