Reliance’s digital cricket deal puts TV to a test

Mukesh Ambani’s cricket deal airs an ominous message for his media rivals. His Reliance Industries has paid $3 billion for the exclusive digital rights to air the Indian Premier League in its home territory through to 2027. Expect the tycoon to use the sport as a loss leader to accelerate adoption of his streaming service. That will come at the expense of Walt Disney, the previous owner, which has ponied up $3 billion to retain the television rights.

Reliance’s oil-to-retail conglomerate sits atop a vast media empire spanning financial news to children’s television. It claims one in two Indians consume its 60 channels across more than 10 regional languages, amounting to some 800 million-plus annual viewers and over 10% viewership share in entertainment television.

Cricket rights will boost the fortunes of Voot, Ambani’s nascent digital streaming platform. The online service can lean on its parent’s content library that spans the National Basketball Association, Fifa World Cup, and football leagues like La Liga and Serie A - all snapped up in the last year. Reliance’s enhanced offering could see the $170 billion Disney lose a large chunk of not only its television audience, but also subscribers for its Disney+ streaming service, who account for one-third of the global total.

The auction’s result points to a difficult outlook for broadcast television, where penetration in India remains one-third lower than in the United States and China. Indians have adopted smartphones – used as mini televisions – at a blistering pace thanks to Ambani’s Jio service, which boasts over 400 million mobile subscribers. And Reliance is bringing TVs online by rolling out double the fibre-broadband connections of its rivals combined. While television subscription revenue fell 6% in 2021, digital grew 29% and is now half the level of broadcasters, per EY. Digital advertising spend has almost caught up too.

Reliance expects streaming profits will take “sometime”. That doesn’t matter too much for Ambani’s investors as media is less than 1% of $230 billion Reliance’s annual EBITDA. And the sports splurge is propped up by outsiders: Reliance indirectly owns 51% of Viacom18, a joint venture with Paramount Global with new backing from James Murdoch and ex-Disney executive Uday Shankar. The pair invested $1.7 billion in the business in April.

The Indian parent company’s effective minority stake Viacom18, held through a cascade of multiple listed entities, reduces any financial downside while preserving control. Ownership of the Mumbai Indians cricket team, a recipient of rights proceeds, also helps Reliance recoup some outlay. It leaves Ambani with arguably less to lose than Disney.

CONTEXT NEWS

The rights for Indian Premier League cricket for the next five years through 2027 have sold for some 484 billion rupees ($6.2 billion), Reuters reported on June 14 citing the country's cricket board.

Reliance Industries’ Viacom18 agreed to pay 238 billion rupees, about $3 billion, for the exclusive digital rights in the e-auction, while Walt Disney agreed to pay 236 billion rupees for the television rights.

Disney held the full set of rights for the previous five-year period, obtained through its acquisition of Twenty-First Century Fox’s international and entertainment assets, including in India. Fox’s Star India paid 163 billion rupees, roughly $2.6 billion at 2017 exchange rates.

[Editing by Robyn Mak and Amanda Gomez]