Star India outbids giants for IPL, but Amazon might still want in

Skeptics are doubting how Star India can possibly make a return on investment from the $2.6 billion it has just paid for worldwide Indian Premier League (IPL) rights, despite viewing figures for the Twenty20 cricket tournament being off the charts. However, there is still the possibility that the guiding hand of Amazon may play a major role in the Indian entertainment group’s cricket monopolization strategy.

Star India is expected to make a loss on the IPL for the first two years, but we are among the optimists who believe the full five-year time frame for the deal, from 2018 until 2022, will certainly pay dividends, and then some – particularly as the contract includes the rights for digital distribution as well as traditional cable and broadcast TV.

Star India, part of the 21st Century Fox empire, has batted away rival bids from technology, telecoms and media giants in the IPL rights auction this week. Rival bids came from Facebook, Twitter, Yahoo, Sky, British Telecom, Reliance Jio, ESPN Digital and Discovery. Amazon was also in the running, which suggests that the budding partnership between Amazon and Star India, to share some cricket rights, has fizzled out.

However, in order to build itself a monopoly over cricket viewing, Star India’s investments must not stop at buying IPL rights. It must invest substantially in its OTT video service Hotstar, to take full advantage of its newly acquired pass to distribute Twenty20 IPL content in regions where it had no footprint previously – although remaining cash might not stretch to fund an international expansion.

This is exactly where a deal with Amazon could play into Star India’s hand, to distribute cricket content overseas while Star can prioritize India itself. It would make no sense for Amazon Prime Video in India to show IPL content, as it has no free ad-supported tier, but in areas where Amazon has a strong foothold, Star India could benefit from Amazon being its international distributor of choice.

No reports on discussions between the two firms have been covered for some time, but Star’s win this week may reignite Amazon’s interest, as it clearly did not feel comfortable coughing up a counter bid for an unfamiliar business.

Hotstar has a variety of free offerings as well as a $3 monthly tier, available in India, Bangladesh, Pakistan and Nepal. The service was built around the Accenture Video Solution (AVS) software platform, which came out of work for Mediaset in Italy, KPN in the Netherlands and BT Sport in the UK.

Ad-supported services are the standard viewing format in India and across most of the Asia Pacific over subscription-based, and estimates peg that Sony, the IPL rights holder until next year, will bring in around $200 million in ad revenue this year. Maintaining this level of ad income over the full five-year contract will not bring in nearly enough to cover the initial costs, so striking deals with international distributors with established subscriber bases is essential.

Star India CEO Uday Shankar, is under no illusions that monetizing the IPL will be an easy ride, given the fragmented and fierce Asian markets. He joked following the company’s auction win, “After this bid, I don’t have money to take you guys out for lunch. It is in the DNA of this company to take very few, but very big, risks and then go about executing them relentlessly in a very disciplined manner.”

Cricket doesn’t stop at the IPL, and Star India doesn’t plan to stop there either, as reports suggest the company is preparing to bid for the broadcast and digital rights for Indian Cricket. This is a less lucrative tournament than the IPL but it would be a win that would further ensure that Sony could not get its hands on any cricket rights and help establish Star India as a cricketing video monolith. Sony has a part ownership in Hooq, one of the online OTT rivals to Hotstar in the region.

Star India also has its BCCI (Board of Control for Cricket) international matches up for review next year, and the company cited this as key factor to grabbing IPL rights.

“In the competitive environment of sports broadcasting today, we did not want to take anything for granted and it’s nice to have the IPL after living without it for the past 10 years. We are excited about the digital platform because it has seen tremendous growth and our own experience with the IPL on Hotstar is testimony to that,” said Shankar.

Also this week, Star India said it has spent $192 million over the past six months funding content for Novi Digital Entertainment, its digital content business which operates Hotstar. Spreading this spend out over a five year period and adding it to the IPL rights brings Star India’s content spend to at least $4.5 billion up to 2022.

Star India was the focus of some unwanted headline news last month following a Game of Thrones leak, for which one of its technology suppliers, Indian media software company Prime Focus Technologies (PFT), was responsible. Current and former employees of PFT reportedly illegally breached obligations by leaking Episode 4 of Season 7 of the fantasy series online, bearing a watermark from Star India, three days before it was due to air.

There has still been no mention in the press yet of HBO asking for reparations from Star India, but it is likely that HBO will have contract provisions for potentially massive payments from Star to cover this eventuality.