Here's what we learned from two recent auctions about the future of sports broadcasting

Here's what we learned from two recent auctions about the future of sports broadcasting

In mid-February 2018, the domestic broadcast rights to the English Premier League (EPL) football matches from 2019 to 2022 were sold to Sky Sports, and BT Group, a telecoms company, for £4.46 billion (₹415 billion) with the former securing four packages and the latter purchasing one. In early April 2018, Star India bought the global rights to the Indian cricket team’s home games from 2018 to 2023 for a staggering figure of ₹61.38 billion.

Rather unsurprisingly, Rupert Murdoch was at the centre of both bids. Murdoch’s 21st Century Fox owns a 39% stake in Sky while Star India functions as Fox’s fully-owned subsidiary in India. The winning bid for the EPL has extended Sky’s stronghold on sports broadcasting in the UK for another three years. The media company, which has held the rights to the EPL since its inception in 1992, joined forces with former competitor BT for its bid. The purchase price fell significantly short of the £5.1 billion that Sky bid in 2015 for the three-year rights to the EPL.

In contrast, Star India’s bid represents a 60% increase over the ₹38.5 billion it paid for the media rights to India’s cricket games between 2012 and 2018. Star India reportedly outbid Sony by a mere ₹200 million. It had also beat Sony for the ten-year rights to the India Premier League (IPL) in November last year with a bid of ₹163.5 billion.

Despite the varying nature of the bids, the auctions for the rights to the EPL matches and Indian cricket team’s games reveal a number of important details about the direction the global sports broadcasting industry is headed in.

Bidding will go the open, electronic route

The bidding for the Indian cricket rights was conducted through an electronic auction (e-auction) - the first such instance in the history of sports broadcasting. Bidders were given a login and password for an online portal and allowed to submit and revise their bids in real time, while monitoring the highest bids for each category.

The Board of Control for Cricket in India (BCCI) said that it opted for an e-auction as opposed to a closed bidding process in the interest of transparency. However, in conducting an open electronic auction, it was able to make the bidding process a lot more competitive, more so given the fact that there were two main bidders- Star India and Sony.

In fact, in the words of NP Singh, the CEO of Sony Pictures Networks India, ““We were clear that either we will get the BCCI media rights at the right price, or let them go at a price which would be economically unviable”. The open auction process allowed the bids to keep going up and will likely become the norm as the broadcasting industry moves towards consolidation.

There will be joint bids, especially from media and telecoms firms

Future rounds of auctions will likely see former competitors joining forces in a bid to even out the risk and keep prices manageable. In the EPL auction in 2015, BT forced Sky to shell out a price that was 70% higher than what it paid in 2012 in order to retain the rights to the most popular time slots for matches.

However, the lower deal value in February 2018 is widely seen as a correction, as opposed to an indication that the EPL bubble has burst. The recent auction followed a cross-licensing agreement signed in December 2017 between BT and Sky Sports to sell their content and channels on each other’s platforms and television packages.

Under the deal, which seems more like a truce, BT will offer Sky’s Now TV streaming service to its subscribers while Sky will be able to broadcast BT’s sports content, which includes the UEFA Champions League.The move came in response to competition from online streaming platforms. As a result of the deal, the two companies were not compelled to aggressively bid against each other in the auction for the 2019-2022 EPL rights.

In bidding for the rights to Indian cricket matches, Sony and Star India were joined by telecoms upstart Reliance Jio. It wouldn’t be a stretch to imagine a tie-up between two of these companies in the next round of auctions, or see Reliance, which recently took control of the Viacom 18 network, submit a joint bid between Jio and Viacom 18.

Global broadcasters will increase their focus on India

Make no mistake, the deals for the rights to the IPL and the Indian cricket team’s home games reveal Rupert Murdoch’s ambitions in India. The Indian market will be an important growth driver for global broadcasters like Fox, especially in terms of online video consumption.

Star India’s monopoly over cricket broadcasting rights in India means it will have hundreds of millions of viewers every week for its sports content alone. It has expanded regional language coverage and also doubled down on its online streaming platform, Hotstar, which has helped drive its viewership of the IPL to record highs.

China is also an important market for broadcasters. The English Premier League was able to sell its broadcasting rights in China for the 2019-2022 seasons to PPTV, an online video service, for around US$700 million, culminating in its largest ever international deal. PPTV, which is a subsidiary of the Suning retail group, reportedly paid 10 times more than the previous broadcasting contract for the EPL in China.

Tech giants like Facebook, Amazon and Netflix will be bigger players in the market

Both the BCCI and the owners of the English Premier League included digital and/or smaller packages to accommodate streaming platforms and non-traditional broadcasters like Facebook, Amazon and Netflix.

The EPL offered two new packages which included the live streaming rights to two entire rounds of ten matches. Amazon was reported to be interested in one of these packages and even submitted a bid. However, the these packages weren’t sold, and there sale will reportedly be delayed until the summer, as their reserve prices weren’t met. The EPL will likely make the deal more attractive by allowing rights-holders to broadcast additional games after a short delay.

Similarly, the BCCI offered a digital rights-only package in the recent auction. While both Facebook and Google bought the tender document, neither submitted a bid. In the previous auction, the BCCI has bundled television and digital rights into one package.

Amazon is no stranger to sports broadcasting, however it is still in experimental mode, opting for smaller offerings as opposed to large packages like the EPL. In September last year, it beat Sky for the rights to ATP tennis games and also bought the rights to the Thursday games of the USA’s National Football League (NFL). It also recently bought the UK rights for US Open tennis matches.

Facebook has also experimented with live streaming of UEFA Champions League matches and the ICC Champions trophy cricket tournament. While its US$610 million bid for the IPL rights in September proved to be unsuccessful, it showed that the company has an appetite for sports broadcasting.

The entry of tech firms and streaming platforms will shake up the traditional broadcasting. As incumbent broadcasters like Sky and Star India are preparing themselves for this threat by expanding their own streaming services and tying up with telecoms firms, it is the viewers and the organisers of sports events who stand to gain the most. They will be spoilt for choice- the former in terms of viewing options and the latter in terms of bids.