Star Sports may be losing big time over the years but 21ST Century Fox CEO James Murdoch has reiterated that Star Sports is set to achieve its target of breaking even in the year 2018. He also pointed out that the strategy to plough back the profits from the entertainment business into the loss-making sports business was the right strategy.
“We took a tough bet there to take all of our profits in the past and put that into building the sports business. I think it was the right thing to do. The break-even target set by Star India is 2018 and we should achieve that,” Murdoch has said at a Press Conference recently.
Murdoch, in a reference to the $2.5 billion Indian Premier League media rights acquisition, said that the company was cautious of its EBITDA targets while making its bid. “One thing we didn’t want to do was to derail from our goals. Even if we are investing a lot in it we wanted to make sure that it makes sense from short term and long term perspective because we know that investors wanted us to focus on our goal,” Murdoch said.
Murdoch claims IPL to be a great product with a loyal audience and fan base which will be a big driver for the business in the long run. However, he also noted that no one set of rights is completely essential as the business is made up of much more than that. The addition of IPL also means that Star Sports has a continuous supply of sports content through other sports properties like Pro Kabaddi League, Indian Super League, and BCCI.
“The IPL is a great product. Clearly, fans and customers love it. It also works well from a schedule perspective if we look at the IPL plus the Pro Kabaddi league and the ISL. So, the calendar really works for us so we can have a year of great programming for Star Sports,” Murdoch elucidated.
The IPL will also be used to grow video on demand (VoD) platform Hotstar globally. The IPL attracts a lot of diaspora population in mature markets like US and UK. “And it’s probably the most exciting cricket competition in the world. It’s global, so it also speaks to the South Asian diaspora which we are excited to monetize. We launched Hotstar as a subscription service internationally just this year so it’s super early days, but as the IPL picks up, that is going to be great,” Murdoch noted. He also pointed out that Hotstar had the streaming rights for IPL and the league was a big driver for the VoD platform. “And between the entertainment and the sports products on Hotstar, we’ll view, on some days, have over 1 billion minutes a day of watch time. That’s something that’s really important from an engagement perspective for us and for our ad business there,” he stated.
Star India, which has set a target of delivering $500 million EBITDA in FY18, has posted an EBITDA of $100 million in the first quarter ended 30 September. Murdoch believes India business is poised to touch $500 million for the full fiscal with three more quarters left in the fiscal. The company has set a target of $1 billion EBITDA by 2020. 21st Century Fox, the parent company of Star, follows a fiscal calendar of July to June. Murdoch also noted there were many naysayers when he first talked about the ambitious EBITDA target for the India business. “We feel that the growth from that business is very large in the next couple of years and we are well on track. I know when I said that we are going to do $500 million EBITDA a lot of people said umm…’I don’t know’,” he said.
We are on track and in the first quarter, we did almost $100 million EBITDA and there’s a growth through the balance of the year,” Murdoch asserted while adding that the ambitious target is not easy to achieve but Star is on track to accomplish the same.
Murdoch also had a word of appreciation for the Star India team led by chairman and CEO Uday Shankar and ably assisted by MD Sanjay Gupta. Shankar was recently elevated to president Asia for 21st Century Fox. “Our team there has been at it for a long time and we have built a lot of capability there and they are focused and very good at execution. The team has a great taste, great judgement and we are just empowering them to do better,” he stated.
The 21st Century Fox CEO further noted that the India business is also growing its capability around new businesses like Hotstar, which is growing at a great speed. The core entertainment and sports businesses regionally and nationally in India continue to do well. “We remain bullish about India over the long term. We’ve been investing there for a long time. I mean, just see the scale in the marketplace, the transparency in the marketplace, the ability to go and innovate and entrepreneurial spirit in the marketplace – I mean, that is just unique in the world,” Murdoch said.
According to Murdoch, the regional business, which has been built organically and inorganically through acquisitions like Asianet and Maa TV, has transformed the business in India. “We have been able to put that all together into an overall national and local business together in India that is head and shoulders above any of our competitors,” he affirmed. The consolidated national and regional entertainment and sports business has helped the company in driving the pricing both on the affiliate as well as ad side.
Star, Murdoch stated, has been working on increasing more transparency by closely working with the cable TV and direct to home (DTH) operators. “So we’ve been able to really make progress on affiliate fees there, working with the local cable operators and the DTH segment, in particular, to drive more transparency into the business, and collecting affiliate fees and understanding transparent subscriber numbers. And we’ve been able to really put together a great ad business, which continues to benefit from the overall growth in the economy and a lot of new people coming in,” he explained.