Edelweiss Securities said Zee losing out on the race for IPL broadcast rights is 'perceived as a huge relief' as the huge expenses incurred by the rights winners would put a lot of pressure their margins. Retain ‘BUY’ on ZEE as it would gain from its merger with Sony, and IPL concerns seem to have gone away, Edelweiss said.
Usually, a company's stock gets a bump-up after a major development, like say, securing broadcast rights for India's premier cricket tournament, the Indian Premier League (IPL), which is also the second biggest sports league in the world by value of rights.
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But predicting the stock market is not an exact science, and in keeping with that, Zee Entertainment — which lost out in the race to bag streaming or broadcast rights for the IPL — had its stock upgraded to 'buy' by Edelweiss Securities Limited.
Disney Star has won the India TV rights for Rs 23,600 crore while Viacom18 has won the digital rights for Rs 20,500 crore.
In a research note, Edelweiss noted that the only real winner(s) from this is BCCI and, the IPL teams. "...the only entities that make money in IPL is the BCCI and teams (they get revenue share from BCCI). As of now, the BCCI has earned a staggering Rs 46,000 crore (up 2.5x versus 2018 auction value of Rs 16,300 crore)," Edelweiss said.
Edelweiss said this is perceived as a huge relief for Zee Entertainment as the huge expenses incurred by the rights winners would put huge pressure their margins. "(Zee) would gain from its merger with Sony, and IPL concerns seem to have gone away," the research note added.
In the note, Edeweiss said it would be difficult for the winners of the rights to make any profits in the initial years.
"Two big revenue streams for sports channels could potentially get impacted: Government has banned: i) surrogate advertising by liquor players (we await more clarity on how severe this will be); ii) ads from online betting companies. These bans would accordingly make it difficult for sports channels to air a disproportionate share of such ads," the note said.
Edelweiss added in the note that Zee and Sony should continue with their existing strategy of "low-cost but sustainable content" in both sports and non-sports. "For example, Zee had won rights of UAE T20, which is much cheaper. Plus, they should continue to focus on non-cricket such as the Olympics, tennis, etc," the note added.
"At Zee, we evaluate all business decisions through the prism of value creation for all our stakeholders and we will continue to evaluate every sports property with the same prism,” said Rahul Johri, President — Business, Zee Entertainment Enterprises Ltd, while thanking BCCI President Sourav Ganguly and Secretary Jay Shah for a transparent e-auction process.