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Star India to invest additional $5 bn over next 3 years

MUMBAI: Star India is looking to invest $5 billion more over the next three years, signalling that it will possibly make a very aggressive bid for the Indian Premier League (IPL).

Star, a wholly owned subsidiary of 21st Century Fox, made its additional investment announcement at the US-India Business Council’s (USIBC) Leadership Summit in Washington.

“We see huge potential in the Indian market and have been one of the largest foreign investors in India and the largest in media and entertainment sector,” Star India chairman and CEO Uday Shankar said.

Prime Minister Narendra Modi, who is on a five-nation tour, addressed the USIBC’s 41st Annual Leadership Summit. Modi met CEOs from both the United States and India to get an update on the progress in the bilateral commercial relations at the CEO Roundtable.

All put together, USIBC members have committed to invest an additional $45 billion in the country.

Amazon, which is planning to launch its over-the-top (OTT) service Amazon Prime in India, is planning to invest an additional $3 billion in India on top of the $2 billion that it had announced in 2014, its CEO Jeff Bezos said.

While Shankar has not specified the areas in which these investments will be pooled into, it is highly likely that the broadcaster might throw its hat in the ring for the IPL rights, which are coming up for renewal next year, with a very aggressive offer.

IPL’s current TV broadcaster Sony Pictures Networks India (SPNI) has an upper hand by virtue of having the first right to refusal and a right to match the bid in case the property goes through the bidding stage.

Shankar has already stated in media that Star India would make a bid for the IPL if it comes up for grabs.

21st Century Fox CEO James Murdoch had earlier mentioned about IPL rights while talking to analysts.

Responding to a question on the sports rights scene in India and the other investment prospects, Murdoch had told analysts in the US, “With respect to Star, the landscape for sports rights in the near term is really probably dominated by what happens with the BCCI and the IPL, the Pro Kabaddi League domestically there. And we have to see how that shakes out over the next couple of years. I think it’s in the next year the IPL picture becomes clearer. That is something that we don’t hold today. But fundamentally, there’s nothing that we feel would necessitate us, or adjusting our goals for the business, both from a margin perspective and an absolute profit perspective, over the next four to five years. But that said, you make choices around different packages, you make choices about how much you’re investing in different things.”

Sony had bagged the IPL broadcast rights for South Asia including India for $1.1 billion. The BCCI has already started the negotiation process. Sony has got 60 days to come up with an offer for the BCCI. The new deal is expected to be a shorter one compared to the 10-year duration in the previous duration. The value of the new deal is expected to climb steeply, even for the shorter rights cycle.

21st Century Fox, which has identified India as its next big growth engine, has set a target of $500 million EBITDA by 2018 and $1 billion by 2020.

Star India is also expected to up its investments in the core entertainment business. Hotstar, Star India’s video streaming platform, will also consume a lot of investment.

Star has been making big investments in the Indian market for the last few years. First, it fully acquired Asianet Communications in 2014, gobbling the remaining 13% stake in the company for $50 million. Overall, the company has invested $557 million to take full ownership of Asianet.

Star entered the sports broadcasting ring in 2012 by taking control of the India business of the erstwhile sports broadcasting joint venture ESPN Star Sports. 21st Century Fox, which was then known as News Corp, had bought ESPN’s 50% stake for $335 million. While ESS was a pan-Asian sportscaster, India was its biggest market.

After taking control of the sports business, Star re-launched the sports network in 2013 by re-branding it as Star Sports with the tagline ‘Believe’. It currently owns and operates eight channels with four each in SD and HD.

To reduce its dependence on cricket rights, the company started investing in local leagues. It formed a 75:35 JV with IMG Reliance to launch the soccer league Indian Super League. Star has committed investments of Rs 2,000 crore (Rs 20 billion).

Star went on to become the owner of the Pro Kabaddi League by acquiring 74% stake in Mashal Sports, the owner of the league. In 2013, Star had said that their cumulative investment in sports was Rs 20,000 crore (Rs 200 billion).

In 2015, the company acquired the broadcast business of Telugu TV network Maa TV. Maa TV owns and operates four channels, namely Maa TV, Maa Music, Maa Movies and Maa Gold. The broadcaster had closed the Maa TV deal for $346 million.

In order to accelerate growth, Star India has created five business units, with each having individual CEOs.

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