Star’s story in Asia...its sports business: Sanjay Gupta

Many experts mused loudly that Star had found a way to quickly kill a highly profitable franchise built on leadership in entertainment across genres and languages.

April 25, 2013 10:04 IST | India Infoline News Service
I am especially thrilled to talk about an exciting part of Star’s story in Asia, its sports business.

By the end of 2011, Star in India had clearly established itself as the premier entertainment network in India and for Indians worldwide, with 400 million people watching our drama and movie channels in 7 languages every day. In one of the most competitive markets in the world, we had established substantial leadership in every genre and in mostgeographies. And while Star and Fox had built an attractive franchise in entertainment, in sports, very unlike our traditional approach, we had tucked the business away in a joint venture with ESPN that was not managed or controlled by us.

Starting in April 2012, this started to change. We acquired the rights to India’s international cricket calendar that month; a few months later, our parent company bought out its partner from the ESPN Star Sports joint venture in Asia with the intent to roll the Indian part of the joint venture into Star; we launched two new domestic leagues in university cricket and hockey; and we renewed the rights to English Premier League football with a substantive bid. All in all, we invested a billion dollars in less than 6 months.As a result, by the end of 2012, we had established ourselves as India’s leading sports broadcaster.

So, why did we get aggressive on a business where the traditional wisdom is that no one makes money?

Many experts mused loudly that Star had found a way to quickly kill a highly profitable franchise built on leadership in entertainment across genres and languages. I still run into these questions every day. Just two days ago, a leading Indian business daily ran a big story wondering why Star had entered a business that usually never makes money. After all, one sports broadcaster had gone bankrupt trying to pay the bills for the Indian cricket rights, another is struggling to break even and yet another is trying to run a sports business without much sports content. Why would Star make such a big, bold move particularly at a time when the overall sentiment on the India story has gone cold?

So, again, why did we do this? Did we lose the plot?

In order to answer this question, it is important to take a close look at a few facts, some conventional wisdom and many myths that surround the Indian sports business.

Everyone in this industry knows one thing. India is a single sport country. It is a country where cricket is a religion, where passion for the game is deep and where the country shuts down when the national team is playing.

And yet, this is only half the truth. Even for a big match where India plays arch rival Pakistan, consumers do not view the entire match, they view only 15% of the match on an average. The reality outside of really big tournaments is even starker. Out of more than 1000 hours that an Indian viewer spent watching television last year, only 20 hours was on cricket, about 2percent. This is actually less than the time spent on a single successful show on Star Plus!Consumption of domestic cricket is even worse. Although matches are played round the year, only 50 matches are broadcast on television in a year.And very often, the best of the country’s talent do not participate in these games.

Imagine if soccer crazy England manifested its interest in the game only by watching the FIFA World Cup once in 4 years and only really paid attention when England played Spain or Italy. That is the equivalent of India’s current state in cricket viewership. In fact, until the Board of Control for Cricket in India introduced the Indian Premier League, there was not even a domestic league, the equivalent of an EPL or an NFL.

So, India is not a single-sport country, it is at the moment a zero-sport country that occasionally follows 11 Indian cricketers when they play a big marquee tournament.

For us, though, the more interesting question is why this happened, and what has led to the current state of affairs. We believe that the biggest culprit is the Indian sports broadcaster. Let me explain why.

A big shift happened in the last twenty years in cricket in the profile of its followership. It moved from being a sport for the urban elite to one that has a mass following across the country.The BCCI deserves credit for this transformation by making substantial investments to improve the quality of stadiums and infrastructure around the country.Today, some of the country’s best cricketers come from outside the large cities; and small towns host international matches on a regular basis. It is also a country where less than 1% of the population has actually watched any sport in a stadium.

And, yet, sports broadcasters have not made any effort to make their programming more relevant to the new audience.

In a country where less than 10% of the population understand English, and a much smaller number are native speakers, sports broadcasters programmed only in one language: guess which one? English. This, despite the fact that everyone knew that the big growth in entertainment consumption in the country came when programming on satellite switched to Hindi and other local languages. And even for the very few that actually understand English, it is quite a world they have to navigate to understand the diversity of commentator accents on television: from the Westernized Indian accent to the local Indian accent to the Aussie accent to the Kiwi accent to the Scottish accent to the West Indian accent. It is almost as if the sports broadcasters were not relaying sports, they were running extraordinarily painful accent training programs on television for the very small English speaking audience that came to watch in the first place.

The pain did not stop there. Around the world, sports graphics is used to bring the game closer to the viewer and to help the viewer understand the game. Yet, in cricket, graphics is more a nuanced tool meant to tickle the sensibilities of the few deep masters of the game, not the 99% of the country that has never even been to a stadium. The same story extends to television commentary too. Rather than being the anchors of the game who explain the game and bring the excitement of the stadium to the viewer’s living room, the cricket commentator is invariably an expert talking to his peers.

It is no surprise then that the Indian viewer does not spend much time on sports on television.

But, it would be unfair to put all the blame on just the sports broadcaster. The broadcaster has had many fellow partners-in-crime in ensuring that sports viewership remains miniscule.

Its biggest partner has been the cable and satellite platform. Around the world, sports have been a huge driver of revenue and profit for pay television operators. In India every operator complains about the low ARPUs they get from the business. And yet, instead of using compelling sports content to get more money from consumers and reduce churn, the cable and satellite operators make it difficult for their subscribers to discover and develop a habit of consuming sports.

And this attitude shows up in the distribution of sports channels, which are treated less like the mass product that they should be, and more as premium add-on products for a small, rich, niche audience.

To make matters worse, these platforms turn off the channel when a marquee event is not on. While this may have made sense in the old, bandwidth-limited analog world where you could only put 20-30 channels, it makes no sense that even DTH operators are employing the same tactic when they have 300 channels to offer. Compare this to other content categories. They do not switch off a news channel when a breaking news event is not on; they do not turn off the movies channel when a blockbuster is not on. But this is exactly what they do in sports. It is the worst kind of behaviour that limits the ability to build habit for the sports fan.

Even worse is the behaviour of a few platforms that have created their own channels that switch to the most marquee sports events of multiple broadcasters. While they hide under the pretence that they are addressing a consumer need, what they are really doing is illegal piracy. But what is distressing is that they do not understand the long term damage they are doing to the business. Instead of multiplying choices and triggering demand, they are creating a structure that will ensure that viewers only watch a few cricket events.

Put together, it is therefore not a surprise that the reach of sports channels lags that of even niche channels like DiscoveryandMTV!

So in a zero-sport country, sports broadcasters and pay TV platforms have worked very hard to make sure that it is only the deeply committed, rich expert fan comfortable with English that actually watches a match on television.

Of course, if the sports broadcaster and the platform have done their part in eroding the value of sports franchise, the regulator and the government have not been far behind.

For the regulator and the government, the overwhelming objective must be to further consumer interest. It is in the interest of consumers to have more and more sports available for them. It is in the interest of any country to have more and more people play sports. And the reality is that people play sports only when they passionately follow games and teams. If India has to break its poor status in international sports and use sports to create a virtuous cycle for the larger society, then the regulator and the polityhave a powerful role to play.

I am reminded of an incident that happened in Canada last year. When the hockey union went on strike, the prime minister of the country got involved because his fear was that a prolonged strike would have an adverse impact on the GDP of Canada! More than anything, it showed the power of sports and its ability to be a huge economic growth engine. It also shows the lens with which politicians and executives approach sports globally.

However, the regulator, the bureaucracy and the political class have not shown such an enlightened approach to sports in India.

Of all things, the regulator has imposed a cap on prices. A price cap is never good for the long term health of a business but it is especially absurd in the context of sports, where the market we operate in is truly global, where the acquisition costs for rights reflects a global market. What is even more absurd is that a news channel, a general entertainment channel, an education channel and a sports channel are all capped at the same level, without any linkage to the underlying cost of content or the relevance of its shelf life.Shockingly, Star Sports which has the most compelling portfolio of content in the country can charge no more than the country’s weakest sports channel with practically no sports on it.

To make matters worse, the government has mandated that the most expensive sports events are events of national importance that need to be made available to the public broadcaster – who in turn not only retransmits an unencrypted signal to all its subscribers for free, but also makes it available to private platforms to carry the content under a statutorily mandated ‘must carry’ law. So even as you are making no effort to ensure wider coverage for all sports for the long term, you are killing the economics of the sports broadcaster by forcing it to share the most popular content today without adequate compensation and also legitimizing piracy by permitting access to sports content by platforms for free.

The entire eco system has therefore unwittingly conspired to ensure that sports broadcast is unprofitable, sports consumption is limited and sports followership is minimal.

So, the question comes back to: if things are looking so bad, why did Star decide to make a big push into sports?

For only one reason.The current state of affairs is just not right, is not sustainable and is not good for anyone. Somebody needs to change this unhealthy equilibrium which is hurting the country, the consumer and the media industry.

And as the country’s media leader, and as a company that has faced such hurdles before and still managed to build an outstanding franchise, we believe that we can shape this change.

Clearly, change will not happen overnight. It will require a lot of effort to break the status quo. We will have to ensure that we create compelling sports content, across multiple sports, across multiple languages, with an economic structure that will add value for all.

But, we are patient, as we always have been in India. And our history, our parentage and the coherence of our approach gives us confidence that we will build India’s first successful and profitable sports franchise.

The author is COO STAR India. The above is his  keynote address from APOS Bali, Indonesia on the dynamics of Sports broadcasting in India.

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