Price a sports right as the cost of acquiring a subscriber, or do not bid

In the spring of 2024 Ilavenil's board debated a bid for the Tamil- and Telugu-language television and streaming rights to a franchise cricket league run by a state association. The rights covered five seasons. Our advertising sales team forecast ₹130 crore of advertising revenue over that period, and the bid our managing director first favoured was ₹220 crore. The gap, everyone agreed, would be justified by what the league did for Ilavenil Play: the subscribers it would bring and the evenings it would take from rivals.

I recommended a ceiling of ₹150 crore. The managing director authorised ₹190 crore. A rival paid ₹236 crore, and we lost. I want to set out why I recommended what I did, because the reasoning applies to most sports bids by regional broadcasters, and because the arguments used to close the gap in that room are the ones I hear wherever sports rights are discussed.

The advertising case rarely closes

For a national broadcaster with international cricket, advertising can pay for sport. For a regional broadcaster bidding on a league or a regional-language feed, it usually cannot. The audience is smaller, the season is short, and the advertisers who buy sport also buy the main Hindi and English coverage of the same matches. Our sales forecast assumed rates about 40 per cent above our prime-time fiction, which was reasonable for the final weeks of a season and optimistic for its early matches. It also assumed the advertising would be additional. In practice some of it would have moved from our fiction and film slots, where the same advertisers already spent.

Adjusted for that, the advertising case was nearer ₹100 crore. Production, studio and commentary costs over five seasons came to about ₹35 crore. On advertising alone, the rights were worth perhaps ₹65 crore to us. Everything above that figure had to be justified by something else.

It is worth noticing how rarely that figure appears in a bid paper. The papers I have read, at Ilavenil and elsewhere, usually show the advertising forecast and the bid side by side and leave the reader to assume that the difference is covered by benefits too large to count. Directors should ask to see the difference stated as a number, with a named source for each part of it.

Count the subscribers who stay after the final

The something else is usually called strategic value: brand, reach, relevance to younger viewers. I do not doubt that these exist. I doubt that they can be priced the way they are usually presented, which is as a residual that grows until it reaches the bid.

What can be priced is subscribers. A league with good matches brings people to a streaming service during the season. Some stay, many leave after the final, and a few return the next year. From three years of our own data we knew what a paying subscriber who stayed at least twelve months was worth to us after content and distribution costs: about ₹1,900 over three years. From earlier live events we knew that roughly a quarter of the people who subscribed for an event were still paying a year later. We estimated that the league would bring about 320,000 new subscribers a season, of whom about 80,000 would stay: 400,000 retained subscribers over five seasons.

On those figures the retained subscribers were worth about ₹76 crore. Added to ₹65 crore of advertising value and a modest allowance for the sampling I describe below, that produced my ceiling of ₹150 crore. At ₹220 crore, each retained subscriber would have cost us about ₹3,900, twice what such a subscriber is worth and about six times the ₹640 we pay to acquire one through a broadband or mobile bundle.

That comparison is the centre of my argument. A sports right bought by a regional broadcaster is, in economic terms, a marketing expense: a way of acquiring subscribers and attention. It should be compared with the other ways of doing the same thing. If a bundle with a broadband operator buys a retained subscriber at a fraction of the cost, the sports right is not strategic. It is expensive.

The objections deserve a fair statement. Bundled subscribers are less engaged than those who choose us for a match, and they leave when the bundle changes. Sport also brings audiences to the channel who then sample our fiction, and that sampling does not appear in subscription data. Both points are true. We tested the first by comparing the viewing hours of bundled and direct subscribers; direct subscribers watched about 30 per cent more, and we adjusted the comparison for it. The gap remained wide. The second we could not measure, which is why I left room for it in the ceiling rather than ignoring it.

Set the walk-away number before the room does

The most important step came before the auction. Sports rights are sold in conditions designed to make bidders forget their own arithmetic: deadlines, rival bids, a seller who reminds everyone of the last cycle's price. The only protection I know is to agree at board level, in writing, the price beyond which the company will walk away and the reasoning behind it, before bidding begins.

We did that in 2024, though the number the board agreed was higher than the one I proposed. When the rival bid ₹236 crore, nobody in our team had to make a decision under pressure; the board had already made it. We have since spent on acquiring subscribers in other ways: two further bundles with regional broadband operators and a season of Tamil and Telugu fiction released first on the app.

I do not argue that regional broadcasters should never buy sport. A league our audiences care about, at a price set by retained subscribers and honest advertising, can be a good purchase. My argument is narrower. When the case for a bid rests on a residual called strategic value, the bid is too high, and the board should ask what the same money would buy if it were spent on acquiring subscribers directly.

In two or three seasons the rival that paid ₹236 crore will know whether its price worked. I may be wrong about the league. I would still rather be wrong with a number I can explain than right by a margin I cannot.