afaqs!

IPL Second Innings: What's in store?

By Sapna Nair , afaqs!, Mumbai | In Media Publishing | February 16, 2009
The outstanding success of the debut season of IPL has raised huge expectations this time round. afaqs! investigates the factors that would contribute to its success

In 2007, the dawn of a new cricket format in the country was announced - the Indian Premier League (IPL) - which promised to be the "baap of entertainment". The Twenty20 cricket tournament launched by BCCI (Board of Cricket Control of India) was, indeed, the biggest entertainer in years.

Although tremendous hype preceded the tournament, so did much criticism, such as the lack of team India spirit, limited appeal across the family and the nature of team compositions - factors that could go against the IPL. However, its resounding success was both unprecedented and somewhat unexpected. Interestingly, even the organisers underestimated the power of IPL.

Sundar & #BANNER1 & # Raman, CEO, IPL, says, "We expected the tournament to be popular in India, but we never imagined that a domestic league in India would create such interest globally." The league was widely watched in Australia, South Africa, South East Asia, US and the MENA (Middle East and North Africa) region.

The second season of IPL starts on April 10, and just as the success of a film generates great interest in the sequel, the bar has been set high for IPL 2 as well.

For obvious reasons, the organisers are quite optimistic about the success of the tournament. "If the initial indications of interest in the player auction at Goa is anything to go by, I think Season 2 of the Indian Premier League should be even bigger and better than the inaugural season," Raman asserts.

Many other industry observers are also convinced that like other big leagues, IPL also has the potential to grow. Sports consultant and CEO, GloboSport, Anirban Das Blah, says, "Initially, it took time for people to understand the concept of T20. Now that they have enjoyed the format, the excitement about the game would be greater," he says.

No questions on this. But unlike other international leagues, IPL still lacks the team loyalty, which will be crucial to retain the thrill in the years to come.

Forget about international leagues such as English Premier League, European Premier League or the NBA, IPL's team loyalty wasn't even close to the domestic football clubs back home. When Indian football was at the peak of its popularity, domestic clubs such as Mohun Bagan Athletic Club, East Bengal Football Club, Salgaocar Sports Club or Mohammedan Sporting enjoyed a die-hard fan base. Even now, some of these clubs have huge fan bases.

Supporting this, Manuj Aggarwal, COO, PDM India, a sports marketing company, says, "IPL lacked team loyalty. If people were rooting for any particular team, it was because of the star value attached to it. For instance, people supported Kolkata Knight Riders for Shah Rukh Khan, like they supported Chennai Super Kings for Dhoni."

Aggarwal points out that this situation exists because of the lack of local stars. The stars of IPL teams are hired ones, unlike EPL or County Cricket, where local players are the heroes.

However, industry observers believe that team loyalties may begin to grow only after the fifth or sixth season. As Jagdeep Kapoor, chairman and managing director, Samsika Marketing Consultants, says, "Last season, the format of the game was too new for people, but now there is better clarity."

He is of the opinion that support for the teams will be people-led, rather than region-based. For instance, a person from Hyderabad may support Chennai Super Kings, because Dhoni is his favourite cricketer.

However, there is also a point of view that IPL is beyond any team loyalty, because it's a complete entertainment package. Sudha Natrajan, president and chief operating officer, North, Lintas Media Group, says, "Team loyalty will not have a major effect on how IPL is viewed. People will continue to watch it because of the entertainment value of the property."

Natrajan also believes that team loyalty has started to build from the last season and it's more city-based. "Gradually, every team is evolving in character; the components of the team and the uniforms have all provided visual cues to the viewers," she says.

"Comparing it with County Cricket is unfair, because these tournaments are for hardcore sports fans, whereas IPL has a far wider appeal," she adds.

However, promoting IPL as an entertainment property also had a downside. A senior sports consultant says, "Because IPL was promoted as an entertainment property, rather than a sports property, people went to see a match once, just like they watch a movie. On the contrary, this is not the case when India as a team is playing cricket."

When IPL was launched, ticket sales were expected to contribute a substantial share of revenue. However, it is estimated that not more than 20-25 per cent tickets per match were sold, despite prices as low as Rs 200. A large number of tickets were given free through contests and promotions.

Even this time, the ticket sales are not expected to be substantial. As a result, there is higher dependence on sponsorships and merchandising, besides the revenue from broadcasting rights, which is the largest chunk.

As per the revenue sharing arrangement between IPL and its franchisees, the latter will receive 80 per cent of the television rights revenue earned by IPL over the first two years, which will come down to 70 per cent in the third and fourth years, and further reduce to 60 per cent between years five and ten.

From the 11th year, IPL will share only 50 per cent of the television rights revenue. In addition, the franchisees will also receive 60 per cent of the sponsorship revenue during the first 10 years, after which they will receive 50 per cent. Of the total amount to be distributed by IPL among its franchisees, 20 per cent will be based on the final league positions of the franchises, while the other 80 per cent will be shared equally.

Going by this formula, franchisees earn around 60-70 per cent of their revenue from broadcast rights and the central sponsorships. Team sponsorships and merchandising form another 20-25 per cent of their revenue, followed by ticket sales, which forms 5-10 per cent.

Another issue is that in a scenario where every rupee counts, are advertisers willing to pump in money into the property just as they did last time?

Raman is sure of a good response from advertisers; moreover, he says that many sponsors such as DLF, the title sponsor and Hero Honda will continue. "We still have a host of corporate companies that have been in talks with us for various sponsorship opportunities. I am told the same is the case with our franchisees," he says, confidently.

The feedback that afaqs! got from the industry is that currently, franchisees are asking for exorbitant amounts of money from advertisers seeking sponsorship, based on the success of the league last year.

As per industry estimates, as high as Rs 16-20 crore is being quoted for lead sponsorship of teams. "The economy has shrunk and that will have an impact on how much people can shell out. If they will continue to overprice it, they (team owners) are going to suffer from serious heartburn," cautions Blah of GloboSport.

However, the major portion of revenue for the IPL teams come from the broadcast rights. In fact, a section of industry observers also attribute the success of IPL to its success as a television property. As Natrajan puts it, "The success of the tournament on television has a major contribution in turning IPL into a national phenomenon."

Ravi Kiran, CEO-South East and South Asia and CEO-Specialist Solutions, Asia, Starcom MediaVest Group, is also convinced about IPL as a television property. "In today's market scenario, IPL will be a very low-cost way to get entertainment, spend time with family, and forget that life is tough, even if it's only for a few hours. Recently, the Ranji trophy, Australian Open and Super Bowl have all proved that," he states.

As a television property, IPL is seeking a rate of Rs 4 lakh for 10 seconds, which is perceived as expensive in the current times. Rohit Gupta, president, Network Sales, Licensing and Telephony, SET India, the broadcaster which owns television rights, says, "We have priced it much higher this time, after the runaway success of the league. We are sure to sign more advertisers this time, because IPL has proven to be a sure-shot, risk-free property. "

A senior media planner is confident that SET Max won't have any problem selling air-time. Advertisers are keen; while some have already signed deals, some are waiting to see if the rates will be lowered.

Kiran of Starcom perceives this as Max's great opportunity for sales-linked deals, since IPL is an assured way of getting eyeballs. Normally, television deals are fairly risk-free, where the advertiser pays a certain amount of money for a spot. A sales-linked deal is one in which the media owner charges the advertiser for incremental sale on achieving the reach or objective.

In conclusion, Raman takes pride in informing that Cricket Australia and Cricket South Africa are looking at ways of duplicating IPL's success in their respective principalities. "What better testimony to IPL and its success than this?" he wants to know.