IPL 2020: Cheering factor for Indian economy – from brands, fans to stars

It’s party time, folks!

Cricket’s biggest extravaganza gets underway and, for the next six weeks, business, sports, entertainment and many others will have one thing to talk about – the business of cricket!

Indeed, while cricket is the biggest sport in the country, the business around cricket has made it an unmissable event for businesses, brands, fans and celebrities alike. That is why despite the trying circumstances, conducting the biggest cricket spectacle on earth could be deferred but not stopped. Money, after all, makes the world go round.

Take the value of the franchise, for example. When a study by Duff & Phelps about the Indian Premier League (IPL) in 2019 showed that it was valued at $6.7 billion, inching up from $6.3 billion the year before, it came as a little surprise. The value of the IPL brand may have jumped over the last 2-3 years sharply but in the global context of things, it is just the beginning for the IPL to stride ahead.

Leagues of several other sports, started decades ahead of IPL, have been a bigger hit with their fans, garner more revenues and teams are valued far higher with significantly more in the moolah, which is their ultimate strength. The NHL, for example, makes over €4.2 bn in revenue despite the sport being followed largely in the U.S. and Canada.

BUSINESS OF LEAGUES

IPL: Early years for the brand

The value of IPL is, arguably, still in its infancy. Given the way its fan following has been increasing, there is little doubt that it is set for glory days in the not too distant future. The six weeks of entertainment now needs to expand its presence for a longer duration during the year. But with the unique requirement for cricket – test matches, ODIs and T20 formats – it could be easier said than done.

Since football players for the popular European leagues spend a better part of the year, committed to their franchise team, they contribute directly to increasing the value of their team with performance on and off the field.

At $4.24 billion, for example, Real Madrid is the most valuable football team in the world in 2019. With a shade over €750 million in revenues in 2018-19, Real Madrid stood out among peers with a €38 million profit. It managed to beat others in the combined metric where the matchday, broadcasting value, commercial value and the value of the brand was measured. Real Madrid has a contract worth €110 million with Adidas and €40 million with Emirates, which are its biggest brand partners. Such contracts guarantee long-term income which IPL teams now need to stitch together.

Barcelona FC’s commercial success has, partly, been attributed to Lionel Messi’s rise as a star. After Barcelona, Manchester United, Bayern Munich and Manchester City as clubs have been very successful in building their brands and were next in the pecking order for 2017-18.

No IPL franchise, far lesser one in any other league, can ever dream of that kind of lofty valuation for a cricket team. As of now, according to the Duff & Phelps 2019 report, Mumbai Indians was at the top of the charts for the fourth consecutive year with a value of Rs. 809 crores (~$110 million) while Kolkata Knight Riders and Royal Challengers Bangalore saw their value fall to Rs. 595 crores (~$80 million).

The value of television rights, and how it contributes to the guaranteed earning of the teams, is a significant part of the earnings for the IPL teams. It is the other source of revenue that needs to be propped up. IPL teams have not been able to commercially exploit the value of the brand as much, partly because of the limited window that they have to work with the brands.

With the matches being played at overseas locations with a third of the capacity in the stadium, teams will hardly be earning anything from their share of gate receipts for this year. The expanding digital reach could make up for that partner, which could be exploited by the official broadcaster. New categories of mass products may want to ride the cricket bandwagon at a time when the advertising clutter is far lesser.

If the ground can see enough firecrackers from the players, expect the Diwali or festival season feeling to rub off on the economy.

What better than cricket to bring cheer to India!

  • Ashutosh Sinha is the founder of WordWiseWeb Media. Read his weekly column on the business of sport here. Connect with him @ashutoshsinha00 on Twitter

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