With news that the two new franchise owners of the Pune and Kochi India Premier League (IPL) cricket teams acquired the rights to the teams for US$370 million and US$320 million, respectively, the time is right to look at India as an advertising market and examine its inherent wealth.
To put the two deals into perspective, the IPL was formed three years ago and is currently comprised of eight regional teams from Mumbai, Bangalore, Hyderabad, Chennai, Delhi, Kolkata, Rajasthan and Punjab. When the league was first set up and teams were established, the Rajasthan franchise cost the least at US$57 million, while the Mumbai franchise cost the most at US$100 million.
Rajasthan won the first IPL series, which was watched by over 88 million Indians and attracted TV advertising revenues nearing US$65 million. The 2009 series attracted an average audience of 22 million each day, meaning the TV audience multiplied by a factor of six in 12 months, while TV ad revenues doubled. That series was won by the Deccan Chargers.
The 2010 series, which is currently underway, is expected to generate record revenues and has seen every match packed to capacity. Clearly, the concept of the IPL has taken off and has become entrenched as a valuable national asset. It’s also one that is increasingly attracting huge sums of investment. To compare with the Pune and Kochi teams, take a look at the English Premiership clubs acquired in recent years:
Chelsea (2003 takeover): US$190 million
Manchester United (2005 takeover): US$1.4 billion
Liverpool (2007 takeover): US$340 million
Manchester City (2008 takeover): US$300 million
It should be recognized that when buying into the English Premiership clubs, the owners acquired existing brands with tangible value, as well as an established cash flow and fan base. The investors in the IPL – and especially the new teams of Pune and Kochin – have had to develop their own brand identity, build up a supporter base, and acquire rights to use (and in many case redevelop) entire stadiums.
It’s also worth considering that neither of the new Pune or Kochin teams actually exist at present except as a franchise concept. There is not even a website for either of them. Building up those two brands is going to be fascinating to watch since they will be taking part in a little less than 12 months from now.
Clearly, the IPL has become a massive money-making exercise capable of reaching out to Indians on a truly national basis. As a means to effectively and efficiently reach out to all middle class Indians, the IPL is delivering an audience that no other platform has been able to reach before. Looking forward, it seems likely the IPL will further expand. Bids are being considered from the 2012 season, possibly bringing in an additional two teams from Nagpur, Ahmadabad, Kanpur, Dharamshala, Indore, Cuttack, Gwalior and Visakhapatnam. Lucknow and Goa have also been mentioned as wanting to be represented. It’s also attracting investment from overseas with Britain’s premiere cricket club, the MCC, having been on fact-finding missions. The IPL itself is also slated to launch on the Bombay Stock Exchange within the next two years.
While massively popular in India, it remains to be seen if it can be exported and developed overseas in the same manner the English Premiership has. It may well do so, at least in Asia. Games are more exciting, and the 20-20 format means results are often not known until late in the game thus leading to dramatic finales. The English Premierships hold on global sports coverage may be under some threat here – or lifestyles may change. In packed bars on weekends in India, both the IPL and Premiership games are screened live and simultaneously, but it is the cricket that gets the commentary. With the amount of value coming into the IPL, it will continue to play an active role in where advertising dollars are spent in India and how multinational organizations reach out to the domestic market.
This article was written by Chris Devonshire-Ellis for the Asia business news website, 2point6billion.com. Chris is the founder of Dezan Shira & Associates, which helps foreign companies with India and China tax , business development and accounting issues.
Chris also writes for the India business news website, India-Briefing.com.