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IPL’s cut-price show in the Gulf

V Krishnaswamy | Updated on September 18, 2020 Published on September 17, 2020

Side business: Sales of team clothing and merchandise, a major revenue stream for players, will be hit in the absence of spectators   -  BusinessLine

Sponsors no longer have access to cricket-crazy fans, and this has had a chilling effect on the billion-dollar IPL’s earnings, as it pads up to play in the UAE today

* In 2018, Vivo acquired the IPL title sponsorship for ₹2,199 crore in a five-year deal, which translated to ₹439.8 crore annually

* For the 2020 season, Dream 11 came in at a price of ₹222 crore

* Australian all-rounder Pat Cummins set an all-time record by going for ₹15.5 crore

If there is one event that has defined Indian sport in the past decade, it is the Indian Premier League (IPL) for cricket. Call it a soap opera or a can of controversies or a bundle of cash — or what you will. Yet, there is no denying that it is a money-spinner for almost everybody involved.

The pandemic has shifted the tournament, earlier expected to be held in India in April, to the United Arab Emirates (UAE) — the very place the Indian government and cricket administration shunned in the 1990s because many thought it was a hotbed of corruption in cricket. There were no Indian teams playing in the then popular tournaments in Dubai and Sharjah.

The wheel has turned a full circle. Starting today, the IPL will be played in Abu Dhabi, Dubai and Sharjah.

Since its inception, the IPL has created an economic atmosphere like no other sport in the Asian region. It has stood for sports, stars, glamour and big money — along with sleaze, controversy and alleged corruption. The IPL ecosystem was valued at $6.8 billion, according to Duff & Phelps, the global advisor on valuations (IPL Brand Valuation Report 2019).

 

A new gig-economy revolved around it. Not only were the team owners ‘picking up’ players at unimaginable prices, advertisers, too, were ready to pay astronomical sums for TV commercials during the matches. As a result, the broadcasters broke the bank, as it were, to pay for TV rights running into billions of rupees, while they hoped to reap profits from advertising and a massive TV subscriber base.

The IPL auction for the 2020 season, held before the pandemic hit the world, was a relatively small one as only 73 slots were available, of which 29 were for foreign players. The value of Indians is often enhanced by the fact that each team can have only a specific number of foreign players in its Playing XI. Australian all-rounder Pat Cummins set an all-time record by going for ₹15.5 crore, shattering the previous best for any foreigner: ₹14.5 crore for England’s Ben Stokes in 2017.

There was a time when marketing whiz kids would say that IPL was “recession proof”. No matter what happens, people will want to watch the IPL — in the stadium or on TV.

Then came the 2020 googly — the pandemic.

The sponsors no longer have access to fans, who now cannot come to the stadium. The advertisers, whose main businesses are anyway suffering, are unable to leverage their brands through ‘activation’ and ‘engagement’, which require players to meet sponsors, fans and so on. Covid-19 means no people-to-people engagement — namely, all those competitions, contests and meet-and-greet functions.

 

This has had a cascading effect — on the IPL as an organisation and the teams. Down the line, it has affected event-management companies, which organise various sponsor and fan activities, stadium management, food and beverage sellers and much else.

Though most stadiums seat only 30,000-40,000 fans, they kept alive the business of the vendors through sale of tickets, merchandise, food and beverages. Other service providers such as those dealing with technology and transport also benefited. The chain included ushers, waiters and chefs in plush hospitality marquees, security guards and drivers, among others.

The IPL organisers earn a major chunk of their income from media rights (TV, radio and other sponsors) in a multi-year deal, which runs into billions of rupees. Star TV is the rights holder currently. Additional revenue sources include the biggest of them all: The title sponsors.

The requirement of ‘social distancing’ has led to a dramatic fall in the prices of all sponsors, many of whom have also pulled out, citing the economic crisis. The change in the title sponsorship — from Vivo, which has Chinese connections, to Dream 11, a gaming company — has been accompanied by a slump in price. In 2018, Vivo acquired the IPL title sponsorship for ₹2,199 crore in a five-year deal, which translated to ₹439.8 crore annually. Dream 11 came in at a price of ₹222 crore for the current season. It is not known whether Vivo will return later or Dream 11 will continue for the future.

Then there are the several other segments known as central sponsors. The IPL so far has four sponsors — title sponsors Dream 11, Tata Motors (Altroz), PayTM and Ceat tyres. The organisers — an arm of the Board of Control for Cricket in India — retain a good part of the earnings from sponsors and distribute the rest among the teams.

Team revenues include earnings from ticket sales, stall rentals, merchandise, team clothing and sponsors that range from the official technology partner to soft drink and food companies. In the absence of spectators, teams will clearly suffer losses.

The UAE, with a dominant population from India and other parts of South Asia, has always been a big base for cricket. But it has to be seen how much of an interaction with players will be allowed, or whether other sponsors will come up. All of that is uncertain now, especially after some players and officials tested positive for Covid-19.

The UAE is still the best bet for the IPL. It has pulled all stops to get the event: A big sporting event will boost its upcoming Expo — which was pushed from 2020 to 2021. Its economy gets a boost with teams taking up luxury accommodations with all safety precautions against the virus. Smaller businesses will also gain from the presence of a major sporting event. All of this had meant a lot to Indian vendors once. Now that business is going to the UAE.

The show, after all, must go on.

V Krishnaswamy, a freelance writer and consultant, is the author of ‘Shuttling to the Top — the story of PV Sindhu’

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Published on September 17, 2020
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