With the two new Indian Premier League (IPL) cricket teams bringing in Rs 3,235 crore (Rs 32.35 billion) as auction price, advertising agencies and IPL franchisees expect the tournament to give a good push to the Rs 23,000-crore (Rs 230 billion) advertising sector this year.
Various advertising agencies and analysts like Madison Media and KPMG have pegged 13 per cent growth for the industry in 2010, which works out to addition of around Rs 3,000 crore (Rs 30 billion) for the advertising industry. And, IPL is expected to contribute at least Rs 1,000 crore (Rs 10 bilion) in advertising revenues this year.
In its inaugural year in 2008, IPL generated $200 million in revenue from various streams -- ticket sales, uniform advertisements, merchandising, etc.
Madhukar Kamath, managing director and CEO, Mudra Group, said, "Advertising reaches its peak when IPL is on. A lot of advertisers who had deferred advertising spends would now be putting in money into the tournament and into the teams. Overall, we would expect IPL to fetch advertising revenues of Rs 1,000 crore (Rs 10 billion) this year, if we calculate broadcast, print, outdoor and all forms of advertising."
Globally, sports events such as the Olympics, the football world cup or any other large one always boosts advertising. "In India, cricket and Bollywood are two of the safest bets for any advertiser. Although there are other sporting events lined up this year, IPL is still the biggest as of now," Kamath said.
Broadcaster Multi Screen Media, which operates Sony Entertainment Television, expects more than Rs 700 crore (Rs 7 billion) in advertising revenue from IPL in 2010. Rohit Gupta, its executive vice-president, sales and revenue management, said: "We expect advertising revenues from IPL to bring in more than Rs 700 crore this year. In the first year, we made Rs 250 crore (Rs 2.5 billion), while in the second year, we made Rs 475 crore."
Gupta is of the opinion that for the next five to seven years, advertisers' focus would be on cricket. "The advantage of IPL is that it brings various advertisers together because of Bollywood, entertainment and cricket, all riding together. Also, IPL is not just cricket, earlier considered a male-centric game. So, obviously all advertisers can find a brand-fit in IPL and therefore the continuous surge in advertising revenues," he said.
The IPL franchisees also expect advertising and sponsorship revenues to increase by 25 to 40 per cent. Sources in Mumbai Indians, told Business Standard, "We have bagged Rs 50 crore (Rs 500 million) worth sponsorship for 2010, which is an increase of 25 per cent over last year. We have a total of 14 sponsors this year of which four or five are new sponsors."
Likewise, Chennai Superkings expects the franchisee to make over 30 per cent more ad revenue this year compared to last year, when the venue had to be shifted to South Africa because of security concerns here. Rakesh Singh, marketing head of Chennai Superkings, said, "Usually, deal sizes range between Rs 1 crore (Rs 10 million) and Rs 15 crore (Rs 150 million), depending on the capacity at which the brand will be present.
But, new sponsors coming on board this year are paying a premium of 30-40 per cent compared to the first IPL, while the existing sponsors are increasing the rates they were paying by around 15 per cent."
However, brand valuation specialists see potential stress for IPL in future. Unni Krishnan, managing director of Brand Finance in India, said the long-term commercial sustainability of the IPL brand and its franchisees will be a big challenge, as IPL will hit an inflection point and the business model will be subjected to stress tests.
These include stagnation of television broadcasting rights, current and potential fan base being exposed to various game formats and other sports, which means sponsors may have more options.
"IPL will have to be innovative in overall product positioning and delivery medium, to meet the high expectations of the global fan base. The main reason why clubs have gone bust in the English Premier League was the poor financial management and execution capabilities. Most of the clubs made large promises which were unfulfilled due to the financial crisis, resulting in fans' dissatisfaction," Krishnan said.
The commercial success of IPL would largely depend on the development of brand value governance principles and policies, governing the franchisees and aligning all the stakeholders towards long-term IPL brand value creation, Krishnan added.