Commercialization Of Indian Premier League

Cricket is just one of those many sports which was conceived by the English and perfected by the world; the Indian Premier League is just an extension of this phenomenon. The Twenty 20 format was invented in England in 2003 but it really took off when the master strategist that is Lalit Modi took it upon himself to take this format a step higher into crickets first franchise based sports event.

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In late June 2007 Lalit Modi who was then Vice-President of the Board of Cricket Control for India spoke to Andrew Wildblood of the International Management Group (IMG), a company with a vast experience in the whole area of sports management. IMG and Lalit Modi then sat down to discuss this model and finally came up with the idea that is the IPL in its current format.

The idea behind creating city based teams was based on the model present in sports in US and UK. IMG designed the IPL after an intensive study of the primary sporting leagues around the world such as the NHL, NBA, NFL and EPL. They examined the theoretical models and also the result and impact of each of these leagues before arriving at the final blueprint. As in most other areas, there were at least as many learning’s from the shortcomings and weaknesses as there were in the strengths and benefits – mapped to the individual market contexts. What has finally emerged as the IPL design is one that has been meticulously refined to work for cricket.The league structure has been modeled so as to flourish in the uniquely Indian context, and drive the development of grassroots talent in Indian cricket.

The idea had all the ingredients to be a success as it had the best cricket players of the world, fans from around the world and a dollop of glamour due to the presence of Bollywood celebrities, corporates and Indian politicos.

The IPL was the first of its kind sports extravaganza of its kind, prior to this India has been fed a steady diet of 50 overs and test cricket. This kind of model which is common in the west but a first of its kind in India provided many new avenues for all the stakeholders. The grand old game of Cricket has undergone several makeovers in its history. Test cricket was followed by 60 over one day matches which later became 50 overs. The all white strip of the 70’s gave way to the colored clothing and day-night matches of the Kerry Packer era. The Twenty 20 format which originated in England was devised to bring back the crowds in English County Cricket. The game in England was going through a major crisis and the introduction of T20 was instrumental in bringing a much needed dose of excitement in the game.

Once again English were left to marvel as the sport they had created in their own backyard was spun into the “Great Indian Tamasha” by Lalit Modi and his comrades.

Commercialization of IPL:

Indian Premier League (IPL) has defined a new set of paradigm to do business in the Indian landscape. This was bound to happen someday, looking at the craze for the cricket in this country. IPL is not a yet another cricket extravaganza but an event where money is spun around with many different angles and huge stakes are involved in it. IPL has corporatized cricket in a unique way. It has added a new dimension of marketing and branding the sport in India. IPL is a business which has big economy of scale. India has seen the success of different businesses and the organizations or entrepreneurs running them and now it is the turn of IPL. Overall IPL itself has become a big brand under the leadership of Top management and it is a matter of interest that how it has been done as compared to the failure of its rival league ICL. The Value Positioning of IPL is “Fast and Quick Entertainment” Which has its own pros and cons according to the test and 50-50 Over Cricket Fraternity.

The Making of the Franchises:

The biggest USP of the Indian Premier League is that, here the teams are run and managed by various corporate houses or Bollywood celebrities. The owners of the teams went through a bidding procedure to buy the teams and after that, the cricketers were also put up forauction. The managements of the teams took part in the auction and bid for their desired cricketers, with a view to make their team the strongest one among all others. Cricketers from around the world, including the Indian cricketers were put up for auction. The BCCI actually followed the format of England`s most popular football event, the Barclays English Premier League (EPL) for governing the rules and regulations of the Indian Premier League (IPL).

Right from the ownership of the franchises to the games themselves, IPL saw an exciting cocktail of Cricket, Bollywood and Business Barons. The people involved in buying these franchises were the who’s who of Bollywood and Indian Business Houses.The winning bidders for the eight franchises were declared on 24 January 2008. The total base price for the auction was US $400 million but the auction went on to fetch US $723.59 million.On March 21, 2010, Pune and Kochi were unveiled as the two new franchises for the fourth edition of the Indian Premier League. The base price this time around was $225 million. While Pune was bought by Sahara Adventure Sports Group for $370 million, the Kochi franchise was bought by Rendezvous Sports World Limited for $333.3 million. The process was to have been completed on March 7 but was postponed by two weeks after many bidders and the BCCI objected to stiff financial clauses. The second franchise auction fetched total $703 million. This auction brought a lot of attention towards the IPL for the alleged involvement of Union Cabinet Minister ShashiTharoor . His involvement in trying to tip the scales in the favor of a particular consortium created much furore in the media

Open Auction for Individual Players:

Highest bidder becomes the buyer.

Each player has a ‘base annual fee’ which is on a pro-rata basis depending on his availability.

Each IPL franchise has a max limit to spend on bidding for players.

Television rights and sponsorships:

The IPL is predicted to bring the BCCI income of approximately US$1.6 billion, over a period of five to ten years. All of these revenues are directed to a central pool, 40% of which will go to IPL itself, 54% to franchisees and 6% as prize money. The money will be distributed in these proportions until 2017, after which the share of IPL will be 50%, franchisees 45% and prize money 5%. The IPL signed up Kingfisher Airlines as the official umpire partner for the series in a Rs. 106 crore (1.06 billion) deal. This deal sees the Kingfisher Airlines brand on all umpires’ uniforms and also on the giant screens during third umpire decisions

Television rights:

On 15 January 2008 it was announced that a consortium consisting of India’s Sony Entertainment Television network and Singapore-based World Sport Group secured the global broadcasting rights of the Indian Premier League. The record deal has duration of ten years at a cost of US $1.026 billion. As part of the deal, the consortium will pay the BCCI US $918 million for the television broadcast rights and US $108 million for the promotion of the tournament. This deal was challenged in the Bombay High Court by IPL, and got the ruling on its side. After losing the battle in court, Sony Entertainment Television signed a new contract with BCCI with Sony Entertainment Television paying a staggering Rs. 8700 crores for 10 years.

Sony-WSG then re-sold parts of the broadcasting rights geographically to other companies. Below is a summary of the broadcasting rights around the world. On 4 March 2010 ITV announced it had secured the United Kingdom television rights for the 2010 Indian Premier League. ITV will televise 59 of the 60 IPL matches on its ITV4 free to air channel. Sony charges Rs 4-5 lakh per 10 seconds, (top soaps charge Rs 1.5 lakh per 10 seconds). According to Television Audience Measurement (TAM), the average Television Rating Points (TRP) of the first 14 matches in Season 1 was 4.97; in Season 2 it was 4.52, and in Season 3 it’s grown to 4.69. If IPL-1 reached 77 million people in the first 14 matches, IPL-2 went to 96 million and IPL-3 is at 108 million. The ratings have also raised team earnings.

Winning Bidder

Sponsorships:

India’s biggest property developer DLF Group paid US$50 million to be the title sponsor of the tournament for 5 years from 2008 to 2013.Other five-year sponsorship agreements include a deal with motorcycle maker Hero Honda worth $22.5-million, one with PepsiCo worth $12.5-million, and a deal with beer and airline conglomerate Kingfisher at $26.5-million.

Revenue and Profits:

The UK-based brand consultancy, Brand Finance, has valued the IPL at $4.13 billion in 2010. It was valued at U$2.01 billion in 2009 by the same consultancy. There are disputed figures for the profitability of the teams. One analyst said that four teams out of the eight made a profit in 2009.]While the London Times said that all but Kings XI Punjab made a profit. In 2010, the IPL expects to have 80 official merchandising deals. It has signed a deal with Swiss watchmaker Bandelier to make official watches for the IPL.

Official IPL applications:

DCI Mobile Studios (A division of Dot Com Infoway Limited), in conjunction with Sigma Ventures of Singapore, have jointly acquired the rights to be the exclusive Mobile Application partner and rights holder for the Indian Premier League cricket matches worldwide for the next 8 years (including the 2017 season). Recently, they have released the IPL T20 Mobile applications for iPhone, Nokia Smartphonesand Blackberry devices. Soon it will be made available across all other major Mobile platforms including the Android, Windows Mobile, Palm & others.

How Does IPL make Money?

Auction of broadcasting rights.

Title sponsorship and corporate sponsorship.

Sale of Tickets (20% allocated to IPL).

Auction of Franchisee rights.

Official Umpires sponsorships.

How is the Income Distributed?

Share of the broadcasting money with franchisees.

Share of the sponsorship money with franchisees.

Share of ticket money with franchisees.

Inauguration expenses.

Prize Money.

Sources of Income for an IPL Franchise (ROI)

Share in revenue from the broadcasting rights.

Share in the sponsorship money.

Share in revenue from the sale of tickets.

Revenue from In-stadium Advertising.

Sale of Players to other franchise.

Revenue from own sponsorship and corporate sponsorship.

How is the franchise income distributed?

Franchisee fees: 10% of the total franchisee costs every year to IPL.

Players cost.

Match fees and Inauguration expenses.

Rent of Stadium.

Marketing and promotional cost.

Fees for coaches, physiotherapists and other members.

Administrative cost.

Franchisees can earn profit in IPL as Team owners get 80% of broadcast revenues, 60% of sponsorship revenues, 100% of team sponsorship revenues, 80% of ticket revenues, 87.5% of all merchandising revenues, and 100% of all hospitality revenues.

Brand Finance, which came out with IPL brand’s latest valuation at $ 4.13 billion, said that the brand alone has risen significantly, providing tremendous economic value to its owner, BCCI.

Although the English Premier League is valued much higher at $12 billion, the IPL’s valuation has risen above $4 billion in just three years, Brand Finance pointed out. Indian Premier League would generate revenue of $1 billion this season, thanks to huge fan following across the globe, attracting a large number of advertisers.

Indian Premier League’s brand value has more than doubled to $4.13 billion (over Rs 18,000 crores), while ‘Chennai Super Kings’ has emerged the most valued franchise this year, says a study. Ranked fourth last year, Chennai Super Kings led by MS Dhoni has moved to number one with a valuation of $48.4 million, followed by Shahrukh Khan-owned Kolkata Knight Riders ($46 million) and Shilpa Shetty’s Rajasthan Royals ($45.2 million). The valuation of teams pale in comparison to the IPL brand itself, which has more than doubled from last year’s $2.01 billion.

The individual franchisees have also seen a fair amount of uplift in value since last year. Vijay Mallya-promoted Royal Challengers Bangalore is ranked fourth this year with a valuation of $41.9 million and is followed by Nita Ambani-owned Mumbai Indians ($40.8 million), Delhi Daredevils ($40.5 million), Kings XI Punjab ($36.1 million) and Hyderabad Deccan Chargers at the bottom with a valuation of $34.4 million.

Consider this. Chelsea, one of the wealthiest, most powerful football clubs in Europe the Premiership giants, who were bought by Russian oligarch Roman Abrahmovic for £140 million (Rs 966 crores) in one of the most high-profile takeovers in international sport in 2003, would appear a mid-table struggler if compared to the £246.35 million (Rs 1,702 crores) Sahara splashed out to buy the Pune team.

While it is almost certain that Rendezvous Sports pumping in money for a Kochi-based T20 franchise sounds the death knell for Kerala’s traditional favorite, football, at Rs 1,533 crores, the cricketing venture heads both Chelsea and Liverpool, which was taken over by US ice-hockey team owners George Gillett and Tom Hicks for £219m (Rs 1,511 crores) in February 2007.

It should be noted that seven seasons ago, the Russian oligarch was paying the amount he did for an established brand, one that was almost a century old, while the Indians paid these astronomical sums merely to gain entry into what is still a fledgling venture, which recently began only its third season.

IPL SWOT

Strengths

The IPL is set up upon the T20 cricket game which should be completed in 2.5 hours. That means that is fast-paced and exciting, and moreover it can be played on a weekday evening or weekend afternoon. That makes it very appealing as a mass sport, just like American Football, Basketball and Soccer. It is appealing as a spectator sport, as well to TV audiences.

The IPL has employed economists to structure its lead so that revenue is maximized. The more unified the sport, the more successful it is.

Weaknesses

Twenty20 has been so popular that it could replace other forms of cricket i.e. damage the game that generated it.

Some fans will also have to pay for travel to the ground. There may be large queues for the most popular games. There may be some distance between where the fan lives and the cricket ground.

Stakes are very high! Some teams may not weather short-term failures and may be too quick to get rid of key managers and players if things don’t go well quickly. Famously, Royal Challengers Bangalore (RCB) sacked their CEO Charu Sharma for watching his team lose 6 from their first 8 games.

Some teams have overpriced their advertising/sponsorship in order to gain some short-term returns (e.g. Royal Challengers), and some sponsors and are moving their investment the more reasonably priced teams.

Opportunities

Since it has a large potential mass audience, IPL is very attractive as a marketing communications opportunity, especially for advertisers and sponsors.

The league functions under a number of franchises. Each franchisee is responsible for marketing its team to gain as large a fan-base as possible. The long-term success of all of the franchises lies in the generation of a solid fan-base. The fan-base will generate large TV revenues.

Different fans will pay different amounts to watch their sport. There will be corporate hospitality, season tickets, away tickets, TV pay-per-view and other ways to segment the market for the IPL.

There is a huge opportunity for merchandising e.g. sales of shirts, credit cards and other fan memorabilia. Grounds can also sell refreshments and other services during the games.

Marketers believe that the teenage segments need to be targeted so that they become the long-term fan-base. Their parents and older cricket fans may prefer the longer, more traditional game. The youth market may also impress on their parents that they want them to buy their club’s merchandise on their behalf – as a differentiator or status symbol.

Franchise fees will remain fixed for the up until 2017-18, which means that the investment is safe against inflation which is traditionally relatively high in India.

Threats

The level of competition that the Board of Control for Cricket in India (BCCI) can generate determines long-term viability of the league. If the level of competition drops, then revenue will fall. For example, if the top names in cricket cannot be attracted to India, the appeal of the game will fall. Often getting hold of the big names is a problem – Australian domestic cricket runs concurrent with the IPL and if players move from Australia to India to follow the money then their domestic game will be hit. This is known as ‘Free Agency.’

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If the franchisee’s fan-base does not generate income then they may not have the cash to pay the salaries of the best players. However, if you invest in the best players and they do not win the trophies, then you may not see a return on your investment. It won’t be a quick return on investment – so owners need to be in it for the long-term.

The most highly priced teams may not be those that have the early success. Revenues will come from the most highly supported teams.

Marketing Strategy: IPL

The DLF Indian premier league is a concept sell.

It is clearly observed that IPL is a perfect example of controversy marketing

Strategies:

Auctioning the franchisees.

Auctioning the players participating in the IPL tournament.

Advertisements on various TV and radio channels.

Cheerleaders were one of the most important things that is talked about, foreign girls attracted huge crowd.

Worldwide telecast.

Locations: the venue chosen for the cricket matches was a strategic choice of places which are named after franchisees, which helped attract people.

Conflicts with some media partners and some other cricket boards again demanded the attention of people.

Timing: IPL has shown its strategic application of intellect by choosing the evening time for the matches, which made people watch game comfortably.

ICL: the rival ICL had been one of the reasons for the publicity and emergence of IPL. People started comparing the IPL & ICL that caused the huge publicity for the IPL

Opening ceremony gala, Live Concerts.

Franchises taken by film stars like Shahrukh Khan, Pretty Zinta and Juhi Chawla etc are the center for attraction, which made some Bollywood stars come for the game.

Use of models and Bollywood stars for anchoring and promotion of teams like Akshay Kumar for Delhi daredevils, Shahrukh khan for Kolkata Knight Riders.

The commentators were not less than PROs, use of phrases that pleased sponsors and made them pay more. Example: for every six it was a DLF Maximum, for every special moment it was city moment of success.

Advantages and Disadvantages

Players:

Advantages

Disadvantages

Earn at least Rs 80 Lakhs ($200000) or more per season on average.

Due to the tight schedule of international cricket, Chances of injury lowers the tenure of career.

Bonuses and Prize Money from Team owners.

Neglecting other forms of cricket

A great stage to show case skills and compete with the best in the world.

Fast game. Stamina and patience to build an innings and bowl tirelessly to get wickets is lost.

The top 4 highest earning international cricketers are Indians, with the captain, Mahendra Singh Dhoni, leading the way with annual earnings estimated at US$10m, Tendulkar at US$8m, Yuvraj and Dravid earning in excess of US$5m.

Franchise:

Advantages

Disadvantages

Using the cricket property to promote other businesses.

Financial Loss if the IPL fails to take off.

Prize money if the team wins.

Franchises Pays the team and financial costs i.e. Cost of acquisition.

They earn from the share in revenue from IPL.

Promotional expenses have to be paid by franchises.

They also pay the franchisee fee e.g. RCB has to pay $11.16m p.a. for 10 years.

Sponsors:

Advantages

Disadvantages

Spot rate charged from advertisers of IPL.

Spot Rate may go down if any IPL season is not a blockbuster.

Improves customer base.

Too much reputation at stake tied to the fortunes of the franchise teams as a whole.

Sponsors get branding and recognition.

BCCI:

Advantages

Disadvantages

The BCCI makes good money solely from the sale of TV rights, promotion and franchises.

May forget to put efforts to promote other forms of cricket – Domestic and Test Cricket.

Got a great source of revenue.

Viewers:

Advantages

Disadvantages

Unlimited Masti and entertainment.

Chances of family fights over Channel viewer ship.

A great arsenal to make the case strong against the Saas – Bahu fans in the family.

Capital costs in terms of additional investment in television sets.

A very good reason to increase productivity in office – Return home by 8 pm.

A to Z of IPL Controversies

A for Australia

Anyone remember that the Aussies had the biggest problems at the beginning of IPL? There were issues regarding the protection of Baggy Green sponsors and availability of the players with certain tours. Our relations with Cricket Australia were at an all-time low.

A is also for Andrew Symonds who got a record price in the first auction raising a lot of eyebrows and people wondered how he would fare in the IPL. Now Symmo is on his way to becoming a desi and no-one will bat an eyelid if any Aussies takes Indian citizenship.

B for Betting

When cricket is played in India, can rumours of betting be far behind? After the Modi-Tharoor spat, everyone is talking about it again.

A recent Forbes report puts the illegal cricket-related betting annually at a whopping Rs 160,000 crores. How much of that is IPL related?

The Karnataka Home Minister called the shifting of the semis from Bangalore to Mumbai a result of the ”powerful betting lobby”. Even the I-T raids that are taking place on the premises of BCCI and IPL have a betting angle to them.

One hopes that nothing comes out of all this for a Betting Scandal has the potential to be the biggest game-killer of them all.

C for Cheerleaders

They have been controversial right from the beginning, but they continue to charm the crowds. The all-white cheerleaders have raised many an eyebrows in a past edition of IPL. A row was kicked up over two coloured ones being sent home. No case was filed. Various groups at various times have protested against them while there have been uproars in political assemblies too. Bans have been demanded. But Indian or not, they are here to stay.

D for Dada

Was Sourav Ganguly a victim of the KKR management? Was John Buchanan a villain in wanting to show him the door? Was Shah Rukh Khan foolish in getting into a conflict with him? Did SRK interfere too much with the strategy of KKR? Did Dada refuse SRK’s request to talk to the government for tax favours? Did the troika of Dada-Buchanan-SRK fight all the time? One thing is for sure. There’s never a dull moment when Dada is around.

E for ECB

The ECB was the other board apart from CA that had a lot of issues with the IPL. Player concerns resulted in Dimitri Mascarenhas being the only signed player in 2008. In order to break free of the IPL, the ECB attempted the Stanford 20/20 with the WICB. That ended in a disaster when Texas billionaire Allen Stanford was charged with fraud. Things are finally okay and English players like Kevin Pietersen and Paul Collinwood have done pretty well in IPL3.

F for Fake IPL Player

Is there anything the IPL doesn’t have? As if Twitter wasn’t good enough, you had a blogging controversy to boot. A player claiming to be part of KKR started baring all the details of dressing room talk, strategies gone wrong, all the backbiting and salacious gossip in 2009.

Was he real? Was he telling the truth? It didn’t matter. He got lakhs of visitors and also came out with a book called The Gamechangers. Fake or real, this is the most famous anonymous dude around.

G for Glass of Beer

In IPL2, a spectator offered a glass of beer to Shane Warne and the Aussie actually crossed the boundary and drank it! Critics cried foul. Others defended him. It was the strategy break!

It was technically outside the cricket field. It’s just IPL, good pure entertainment! Out of all of Warne’s controversies, the spinner will probably rank it at its lightest. Vijay Mallya must have been sniggering somewhere in the background.

H for Harbhajan

Some people draw controversies like a magnet. Call it the Passion of Harbhajan Singh, but you just can’t keep him quiet on the cricket field (or off it, for that matter).

The ICC had rules on what to do if a player slapped a player on the field. That dead clause came to life when Harbhajan slapped mercurial S Sreesanth at the end of a match. A sobbing Sreesanth was all over the TV screens and some even said he got what was coming to him! But still it was a grave act for technically Harbhajan could have been handed a life ban. Ouch!

I for Icons

They were announced with great fanfare and the IPL and the franchisees clung on to them in the hope of drawing popularity and brand recall. But as the IPL progressed they were slowly dispensed with. Rahul Dravid was given the boot from the captaincy and VVS Laxman from the team. Yuvraj Singh hurtled from one disaster to another and was also stripped of his captaincy. Virender Sehwag gave up his mantle on his own. Sachin Tendulkar looked the tired man in the first two seasons and only came on his own in IPL3 when the whole concept of Icons was shelved.

J for Joint Ventures

While some teams were owned outright by single company, most of them were owned by a group of people. Who owned what percentage and paid how much money? While all this was swept under the carpet in the first two seasons, it suddenly became a hot topic in IPL3 when Modi put up the holding details of the Kochi franchisee.

In the beginning was a Modi Tweet… Kochi shareholders are: Rendezvous 25% free, Rendezvous 1%,Anchor 27%, Parinee 26%, Film waves combine 12%,Anand Shyam 8%,Vivek venugopal 1%…

K for Kochi

…and that directly brings us to the Mother of All Controversies. It encompassed Shashi Tharoor, Lalit Modi, Twitter, North-South Politics, Lok Sabha, I-T Raids, NCP… Phew! Who would have thought that something from Kerala would have brought down the whole IPL pack of cards in one huge sweeping stroke!

Sunanda Pushkar washed her hands off Kochi and Shashi Tharoor finally had to bid goodbye to his ministry before his first anniversary. And the can of worms has just been opened. They keep coming out one after another.

L for Lalit Modi

Mr. Lalit Modi. Some time back you could have easily have said IPL = Modi and Modi = IPL. This man is no stranger to trouble. In fact, now controversy has become his middle name.

Charged in a US court, in trouble with the authorities with the way he ran the RCA, Modi has been hurtling from one disaster to another in the IPL. And getting away with all of them to boot! He famously declared in a TV channel that he swatted controversies like flies. But such is life where even the greatest of grandmasters can be checkmated!

M for Media

In season one, the IPL tried to impose all sorts of media restrictions related to images and were faced with a boycott. The IPL backed off and the Indian Newspaper Society played ball. In season three, it was the turn of the broadcasters. A controversy erupted over the amount of footage TV channels could use and another boycott loomed and that too was sorted out at the eleventh hour.

N for Ness Wadia

While all the KXIP action has been around Preity Zinta and Yuvraj Singh and all that hugging, Mr Wadia is also an owner and has been part of the behind the scenes action. He came in th