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ICC World Cup: Commercial Interest vs National Interest!

Published on Fri, Mar 13,2015 | 11:14, Updated at Fri, Mar 13 at 11:14Source : Moneycontrol.com 

ICC World Cup: Commercial Interest vs National Interest!

By: Desh Gaurav Sekhri, Sports-Counsel & Practice Coordinator, JSA

The Supreme Court of India recently stayed the Delhi High Court’s order that had prevented Prasar Bharati from relaying the ICC’s ODI World Cup (“WC”) matches featuring the Indian team, and the semi-finals and finals of the tournament. For Star India, which has the commercial rights to broadcast the WC in India, an adverse ruling by the Court would be a significant setback, as it sizably dilutes the exclusivity to broadcast what is arguably the most-viewed tournament that the ICC conducts. As the official broadcaster with global audio-visual rights for ICC events up to 2023, a ruling by the Supreme Court in its largest viewership market that could likely reduce the advertising and subscription revenues for future events would be a significant setback for Star India.

The Supreme Court’s ruling would likely be based in part on its earlier ruling in the BCCI-IPL conflict of interest matter, where it held that the principles of natural justice and the greater public good superseded commercial rights aspects, given that the most important and critical stakeholders for the game of cricket were its fans, namely the entire population of India.  Unlike its ruling in the BCCI-IPL matter however, where public policy trumped any actual legal argument that the BCCI made, the basis for the ruling in the Prasar Bharati matter will be in a legislation that was passed primarily to address this situation.

The Sports Broadcasting Signals (Mandatory Sharing with Prasar Bharati) Act, 2007 (“Act”) was enacted with the intent of ensuring that in certain sports events,  national interest superseded commercial interests, from the point of view of parity and widest possible dissemination.  The Act’s intent is to provide access on a free to air basis, of sporting events that have national importance, to the largest number of television viewers and radio listeners, through mandatory sharing of sports broadcast signals with Prasar Bharati. For the WC, the reach of this Act may extend to the semi-finals and finals, irrespective of whether or not the Indian team reaches that far.

In accordance with the Act, Star India, despite paying a hefty (undisclosed) sum for the exclusive broadcast rights and consequently becoming the content rights owner/holder, could regardless be required to share its live broadcast signals simultaneously with Prasar Bharti minus the advertisements, for television and radio re-transmission. As consideration for this mandatory sharing of the signal, Star India and Prasar Bharati would then share the advertisement revenue from the re-transmission on Prasar Bharati in the following ratios- not less than 75:25 for television coverage, and 50:50 for radio coverage. The penalty for non-compliance with the terms and conditions as may be specified could include suspension or revocation of licenses, permissions, or registrations, to be imposed by the Central Government.  Star India in that case would be understandably aggrieved, given that it stands to lose significant advertising revenue and subscription fees due to the free-to-air provision of the most lucrative matches from its perspective possibly for the WC, and certainly for future tournaments. The reason for this is simple- from the broadcaster’s perspective, the two primary sources of revenue are- a.) advertising revenues which are enhanced greatly by higher viewership estimates/figures, with exclusive broadcasts adding an additional premium to the rates and demand from advertisers for prime slots, IPL being a good example; and b.) subscription revenues, which in this case could also be dealt a significant blow with the free-to-air option available to virtually the entire viewing public.

Estimating the advertising revenues on Prasar Bharati to determine the revenue-share proportion attributable to both parties could prove problematic logistically and otherwise, which was the reason why Star India during the proceedings requested the establishing of an additional channel exclusively for the WC, offering to bear the cost of setting it up, a request however that was denied by the Court as being impracticable in the current time-frame. It may also be difficult to quantify the actual subscription revenue lost by Star India across its regional and national network, although it will likely be able to assess potential revenue losses from advertising revenue based on estimates from similar past events. Whether or not the Court rules in Star India’s favor regarding the lost revenue is another matter entirely.

A commonly used refrain for the Indian sports sector is the difficulty and/or inability of potential investors to monetize and optimize commercial for-profit opportunities due to a host of roadblocks. An expected ruling by the Court upholding the Act and Prasar Bharati’s rights in this matter could further exacerbate the wariness that corporates have with respect to investing in the sports sector in India. On the other hand the Court, from its perspective, would have been mostly consistent in both its rulings, citing common principles for both its decisions concerning cricket thus far in 2015. Both the matters it would have ruled on share in common the need to balance the interests of the fans of cricket i.e. the people of India, with the protection or allocation of the commercial interests of those who invest in the sport.
 
For now, the Supreme Court could look to balance the equity of access to undiluted cricket with the monetization of the sport. This would be rooted in the trade-off between the principles of natural justice and the barriers to viewership and/or the right to the undiluted administration of cricket that the Supreme Court has used as the benchmark in its observations and earlier ruling. The Court could rule that it is in the broad national interest that the principles of natural justice are interpreted to prevent commercial interests from monopolizing the conducting or dissemination of the sport. Perhaps this would be the initial trade-off for the sports sector to achieve better governance and a cleaner reputation, although the unfortunate collateral damage would be the cost of professional entities foregoing profitability in their investments. Yet another significant ruling by the Court is awaited.

 
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