The Hindu Business Line : ‘IPL vibes with our outlook’

Reliance is sure to change Mumbai cricket as we know it. But the corporate heavyweight hopes the performance quotient of the game will prove a big asset in the years to come.

We are a nation of cricket understanders, enthusiasts and analysts, across layers of society and geography.

R. Balachandran, President and Chief Marketing Officer, Reliance Retail

G. Viswanath

Mukesh Ambani’s Reliance Group and batting ace Sachin Tendulkar have come together for the DLF Indian Premier League’s inaugural T20competition. R. Balachandran, President & Chief Marketing Officer, Reliance Retail, has added one more brand to this combination _, ‘Mumbai.’

“There’s this uniqueness between Sachin and Mumbai. There are a number of cricketers who are admired and respected. Sometimes, we stand in awe of them, but in some cases there are cricketers who are loved. Sachin has spent half his life playing international cricket. He has been an icon for very clear reasons and there’s Mumbai itself. There’s going to be magic at play; in fact, it has already started. IPL is a great step forward in Indian cricket,” said Balachandran in the course of an interview with Brandline. Excerpts:

What’s it like being a franchisee owner of a high-profile cricket team?

We have gone into IPL as Reliance Group. We see it as an opportunity coming at the right time. The circumstances are right and a set of enablers have come at the right time that one normally associates with big events. If one asks me why Reliance Group has shown interest in the IPL, it would be a multi-part answer.

Fundamentally, cricket in India has a deep-rooted connect with people; it’s much more than a sport. India is not a nation of cricket watchers, and if I may phrase it that way, we are a nation of cricket understanders, enthusiasts and analysts, across layers of society and geography. Cricket is discussed universally, from tea shops to the ballrooms of five-star hotels. That’s something important for us at Reliance. It’s one of the names that’s recognised wherever you go. Reliance as a group does not advertise very much in a conventional FMCG, consumer durables or services sense. In the last few years we have come into customer-facing businesses, but the traditional businesses we have always operated with a B-2-B approach.

Yet, this is a brand that has connected with the people. It’s been a brand by performance, by its track-record, not by advertising. So, the fundamental reason is both cricket and Reliance have a deep-rooted connect with people in India.

Then, as a group, we have aspirations to be world beaters. It has happened in industry. We have also proved that we are world-beaters in cricket, but that requires consistency. So, we are looking forward to contributing to achieve consistency.

The third reason is that we engage with people across India and we all know that sports talent can emerge at every level. For obvious reasons, the key crucibles of talent have been few in number, but as has been observed in recent years, a lot of cricketing talent is emerging from the small towns. I think we can also contribute our mite to enabling that talent and nurturing it.

Since the Reliance World Cup a little over 20 years ago, the company has not chosen any platform to form teams in hockey, football, cricket, and such, just as the PSUs and top corporates have done?

The opportunity that has arisen now in terms of the depth of involvement was not available to us earlier. IPL as a format and venture presents an opportunity for involvement which runs deeper than mere sponsorship. Now, we own the Mumbai franchise. We are putting up a team. We have taken with both hands the rich canvas or mosaic of opportunity that presented itself. This is not going to be an involvement for a day, tournament or a year. The IPL is from now to perpetuity.

The base price for each team was $50 million. But Reliance Group made a bid for the Mumbai region for $111.9 million for 10 years?

I can appreciate that the money ($111.9 million) taken in the cricket context is big. . However, from a business point of view and given the scale we operate at, it’s not necessarily so. If one looks at the way the franchise fee is structured, we have not paid it upfront. It has to be paid in tranches over 10 years. This works out to around Rs 45 crore for a year, and in our scale of business that’s not very large.

As to why Mumbai drew the highest, it’s but natural. The bids were not independent of the locations and there was a particular value attached to each location. We said if it’s Mumbai, it’s this. We were the highest in several of the locations. Mumbai was one of the regions we were the highest and hence we chose Mumbai.

In many ways, Mumbai is a global city that represents the face of our country and a lot of the faces of our cricket. Mumbai was a natural choice and we believe that it’s worth that amount as we are contracted to pay for a 10-year period.

Was IPL’s revenue model from the central pool (80 per cent of global media rights and 60 per cent of sponsorships) and local pool another factor that appealed to Reliance?

If one looks at the IPL holistically, revenue model is part of it. We have gone into the numbers very carefully. It’s been evident from the beginning (in the Invitation To Tender) that certain rights have been defined. The single largest revenue is from the global media rights, then there is the sponsorship, which is not just the title sponsorship; there are also the associate and umpires sponsorships.

The second is the local pool which is our right. It includes the gate revenue, merchandising, supplier contracts and such in the local area. We did our number work before we went in for the bidding. I think IPL has done a great deal of work even before it put out the tender in terms of evaluating what would be the potential impact to these revenues coming in. Some of these will be realised as we go along, but we have done our own projections and taken our prudence into account. It’s certainly a workable and viable revenue model and it’s important that something like this stands on its own feet.

Andrew Wildblood, Senior Vice-President, International Management Group (IMG) Sports, Entertainment and Media, said franchise owners are going to say three or four years down the line that they are happy owning an asset?

We have gone into IPL with our eyes open and with a set of objectives. I don’t think we are going to wait for three years to be happy. He (Wildblood) may have referred to the fruition of an asset. It all depends on the creativity of the franchise and how it’s able to marshal and get the revenue. There may be potential sources of revenue, but there have to be actual flows of revenue. I think in terms of an asset, one is a narrower view of it as a financial asset.

We at Reliance Group would like to think of it as a multi-faceted way in the sense that here’s something that vibes with our outlook; the accent is on performance built on a very solid platform. In a compressed three-hour game, there will be a share of excitement, but built on solid competitive cricket. I think that component of competitive cricket linked to the discerning fan would be the real asset. The performance quotient linked to our corporate ethos is our outlook and this is the big asset we see and would start building on that from the first year.

It’s estimated that franchisees will have to spend another Rs 40 crore to run the team in the first year. This includes the player fees.

Ultimately, it’s a question of revenue inflows, a part of which is underwritten through the central pool (global media rights and sponsorships) which is known to all of us. A significant part of the expenditure is on the teams. The rest of it is purely the way a franchisee operates, and creativity in looking at revenue. It’s one thing to have a revenue scheme and another to actualise it. One has to make it happen. This is the inaugural year. It’s most important to make sure that the IPL gets off to a fantastic start, which I am sure it will.

There has been a tremendous effort on the part of the BCCI, IPL, franchisees and the players’ will in the terms that they play. But we have to keep in mind that it’s not a one-off event. It’s a league in perpetuity. There will be fresh pointers that would emerge from the first season for us to learn to make it better next year.

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