Inc. is planning to withdraw from a heated competition for the rights to stream Indian Premier League cricket matches, ceding one of the world’s most popular sporting contests to rivals from Walt Disney Co to Mukesh Ambani’s Reliance Industries Ltd.

The rights had been estimated to fetch an unprecedented $7.7 billion. The US giant, led by Jeff Bezos, is planning to throw in the towel rather than get into a bidding war at the June 12 auction, according to people familiar with the matter.

While Amazon has already invested more than $6 billion in the country, more spending merely for the online streaming rights to the league didn’t make business sense, they said, asking not to be identified discussing internal deliberations.  Representatives for Amazon didn’t respond to a request for comment.

Amazon’s surprise pullout leaves the field open to Ambani’s Reliance, Disney and Sony Group Corp, who’re betting the game will help them dominate an Indian consumer market increasingly going online. Whichever company scores the deal could also bolster their position in a country of 1.4 billion where the English sport enjoys cult-like status. 

Challenge to recoup investments

“Amazon has a great balance sheet but as a standalone, digital-only bidder, it would’ve had a challenge recouping such a big investment on streaming,” said Mumbai-based Mihir Shah, vice president and India head at Media Partners Asia. “There’s a global shift toward saner valuations, and companies including Amazon are thinking harder about acquisition costs and unit economics.” 

Amazon, which identified IPL among a half-dozen global sports franchises it’s interested in, had initially been determined to score a victory, Bloomberg News reported. The retail titan has spent hundreds of millions of dollars on European soccer rights, and has forged a deal to broadcast Thursday Night Football in the US at $1 billion a season until 2033. 

The IPL is a multiweek tournament typically held in April and May every year. Ten teams comprising players from mostly the British Commonwealth countries play matches that last three hours each, a shortened and more entertaining format compared to the classic five-day test cricket.

Drawing more than half-a-billion viewers, the annual IPL tournament trails only English soccer and the National Football League in popularity globally, according to its organiser, the Board of Control for Cricket in India, or BCCI.

The IPL was valued at about $5.9 billion in 2020 by Duff & Phelps, now known as Kroll. That number could now be 25 per cent higher, according to Santosh N, managing partner at D and P India Advisory Services. The BCCI estimates it’s worth $7 billion.

For the first time, the BCCI will auction IPL’s broadcast and streaming rights separately. Four contracts are up for grabs, broadly covering television and digital rights, as well as a pick of key matches, in the Indian subcontinent and overseas. 

Total bids

Given the intense competition, total bids could reach even $7.7 billion, said Karan Taurani, a media analyst at Elara Capital. That would be more than triple the ₹163 billion 21st Century Fox Inc paid in 2017.

Disney, which inherited the rights when it took over Fox’s entertainment assets in 2019, is flying in top executives from its headquarters to Mumbai for the auction, according to people familiar with the matter. Hotstar, a local streaming service popular among cricket fans and now with Disney after the Fox deal, accounts for more than a third of Disney’s 138 million streaming users globally.

Representatives for Disney, Reliance and Sony declined to comment.

Should Amazon exit, it may bolster the prospects for Reliance. Ambani, 65, has been assembling a team of veteran executives starting mid-2021 to ensure a winning bid at the auction, people familiar with the matter said, asking not to be identified discussing internal processes. They include Anil Jayaraj and Gulshan Verma, who helped Fox clinch the previous contract. 

Reliance’s war room

Reliance’s war room also comprises Ambani’s trusted lieutenant Manoj Modi and older son Akash Ambani, people familiar with the developments said. A recent alliance forged with Uday Shankar, a former head of Fox’s and later Disney’s India and Asia Pacific operations, will also add heft to the team.

Amazon and Reliance have been locked in a battle for control of India’s retail market for years. Most recently, the two companies fought a bitter court battle over acquiring Future Group, a struggling retailer, but neither succeeded. Both are betting content will serve as a gateway to their retail goal as more and more Indians go online for shopping and entertainment.

Despite the exit of Amazon, the cricket auction would still be hyper-competitive and an expensive affair, said Media Partners Asia’s Shah.

The aim of winning the auction isn’t grounded in the conventional profit and loss logic, but a hypothesis that a few hundred million internet users will become committed users of a variety of digital businesses, said Tarun Pathak, a research director at consultancy Counterpoint Technology. 

“Amazon took commerce and built the Prime Video content business on top of it,” Pathak said. “If Reliance wins, it’ll take the opposite approach — building commerce on top of content to make Jio a household name,” he said, referring to its technology arm.

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