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Cricket Can Add More Runs to Your Portfolio

U.S. media companies jockey to gain rights to the world’s second most valued sports league.

Ruth Saldanha 22 June, 2022 | 3:49AM
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Cricket Field

A new battleground has emerged for global OTT behemoths as they jostle for new subscribers: it’s called the Indian Premier League (IPL), the biggest and the most popular cricket league in the world.

In a recently concluded auction of the 2023-2027 broadcast rights for the coveted cricket league, leading U.S. media giants bid big dollars to snag multi-billion-dollar deals to stream IPL sporting events. These giants hope to connect with a cult-like following from the 600 million viewers in the Indian Subcontinent, its global diaspora, and British commonwealth countries worldwide.

The annual IPL tournament is the world’s biggest platform for the Twenty20 cricket (also T20) - a short, snappy version of the game that arguably borrows its format from baseball. This year, IPL burst onto the international sport scene after it overtook the English Premier League (EPL) in terms of per match telecast rights valuation. At just over US$15 million per game, IPL is now the world's second most valued league, having pipped the EPL (US$11M), the MLB (US$11M), and the NBA (US$2M), only trailing the NFL (US$17 billion). 

While cricket remains an exotic sport for most Canadians, investors looking to play one of the world’s fastest growing sporting events may want to score the following deeply-discounted stocks of American media powerhouses well positioned to benefit from cricket’s Moneyball moment.

The House of Mouse Walt Disney (DIS) owns the rights to some of the most globally recognized characters including Mickey Mouse and Luke Skywalker. It owns film studios such as Pixar, Marvel, and Lucasfilm and operates media networks including ESPN and several TV production studios. The media company’s streaming services include ESPN+ and the Disney+.

In India, Disney has tied up with Star India to offer Disney+ Hotstar, a product offered in the Indian subcontinent with cricket being a big driver of that. Disney+ Hotstar’s about 50 million subscribers account for more than one-third of Disney +’s worldwide subscribers.

Disney splashed a whopping US$3 billion to scoop up the rights for broadcast IPL games on legacy TV. The company has about 70 channels in India, beamed through cable and satellite TV operators, which it uses to promote Disney+ Hotstar.

Disney+ added 7.8 million customers globally in fiscal 2022 second quarter. “New customer growth was concentrated outside the United States, with 1.5 million added in the U.S./Canada, 2.1 million in international markets excluding Hotstar, and 4.2 million in Hotstar countries,” says a Morningstar equity report.

Wide moat Disney’s OTT offerings “Disney+, Hotstar, Hulu, and ESPN+ are taking over as the drivers of long-term growth as the firm transitions to a streaming future,” says Morningstar equity analyst Neil Macker, who pegs the stock’s fair value at US$170.

Formed via the reunion of Viacom and CBS, Paramount Global (PARA) is a global media empire with television assets including the CBS television network, 28 local TV stations, and 50% of CW, a joint venture between CBS and WarnerMedia. Viacom brought several leading cable network properties, including Nickelodeon, MTV, BET, and Comedy Central.

Paramount operates in India through Viacom18 Media Pvt., a joint venture between Paramount Global and Indian billionaire Mukesh Ambani’s Reliance Industries Ltd. Viacom18 splurged US$2.7 billion to clinch the global streaming rights to the popular annual cricket tournament, IPL, for the next five years.

Paramount produces original motion pictures and owns a library of 2,500 films, including the Mission: Impossible and Transformers series. The media conglomerate operates a number of streaming services, most notably Paramount+ and Pluto TV.

Paramount’s wide moat stems “from the CBS broadcast network, a valuable portfolio of cable networks with worldwide carriage, production studios, and a deep content library,” says a Morningstar equity report.

The company has a strong portfolio of sport rights, including NFL, college football, and college basketball, and more recently the richest cricket league IPL. 

Paramount’s product offerings benefit from “the firm's strong content creation abilities, deep programming library, and the secular trend toward greater streaming adoption,” says Macker, who pegs the stock’s fair value at US$58.

Media behemoth Comcast (CMSSA) acquired NBCUniversal which owns several cable networks, including CNBC, MSNBC, and USA, the NBC broadcast network, Universal Studios, and several theme parks. The company acquired leading British broadcaster Sky in 2018, which owns multiple media properties including Sky Sports.

While Comcast isn’t a pure IPL play, the company’s Sky Sports is a leading broadcaster of some of the biggest cricketing events including the Cricket World Cup, and enjoys a significant viewership.

“Sky is the U.K.'s largest pay-television operator, with about 13 million retail subscribers, equal to about 45% of the households in the country,” says a Morningstar equity report, noting that the company was “early to build critical mass in the pay-TV market, enabling it to gain exclusive rights to premium content, notably the English Premier League.”

Sky, which also owns Sky News and an entertainment studio, claims more than half of the content viewed on its services comes from its own portfolio. “Rolling Sky into the Comcast family promises to further enhance this content position, helping Sky cement its position with customers even as distribution methods change,” says Morningstar sector director Michael Hodel.   

Sky is also the dominant pay-TV provider in Italy, Germany, and has launched service offerings in Spain and Switzerland. “The firm is following the same strategy in these markets as it has in the U.K., building proprietary content,” says Hodel, who appraises the stock to be worth US$60.

 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Comcast Corp Class A35.59 USD-0.17Rating
Paramount Global Class B19.24 USD-3.37Rating
The Walt Disney Co95.69 USD-3.22Rating

About Author

Ruth Saldanha

Ruth Saldanha  is Editorial Manager at Morningstar.ca. Follow her on Twitter @KarishmaRuth.

 
 
 

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