Monday, September 17, 2012

Indian Premier League: A sustainable ball game for franchisees?

When Lalit Modi said “Let the games begin”, following a glitz ceremony at Bangalore with superstars of Bollywood in the audience, the luminaries of Indian cricket in the field, the biggest of Indian Corporate Honchos owning teams; no one would have imagined this would be the state of the league five seasons down the line. What started off as a league where money was thrown around is now a league in deep trouble: Two teams (Kochi and Deccan Chargers) have been terminated; One team had trouble paying wages to its players (Royal Challengers Bangalore). Pune Warriors India left the league, and then came back on board after assurances. Not to forget Kings XI Punjab and Rajasthan Royals have had their own set of issues with BCCI as well. The former chairman of the league was ousted and is now living outside the country, and continues to throw allegations at the IPL from time to time.

Where did things go wrong? Was it the hurry in which the league was conceived as a reaction to Zee’s ICL? Was it the urgency to have something in place that led to a non-sustainable business model for franchisees being put in place? Or was it lack of due diligence in bidding for franchisees that has led to owners being unable to manage their finances with the teams? Was it the auction model that led to a major wage budget for the franchisees despite the wage cap? Or is it just the fact that the holding companies have been having trouble with their core business and has nothing to do with the IPL as such?

The IPL, when it was conceived was not designed to be a short term money spinner for the investors but promised to be a major revenue generator once the league was well established. But consistent controversies have plagued the league (including those of fixing) that lead to questions about the sustainability of the IPL. The recent bidding for the Deccan Chargers franchisee saw only one interested bidder: PVP – a film production house in Andhra Pradesh. While Videocon was rumoured to be interested, they did not express the same with an official bid. It appears that the days of the sky rocketing team valuations are long gone by, and reality seems to have sunk in about the actual money that IPL generates for a franchisee.

Why some have got it right
Undoubtedly, the IPL has been a tremendous money spinner for the BCCI in itself. A few of franchisees like KKR and Chennai have even started making profits according to reports that have been doing the rounds. The success of Chennai can be attributed to the extraordinary spell that the franchisee has enjoyed in the 5 seasons in the league. It has established a solid and loyal fan base in Chennai. Chennai Super Kings have also managed to engage the ‘knowledgeable Chennai crowd’ in a way that no IPL team has managed to do –  a fact that is reiterated by the variety of fan videos that have sprung; flash mobs across the world, team songs etc.

 KKR, on the other hand, prides itself on a strong marketing base that sees ever bit of the value available to be mined, being extracted through endorsements & tie-ups. Kolkata Knight riders also enjoy the unquestionable brand pull of the owner who is none other than the Bollywood Badshah himself.

Chennai has also maintained the core of the team consistently right from season 1, unlike most other teams, that has led to a greater fan connect – the most important factor for any sport club. Other teams (excluding Mumbai) have consistently chopped and changed their teams that lead to a situation where the non-hard core audience has difficulty in relating to the team. The ‘local’ aspect that was central to the development of the franchisee and the fan connect seems to have gone missing with very few teams having local players who are central to their team.

What has gone wrong
BCCI’s initial idea to establish a football like Champions League tournament hasn’t quite succeeded with lead sponsors changing for the Champions League T20, thrice already. There is an imbalance of team strengths in favour of the IPL teams in the Champions League. While other countries send in the winners of their national T20 championships, India is represented by the cash-rich IPL teams (instead of say a Rajasthan or a Tamil Nadu Ranji Team). There have been many situations where players from foreign countries turn up against their own state teams, while playing for their IPL team!

 The establishment of alternate local revenue streams from merchandising, local advertising (other than the central sponsorship pool) has not taken off as expected during the conception of the league. TV Revenue, Central Sponsorship still form the major chunk of the revenue streams for a majority of the franchisees – which makes their sustainability as a stand-alone business for owners questionable. Another unfortunate issue has been the untimely financial issues in the core businesses of a few owners that made the cash-crunching maintenance of the franchisee – a non-starter.

TRP ratings have fallen (or stabilised based on whether you see the glass half full or half empty) and IPL is no longer the scary entertainment giant that put off movie releases during the summer. The IPL does not seem to be a money making investment for most owners and is more of a ‘pride factor’ – that they own an IPL team. The reputation of the IPL has taken a major hit where fans (and owners?) believe it is more about the partying than cricket or the business.

What needs to be done
The IPL needs a fresh format that is not as long drawn out. Playing 76 matches in a span of two months no longer seems the right approach. It causes boredom to the fan and results in a stupendous amount of matches that have no consequence. It needs a format where players are not burnt out and give their best shot in every match.

IPL will have to reinvent itself, in order to stay relevant to the cricket fan in India. It needs to inject some transparency into proceedings to prevent controversies like the match fixing scandal during the previous season. This is essential in order to appear honest to the fan who watches the games. After all, the IPL and as a proxy, Indian Cricket, cannot afford to lose the fan who is central to the entire business model, due to sheer disillusionment.

Note: This was first published in here:

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