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James Murdoch indicates disciplined bid for cricket rights with an eye on EBITDA targets

MUMBAI: Will Star India bid irrationally for the five-year new cycle of Indian Premier League (IPL) media rights?

21st Century Fox CEO James Murdoch has said that the company is open to strengthening its cricket rights portfolio but it would be fiscally prudent to acquire new rights in order not to upset its near-term and long-term targets of achieving $500 million EBITDA by 2018 and $1 billion by 2020.

Murdoch’s comment comes at a time when the company’s India unit is aggressively pursuing the IPL rights, which are up for grabs. The IPL media rights for the Indian subcontinent is expected to be hotly contested between Star India and Sony Pictures Networks India, the incumbent broadcast rights holder for the region. Star is the incumbent digital rights holder for India.

Star’s cricket portfolio comprises ICC, Asia Cricket Council, BCCI, Cricket Australia and England Cricket Board (ECB) rights. Between these five properties, the company is assured of enough volume of high-quality cricket. However, the IPL has been a big missing piece in Star India’s cricket portfolio.

“From time to time, new rights are available in the market, and I would just say to you that, Star Sports, the cricket portfolio is very strong right now. If we could really strengthen it, we’d love to do so, but being very disciplined about that and certainly we don’t want to do things that are going to make a problem in terms of our near-term and longer-term goals for the business,” Murdoch told analysts in the US recently.

The company’s CFO John Nallen expressed confidence that Star India, notwithstanding the ad revenue loss due to demonetisation, is well on its way to achieve the milestone of $500 million EBITDA by 2018, which is in line with the company’s original plan.

“Internationally, we’re expecting strong total revenue growth, driven by Star’s advertising increases, where we’ll continue to generate market-leading organic ad growth, will lap the impact of the demonetisation policy, and we’ll hit the $500 million EBITDA milestone,” Nallen said.

Concurring with Nallen, Murdoch said that the company would not make a reckless move in acquiring cricket rights that could jeopardise its ambitious target.

“We’re well on track for our targets in India of $500 million EBITDA next year and thereafter. So, no, we don’t have any plans to do anything complicated with cricket rights that would jeopardise that. Although when we see any new rights come up, we approach them in a disciplined way, and in a way that we think is going to be end of the best thing for customers and for the business,” Murdoch averred.

Going by Murdoch’s comment, it can be assumed that Star will not break the bank to buy the coveted IPL media rights. That said, it’s an open secret that Star India is desperate to have cricket’s most-prized property in its kitty. With the IPL, Star India’s sports business will become enviable.

Talking about the company’s Indian OTT product Hotstar, Murdoch said that the platform had crossed 1 billion minutes of watch time in a single day during the fourth quarter ended 30 June.

“And Hotstar set the pace for the streaming market in the world’s fastest-growing economy, crossing 1 billion minutes of watch time in a single day during the fourth quarter,” he noted.

He further stated that the OTT business allows the company to reach a diverse set of audiences in different markets. “From Hotstar in India to Hulu Live and SkyGo and SkyQ, we’ve never been able to reach customers and as diverse, flexible and rewarding a fashion as we can now. This is, of course, just the beginning. We’ve got great confidence in the future of this video business for us,” he stated.

Murdoch also believes that constant iterations and constant innovation and experimentation with packaging is really beneficial. “And to be able to do that at the high pace is the best way to build our business and find the best combination,” he added.

On minority investments in companies outside the group, Murdoch said that the company does not buy minority stakes very often, but when it does it sees if there is an opportunity in a new category or brand where it can add value. He cited the Indian DTH company Tata Sky as an example where the company holds 30%.

“Tata Sky is another good example where, from a regulatory perspective, we couldn’t own a certain amount, but we think it’s really important to drive that business forward and great for the Indian television marketplace and for our business there,” he explained.