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ZEEL re-enters sports broadcasting biz, acquires UAE T20 League TV rights for 10 years

Zee Entertainment Enterprises Limited (ZEEL) has acquired the broadcast rights for the Emirates Cricket Board’s (ECB) UAE T20 League for a period of 10 years, sources close to the development have told exchange4media. The sources further stated that the broadcaster will be paying $15 million per year as broadcast rights fee for the league. Thus, the total value of the deal works out to $150 million over the 10-year period.

The broadcast rights acquisition has happened at a time when the company is in the process of merging its business with Sony Pictures Networks India (SPNI) to create a media behemoth with combined revenues of $2 billion. ZEEL had exited sports business in 2016 by selling Ten Sports to Sony for $385 million. The Zee-Sony merger will mean that the combined entity will be a major player in the sports media business.

“ZEEL has inked a 10-year deal for UAE T20 League broadcast rights with an annual pay out of $15 million. It will pay $150 million over a 10-year period,” a media industry veteran said on the condition of anonymity. ZEEL didn’t offer any comments on the development.

Speaking at APOS India 2021 event recently, ZEEL MD and CEO Punit Goenka had said that the Zee-Sony merger deal is progressing well. He also said that the $1.57 billion growth capital infusion by Sony will allow the merged entity to invest in high-quality content, including sports. While sports will become a focus area for Zee-Sony, Goenka had noted that the decision on bidding or not bidding and at what price will be taken by the board of the merged company.

“Zee and Sony will form the largest media and entertainment player in the country. Our revenue on a standalone basis will be close to $2 billion and the growth capital that Sony is going to infuse in the merged entity will give us the opportunity to invest in premium content including sports. There is a going to be a huge opportunity on both digital and linear side to create big scale entertainment properties and acquire large IPs across genres,” Goenka had stated.

The ZEEL MD & CEO had also asserted that Zee on a standalone basis will not bid for sports rights since it has just finished non-compete with Sony on the sports side. “While we will reconsider sports on a standalone basis but right now my focus is look on joint consolidated basis with Sony. A lot has changed since we exited the sports business and funnily so, we sold it to Sony, and it’s coming full circle back home,” he had noted..

For ZEEL, it makes ample sense to acquire the UAE T20 League rights since it has a global presence including Middle East with channels like Zee TV, Zee Cinema, &TV besides Zee Aflam and Zee Alwan which are targeted at Arabic audiences.

Furthermore, cricket, which has over 2.5 billion fans globally, is the second most watched sport in UAE which also has a huge diaspora from cricket-crazy countries like India, Pakistan, Bangladesh, and Sri Lanka. That explains why four of the six team owners in the league are Indian companies.

Experts point out that 89% of UAE’s population are expats and 47% of UAE’s expats follow cricket. UAE also boasts of three world-class stadiums in proximity to each other which will lead to operational efficiencies.

The biggest advantage of the league is the favourable time zone and geographic advantage to attract fans from all over the world, experts aver. A case in point is India, where the matches are likely to air during the evening prime-time. Even in other cricketing nations, the matches will be available for viewing during the prime time. The league will be played during the December-January window.

The league will feature six teams that will play a total of 34 matches including 30 round-robin matches, three play-offs and a final. The ECB is believed to have sold the six teams to Shah Rukh Khan’s Knight Riders Sports, Delhi Daredevils co-owner GMR Sports, Mukesh Ambani’s Reliance Industries, finance company Capri Global, Big Bash League team Sydney Sixers, and Manchester United owner Glazer family.

It is pertinent to note that Capri Global and Glazer family had recently lost out to CVC Capital and RPSG in owning the Ahmedabad and Lucknow teams of the Indian Premier League (IPL). Championship Cricket LLC, which was floated by Manchester United owner Lancer Capital (Avram Glazer), had bid Rs 4128.65 crore for Ahmedabad and Rs 4023.99 crore for Lucknow. Capri Global, an NBFC, had bid Rs 4204 crore each for both Ahmedabad and Lucknow.

According to ITW Consulting MD Bhairav Shanth, the UAE T20 League has everything going in its favour whether it is favour to become the second most successful cricket league after the IPL. “It may look as if the league marketplace is getting crowded, but there is actually a lot of headroom for growth and the UAE T20 league is a prime candidate for leading that next boom.”

He also stated that timing is the biggest advantage that UAE T20 League will have over non-IPL T20 league. “Firstly, it has important advantages over other established leagues – a primetime presence of matches in the Indian subcontinent (they will be played around 7PM IST which is a similar slot to the IPL) and secondly it has the involvement of key cricket playing countries, 8 foreign players, and quality venue infrastructure.”

Secondly, he noted that the current IPL teams have picked up maximum number of franchisees in the league due to which there will be an IPL rub-off effect on the new league which will help it cultivate an Indian fan base that regularly tunes in. “Our research and deep data analysis arm ITW Core is quite bullish about the potential and quality of the league. According to their projections, it could garner close to a 100 million cumulative audience in India and around 50 million more around the world.”

From a business perspective, Shanth said that the UAE T20 League is a logical addition to any company with sports interests in India and looking at global expansion because the economies of scope are immense. “More franchises can follow in the footsteps of the likes of the Knight Riders who have franchises in the CPL and will have one here too. It allows them to leverage the brand while at the same time amplifying its presence in new markets building a global name of the likes of the New York Yankees or Manchester United.”

Lastly, Shanth said that the valuation of these franchises will easily be in the $90-100 million range as per ITW’s assessments of the revenue prospects in terms of TV rights and sponsorships over the next decade or so. “It’s an attractive opportunity for an investor to get in on the ground floor of this,” he asserted.

Each of the six teams will have 18 squad players including 10 international, 5 UAE and 3 Associate member players in the squad. The playing XI will have eight maximum international players, 2 minimum UAE players, and 1 minimum associate member players.

The revenue share between the league and the franchisees will remain fixed for the first 10 years. According to sources, the organisers have told the franchise owners that the league’s business model will result in positive operating income right from the first year.

One of the sources said that the league owners have projected an anticipated revenue of $29 million in the first year including $15 million from broadcast rights which will be shared in the 80:20 ratio between organisers and the franchise owners. The 80:20 broadcast revenue sharing will be in force for first 10 years of the league.

The league owners are eyeing $10 million in central sponsorship revenue followed by $4 million in gate receipts. The gate receipts revenue will be split in the 25:75 ratio between the league and the six franchisees while central sponsorship revenue will be split equally.

For the first five years, 70% of the production cost will be borne by the organisers. The total production is estimated at $3 million with the organisers setting off $2.1 million against the broadcast revenue and the franchises absorbing the rest. After five years, the production cost sharing will be 20:80 for the next five years with franchisees absorbing a large chunk of the cost.

According to the internal calculations of the organisers, each franchise is projected to earn $6.83 million in anticipated revenue for Year 1 including $2 million broadcast revenue, $0.83 million central sponsorship revenue, $3.5 million franchisee related revenue, and $0.50 million gate receipts revenue.

In terms of costs, each franchise will bear $2.65 million in anticipated expense for Year 1 which includes $0.15 million production cost, $0.2 million cricket operations cost, $0.30 million travel & hospitality cost, and $2 million player fees. The franchise fee is expected to be $6 million per year.

According to a source, the franchises are expected to burn roughly $7 million over the 10-year period. Majority of the cash burn will happen in the initial few years. The profitability of the franchises is dependent on how well they keep their costs under control and parallelly grow the team sponsorship and gate revenues. “If all goes well, the teams will start making a small profit from year 7,” the source said. My News 24×7

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