Best Media Info

Editor’s Picks
Special
Interviews
Events
IRS
Misc
BuzzInContent

IPL's business value grows by 26% over the last year

Mumbai Indians is the first franchise to cross over the business value of $100 million. It is the biggest franchise of IPL in terms of valuation

The business valuation of Indian Premier League (IPL) has grown from $4.2 billion in 2016 to $5.3 billion in 2017 as per the report ‘IPL: The Decade Edition. It is a concise report on brand values in the Indian Premier League’ released by Duff & Phelps, a global valuation and corporate finance advisor.

The findings of the fourth edition of Duff & Phelps’ annual study indicate a 26 per cent overall growth and a three-year CAGR of 13.9 per cent. The report highlights the evolution of the IPL since its inception in 2008 and its steadily expanding foothold on the global sporting scene.

“Our valuation analysis reflected a notable increase in brand values in the IPL,” said Varun Gupta, Managing Director, Duff & Phelps and leader of the firm’s operations in India, South Asia and Japan.

“This IPL season has garnered attention for all the right reasons. Namely, a relatively controversy-free tournament, increase in social media engagement, strategic and highly successful marketing initiatives, and compelling on-field performances – all of which affirmed IPL’s standing as the most valuable cricketing league in the world.”

What are the prospective challenges that the tournament can face going forward in terms of growth? Gupta said, “What IPL has done is remarkable. It is one of the most watched phenomena globally. What is important is that the Indian TV audience gets their money return when they see an intense match being played on TV. Once there is lack of aggression, dishonesty and farce, the audience starts feeling cheated, which has not happened with IPL. Even in season 10, we had some very intensive matches being played. Another thing that can be done is to increase their social media engagements. One thing that our global colleagues have pointed out about IPL is how the league has itself remained a stronger entity than the franchises, which is not the case even with the EPL. A Chelsea, or a Manchester United are much bigger entities on social media, than EPL is. IPL is much more valuable than the franchises.”

The brand values of the individual teams have risen 34 per cent on average in 2017 compared to 2016. The Mumbai Indians sustained the top position with a brand value of $106 million, followed by Kolkata Knight Riders at $99 million and Royal Challengers Bangalore in third place at $88 million.

Factors contributing to the rise in brand values of individual franchisees include increasingly lucrative advertising, broadcasting and sponsorship deals; reduction in franchise fees beginning with the next season; increased viewership across India; and increased fan engagement, evidenced by the rise in social media activity.

However, it was seen in the report that not all the franchises were profitable even in the latest season 10. Santosh N, Managing Director in Bangalore, Duff & Phelps explained the possible reasons, “There are fixed costs and variable costs that a franchise has to bear. The significant fixed costs include the bid amount that they have to pay to the Board of Control for Cricket in India (BCCI), which everyone had agreed to pay at the time of initial bidding in 2007-2008. This was to be paid for 10 years and this is like the investment that these franchises had done. Going forward as this significant fixed component goes away, there are chances that those who have not been profitable will now turn profitable in the coming years. Once they start paying only the variable amount which will be a percentage of their earnings, things will be much easier.”

Satellite and digital broadcasting rights are up for renewal later this month and will be keenly watched. The renewed deal is anticipated to be significantly higher than the one signed by Sony nine years ago.

Sony’s ad revenues crossed Rs 1,300 crore this year, while Hotstar’s ad revenues from IPL rose to Rs 120 crore, more than double the previous year. Television viewership also ascended to new heights, with nearly 45 per cent of viewership coming from rural India, evidence of the reach and pull of the IPL.

“While the league is going strong in terms of the advertiser response and sponsorships too, not all franchises are able to do that. So, they all have to individually evaluate and re-strategize themselves,” said Gupta.

Also, in the case of the title sponsorship bidding for IPL, the mobile handset category just dominated the whole game. Why and when will the other categories take that leap? Gupta explained the reason for the aggressiveness within the category, “That one handset category is growing very fast in India. After e-commerce, this is the fastest growing thing. Going forward, there might be another category of advertisers which gets developed and sees scope in investing so much in the marketing. Mobile phones are penetrating rapidly in the country.”

Santosh added, “Also, mobile phones are consistent purchase. The lifecycle of a smartphone is about 18-24 months, in most cases. So, repeat purchases are on a higher side.”

“The new broadcasting rights auction will be one of the keenly watched developments over the next couple of months. The BCCI is clearly set for a huge windfall. We could be looking at a television broadcasting deal of record proportions in India. This deal may follow the precedent set by some of the big-ticket broadcasting deals across the world,” said Santosh.

Digital content is becoming a very strong medium of social media engagement for the sports viewers. The following statistics from the report reveal the growing significance of content in today’s sports context:

The number of tweets pertaining to the IPL has crossed 8.5 million and continues to grow.

As per Maxus, a total of approximately 6 million mentions on social media were registered in the 10th season, more than twice those of the last season (approximately 3.1 million mentions).

Mumbai Indians had an incredibly successful digital media strategy, attracting over 83 million engagements across Facebook (50 million), Instagram (29 million) and Twitter (3.95 million).

Trevor Birch, Managing Director at Duff & Phelps and Former CEO of Chelsea Football Club, said, “I’ve been intrigued to watch how the IPL has marketed and protected its own brand value separate from the clubs. Having worked with some of the biggest clubs in the English Premier League (EPL), the one thing the IPL has done very well is the marketing and protecting of its own brand. Most of the EPL clubs are bigger brands than the EPL brand itself, whereas in the IPL, it seems to be Brand IPL which is more powerful than the individual franchisees.”

Even the merchandising leg of the business has not been exploited well, since the franchises are still sealing deals till much later in the tournament. Gupta felt that it is an important stream, adding, “Merchandising has massive potential, though right now, it is a very minor percentage of the cricket viewing population. There are franchisee led hashtags and events, in addition to the BCCI fan-parks which has resulted in the engagement and interaction. Merchandising is challenging but there is huge scope.”

Info@BestMediaInfo.com

Tags: IPL
Advertisment
Post a Comment