Nimbus-Star India deal called off

MUMBAI: The much-talked about break-up between Nimbus and Star India has finally happened. Last week, Star India sent an official notice to Nimbus Communications stating the termination of the contract on account of breach by Nimbus.

The distribution deal between Nimbus Sports, the BCCI’s telecast rights holder, and Rupert Murdoch’s Star India was reviewed by Star, thanks to the government ordinance making it mandatory for private broadcasters to share feed of cricket matches with DD. The clause deprived Neo Sports of all exclusivity of content, making it very difficult for Star to increase revenues, or actually get cable operators to carry the channel.

The sharing with DD has also amounted to breach of contract by Nimbus, according to the terms and conditions of the contract with Star India. In fact, Star India had stopped pushing the Neo Sports boxes on ground with the cable operators since January. Highly placed sources at Star confirmed the development and stated that Star India had witnessed a minimal increase in distribution revenue, not justifying the minimum guarantee of Rs 600-700 crore that has been agreed by the broadcaster to pay Nimbus over a four-year period until 2010.

All terms of contract are confidential between the two parties and we would not comment on contractual terms to maintain confidentiality,” a Star spokesperson said. Nimbus Communication CMD Harish Thawani could not be contacted despite several attempts to reach him. Moreover, Star is also claiming a refund from Nimbus for the payments made till date on account of non-fulfilment of the contractual clauses, and the amount in question is still being ascertained.

The fall-out of the Star-Nimbus deal will have some severe repercussions on Nimbus as both Neo Sports and Neo Sports Plus are new channels and the non-exclusivity of content will make it all the more difficult for Nimbus to ink another distribution deal. The other option for Nimbus is to distribute the channels themselves which will require a lot of initial investments, and the lack of clout with cable operators will make it an uphill task.

Apart from the government ordinance, Star also had an issue with the way the channels were priced. The initial pricing of the Neo Sports bouquet, which was Rs 58.50, which was when the deal was inked with Star, was slashed to Rs 37.25 after the Telecom Regulatory Authority of India (TRAI) in its January 11 order directed the broadcaster to reduce its bouquet price in non-CAS areas and to price the channels at Rs 5 in CAS areas.

Moreover, cable operators were refusing to carry the Neo bouquet or pay for it, giving Star India no real advantage in terms of ramping up its distribution revenue. When the deal was struck, none of the above factors were taken into account as the bouquet price had not been introduced and the exclusivity issue was also relevant then. Star India garners close to Rs 360-400 crore annually through distribution revenue and the Neo Sports contract is far too marginal an increase to support the minimum guarantee of the contract.