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IPL as an economic necessity

The second season of the IPL could provide some muchneeded cash flow for India Inc., though uncertainty about security remains a concern.

Anusha Subramanian | Print Edition: April 5, 2009

Cricket has always been a money spinner in india but seldom has it been linked so closely to the revival of a nation’s “economic spirits”. The Indian Premier League (IPL) has raked in the moolah from the day it launched last year, but the 2009 edition is important not just as a sporting extravaganza bringing together the cream of cricketing talent from around the world—but also as an event that will pump in much- needed money into some sectors of the cash-strapped economy.

It’s no surprise then that despite the dates of the General Election clashing with the second season of IPL, efforts have been stepped up to ensure a smooth ride for the league. At the time of going to press, IPL organisers were desperately trying to salvage the tournament, by preparing yet another revised schedule, following a directive by the Home Ministry. Industry analysts reckon that total losses for all involved in the IPL could be as much as Rs 2,000 crore in case the tournament is cancelled. What’s more, the future revenue model of the IPL could go haywire, with the format itself becoming unviable.

However, according to IPL Chairman Lalit Modi, the league continues to be a huge financial success with the contracted revenues for the second edition being in excess of Rs 10,790 crore, an increase of Rs 1,725 crore over the inaugural year.

The annual FICCI-KPMG Entertainment Report observes: “Gauging by industry reaction, IPL is expected to continue as a prime driver in the media and entertainment industry for the coming year.” According to Mahesh Ranka, General Manager, Relay India, the Sports Practice arm of media agency Starcom Mediavest, “IPL has to happen since it will bring in some much-needed money into the economy.”

IPL Scoreboard

  • IPL’s ‘contracted’ revenues for league stands at Rs 10,790 crore this year DLF has taken up title sponsorship at Rs 40 crore a year for five years, beginning 2008

  • Team valuations are up by over 3,700 per cent after one year of IPL

  • 17 players have been contracted for fees of over $15 million

  • IPL is expected to bring in Rs 1,190 crore in ad revenues, every year

  • BCCI will earn around Rs 4,300 crore over 10 years from IPL

So, what are the ways in which this money will come in? To begin with, lump sums are assured for the league from key sponsors who have signed long-term agreements. For instance, DLF has been roped in as title sponsor for five years at Rs 200 crore (Rs 40 crore a year). Associate title sponsors like Hero Honda, Vodafone and Citibank are coughing up approximately Rs 20-22 crore a year, also for a five-year period. Since these deals are longterm ones, there will be no change in the contracts even if the markets continue to remain volatile.

TV viewership is also likely to bring in money. In IPL’s inaugural year, TAM ratings showed that the 44-day tournament achieved an amazing average of 4.7 TVR over 57 matches on SET MAX. This in turn pushed up advertisement rates for 10-second spots to Rs 5-10 lakh, which was marked at Rs 2 lakh per 10 seconds at the start of the tournament. This year, SET MAX has fixed the 10-second spot rate at Rs 3-3.5 lakh to begin with.

Security, however, remains a concern. “Security is paramount. Our budget has gone up by 10 per cent this year,” explains Modi. Nicholls Steyn and Associates (The people who helped at Taj during the Mumbai Terror attacks), the official security partner, will work closely with state government authorities, Modi adds.

If it does take place, then the second season of the IPL promises a cash flow that India Inc. would surely look forward to.

“We are fortunate that india is doing well”

On a short visit to India, Paul Polman, group CEO of Unilever, spoke to BT about the downturn, innovations and business in India.
Excerpts:

The last time you were in India was on the night of 26/11. What brings you back?
One of the main reasons was to finish the meal that we left on November 26. It’s important not to give in to terrorism. On the business front, Hindustan Unilever is a very important organisation for us globally. I met consumers from different economic classes and it was overwhelming to see the brand loyalty we enjoy.

Are you raising the bar in developing markets?
We are very fortunate that markets such as India, South Africa and Brazil—where we are strong—are doing well economically. This is a chance for us to expand our brands in these markets.

Are you undertaking any cost-cutting measures?
We are currently focussing on protecting our operating margins. Likewise, we are seeing to it that our supply chain is better managed. We have also cut down travel by 30 per cent.

 

 



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