💎IPOs, IPL & YouTube (26 June 2022)


It’s a well-heard phrase: “We make decisions, and those decisions turn around and make us”. This week, with the three stories ahead, let’s see how it pans out in real life when it comes to making the right business choices.

IPL Broadcasting.png

IPL broadcasting media rights 2023-27 auction just got done and it was not only huge but also different this time. How? BCCI has unbundled the media rights into digital and television this year. Until now, a single broadcaster (like Star network last year) owned the rights across both the domains through Star Sports and Hotstar.

Talking about the numbers, Season1 of the IPL in 2008 saw a broadcast price of Rs 13.6 crore per match, for the upcoming 2023 onwards it has grown to Rs.105.5 crore (both TV and digital combined) per match.

On the auction day

Reliance-led Viacom group dropped out of the TV rights after the first auction round and Star ended up taking it over. Reliance however bagged the digital rights for the platform, with Rs 50 crore per match.

While TV was the staple source of entertainment in India, the past few years have seen a rapid pivot toward online streaming. And the country may see 900 million internet users in five years, underscoring the potential of digital rights.

But the points to be noted

  • From this time onwards TV and digital broadcasters are different, the companies can start undercutting each other's ad rates to get more advertisers on board

  • Last season, the viewership dropped by 30%, a lot of which was attributed to the poor performance of the top teams Mumbai and Chennai. But that's a variable that no one can control

  • Besides paying the BCCI, the broadcaster has to pay for other costs like production, marketing, etc. Post subtraction of all costs, reaching profitability has been a challenge for the broadcasters to date

Our take

Star's loss of 20 million subscribers might be a gain for Reliance, but how the player solves for profitability metrics will be watched. Brands are already struggling with inflation and slow consumer demand and advertising costs are one of the first ones to take a hit during such times.

Also, another point to wonder about is, in a country like India, be it through digital or traditional mode, is cricket content a greenfield opportunity, or has reached the nooks of the streets already?

IPO China Vs rest of the world.png

China's equity public listings, with a 7% rise as compared to the last year, are way ahead of the rest of the world, where the IPO proceeds have fallen by almost 80%.

Globally, for the companies, the challenge is to find buyers in the lackluster markets, which have been down by 20% since the start of the year. The economic conditions are also tough as amidst the ongoing Ukraine war, prices of commodities like oil have spiraled upwards, leading to inflation and also draining money from the equity markets.

China's listed markets

The listed markets in China have a different story to tell. The CSI 300 Index rebounded 12% since hitting a two-year low in April on expectations that pro-growth measures will reverse a slowdown in the economy.

Looking at the equity markets overall, the 120-day correlation between the CSI 300 and the S&P 500 indexes is now less than 0.1. The relationship was at 0.44, at least a decade-high level, in April 2020.

China's story

  • Chinese IPOs were driven by “technological self-reliance”, which focused on sectors like semiconductors, and renewables. Basically, the ones that lead the economic growth and reduce the dependency on the Western nations like the USA

  • The financial sector in the country worked double-time during the lockdown. Many investment banks, that facilitate IPOs stationed staff at the offices of clients for months to conduct due diligence

  • Post the regulatory crackdown on the listing of Chinese firms in the USA last year, 95% of the IPO fundraising by Chinese companies was carried out in the domestic markets this year

Our take

China’s latest economic data supports the view that despite the strict covid policy, the country kept its export and manufacturing industries strong. Consequently, it has emerged as a safe haven for global investors during such bear markets.

With global fund managers predicting that a recession in the US is almost certain, China now seems to be an attractive market for investors, due to the divergence of its monetary policies from the Western nations.

Youtube Shorts Vs Ticktok.png

Back in 2020, when India banned many prominent Chinese apps citing national security concerns, YouTube made a clever choice. Well, Tiktok was one of the popular short video apps that got prohibited and exactly then YouTube decided to test its Shorts in India.

YouTube Shorts allows users to create videos for up to 1 minute, hence creating competition for Tiktok and Insta reels.

The growing popularity

It was certainly a no-brainer for YouTube to enter the space as it is the world's biggest video platform. Within months of launching in India, the service got more than 3.5 billion views daily and hence they expanded Shorts to the U.S. in March 2021.

YouTube said last week that Shorts is reaching 1.5 billion monthly users.TikTok in September said it had roughly a billion monthly users.

Edge over others

  • Unlike other platforms such as Tiktok and Instagram, YouTube launched in 2005 and therefore has a fair share of the older audience too

  • They've also built out a ton of analytics tools for creators so they can get a sense of how well their videos are doing, who's watching them, and from where

  • YouTube's algorithm is different than Tiktok's. On Tiktok, if the video does not go viral on the same day, it won't ever get the traction but that's not the case with Youtube

Our take

YouTube shorts is trying to get additional features like special effects for the content creators and also how to advertise and earn revenues. Some bit of journey ahead definitely!

Meanwhile, it will be interesting to watch how the platform creates a clear differentiation between the long format with the short one- both among the creators and the viewers. The other way round could find a sweet spot between the two, But yes, any confusion here might not work in the favour of the platform.