Sunday, February 19, 2006

SMS rights - where to from here?

India - Pakistan cricket series is over, but the SMS rights controversy stays on. During the tournament, a Chennai based company Marksman obtained a stay order from Chennai High Court to stop mobile service providers and content providers from offering cricket scores on mobile, without acquiring specific permission from Marksman.

Marksman claimed that PCB had sold the SMS rights to a Pakistan based company called Vectracom and Vectracom, in turn, had appointed Marksman for the Indian territory.

The 18 or so defendents approached the Chennai High Court to vacate the stay and succeeded. However in the judgement vacating the stay, the honourable judge has pointed out a few things which is going to be contested hotly for the next few months in higher courts. From the judgement copy I have, I quote the relevant portions:
(a) Right of providing scores/alerts and the updates via SMS Technology is the result of organization and expenditure of labour, skill and money, which is salable only by PCB/organizers.

(b) Through the SMS technology, the process of sending scores, alerts and updates amounts to unauthorised interference with the normal operation of PCB/Organiser's legitimate business.

(c) The act of Defendents in appropriating facts and information from the telecast and selling it by providing scores and alerts over SMS is nothing but endeavouring to reap the profit where they have not sown.

(d) The whole process of SMS amounts to unauthorised interference with the PCB/Organiser's legitimate business proceed at the point where the profit is to be reaped.

(e) By the act of the Defendents, they are making profit and thereby diverting the material portion of the profit of SMS which PCB would have earned.
I am of the opinion that the last word on this is not spoken yet. We are going to see the case going all the way to Supreme Court. I expect the mobile phone companies and content providers to move against this ruling.

BCCI would have already smelt an opportunity here and would probably be expecting few hundred crores as SMS rights fees.

Friday, February 17, 2006

Nimbus bags BCCI telecast rights

Zee News: Nimbus bags BCCI telecast rights for USD 612 mn

Nimbus has outbid everyone else to claim the lucrative Indian cricket rights. This includes global rights for

* Cable TV
* Terrestrial
* Broadband
* Radio

Nimbus would look at on-selling these rights to key players in India.

Thursday, February 16, 2006

Sun TV plans listing and public offer

Sun TV group is planning to tap the capital market. It has filed a draft prospectus with SEBI, giving us some very interesting information not easily available to public in the past.

Sun TV group is controlled near 100% by Kalanidhi Maran. At this stage, out of the total shares issued 62,000,155, Kalanidhi Maran holds 61,999,969.

Only three months back (November 2005), DMK chief Karunanidhi's wife Dayalu sold her stake to Kalanidhi Maran. The Hindu reported quoting Karunanidhi as saying:
My wife was holding 20 per cent shares in Sun TV, Kungumam, a Tamil weekly, and other magazines. She has, very amicably, relinquished her shares and received the proceeds.
However, the draft prospectus files shows that Dayalu Ammal had a holding of only 5.75% ie., 115,000 shares out of a total of 2,000,000 shares issued at that time.

On October 28, 2005 Dayalu Ammal has sold her shares at Rs. 3,173.04 per share to Kalanidhi Maran, resulting in total proceeds amounting to Rs. 36.5 crores approximately.

It might have been a friendly settlement, but a poor one nevertheless. In the proposed IPO, Sun TV is expecting to offload 10% hoping to raise between 660 - 800 crores. With no material change happening to the company in the intervening period (last 4 months), Dayalu Ammal's 5.75% should have been worth much more - at least 250-300 crores.

In fact, by using some available data and several faulty assumptions (since that was all that I had access to), I valued Dayalu Ammal's stake as close to Rs. 600 crores.

A careful perusal of the IPO draft prospectus shows the following:
  1. Sun TV group controls the channels in Tamil and Malayalam 100%
  2. Both the Kannada and Telugu channels are joint ventures. Udaya TV (Kannada) is owned 66.67% by Kalanidhi Maran directly (that is not through Sun TV group which is going IPO) and the rest owned by two individuals S.Selvam and S.Selvi. Gemini TV (Telugu) is owned or controlled 50% by Kalanidhi Maran (directly and through another investment vehicle), while the rest 50% is controlled by K.Bharathi, Indira Anand, A.Sai Siva Jyoti and others. As such, the revenues of these language channels do not come into Sun TV Limited's balance sheet.
  3. The company Sun TV Limited going for IPO currently owns 100% Kal Radio and South Asia FM which together have won several FM licenses and are also currently operating 4 channels in South India.
  4. The magazine Kungumam and newspapers Dinakaran and Thamizh Murasu do not come into Sun TV Ltd. and as such their revenues and profits do not appear in the balance sheet of Sun TV Limited.
  5. The cable distribution business - SCV - is also not part of Sun TV Limited.
This brings the estimated revenue of Sun TV group down considerably. The 2004-05 financial year revenues were Rs. 301.1 crores and net profit after taxes Rs. 76.8 crores. I had guessed the combined profits of the group (including the Kannada, Telugu TV operations and newspaper, magazine operations and cable distribution operation) at Rs. 150 crores in my earlier post on this subject. I would still be closer to the mark if all these companies were combined into a single entity in the balance sheet.

It may be possible that Sun TV Limited will go for consolidating the various companies in which Kalanidhi Maran has significant stakeholdings after listing Sun TV Limited.

Another observation from the IPO prospectus. He pays his senior executives very little - at least on paper. All the senior managers in Sun TV seem to be getting not more than Rs. 8.4 lakhs per annum! There is no stock option, no sweat equity and no bonus component. What does he then offer them to retain them in his company?

Saturday, February 11, 2006

Court Vacates Stay, but Trial will Continue

Chennai High Court has vacated the stay on mobile companies transmitting SMS scores, but has said that mobile companies will have to maintain their accounts separately for earnings obtained from this service.

The case is committed to trial and the court will examine whether SMS rights are maintainable, and whether cricket boards (sports bodies) can define SMS rights separately and then sell them off.

In the meantime, the second one-day match has started and Pakistan are at 108/4 in 23.3 overs. The mobile companies may probably consider transmitting the scores for the rest of the day.

Previous articles:

Chennai High Court restrains SMS alerts on Indo-Pak ODIs
Move to vacate stay on SMS cricket scores

Move to vacate stay on SMS cricket scores

The Hindu: Move to vacate stay on SMS cricket scores

On Tuesday, a Chennai company Marksman Marketing Services Pvt Ltd. obtained a stay in the Chennai High Court for mobile phone companies from distributing cricket scores of India-Pakistan series via SMS.

Yesterday (Friday), the mobile phone companies and a few content providers joined together and filed a revision asking for the stay to be vacated. The case however has been posted for further hearing today (Saturday). Given that the second ODI starts at 10.30 AM in the morning, the mobile phone companies have requested that the hearing be started at 9.00 AM. The request has been granted. However, it is unlikely that a decision may be awarded within one and half hours.

Court couldn't go into the matter yesterday because a section of the lawyers in Chennai High Court were striking work - linked to a protest against Police Officer in Madurai, who had apparently filed false cases against lawyers in the Madurai branch of the Chennai High Court. So the striking lawyers barged into the justice chamber were the stay case was being heard and forced the lawyers there to quit work.


Continuing on the issue at hand, in 1996-97 National Basketball League (NBA) and Motorola fought some cases in USA. Motorola had launched a pager and was packaging NBA scores through this pager. NBA claimed that Motorola was violating NBA's copyright and was freeriding on NBA's work.

NBA succeeded in getting an injunction in a district court in New York State and restrained Motorola from distributing the scores in July 1996, but Motorola went to the Court of Appeals For the Second Circuit and had the injunction vacated in January 1997.

There is a succinct summary of this case in a page called Ius Mentis. Go there and look around for NBA versus Motorola. Also look at Morris Communications versus PGA Tour, which explains that if the rights holder spends substantial sum of money and investment in technology to collect the scores, then it is fair to say that the rights holder can control the distribution of the same (such as in PGA).

However other games such as Basketball, Football and even cricket which has more than a single point or goal count, the rights holder or his agents do virtually nothing besides organizing the matches. Anyone watching the TV broadcast or listening to the radio broadcast or even following the text description line by line can compose the scores. Then such scores can be comfortably transmitted further for monetary gains.

However it will be interesting to find what the Chennai High Court decides on this. My feeling is that this is not going to stop at the High Court and we will see this being taken to the Supreme Court.

BCCI, I hear, is keenly following this and has been cited as one of the parties in the suit. Their mobile rights are coming up for sale and they would be following this case carefully as well and I am sure arguning that the copyrights over the scores rest with themselves rather than anyone who is creating them.

More as I hear more.

Tuesday, February 07, 2006

Chennai High Court restrains SMS alerts on Indo-Pak ODIs

Daily News & Ananlysis: Chennai High Court restrains SMS alerts on Indo-Pak ODIs

Chennai High Court has stayed all mobile phone companies in India from offering India-Pakistan cricket scores on mobile - for now.

A Pakistani company claims to have acquired exclusive rights to provide SMS scores on mobile phones.

To my knowledge, this may be an unsustainable right. Further arguments in courts would clear this.

Normally rights holders - such as PCB or BCCI - control exclusive access to the stadium and exclusive coverage of the events in audio visual formats. However, once an event is broadcast in the form of video or audio, any reporter anywhere in the world can consume the information, process the information and create content for consumption to general audience. Rightsholder cannot continue to administer subsequent stages of this information dissemination.

Once a fact has come to the public space (that Pakistan has won the toss), PCB cannot demand that the right to inform others that Pakistan has won the toss through mobile phones is still controlled by PCB.

In the current scenario that is what M/s Marksman Marketing Services Pvt Ltd. of Chennai are claiming on behalf of M/s Vectracom Pvt Ltd and PCB.

Currently cricket scores on mobile phones are made available by all the mobile operators in India and also through these phones by all key portals such as Rediff, Yahoo!, Sify, Indiatimes, NDTV and Cricinfo as well as several others.

In a way this is a good case to follow to find out what the Indian courts think of mobile text rights.

Watch this space!