Rs1,400 crore: A telecasting odyssey

The Zee-ESPN row over the sale of Rs1,400-crore cricket telecast rights and one-day matches has taken a new twist with the battle having been taken to the Bombay High Court

In 1983, India surprised all cricketing nations by winning the cricket world cup. The world cup success raised India's interest in the game to new levels. Money started flowing into the game from many spheres of the marketing world. Television broadcast rights, advertising became an important source of revenue. For the first time, competition emerged to broadcast matches that involved India.

In a country of millions of cricket fans, there is enormous scope of making easy money by obtaining the terrestrial broadcasting rights.The Board of Control for Cricket in India (BCCI) decided to sell broadcasting rights for four years for cricket matches to be played in India between October 2004 and 2008 in a tender which was opened on August 14, 2004.

Jagmohan Dalmiya, president of BCCI announced that Zee Telefilms would be granted the rights, after it emerged the highest bidder. BCCI, the richest sporting body in India was going to be richer by a huge sum of Rs1, 400 crore ($308 million) through this deal.

Zee Telefilms, India's largest media and entertainment company had made the highest bid at Rs1,200 crore ($260 million) and promised another Rs95 crore ($20 million) for coverage of domestic matches, while ESPN-Star (ESS) one of Asia's leading sports broadcaster, had quoted Rs106 crore ($230 million).

ESS, decided to top Zee's bid by agreeing to pay Rs1,400 crore ($308 million) to clinch the deal in its favour. Zee, being the highest bidder, was asked during negotiations with BCCI whether it would match the figure of Rs1,400 crore offered by ESS. Zee agreed and also decided to deposit a signing amount of Rs95 crore, which sealed the deal in its favour on September 5, 2004.

ZEE Telefilms owns and operates the largest number of television channels in India —19 across a spectrum of six languages under the ZEE and Alpha brands. It is planning to launch a new sports channel.

Zee Telefilms was also expected to announce its production partner on Thursday September 9. Production house, Nimbus, was understood to be pitching for the production of BCCI matches for Zee. Others in the race included WorldTel, TWI, Trademark, Sunset and Vine and ESC. Dubai-based sport channel, Ten Sports, has also been named in this context.

Meanwhile, Turner International also expressed interest in sharing its expertise with Zee for launching a sport channel. The Turner group already has a distribution network with Zee called Zee-Turner Ltd.

But the issue took a different turn altogether when ESPN-Star Sports decided to challenge the Indian cricket board's decision in the Bombay High Court asserting that Zee was not eligible to bid in the process, as per the conditions outlined in the tender.

Rik Dovey, MD, ESPN-Star Sports said, "We are very clear that ESPN-STAR Sports was the highest eligible bidder under the rules of bidding specified by the BCCI. The BCCI has now changed the entire process of bidding in violation of rules set by BCCI themselves just to favour our competitor by giving them an excessive advantage," he said.

R C Venkalesh, MD, ESPN Software India Pvt Ltd also stated that "Zee should not have been allowed to bid in the first place since it does not qualify because it has no prior experience of broadcasting or producing live international cricket event as specified in the tender."

On September 7, the Bombay High Court asked BCCI to produce the file pertaining to the awarding of telecast rights to Zee Network for a four-year period. A bench comprising chief justice D S Bhandari and justice D Y Chandrachud adjourned the matter to September 9, after asking BCCI to produce the files.

According to the latest development, the Bombay High Court suggested on September 9 that both ESS and Zee Telefilms make fresh bids to broadcast cricket matches played in India between October 2004 and September 2008. Whoever bids the highest would bag telecast rights, the court said. The decision came after both the parties showed their willingness to submit fresh bids following BCCI's submission that Zee as well as ESPN were equally eligible to bag the telecast rights.

The Subhash Chandra-owned Zee has time until September 14, to decide whether it is agreeable to a re-bidding process. Board members of Zee Telefilms will meet to decide whether to participate in a fresh bid for cricket telecast rights.

But legal and media experts point out that if there's a rebidding process, other broadcasters should also be allowed to participate. Besides Zee and ESPN-STAR Sports, the other bidders originally in the fray for these rights were Prasar Bharati, Sony Entertainment Television and Ten Sports

Sources ruled out Sony, Ten Sports and Prasar Bharati participating in the rebidding anyway because of the steep acquisition cost. If there's rebidding, it will open with a floor price of $308 million (over Rs1,400 crore). Since Sony, Ten and Prasar Bharati had bid much lower, they are not likely to revise the bid price to such an extent, sources said. In the initial round of bidding, Zee had offered Rs1,200 crore, ESPN Rs1,000 crore, Prasar Bharati Rs700 crore, Sony Rs600 crore and Ten Sports less than Rs500 crore.

According to analysts, after all the expenses, the broadcaster will end up making 175 crore in operating profit over four years. That's just about Rs43 crore a year, peanuts by broadcasting standards. If fresh bid pushes the price to Rs1,500 crore or more, nobody except BCCI, will ever see the money on these rights.