INDIA BUSINESS WORLD - FEBRUARY 2006
THE MONTH THAT WAS

NIMBUS RISES ABOVE ALL FOR RS 2,755CR BCCI DEAL

Harish Thawani-led Nimbus won the contract for satellite and domestic television rights with a winning bid of $612 mn (Rs 2,755 crore), beating ESPN Star Sports, SET Satellite Singapore PTE (Sony), Reliance Infocomm, Zee Telefilms, Sahara One and DirecTV and Echostar of the US. Nimbus has got the global media rights including transmission through cable, broadband and Direct-to-Home for matches hosted by India. The deal however, excludes mobiles. It is effective from March 1, 2006 to March 31, 2010.

Zee came in second at $530-million with ESPN third with a bid of $401.89-million for telecast rights in India only. Sony and DirecTV are believed to have been disqualified in the bidding process. Public sector broadcaster Prasad Bharti kept away from the bidding process. It is likely to enter into content sharing agreement with private broadcasters.

The sum $612 mn refers to the amount that has to be paid by Nimbus to BCCI over four years. Details of the payment schedule were not available. An upfront payment of around 15-20% is usually part of the contract. This is the second major triumph for Nimbus. On February 9, Nimbus had bagged production rights of all international & domestic matches for next four years.

This may be just the starting point of another, and till now unanticipated, drama about to unfold as far as cricket and broadcasting rights by BCCI is concerned. For the record, all of 2005 witnessed a pitched legal battle involving BCCI, Zee and ESPN, culminating in the scrapping of award to ZEE Sports, which led to this current bidding process. The moot question uppermost in the entire industry's mind is how the broadcasting game now plays out with the winning company, Nimbus, being a production-andmarketing company and not a broadcaster.

The options before Nimbus are threefold: launch a channel of its own, resell the rights to a broadcaster or enter into a strategic revenue-share with one of the existing sports channels. Already some broadcasters, such as Zee, have expressed their willingness to negotiate with Nimbus to broadcast international cricket played in India on its channel. Whatever Nimbus chooses to do, one thing is sure, the cost of buying cricket for advertisers is bound to go up. Even if you consider a moderate margin that Nimbus would like to make on an investment of $ 612-million, the breakeven for it will come at $800 million (around Rs 3,500 crore), which translates into $200-million per year. This figure is almost a fifth of the entire Rs 5,500-crore revenue for all television advertising and includes even distribution revenues .

For four years of 165 days of cricket (55 ODIs and 22 Tests) it works out to a whopping $4.84-million per day. To cover this huge an amount, Nimbus, an old hand at producing cricket in the country (earlier with Doordarshan and then private channels) may have its strategy in mind and calculations done. “It could well be a possibility that it already had a back door with a channel, or that it might launch its own channel in due course, aligning with a channel for the time being,” says an industry observer. Thawani's office refused to comment anything on this. “It's a big question and we will come out with announcement soon,” Digvijay Singh, COO, Nimbus said. “I don't think the advertiser will be willing to pay that much. Lots of new streams like DTH, mobile rights et al will be covering up,” says Laxmi Narasimhan, national director, Group M. However, the advertisers who will really feel the pinch will be the ones that have been buying inventory directly from Doordarshan at really cheap rates, since the effective rate of sponsorship has been much lower than that of the spot buys.

“The critical points for the broadcaster will be how to bring in more money in keeping with the elasticity of ad rates in mind, how to create newer opportunities for branding, how to monetise and popularise some of the low profile matches like India vs. Bangladesh etc. and finally ensuring that Cricket's popularity doesn't go down,” says Atul Phadnis, chief Evangelist, Mediae2e.

For the Board of Control for Cricket in India (BCCI) the Nimbus deal is part of an ongoing revenue maximising exercise. It has set its eyes on crossing the Rs 1,000-crore revenue figure in the next couple of months. On the anvil are the renewals of ground sponsorships, hoarding rights, official drinks sponsors and more merchandising deals, which are likely to fetch BCCI higher revenues compared to previous years. Also on the anvil are rights for mobile/SMS, IPTV and even archive rights which will be sold soon.

alit Modi, VP, BCCI says that the board has already earned Rs 850 crore in revenues this financial year and in the coming months, the figure is likely to touch Rs 1,000 crore. Modi says that global media rights as well as the deals with Nike and Sahara reflects the unlocking of the true value of Indian cricket. “All this while Indian cricket was undersold and these deals indicate the true value,” says Modi, adding that the objective of the board is to enhance the true value and plough the revenues back into the game in India