As News Corp works on expanding its global sports network, India is very much on its radar, especially after the parting of ways with ESPN. With the broadcast rights of key sports properties in its kitty, subsidiary Star India is now looking at investing in local sports even as it tries to change the way sports entertainment is consumed and distributed in India

The game is only beginning for Rupert Murdoch owned media conglomerate News Corporation. The company is slowly and steadily carving up a golden empire in sports; one that stretches all the way across the world and back. News Corp, with total assets of approximately $63 billion and total annual revenues of approximately $34 billion as of December 31, 2012, is launching a global sports network spanning the Americas, Australia, and Asia and while the global media conglomerate expects Asia to drive its revenues and overall growth, a lot of focus will be on India as well with the group setting out on its own after parting ways with Walt Disney owned ESPN.

In the United States, News Corp is launching a national sports network primarily to counter its rival ESPN. In Latin America, News Corp’s international multi-media business Fox International Channels (FIC) purchased from HM Capital Partners the latter?s majority interest in Fox Pan American Sports, to launch Fox Sports in Brazil. In Australia, News Corp has more than doubled its profits on account of higher stake in Fox Sports. News Corp took over Consolidated Media Holdings, taking ownership of Fox Sports and doubling share in Foxtel to 50% in Australia. Fox Sports Australia is the leading provider of sports programming in Australia, while Foxtel is the largest pay television provider in Australia.

Central to its global plans on sports, is the Asia story. In Asia, News Corp bought out Walt Disney?s stake in ESPN Star Sports (ESS) for $335 million. While its subsidiary Star India is in control of the sports business in India, it is under Fox International channels (FIC) for the rest of Asia. ?We?ve had a very good partnership with Disney on ESS but I think that people recognize that partnerships are complicated. The world is fast moving. There?s a lot going on. Each has a different set of priorities and objectives,? said News Corp COO Chase Carey at the Asia Pacific Pay TV Operators (APOS) Summit in Bali recently. News Corp is excited at the opportunity of building across the region a really dynamic sports business with the acquisition, he added.

But there were a lot of moving parts to it, such as working with sports partners in order to add dimensions to what they do, such as what Sky Sports has done with the English Premier League. ?I don?t want to give us too much credit, but Sky?s relationship with the Premier League started in 1993. And it is the cornerstone to the Premier League becoming what it has,? he said.

Both Asia and India remain central to News Corp?s ambitious plans. ?Asia is tremendously exciting for us. It?s 60% of the world’s population, and has a growing middle class. All you need to do is to drop around Asia once and you can feel the energy. This year, our revenue will see $2 billion from Asia,? said Carey. India, he said has not materially moved the needle but could in the next five-ten years become a driving force.

Asia will, as a whole, see increased significance in terms of what it represents. ?Taiwan is big business for us today. India holds a lot of potential. We?ve also made great strides in the Philippines. You go to each market and there are different dynamics to it. We need to figure how to use our brands, how to use our expertise, our content and marry that to local strengths and in developing local content. We need to go deeper and deeper. To create content that resonates with the local community,” he said.

In the US, Carey said, News Corp was building a national sports network. ?What we have in sports is the type of events that appear on the broadcasting network like NFL (National Football League) and then some localised sports channels in individual markets that cover a large portion of the country. Between these two, we felt that we should have a national sports channel that will provide the breadth of sports programming,? he said, adding that News Corp was willing to make investments around the world. ?We are willing to take risks and put the investment up,? he said.

The India growth story

Star India chief operating officer Sanjay Gupta said that the company has pumped in nearly a billion dollars in sports properties in the last six months. Apart from the ESS acquisition, the company had acquired the rights to India?s international cricket calendar and launched two domestic leagues in university cricket and hockey, and renewed rights to the English Premier League (EPL) with a substantive bid. In an attempt to pip rival Multi Screen Media (MSM) which holds the rights to the volatile Indian Premier League (IPL), it had also come aboard the property as an associate sponsor for an unspecified amount. Many industry watchers have said that Star overpaid for that deal. But Star turned around the entertainment business in India and emerged a leader. Given the right framework and time, it will set the sports business right as well, Gupta believes.

?In the sports business, everyone?s bleeding. While one sports broadcaster has gone bankrupt trying to pay the bills for the Indian cricket rights, another is struggling to break even and yet another is trying to run a sports business without much sports content. The fault lies singularly with the existing sports broadcasters because they?ve nothing to grow the business,? said Gupta.

His contention is that that the reach of sports channels even lags behind niche channels such as Discovery or MTV. ?On an average ? if you were to take 1000 hours of TV viewing, only 20 hours will comprise sports programming. This is just 2-3% of total television viewing. In developed countries, the share of sports is as much as 10-15%.? Gupta says that as the market leader, the company will try and push the envelope on sports by investing in local sports and commentary in local languages. It will create local sports icons. Gupta added that people?s connect with sports was poor, with the commentary being technical and convoluted in nature and always in English.

?The strategy is not to go global, but to go local in a very relevant way. I was around for the finals of the Hockey India League and it was a scene to be believed. The stadium was packed. Anticipating the shortage of seats, the organisers had taken a stadium next to it as well and put up a big screen. So there were 8000 people in one stadium, and nearly 20,000 people in the other. And that?s the power we need to unlock,? said Gupta.

On the distribution side also, Star is trying to plug the gaps by trying to get multi system operators (MSOs) and direct to home (DTH) operators to introduce sports channels as a part of the base pack. ?Instead of using compelling sports content to get more money from consumers and reduce churn, the cable and satellite operators make it difficult for their subscribers to discover and develop a habit of consuming sports. These platforms turn off the channel when a marquee event is not on. While this may have made sense in the old, bandwidth-limited analog world where you could only put 20-30 channels, it makes no sense that even DTH operators are employing the same tactic when they have 300 channels to offer,? says Gupta.

News Corp also plans to lobby with Telecom Regulatory Authority of India (Trai), the regulator for the broadcast industry, in order to do away with the pricing cap on sports channels and the mandatory sharing of feed with public broadcaster Doordarshan. ?Why should my sports channel be priced the same as another sports channel which has limited properties?,? queries Gupta. He also added that consumers will never subscribe to content, if they get it for free via the public broadcaster. News Corp will engage with the government on all these points. In addition, it will pursue legal course against news channels and websites that do not respect intellectual property rights (IPR).

The Asia?India split

Research company Media Partners Asia (MPA) in its fiscal year estimate (FYE) June 2013 forecast said that the Asian channels business (Star India and Fox International Channels Asia) will account for close to 40% of EBITDA (earnings before interest, taxes, depreciation, and amortisation) across News Corp?s international channels. Revenue-wise, News Corp’s Asian channels business is almost touching $2.5 billion. The Star India business (without sports) is around $930 million-plus while the India sports business is more than $400 million. While Fox International Channels Asia is estimated at $550 million, Fox Sports in Asia (excluding India) is about $200 million.

Vivek Couto, owner, Media Partners Asia said that a big challenge for Star was the continuing investment in sports. This was something that Star was aggressive on, but also patient with, giving itself long term horizons for growth. ?It’s a sports ecosystem play to change viewer perceptions, consumer value, local sports development and it will lead to margin erosion and likely require a 3-5 year turnaround period, ?he said. In Asia, India contributes to 75% of revenues generated by News Corp. One big challenge for News Corp is that the platforms (distribution) are far stronger in Asia Pacific than in India and these platforms were also picking up rights in the region.

Ashish Pherwani, partner (advisory services) at Ernst & Young said that News Corp was making all the right moves. ?Prices on sports properties have gone through the roof and someone has to foot the bill. Hence they are going after local sports properties which are priced lower. This will also give them a greater connect with the masses,? he said. Pherwani added that with India?s digitisation drive playing out; it is entirely possible that Star may break even in the next few years on its sports investments.

Mona Jain, chief executive of media buying company Vivaki Exchange added that it was a good idea to focus on local sports events. Once these events are popularised and viewership comes in, advertising will follow.

Not everyone agrees

President of the MSO Alliance, Ashok Mansukhani, said that the issue about pricing cap for all pay channels is subjudice in the Supreme Court and will not be decided in a hurry. But he concedes that there is a case for deferential pricing. Also, mandatory sharing of sports feed with Doordarshan is a legislative direction and in public interest. On sports channels being included in base packs, he said, ?The base pack consists of 100 free-to-air channels for Rs100. This is the lowest price anywhere in the world. Sports channels are never free-to-air and have always commanded premium value and in view of the ridiculously expensive purchase of sports rights by Indian broadcasters, the subscription fee demanded by the aggregators from MSOs is so high that they can never form part of the basic pack.? Mansukhani pointed out that News Corp?s focus on India had sharpened after the first and second phase of digitisation. But other broadcasters such as MSM are equally interested in spearheading their penetration of the difficult distribution market through purchase of expensive sports rights. News Corp will not find it easy to dominate the Indian market even in sports.

Man Jit Singh, chief executive of MSM said that as a network, it was opposed to price caps. While he did not want to comment on Star?s sports strategy, he maintained that the IPL was commercially successful. ?We reached 154 million viewers the first two weeks of IPL and by the end of the tournament we expect this to exceed 200 million viewers,? he said. He points out that MSM as a network has done its bit in broadening the audience for cricket via programmes such as Extra Innings which made the game more women friendly, and explained the nuances to the public. They are also introducing new sports to audiences on Sony Six and educating viewers on the rules of these sports through short form educational videos. Further, they were engaging with federations such as the National Baseball Association to popularise specific sports in India.