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Sony’s organisational rejig as NP Singh gets ready for bigger bets
MUMBAI: As he gets ready to bet bigger on sports, Sony Pictures Networks India (SPNI) CEO NP Singh has brought about a change in the organisational structure.
Sensing that the fee for the new cycle of TV telecast rights for the Indian Premier League (IPL) will be exorbitant, Singh has put in place a mechanism that will allow him to monetise the sports business more aggressively. The ramp-up of rights in other sports like football also means that the company needs to keep its growth engine from this segment well oiled.
For Sony, sports is an important piece of the business and the cash cow is the IPL. Sony’s focus has also been on building four pillars of non-cricket sports — football, tennis, basketball and fight sports.The sports segment currently accounts for 25–30% of SPNI’s revenues. The company is aiming to push this up to 35–40% in the near term.
Subscription revenue is the key to the growth and profitability of the sports business. Advertising revenue has matured to a certain extent and organic growth will be less brisk. Cable TV digitisation offers hope to the sports broadcasters to augment their subscription revenues.
Singh has, thus, made the sports business more closely aligned to the distribution business. He has expanded the role of Rajesh Kaul by making him the president of distribution and sports. SPNI sports business head Prasana Krishnan will now report to Kaul.
The realignment has come at a time when Singh has to climb the mountain to retain the IPL rights. Sony’s 10-year contract as official broadcaster of the IPL ends next year. Singh can take comfort from the fact that Sony has the right of first refusal and it also has the right to match the counter offer made by anybody else, a clause that many say the BCCI will do away with in future IPL contracts. But what is disturbing is that the IPL price tag could dramatically increase, with Star India making an aggressive offer to snatch away the rights.
The BCCI could shorten the duration of the IPL rights period. Some say that the rights period could shrink to five years. In the first rights cycle, the cricket board had awarded the TV telecast rights of the IPL for a period of 10 years.
Estimates on the rights fee of the IPL vary, with some saying that it will more than double to be anywhere between Rs 16,500 crore (Rs 165 billion) and Rs 19,000 crore (Rs 190 billion) for the 10-year period. Others speculate that the rights for five years would be between Rs 8,200 crore (Rs 82 billion) and Rs 10,000 crore (Rs 100 billion). The eventual value of the rights will depend on how adventurous Star is with its offer.
As part of the management rejig, Singh has got the company’s distribution chief to head the sports business. This will imply a more aggressive approach to subscription revenues from the sports business while continuing with the network push at an overall level.
“It is the right move come at the right time. Kaul is also the right man to take up the role as he had earlier worked in ESPN Star Sports and has aggression in him,” a media analyst said.
Sony’s subscription revenue is estimated to be around Rs 1,400 crore (Rs 14 billion), according to market estimates. With the company planning to launch more channels, it expects to post strong subscription growth.
So, can pay TV revenues be kicked up to support a huge increase in sports rights fees? Subscription income from the sports broadcasting businesses of Star India and Zee Entertainment Enterprises Ltd (ZEEL) together is estimated at around Rs 1,400 crore. With the rights fees going up, there will be an overall push to up subscription revenues.
Hathway Cable & Datacom managing director and CEO Jagdish Kumar said that multi-system operators (MSOs) would not be in a position to increase payouts to broadcasters substantially. “We expect our content cost net of carriage to increase by 10–15% a year. Sports broadcasters should not insist on putting their channels on the base pack. Consumer ARPU (average revenue per user) should go up so that everybody benefits,” he said.
Singh has taken another strategic step. He has got ESPN on his side, and the partnership is working on the television and digital properties. Two sports channels, Sony ESPN and Sony ESPN HD, have been launched. ESPN has also introduced a localised app and a website in collaboration with SPNI. ESPN app and ESPN.in are carrying rights video content for sporting events from Sony Liv, SPNI’s digital streaming platform, and SPNI’s new Sony ESPN sports channels.
Kaul’s earlier stint at ESPN Star Sports will be an added advantage in the new scheme of things. Having spent long years in ESPN, he is familiar with the culture of the sports organisation. Heading distribution and marketing, he had played a big role in launching Star Cricket.
Singh has introduced another change within the organisation. In the realigned organisational structure, the company’s international business has got consolidated within the networks’ sales and syndication business.
With the business expanding and more channels getting launched, Singh has expanded the roles of Gupta and Kaul and brought in a leadership layer. Since he took charge in January 2014, this is his first big management move.
“Singh has defined two major portfolios. He has given additional responsibilities to two key executives of the company. It is a good strategic move at the organisational level,” a senior executive of a broadcasting company said.