Thursday, March 25, 2010

IPL- A Case Study

The Most Comprehensive Case Study on the IPL :


Origin of IPL Twenty 20 Cricket Idea






How do IPL cricket teams select individual players?
 

  * Now max. limit for each Franchise is raised to $ 7 million for auctions in 2010



Rules regarding team composition

- Minimum squad strength of 16 players plus one physio and a coach.

- No more than 8 foreign players in the squad and at most 4 in the playing XI.For the 2009 edition franchises are allowed 10 foreign players in the squad. The number allowed in the playing XI remains unchanged at 4.

- A minimum of 8 local players must be included in each team.

- A minimum of 2 players from the BCCI under-22 pool in each team.

- The total spending cap for a franchisee in the first player auction was US $5m. Under-22 players are to be remunerated with a minimum annual salary of US $20,000 while for others it is US $50,000.


Economics of the Indian Premier League ( Click to open this in new window & click again to zoom)

Lalit Modi, the man with the most famous lisp in India, has also become its most audacious money maker. Show him an empty space and he will hang a logo on it. Give him free airtime and he will sell it. Heck, point out a piece of the sky and he will monetise it. The biggest names in world cricket are walking billboards, some sporting as many as seven logos (eight, if you count title sponsor DLF).


Modi has made another Rs 54 crore by selling 150 seconds of airtime on SetMax by carrying ads on the scoreboard during an over. Why, even the air above a stadium can be sold: after all, it costs MRF Rs 15 crore to have its blimp in the sky for 24 matches.
New on-ground sponsorships for the strategic time-out and a new central sponsor give teams additional earnings from the central revenue pool. Last year the pool was restricted to broadcasting rights (Rs 67.5 crore for each team). Now with Internet rights, theatrical screenings in bars, after-match parties Colors' IPL-related programming cricket and entertainment are stretched to breaking point.


The world, it appears, is not enough for Modi, who was reportedly disappointed when he was unable to sell the rights for the orange and purple caps worn by the IPL's leading run-scorer and wicket-taker, being pitched separately to brands at Rs 15 crore a year each.





Profit for Franchisees(2009)


All figures are in Rs. Crore

Other incomes include gate receipts, in-stadia advertising, merchandise sales, and media tie-ups

Other expenses include stadia fees, travel, stay cost and team promotion

Winners got Rs. 4.8 crore, runner ups got Rs. 2.4 crore

Had tournament been played in india, profit could have been even more as the matches played in Indian stadiums could have generated heigher revenue from ticket sales. Profit was also reduced due to shifting of tournament from India to South Africa which added cost of shifting players, staff etc.

Profit for BCCI

Main income is TV rights for 10 years starting from 2008 sold to WSG (World Sports Group) / Sony for US $1.64 billion (Indian Rs 8,200 crore). Earlier contract was for US $918 million (Indian Rs 4,200 crore). However due to inclusion of BigDTH to show the matches as well the contract was renegotiated. Now Sony will pay Rs 670 crore per year for first four years and Rs. 1,100 crore per year for next five years. Before renegotiation of contract (contract of Indian Rs 4,200 crore) it was Rs. 280 crore/year for first five years and Rs 540 crore for next five years.

Profit for Multy Screen Media (formerly known as Sony Entertainment Television)

IPL Advertisement tariff Rs 4 lakh to 5 lakh / 10 seconds. (It was Rs 2 lakh to 3 lakh / 10 seconds in 2008). Sony has said to be earned above of Rs 400 crore this year as advertisement revenue which was about Rs. 275 crore last year.

Source: IIFL Research


SWOT ANALYSIS


Strengths


- The Indian Premier League (IPL) is based upon the Twenty20 cricket game which should be completed in 3 hours. That means that is fast-paced and exciting

- 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.

- IPL in partnership with UNEP (United Nations Environment Programme) in general and RCB going green- All the players will take the pledge for environment, A brand ambassador will give tips to the audience on the environment, IPL Plans to build solar power plants on the roofs of the stadiums to supplement the stadia’s energy requirements, IPL will calculate its carbon footprint and will try to compensate it, Waste management, energy and water efficiency are some of things planned for future episodes, BMTC is introducing Big 10 buses from all parts of the city for the IPL 3 matches held in Bengaluru and Mumbai Indians Education for All Initiative to support underprivileged and through the Karbonn Breast Cancer Initiative, Karbonn Mobiles will donate Rs 25,000 per match to the Indian Cancer Society Delhi . And Matthew Hayden making the 'Mongoose' bat  popular in terms of encouraging innovations in the game

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 and afternoon matches in summer is too hot for players and spectators

- 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.

- The irritables - Brand fighting for eyeballs- Advertisements even in the middle of overs between balls, brands all over player's clothes, 'Strategic time-outs' which although is better in 2010 with only 2 small breaks of 2 1/2 minutes compared to a 10 minute break in 2009, have to hear sixes as 'DLF maximums' (which commentators often say- 'DFL') and wickets or other things as 'Citi moment of success', and catches as Karbonn kamaal catch and not to mention the hovering 'MRF' blimp which has to be mentioned about every over, the hosts of Extra Innings show and M S Dhoni answering every question with a "Well, of course"! :)  )

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, IPL in theaters and other ways to segment the market for the IPL. Tickets can range from 200-800 and for people who can afford, they can buy Club lounge VIP tickets and for that you get an Official Post Match Party ‘IPL Nights’ invite – This lets you Wine and Dine with cricket celebrities and other celebrity guests. It also includes invite to Live Fashion shows by leading fashion designers at each official post match party. You get Merchandise Kit including home team t-shirt,cap and miniature bat. And all this includes Chauffeur driven transfers (optional) and all this starting at Rs 35,000 and in the final could cost 1.32 lakh!

- 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.

- Opportunity for youngsters who don't get a chance to play for India, helps them showcase their talent, grooms them and helps their developement by playing along with and sharing the dressing room  with legends of the game.

- Impressive- First sporting event ever to be broadcast live on the popular video sharing website Youtube. The Indian Premier League's brand value was estimated to be around $4.13 billion (over Rs 18,000 crore) in 2010. There are reports that the IPL teams are planning IPOs to enter stock markets and even stake sales which has been denied by IPL Commissioner Lalit Modi.

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.'

- 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.

- Franchises are very expensive. Chelsea, one of the wealthiest, most powerful football clubs in Europe which was bought by Russian oligarch Roman Abrahmovic for £140 million (Rs 966 crore) 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 crore) Sahara splashed out on Sunday & Rendezvous Sports pumping in money for a Kochi-based T20 franchise at Rs 1,533 crore, 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 crore) in February 2007.
- The most highly priced teams may not be those that have the early success. Revenues will come from the most highly supported teams.

- Not enough star players: Constant availability of top overseas players may not be possible, due to growing number of international Cricket tournaments & addition of more teams in IPL leading to more matches and more injury occurances due to hectic schedule & increased competitiveness expected from players due to huge investements made by owners.

- Other tournaments: Potential viewership threat if the ICC decides to hold an annual international Twenty20 cricket championship and if Premier Leagues started by other boards as well.

- Ad blues: Recession and change of venue could affect plans of potential advertisers.

- Game pull: Business prospects may be affected if the franchisees fail to create a loyal fan following in their turf.

- India being a targeted country by terrorists, any attacks can seriously affect hosting the tournament in India in future or star foreign players refusing to come to India will also dampen the tournament

What's in it for everybody?
 
For BCCI: It is one of the most lucrative formats of cricket which can change the way people look at cricket. Also, the IPL is predicted to bring the BCCI income of approximately US$1 billion over a period of five to ten years.


For IPL franchise owners: It is one more business opportunity for earning big returns on investments. Also would be a pride to be owner of one of the cricket teams where they can select their players and form their own team and a chance to get visibility on television & be in the limelight for that period of time.

For Government of India: An additional source of revenue. The Indian government earned Rs 91 crore as tax revenue from IPL 1.

For broadcasters: Cricket increases the TRPs of the TV channel and when the league is at this level the broadcasters can demand a premium from the advertiser. Sony has earned tremendous TRPs and revenue during the IPL 1 and is likely to make big this season as well.

For sponsors: The best platform which can strengthen their brand Image and also create an Impact in the mind of many people across the globe as there would be different formats and various opportunities to market their products.

For cricketers: An opportunity to display their skills in a game which would evaluate their worth based on their past performance and future anticipated performance. Playing as a team with senior players from different countries and learn from the experience and expertise of others.

For people: It's a treat to watch pool of experienced and quality cricketers on a common platform playing for a team which they represent and not the country they are from. This is best shown in the IPL advertisement which has a slogan of 'Ek Desh. Ek Junoon.'

References- Wikipedia, leggully.com, labnol.org, specials.rediff.com, anuragpatil.com, marketingteacher.com, indiatoday.com etc

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