21 Sep 2017
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Star India’s focus on operating profit and the bid for IPL

MUMBAI: Having set itself an ambitious goal of earning operating profit of $1 billion by 2020, Star India may stay out of a reckless bid for the Indian Premier League (IPL).

255px-James MurdochTalking to analysts, 21st Century Fox CEO James Murdoch has indicated that the India company would want to focus on profitability and margins.

Responding to a question on the sports rights scene in India and other investment prospects, Murdoch said, “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 see out there 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.”

The IPL telecast rights will come up for grabs after Sony’s 10-year cycle ends. Incidentally, Sony Pictures Networks acquired the rights for $1.026 billion. This is the ninth season of the IPL.

Star India subsidiary Novi Digital, the company that runs video-on-demand service Hotstar, holds the IPL digital rights in India.

The BCCI is expected to club all the IPL rights together and sell it as part of a package.

Noting that Star is one of the biggest investors in sports in India, Murdoch said that the sports business would be a key driver for the India business in future.

“But that said, you make choices around different packages, you make choices about how much you’re investing in different things,” he added.

He also noted that the company has reached peak investments in sports business in India. “The Star business is going very strong. And while there are some of those lumpy sports rights out there, we’re really through the peak investment in those, as we’ve said before,” he noted.

Star’s entertainment business is highly profitable while the sports business is still a loss leader. The broadcaster is currently in the investment phase as far as sports business is concerned, but believes its peak funding stage is over.

Star India has put serious money into creating local leagues like the Indian Super League (ISL) and Pro Kabbadi League (PKL). It has also made big investments in acquiring properties like the BCCI, ICC, English Premier League, Bundesliga, and F1.

Responding to a query on launching digital media brands to counter emerging platforms, Murdoch touted the example of Hotstar in India, which has shown strong growth in consumption.

“If we look at something like India, the Hotstar business is a mobile internet-only video platform which we launched earlier this year, or I should say early last year, which has really gotten off to a great start. And that is a sports and entertainment platform that is growing very rapidly from a mobile consumption point of view in India,” he asserted.

On being asked whether the company is revising its earlier EBITDA target of $500 million (by FY18) due to the impact of a fall in the rupee, Murdoch stated, “Look, I think we’ve generally assumed a modest depreciation over the rupee normalised over a period of time. We’ve found over the years that, sure we get that wrong in a given year, but generally over time that’s held true.

“And in that—and in those numbers we’ve—in that—in those targets we’ve assumed modest depreciation there. So it could go either one way or another, but we’re not in that business of currency forecasting. But where—with sort of historical trends and where the kind of rupee has been and where we think it might go if it holds the same, we feel pretty confident about the trajectory of the business there. It’s a strong business with real velocity behind it.”