There is a favourite apocryphal story that negotiation trainers love telling their audiences. Back during Theodore Roosevelt’s 1912 presidential campaign, his campaign office printed 3 million copies of a pamphlet featuring a particularly flattering photo of the candidate only to realize that they had not acquired the rights to use the photo.
They could not back down from not putting the pamphlets in circulation with very little time left to print new ones, as the election was close. But at the same time, under the existing copyright provisions, the owner of the photo’s rights could demand up to $1 per copy as compensation.
The campaign did not have that kind of money, however, they could not afford to skip credit altogether and risk a potential scandal. With trepidation, they approached the campaign manager to ask him to make a call to the Chicago studio and the photographer who owned the photograph.
The manager, rather than calling and asking the studio how much they were willing to accept turned the situation on its head telegraphing them “I am writing on the behalf of Teddy Roosevelt’s presidential campaign office. We plan to distribute millions of pamphlets with Roosevelt’s picture on the cover. It’s great publicity for the studio whose photograph gets featured. How much will you pay us to use yours? Please let us know immediately.” Within an hour, the reply came “We have never done something like this before. Would you accept $250?”
BCCI’s humongous returns
Back in the 1990s, the Board of Control for Cricket in India similarly turned the tables with the help of Trans World International when, for the first time it sold the rights to cricket matches featuring India, something for which it used to previously pay the national broadcaster – Doordarshan – to telecast.
DD was the sole broadcaster back then and its monopoly allowed it to charge the BCCI for access to the only outlet back then. A quarter of a century later, the BCCI just sold the rights for the the Indian Premier League from 2018-’22 for a whopping Rs 16,347 crores [$2.55 billion] to Star.
For comparison, the 10 year rights for the league from its year of inception  till the 2017 season went to Sony for $1.7 billion.
The astronomical leap in the bid amount pegs IPL games as the third costliest in the world [Rs 54 crores or $9 million] on a per game basis [the NFL leads the pack with around $23 million per game and the EPL is unsurprisingly second with approximately $13 million a game] clearly reflects how insanely popular the league has become but even accounting for that frenzy, the math seems a bit out of whack.
The Star monopoly on TV
While it is terrific news for players and franchises who will receive cuts from the broadcast rights money a la the English Premier League, the concerns have come a full circle where from the days of state imposed DD led monopoly we now find ourselves in a Star monopoly [they also own the national team cricket rights].
Monopolies have always made layman and economists alike wary and with good reason. Once a monopolist emerges in a market, there are typically two concerns. The first one is that the product or service may get progressively worse due to lack of competition.
In the IPL’s case, that is unlikely and in terms of TV production, Star is surely a step up from Sony. The second concern might be more relevant – the monopolist will do anything to hold on to their market power and crimp competition.
If the numbers seem excessive or inflated it is because, Star, just like Sky in the UK with EPL rights, would be wary to yield any ground to its competitors and will willingly spend extra money to keep them off their turf.
The upshot of this monopolist behaviour is what in economics is termed ‘deadweight loss’ – resources spent on maintaining market power which could have been more efficiently used elsewhere.
In this context, that could mean that wall-to-wall IPL and India cricket coverage might relegate other sports from Star’s most watched channels and undermine their path to popularity.
And, the IPL itself might vaunt itself to a sort of “too big to fail” status like the NFL in the US. Meanwhile, the average cricket fan would have to suffer through hikes in DTH rates and endless streams of advertisements that are likely to only get more intrusive.
To be fair, the numbers are not bereft of basic market logic, but such concentration of rights is unprecedented and if you have ever played the board game, you know that monopoly reaches its logical conclusion when everyone else around the winner is bankrupt.