Feature: An Indian summer for digital sport? - January 2006  

The enormous growth in the usage of computers, the internet, high-end mobile phones and digital video recorders is rapidly changing the way sport is consumed worldwide, writes Ashok Karanth, a consultant with the Frontiers Group. Whilst the change is very evident in advanced markets like the US, UK and Europe, the big frontier for these new technologies is Asia – which offers probably the largest opportunity and the most significant challenge for all stakeholders. Sports rights owners, technology providers and infrastructure suppliers (not to mention the fans) are still coming to grips with these changes in Asia, and the market is far from settled. Whilst China is easily the single largest market out there, India offers a potentially equally large market, however with very different market dynamics.

The Indian sports industry

India’s booming economy (growing at close to 8% every year), a young and massive population (over a billion people, with a staggering 70% below the age of 35) and a vast middle class with higher disposable incomes, all make India a very large market for sport and entertainment. India’s sport industry is overwhelmingly lopsided towards one major sport – cricket. Whilst estimates on the overall size of the industry vary dramatically, cricket is the undisputed King Kong. Over 90% of the industry’s revenues are generated by cricket, mainly through TV revenues. The recent bidding for TV rights for Indian cricket got offers of over $300m for four years, and Indian cricket recently signed five-year shirt sponsorship deals worth around $120m. Football, hockey, tennis and even golf are slowly making their presence felt, but unless something drastic happens, this lopsidedness is here to stay for the immediate future. The Premier League, Formula One and the Champions League have their own support base, which is growing rapidly.

Broadband opportunities in sport

India has just over 30m internet users, with a measly 700,000 subscribers who have access to broadband (256 kbps or higher). Not quite the information superhighway yet eh? Steep computer prices, lack of local language content and support as well as high connectivity charges (relatively speaking) are the major obstacles. Although the broadband user base is growing, it is unlikely to gain significant mass acceptance any time soon. The paltry user base for broadband coupled with the relative ubiquity of TV and cheap cable (cable TV is available in over 60m households) has restricted the potential for sports bodies to fully leverage the internet in India.
Cricket portals such as Cricinfo and large horizontal portals get very high hits and page-views from Indians during matches. Companies like Yahoo and MSN are increasing their online sport content to attract Indian surfers. Whereas internet advertising is growing at around 100%, the base is still very small.
However, one significant opportunity that exists is in targeting the vast Indian diaspora around the world. Estimates claim that there are over 20m people of Indian origin living across the Middle East, US, UK, Europe and Canada. Indians in the US and the UK are one of the largest and wealthiest minority communities, and they are extremely passionate about cricket. One US-based streaming media company reportedly offered $44m for broadband rights for Indian cricket in the US alone. This clearly is potential waiting to be tapped.
The other opportunity that exists is for smaller sports to reach their target audience through the internet. Sports such as snooker and billiards, Indian golf and athletics usually do not attract the attention of television companies, but with some innovations they can leverage the internet to package their sport to a niche audience.
The broadband market is bound to grow exponentially soon, with low cost computers and better infrastructure being made available in 2006. Early market players are currently seeding the market, and are hoping to reach the tipping point soon. True potential of this market can probably only be realised in a couple of years’ time.

Mobile opportunities in sport

India has been one of the mobile industry’s best performing markets. Growing at breakneck speed, India added over 25m subscribers in 2005 alone, taking the subscriber base to about 67m mobile users. The target is a whopping 200m subscribers by end 2007. India’s mobile penetration is currently around 6% - contrast this with many European countries that have more mobile phones than people, and the potential that exists in India is evident.
However, as with most markets in India, the mobile phone market is extremely price sensitive. India’s Average Revenue Per User (ARPU) is around $11 a month, which is one of the lowest in the world and falling. The good news is that the value added services (VAS) market (non-voice) is growing very rapidly. Pyramid Research says the VAS market is as easy as ABC – Astrology, Bollywood and, you guessed it, Cricket.
Score updates during cricket matches are the rage in India, with every telco and content provider offering a shortcode-based SMS service. Indians are estimated to send around 100m messages daily, and these numbers shoot up during match days. To cater to new mobile users emerging from rural India who are not very comfortable with texting, voice activated content is emerging. With handset prices falling rapidly and the subscriber base increasing, this revenue source is growing very fast.
The other area of growth is mobile games. Cricket-related games are one of the most popular in India, and every cricketer worth his salt in India is endorsing a telco and a mobile game. Downloads of these games are increasing as more subscribers buy feature-rich phones with colour screens and GPRS. With major handset manufacturers like Nokia, Samsung, LG and Motorola releasing cheap India-centric phones, game developers expect this growth to accelerate.
The big opportunity and challenge will be when India finally embraces 3G. The country is probably 12 months away from this, but when the rollout is complete, sport will play a major role in determining the success of this service. Operators will rely on sport (primarily cricket), Bollywood content and TV soaps to increase 3G usage. Sports rights holders can make the most of this opportunity to package their content to make it mobile-friendly. Highlights packages, archived content and exclusive interactions with the stars will drive adoption of this service and help rights holders monetize their content better. Whilst an ESPN style MVNO may be few years away, sport can hugely benefit from the mobile boom in India if it plays it cards right. In fact, even international sports associations like the English Premier League and Formula One can extract some value from the Indian market because the early adapters of services like 3G will almost certainly be fans of these sports.
The opportunities for sport in the mobile sector is definitely looking more promising in the short to medium term in India, compared to the opportunities in the internet and broadband segment. However, the market is currently ideally placed for a bullish rights holder or content provider to enter now at lower costs and enjoy the steep growth curve that is imminent. Whereas markets are slowing down or stagnating in the West, India offers huge value and exhilarating growth to those who dare.

Ashok Karanth
+44 79 0851 5020
akaranth@gmail.com
Frontiers Group

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