Thursday, July 26, 2012

IPL 4: On a Gravy Train?

In its Fourth Edition now, The IPL Continues to Grow even though Franchises Need to look for and Exploit Alternative Revenue Streams.

Analysts are often flummoxed as to why successful businessmen don’t mind throwing huge sums of money to buy franchisee teams of the Indian Premier League (IPL). In January this year, two new teams in the IPL fray were snapped up for mind-boggling sums: Subroto Roy of Sahara Group bought Pune Warriors for $370 million and a consortium of businessmen forked out $333 million for Kochi Tuskers. In 2008, when the IPL was launched, one puzzled analyst asked India Cements’ Vice Chairman N. Srinivasan, owner of the Chennai franchisee, about his rationale in shelling out $91 million for buying a cricket team, which apparently did not make any business sense to his core activity of cement manufacturing. But for Srinivasan, investing in IPL was a very clear decision taken solely with a view to building his brand visibility throughout the country. For quite sometime, India Cements had been trying to shed its conservative image and grow beyond its traditional southern markets. Buying into IPL could prove to be a brilliant marketing strategy if the company is able to leverage this association for growing its core business and become a pan-India entity.

It’s not just companies like India Cements that stand to make hay from the shining IPL sun. IPL-4 saw close to 120 brands piggyback on its popularity and make this annual mixture of fun, entertainment and cricket a perfect pitch for brand activation. Tata DOCOMO, Godrej, Volkswagen and many leading brands have taken various marketing initiatives exclusively for the latest edition of IPL-4. Digital imaging brand Canon also joined the IPL bandwagon this season and launched its new range of cameras supported by a campaign featuring its brand ambassador Sachin Tendulkar. Others like Vodafone and Videocon, joint presenting sponsors for the tournament, allocated up to Rs. 600 million each in media spends for 180 seconds of commercials per match. And a record 11 associate sponsors – Samsung Mobile, LG, Hyundai, PepsiCo, Tata Photon, Havells, Cadbury India, L’Oreal, Godrej, Volkswagen and Hyundai – dished out Rs. 400 million each for 120 seconds of commercial time. Every IPL season generates around 12,744 10-second slots but this year it was more as the number of matches were up to 74 from 60 last year.

Also, while IPL-3 had a TV viewership of around 143 million for its 60 matches, this year the figure was already 170.5 million viewers for the first 43 matches in IPL-4. As advertising rates were up 15-20% this year to Rs .65 million for 10-second spots, tournament broadcaster Sony Entertainment Television, which paid $1.64 billion for a 10-year deal, expects to recover Rs 10 billion through channel advertising from IPL-4 itself. The government, too, expects to haul in Rs 3 billion in taxes as compared to Rs 1 billion it raked in from IPL-3.

The growth in this innovative cricketing property over the years has been a source of delight for millions of cricket-loving fans and IPL stakeholders as well. Despite recent controversies and allegations of money laundering by some team owners and the ignominious exit of former IPL commissioner Lalit Modi, the brand has continued to grow. There were more teams (from 8 to 10), more matches (74 compared to 60 last year) and even higher TV revenue (an expected Rs 10 billion compared to Rs 7 billion last year) as IPL-4 season kicked off in April with a better TV rating as compared to the last season (7.14 compared to 5.9 last year for the opening game). Brand Finance, a global consultancy, pegs the overall brand value of IPL at nearly $3.7 billion today, a surprising drop of 11% since last year when it was valued at $4.13 billion. “The fall in IPL’s brand valuation is directly correlated to the controversies that the tournament has faced over the past few seasons,” says cricket expert & commentator Gautam Bhimani.


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