The IPL auction of cricketers in February was called the 'Mumbai Cattle Market' by those horrified by the tamasha of industrialists and filmstars throwing dollars at players. The creme de la creme of the stars were placed for bidding and lapped up at varying prices - more for their local star attraction value rather than their cricketing skills.
Like it or hate it, the IPL is probably here to stay, the first edition showing enough promise. So much so that it could be called the biggest business initiative of 2008. And as all business is ultimately marketing, it's a marketing concoction. It's about BCCI, business houses, the media and the film industry putting their collective might to create a brand of unprecedented proportions. It could also be looked at as a cocktail of four Indian diseases. And here’s the recipe:
First, the base - cricket. Add some glamour in the form of cinema, the opium for Indian masses. Then shake it with some celebration. Indians need an excuse to celebrate, to enjoy. Our respect for all faiths gives the average Indian a festival to celebrate almost everyday. Each has its own rituals of the community coming together to dance, sing and create general cacophony, unmindful of environment pollution and civic sense. Finally, top it with Celebrity Craze. India is a country of 330 million Gods and we make heroes very easily. Cricket stars or film stars, they are easily deified and venerated. People flock in thousands just for a real life glimpse of their heroes.
When these four potent ingredients come together, the cocktail is called the Indian Premier League. Package this in a business proposition and you have something that could re-write the rules of business, sports and entertainment. With the backing of some of the best business groups and the high-decibel promotion, it makes for an experiment worth tracking.
The IPL taps into local pride much like the EPL in football in the UK. The concept of the game, revenue generation model, team ownership and even the concept of cheer leaders, is being lifted from American sports industry. The whole business behind IPL looks like a MLB, NFL or NBA, except for one change, BCCI is not the ultimate beneficiary there! Every dollar earned comes back to franchisee. The basic revenue model for the franchisee is; in-ground ticket sales, in-ground marketing revenue, and other in-ground sales revenue. Considering the amount of money they spend on team players, and other costs they need to take care, it might not be possible for franchisee to break even in first couple of years. However, if the great rush continues, it makes sense from business perspective.
Will this spell the end of other forms of cricket: five-day cricket or one-day internationals? While it may seem so, the truth is every product has its place in this world if properly nurtured. After all the fast-food restaurants and take-away joints didn’t kill sit-down restaurants, did they?
Like it or hate it, the IPL is probably here to stay, the first edition showing enough promise. So much so that it could be called the biggest business initiative of 2008. And as all business is ultimately marketing, it's a marketing concoction. It's about BCCI, business houses, the media and the film industry putting their collective might to create a brand of unprecedented proportions. It could also be looked at as a cocktail of four Indian diseases. And here’s the recipe:
First, the base - cricket. Add some glamour in the form of cinema, the opium for Indian masses. Then shake it with some celebration. Indians need an excuse to celebrate, to enjoy. Our respect for all faiths gives the average Indian a festival to celebrate almost everyday. Each has its own rituals of the community coming together to dance, sing and create general cacophony, unmindful of environment pollution and civic sense. Finally, top it with Celebrity Craze. India is a country of 330 million Gods and we make heroes very easily. Cricket stars or film stars, they are easily deified and venerated. People flock in thousands just for a real life glimpse of their heroes.
When these four potent ingredients come together, the cocktail is called the Indian Premier League. Package this in a business proposition and you have something that could re-write the rules of business, sports and entertainment. With the backing of some of the best business groups and the high-decibel promotion, it makes for an experiment worth tracking.
The IPL taps into local pride much like the EPL in football in the UK. The concept of the game, revenue generation model, team ownership and even the concept of cheer leaders, is being lifted from American sports industry. The whole business behind IPL looks like a MLB, NFL or NBA, except for one change, BCCI is not the ultimate beneficiary there! Every dollar earned comes back to franchisee. The basic revenue model for the franchisee is; in-ground ticket sales, in-ground marketing revenue, and other in-ground sales revenue. Considering the amount of money they spend on team players, and other costs they need to take care, it might not be possible for franchisee to break even in first couple of years. However, if the great rush continues, it makes sense from business perspective.
Will this spell the end of other forms of cricket: five-day cricket or one-day internationals? While it may seem so, the truth is every product has its place in this world if properly nurtured. After all the fast-food restaurants and take-away joints didn’t kill sit-down restaurants, did they?
IPL’s Revenue
IPL has already signed deals that add up to $2 billion with sponsors and broadcasters for the next 10 years. Last year, they made $91 million from broadcast rights, $72.4 million from franchisee bids, and sponsorship added up to $30 million. So, for a year it adds up to approximately $200 million . This does not include associated revenues such as ticketing, which is handled by franchisees.
For next year, they are looking at the same except for the sponsor bit, where we are looking at selling a couple of more slots at around $7 million. Depending on when they are sold, it should add $21 million to revenues. Discussions are on with certain brands but nothing has been finalized.
The franchisee ownership model, tender process, composition of teams, the auction process, etc. Each of it has been carefully thought through and to call IPL a marketing success would be a little shallow in thinking. IPL’s success tends to be evaluated only in marketing terms. The noise levels in media and the talk value can easily be passed off as a marketing hype. Those who can peel the layers see the real value of the product. The league has caught the fancy of people across the world with outstanding response from the non-cricketing countries too. It is the media that has lapped up the product and taken it places. Every single market has appreciated the product. Consequently, IPL is spreading the game globally.
SWOT Analysis
Strengths
1. The Indian Premier League (IPL) is based upon the Twenty20 cricket game which should be completed in 2 ½ 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.
2. The IPL has employed economists to structure its lead so that revenue is maximized. The more unified the sport, the more successful it is.
Weakness
1. Twenty20 has been so popular that it could replace other forms of cricket i.e. damage the game that generated it.
2. 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.
3. 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.
4. 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
1. Since it has a large potential mass audience, IPL is very attractive as a marketing communications opportunity, especially for advertisers and sponsors.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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
1. 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 form Australia to India to follow the money then their domestic game will be hit. This is known as 'Free Agency.'
2. 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.
3. Franchises are very expensive. The most expensive franchise - Mumbai Indians - was bought by Mukesh Ambani for $111.9 million, whereas the lowest priced franchise - Rajasthan Royals was picked up by Manoj Badale for a mere $67 million.
4. The most highly priced teams may not be those that have the early success. Revenues will come from the most highly supported teams.
- Pramod Seshan
IPL has already signed deals that add up to $2 billion with sponsors and broadcasters for the next 10 years. Last year, they made $91 million from broadcast rights, $72.4 million from franchisee bids, and sponsorship added up to $30 million. So, for a year it adds up to approximately $200 million . This does not include associated revenues such as ticketing, which is handled by franchisees.
For next year, they are looking at the same except for the sponsor bit, where we are looking at selling a couple of more slots at around $7 million. Depending on when they are sold, it should add $21 million to revenues. Discussions are on with certain brands but nothing has been finalized.
The franchisee ownership model, tender process, composition of teams, the auction process, etc. Each of it has been carefully thought through and to call IPL a marketing success would be a little shallow in thinking. IPL’s success tends to be evaluated only in marketing terms. The noise levels in media and the talk value can easily be passed off as a marketing hype. Those who can peel the layers see the real value of the product. The league has caught the fancy of people across the world with outstanding response from the non-cricketing countries too. It is the media that has lapped up the product and taken it places. Every single market has appreciated the product. Consequently, IPL is spreading the game globally.
SWOT Analysis
Strengths
1. The Indian Premier League (IPL) is based upon the Twenty20 cricket game which should be completed in 2 ½ 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.
2. The IPL has employed economists to structure its lead so that revenue is maximized. The more unified the sport, the more successful it is.
Weakness
1. Twenty20 has been so popular that it could replace other forms of cricket i.e. damage the game that generated it.
2. 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.
3. 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.
4. 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
1. Since it has a large potential mass audience, IPL is very attractive as a marketing communications opportunity, especially for advertisers and sponsors.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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
1. 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 form Australia to India to follow the money then their domestic game will be hit. This is known as 'Free Agency.'
2. 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.
3. Franchises are very expensive. The most expensive franchise - Mumbai Indians - was bought by Mukesh Ambani for $111.9 million, whereas the lowest priced franchise - Rajasthan Royals was picked up by Manoj Badale for a mere $67 million.
4. The most highly priced teams may not be those that have the early success. Revenues will come from the most highly supported teams.
- Pramod Seshan
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