20 Sep 2017
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IPL TV rights could go for $1.8 bn, digital rights for $210 mn: Duff & Phelps

MUMBAI: The television broadcast rights for the Indian Premier League (IPL), to be contested hotly between Star India and Sony Pictures Networks India (SPNI), could fetch the BCCI $1.8 billion, according to an estimate by Duff & Phelps.

The internet and mobile rights could land in the region of $210 million, Duff & Phelps managing director Santosh N said.

The rights fee for the IPL is set to more than double in value. The new cycle of media rights is for a period of five years. In the earlier cycle, Sony had taken the TV rights for 10 years. In February 2015, Star India had got for three years the Internet and mobile rights for Rs 302.2 crore.

“In our analysis, we have assumed the renewed television rights to be around $1.8 billion for a five-year period and the renewed internet and mobile broadcasting rights to be around $210 million. Given the popularity of the tournament as well as the increase in the number of bidders, it would not be a surprise if the broadcasting rights are renewed at a much higher rate than what we have estimated,” he said.

Duff & Phelps looked at the interest coming in from multiple parties for the rights, the growth in rights fees that the English Premier League (EPL) has managed to get globally, as well as the growth in the Vivo title sponsorship deal in arriving at the figures.

Santosh noted that companies will look at this from an investment point of view to push the distribution of their services. One could see an all-out war between Star and Sony. But he also added that Reliance Jio might be a wildcard player. “They have a great subscriber base with their offers. They are looking for great content,” he added.

According to Santosh, Sony’s ad revenues crossed Rs 1,300 crore this year, while Hotstar’s ad revenues from IPL rose to Rs 120 crore, more than double the previous year. Demonetisation evidently had no impact on the ad expenditure by the corporates. Television viewership also ascended to new heights, with nearly 45% of viewership coming from rural India, evidence of the reach and pull of the IPL.

With the internet pricing war among the telecom players heating up, coupled with the attempts made by Hotstar to increase their reach, the online IPL viewership is believed to have increased by 30% from last year. Due to the absence of some blockbuster players such as Kevin Pietersen, Mitchell Starc and R Ashwin, this season witnessed the excellence from some fresh faces, which kept the ball rolling for the teams.

“The new broadcasting rights auction will be one of the keenly watched developments over the next couple of months. The BCCI is clearly set for a huge windfall. We could be looking at a television broadcasting deal of record proportions in India. This deal may follow the precedent set by some of the big-ticket broadcasting deals across the world,” Santosh said.

Meanwhile, the findings of the fourth edition of Duff & Phelps’ annual study of the IPL franchisee brand values indicate that the overall value of IPL as a business has increased to $5.3 billion from $4.2 billion last year, representing a three-year CAGR of 13.9%.

The report highlights the evolution of the IPL since its inception in 2008 and its steadily expanding foothold on the global sporting scene. “Our valuation analysis reflected a notable increase in brand values in the IPL. This IPL season has garnered attention for all the right reasons. Namely, a relatively controversy-free tournament, increase in social media engagement, strategic and highly successful marketing initiatives, and compelling on-field performances—all of which affirmed the IPL’s standing as the most valuable cricketing league in the world,” said Duff & Phelps MD, leader of the firm’s operations in India, South Asia and Japan, Varun Gupta.

The brand values of the individual teams have risen by 34% on average in 2017 compared to 2016.

The Mumbai Indians (MI) sustained the top position with a brand value of $106 million, followed by Kolkata Knight Riders (KKR) at $99 million and Royal Challengers Bangalore (RCB) in third place at $88 million.

Factors contributing to the rise in brand values of individual franchisees include increasingly lucrative advertising, broadcasting and sponsorship deals; reduction in franchise fees beginning with the next season; increased viewership across India; and increased fan engagement, evidenced by the rise in social media activity.

Digital content is becoming a very strong medium of social media engagement for the sports viewers. The following statistics from the report reveal the growing significance of content in today’s sports context:

The number of tweets pertaining to the IPL has crossed 8.5 million and continues to grow.
As per Maxus, a total of approximately 6 million mentions on social media were registered in the 10th season, more than twice those of the last season (approximately 3.1 million mentions).

Mumbai Indians had an incredibly successful digital media strategy, attracting over 83 million engagements across Facebook (50 million), Instagram (29 million) and Twitter (3.95 million).

Duff & Phelps MD and Chelsea Football Club former CEO Trevor Birch said, ‘’I’ve been intrigued to watch how the IPL has marketed and protected its own brand value separate from the clubs. Having worked with some of the biggest clubs in the English Premier League (EPL), the one thing the IPL has done very well is the marketing and protecting of its own brand. Most of the EPL clubs are bigger brands than the EPL brand itself, whereas in the IPL, it seems to be Brand IPL which is more powerful than the individual franchisees.”

Santosh added that the individual franchisee brand values have seen a significant increase compared to last year. Various factors contributed to the rise in brand values of individual franchisees. “With the end of IPL 10, franchisees will no longer be required to pay the fixed franchisee fee as mandated in the original agreement with BCCI. Going forward, they will be required to share a percentage of their profits with BCCI as a franchisee fee, which along with the renewed title sponsorship deal helped bump up the franchisee brand values.”

MI, buoyed by its record third title win, saw their brand value grow as the franchise consolidated its position at the top.

Though RCB finished at the bottom of the points table, this did not have a material negative impact on the brand. The positives (star power, cricket crazy fan base and brand recall) outweighed the negatives.

SunRisers Hyderabad were the biggest gainers in percentage terms with their brand value growing by 37% over last year to reach $56 million. Delhi Daredevils (DD) and Kings XI Punjab (KXIP) also saw their brand values appreciate to $44 million and $41 million respectively. DD, in particular, drew crowds due to some fine performances from some of its rookie players. Holding on to future stars such as Rishab Pant and Sanju Samson will augur well for DD in the long run.

The report did not value Gujarat Lions and Rising Pune Supergiant as both teams will no longer be part of the IPL.

“The IPL continues to be a cash cow for the BCCI. It has come a long way since its inception in 2008, steadily expanding its foothold in the global sporting scene. The value created by the IPL in such a short time is significant due to the minimal initial investment by the BCCI. The renewed sponsorship deals are testimony to the IPL’s popularity. The new broadcasting rights auction will be one of the keenly watched developments over the next couple of months. The BCCI is clearly set for a huge windfall. We could be looking at a television broadcasting deal of record proportions in India. As mentioned by us last year, this deal may follow the precedent set by some of the big-ticket broadcasting deals across the world (EPL, NBA and MLB). These other leagues have seen a consistent multi-fold growth in their broadcasting rights,” the report added.

Adding further to the strength of the IPL brand are the title sponsorship deals. DLF, Pepsi and Vivo have paid significant amounts in the past for being the title sponsors. Each of these title sponsors has paid a large premium over the earlier title sponsors. The report further noted that with the end of the 10th season, the title sponsorship rights were also up for renewal. Vivo retained the title sponsorship for the next five years starting August 2017 with a sky-high Rs 2,200 crore. The annual break-up of the deal works out to nearly Rs 440 crore per annum, an exorbitant 500+% more than the previous contract.

Santosh noted that the price that Vivo is now paying could serve as a catalyst to make associate sponsors as well as companies who want to be associated with IPL franchises look at the IPL in a different way. This could lead to a multiplier effect and benefit the BCCI and the franchise owners.

The continued unprecedented response from advertisers, broadcasters, sponsors, affiliates, partners and the viewing public year after year has made the IPL the most keenly awaited event in the campaign calendar for advertisers and the most viewed sporting event for TV viewers in India. So much so that even Bollywood takes a step back and film distributors delay new releases until the end of the IPL season.

At the same time, the Duff & Phelps report noted that along with all the highs, the 10 years of IPL also saw significant lows. There were match fixing scandals, controversies involving celebrity owners, player conflicts, etc. CSK and RR got banned from playing in two seasons, and teams like Deccan Chargers, Pune Warriors and Kochi Tuskers had their contracts terminated due to factors such as noncompliance with IPL financial code and poor corporate governance. Pepsi terminated its title sponsorship deal midway into its five-year contract. There were rumours of misappropriation in awarding franchise rights and eventually the Supreme Court came down hard on the franchisees. All of this has had some negative impact on the IPL brand.

While many anticipated these controversies to shake the belief and trust of sponsors and corporates alike, the league continued to surge even higher after each controversy. The ever-increasing sponsorship deals, the renewed blockbuster Vivo title sponsorship deal and the huge interest in the broadcasting (both television and digital media) rights is a testimony to the fact that despite its shortcomings, the IPL will continue to be a mega brand for many more years, the report stated.

The IPL has shown the path to success to many other sporting leagues in India. Pro Kabaddi League, Indian Super League and International Tennis Premier League are other leagues modelled around IPL.