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Is an e-auction better than a closed bid?

On Tuesday, the BCCI will use the e-auction method for the first time ever to determine the winner of the rights for Indian cricket for the 2018-23 five-year cycle. The rights comprise both television and digital, covering different global territories. However, even before the six companies in the fray submit their starting bids, the BCCI has faced numerous questions, both from the bidders and critics within the board, including its three office bearers. ESPNcricinfo lists the main talking points highlighted by the critics, and the BCCI management team's defence of why the e-auction is the way forward.

Is the e-auction better than the closed-bid process?

What critics say: At a meeting in late March, called by former BCCI president N Srinivasan, several BCCI members vehemently objected to the decision to sell the Indian cricket rights via an online auction. That decision was taken by the Supreme-Court-appointed Committee of Administrators (CoA) in synergy with the board's management team led by its chief executive officer Rahul Johri.

Srinivasan and board members including acting president CK Khanna and treasurer Anirudh Chaudhry, with formal support from acting secretary Amitabh Choudhary, felt that the Supreme Court, which has appointed the CoA, had not given the panel and the CEO such "sweeping powers to act opaquely and independently on a matter of such great financial magnitude."

The bitterness spilled over outside the BCCI, too. One of the six bidders in fray said the move to conduct an e-auction was borne out of "ignorance". According to him, an e-auction works when there are multiple categories and multiple bidders, where there is complexity in bidding. "What is the point of doing e-auction when it would be most probably be only Star and Sony vying for the television rights?"

This bidder, who has participated in previous sealed-bid auctions, said the "fear" of being left behind would force potential bidders to put up the highest value upfront. In an e-auction he said bidders would be more conservative. "Earlier when I went in to the closed-bid auction, I knew I would only get one bite at the apple, so I put my top value assuming the next guy might be putting, say, 30% less. Now I am able to calibrate because I am seeing how aggressively the other guy is bidding."

What the BCCI says: Johri said he understood the advantage of the price discovery via the close-bid auction where a desperate company could pay a big price. As an example he cited the IPL title sponsorship deal, which was won by Chinese mobile handset manufacturer Vivo, which last June paid nearly USD 341 million for the five-year deal. Vivo had paid significantly more than its rival Oppo Mobiles India, which had won the India team sponsorship deal last March.

The BCCI had been apprehensive last year when it invited bids for the IPL media rights auction. Subramanian Swamy, an Indian economist and politician, had even filed a petition in the Supreme Court urging for an e-auction for the IPL rights. The court allowed the BCCI to carry on with the closed-bid auction subject to the process being transparent.

According to Johri, although there were suggestions that supported the e-auction to be introduced for the IPL rights bidding, he and the CoA resisted the move because of the complexity of issues. "The IPL was much more complex in terms of territories (for the rights to be sold) and so we didn't want to try the e-auction for the first time."

Once the BCCI noted the strong interest in the digital segment during the IPL auction it felt it was not ready to try out the onine auction. "The purpose of this new auction is to provide a free, fair, transparent process which is future proof. In an organization you want to keep evolving. It is more about where we are going as an organisation. I'm quite confident it will redeem the best result."

No five-minute delayed feed for digital consumers

What critics say: In the previous rights cycle (2012-18) the BCCI had packaged both television and digital rights as one bid. So the choice of telecasting feeds was with the rights holder. That was different to the IPL where the BCCI had decided that if the rights holders for television and digital were different, the digital feed would be delayed by five minutes. But if the if same bidder owned both rights, then the choice was theirs again. The delayed feed was solely brought in to protect the television-rights owner.

In the next cycle (2018-23) the BCCI has decided to allow both feeds to play simultaneously. One of the bidders called the move "bizarre", saying such a decision would "benefit" a couple of rivals. This bidder also said that while the television broadcaster would pay INR 40 crore as a minimum bidding price or per-match value (PMV), the digital rival would only pay INR 7 crore as PMV. "This is totally bizarre so the guy who is paying just 7 crore is going to ambush you," the bidder said.

The bidder was also worried about digital giants like Google and Facebook and Reliance Jio, who are among six bidders, have a "massive appetite" as they had shown during the IPL auction. He feared that these companies could easily stream the matches live for free, consequently having an impact on the bottom line of the television broadcaster. "So this is very short-sighted behavior and is bound to impact the TV rights in the long run."

According to this bidder if the same content is live on say a platform like Facebook or Google's YouTube, advertisers had less of an incentive to play a premium to buy space on TV. "That is a big corrosion of value."

What the BCCI says: The exponential growth in the digital industry especially on the mobile platform was instrumental in the BCCI taking the call. "Television today shows a stable graph whereas digital experienced a sharp growth spur," Johri said. "So how do you leverage this growth? You leverage it by trying to get the highest value. That was our focus."

Johri said it was not a "restrictive" move to run both feeds simultaneously. He said the BCCI decision was based on feedback received from bidders. "One of the bidders said that the lag should not be there in the live feed on both television and digital in case the same company won the global rights. But even if there were two different parties that won the bids separately and they reached an understanding mutually and applied to saying they would not want any lag, we would have agreed."

According to Johri the delayed feed works in the IPL, which is a fast-paced environment. However in a Test or ODI that gets "diluted." Johri also did not agree with the argument that advertisers would shy away from TV. "40% of the revenue for a broadcaster comes from cable and satellite distribution. So it makes no difference. Also there are less matches for a couple of years. So if you are a broadcaster you are bound to benefit more considering the digital content provider will charge the same fee regardless of the number of matches per year."

'The quality of FTP is really bad'

What the critics say: The BCCI has listed a total of 102 matches that will form part of the ICC's Future Tours Programme (FTP) between June 2018 and March 2023. During this period India will host 22 Tests, 45 ODIs and 35 T20Is against nine opponents barring Pakistan and Ireland. This includes the new ICC FTP for the next cycle (2019-23) which will be finalised at the governing body's annual conference this June.

The marquee series in this period will be the five-Test series against England in late 2021 and the four-Test series against Australia in early 2023. Still critics are not convinced. "The quality of the FTP is really bad because West Indies are playing some three series in five years," the bidder said.

The first match the new rights holder(s) will broadcast will be Afghanistan's inaugural Test in Bangalore from June 14 to 18. Incidentally several of India's Test regulars including captain Virat Kohli are likely to miss the Test and instead play county cricket to prepare for the England tour that follows. So the bidder said it would be tough to lure advertisers for the one-off Test: "The BCCI has become a paralysed body and is being run without any imagination and concern for cricket."

What the BCCI says: Johri disagrees with that argument. "We are giving a quality FTP till 2023. Majority of the matches are against quality opposition. There is minimal risk of things changing because all teams are committed to the global FTP. So you cannot disrupt the global calendar."

Another big advantage that Johri feels was not part of the previous cycle is the inclusion of women's cricket. "One of the biggest upsides is women's cricket, which is growing . So anybody who wins the rights will be able to broadcast women's matches too. Add to that domestic cricket, for which we want to increase the number of days that are being broadcast going forward. Also the potential to show domestic cricket on the digital platform is increasing so that is another added benefit."