The HBL PSL media rights have not really seen any increase in value. Here’s why

The Pakistan Cricket Board (PCB) has finally announced who the broadcasting rights for HBL Pakistan Super League (PSL) have been sold to. While trying to remain discreet about the exact figure, the chairman and secretary respectively stated that this was the highest ever ” deal” and that the deal was “at least Rs 3 bn more than the last bid”.

Over the years, the PCB has remained discrete about the amount of money these deals go for. Unluckily, this time, the value of the deals and reserve prices have been revealed by various media reports and there seems to be vast consensus on these values. The PCB historically only reveals the percentage increase in the amount for which TV and digital rights are sold. This time around, the PCB claims that it has seen a “massive increase” in the value of PSL’s media rights.

But to know how “high” this deal really was, it is important to first know what the real values of the deal are. The PCB press release states that the TV rights have been sold for a 45% increase and the digital rights have been sold for 113% increase. From previous reports we know that the TV rights for PSL were sold for Rs 4.35 billion in 2021. Reconciling with the figure reported by other media outlets this time, we establish that the PSL broadcast rights were sold for Rs 6.30 billion. This figure also becomes mathematically verifiable. Including the digital rights, the amount PCB earned is Rs 8.15 billion in total. Of this, Rs 1.85 billion was fetched from digital streaming rights, as revealed in various media reports.

Now that the numbers are clear, an important question is raised, is this amount higher than the last auction? And is the PCB management correct in tooting its own horn for a “massive” improvement?

The real value conundrum

Even though not mandatory, it is a worldwide practice to report broadcasting rights of major sports leagues in dollar terms. One of the main reasons for that is comparability to other major leagues, but another major reason is the stability of the US dollar, being a peg for many currencies around the globe. 

For example the IPL sold its TV rights to Star for approximately INR 24,000 Crores or $3.02 billion last year. Similarly, it is common knowledge that Cricket Australia sold rights to 7even and Fox Cricket at $1.5 billion for the next 7 years. There is however, another important reason for this form of reporting, and that is the real and nominal economic value. A concept well heard of in economic and accounting practices, seems to have eluded the PCB.

While some readers may be aware of the difference between real and nominal values of a commodity, it is important to explain what they mean to understand the PSL media rights problem. The current economic climate is perfect to explain this phenomenon. Say a 75g bag of chips used to cost Rs 50 in 2021. The same bag is currently going for Rs. 100 in the market and a 40g bag now costs Rs 50. The explanation for that is inflation, as everyone understands it.

The decrease in the size of the bag of chips happened due to huge inflation numbers in the last two years. This inflation was caused by a steep devaluation of the rupee, increase in global commodity prices etc. While the price of the bag of chips has increased, was it because of the increase in demand for the chips or an appreciation in its brand value? Not entirely!It could be but for that we need to take inflation out of the picture. So to map the increase in the value of PSL media rights, one has to adjust it for inflation. 

A much simpler way to get to the ballpark figure, which news media around the world would generally do while reporting, is taking the dollar value of the increase. However, the dollar economy itself sees a certain amount of inflation so the real economic value is the correct way to measure an increase in value.

The media rights for the 2022 and 2023 seasons, sold in December 2021 were awarded for approximately $24.6 million (Rs 4.35 billion), as per the dollar-rupee conversion rate from December 2021. Calculating the value of the current bid, the dollar value for TV broadcasting rights has not seen a “massive increase” but is rather lesser than the previous deal, at $22.6 million. The decrease in dollar terms is therefore calculated to be 8%.

Profit, however, delves deeper to carry out the real value determination, adjusting the PSL deal with inflation. With the average annual inflation between December 2021 and December 2023 at 27.1%, taking 2021 as the base year, the real rupee value of the PSL media deal is Rs 3.899 billion in December 2021 terms. This marks a 10% real decrease in value and hence does not really give any bragging rights to the Zaka Ashraf led board. 

To find the real value of a statistic by adjusting it for inflation is not a new concept, in fact all the growth statistics published by the Pakistan Bureau of Statistics are already adjusted for inflation. While the PCB is not an entity well-known for its prowess in economic valuations, it is important to point these out when gauging board performances. 

With the reveal of the current value of the PSL deal, we can also calculate the two-year value of the broadcasting rights sold to Blitz and Tech front in December 2018. While the price leaked by the media, at the time, was $36 million dollars (Rs 4.7 billion for 3 seasons), a reconciliation with the percentage increases reported over the next two deals lands the pointer at a calculated Rs 4.45 billion for the deal with Blitz and Techfront in Dec 2018.

Taking December 2018 as the base year, the graph below shows the real increase in the value of PSL’s brand rights over the last 6 seasons that have been auctioned. 

This goes to conclude that the “highest ever” rights valuation for the HBL PSL was fetched, not this year, but in 2021.

The Digital Front

There is however one medium where the PCB has outperformed its previous bid, though due to no brilliance of its own. This is the digital rights for PSL. A nominal increase of 113% marks a significant real increase as well. Once again, the present value of the bid by Walee Technologies, as revealed by media at Rs 1.85 billion, means that the previous bid made in December 2021 was Rs 868 million. Even after adjusting for inflation, this shows a 32% increase in real value.

Over the last 3 years the viewer migration to OTT platforms has been great. With a steep rise in broadband and 4G connections, Pakistanis are now much more at home, watching cricket from their phones. It would in fact not be wrong to say that the Over The Top (OTT) services and video streaming apps that operate in Pakistan, primarily do so on the back of cricket.

To state a few numbers, 14.4 million people watched Asia Cup 2023 on Jazz’s Tamasha app. More than 21 million people joined the live stream of Daraz during the Pakistan vs India match in Asia Cup 2022. As of now, all the leading cricket streaming apps have more than 4 million downloads.

In fact 3.8 million people downloaded tamasha and 2.8 million downloaded Daraz during the Cricket World Cup 2023, alone. This goes to show that the market size on the digital platforms has increased by a large quantity, ever since December 2021. Where does this place the growth in the value for which PSL’s digital rights were sold? The answer is still not clear due to lack of availability of user data.

However, numbers from across the world suggest that Pakistan still hasn’t cashed in on digital rights sales. To take the IPL example, it is seen that the digital viewing rights, last auction, went for the same amount of money as the TV rights. In the case of other boards and leagues, Cricket Australia signed a 7 year deal with 7even and Fox for $1.5 billion, of which digital rights amounted to 33% of the total bid value (~$500 million). 

The Reasons

Now that it has been established that the value of PSL’s rights has decreased over time, let us answer why. A TV deal is only as good as the amount of money it will fetch. Given the current economic climate of Pakistan, the amount of money anticipated to be earnt through PSL is not huge. An economic slowdown and less availability of credit, does not allow companies to invest as heavily in marketing and expansion as they normally would. 

It is also important to mention that one of the biggest advertiser demographics, that has spearheaded the sponsorship for the majority of leagues in the recent past, has been betting apps or surrogate companies representing those betting apps. With a potential ban on these advertisers by the PCB, the pool of money that PSL normally earns from has already shrunk compared to the previous years.

Before the auction of PSL’s media rights, the PCB hired Colganbauer, a UK-based consulting firm to determine the valuation of the PSL media rights. Reportedly, according to Colganbauer, the total worth of the TV rights of Pakistan Super League, sit at Rs.6 billion. This is after taking into account currency depreciation, real values and expected revenues. 

Considering the figure given by the consultant, the PCB has done well to sell off the rights for 6.3 billion. However, is this a jackpot? Absolutely not. The PSL has, for sure, seen better days.