June 14, 2012

Stadium crowds show the IPL the money

The IPL's TV ratings may have stagnated, but attendances at the grounds were up this year, and the broadcaster and the franchisees expect revenues to improve over the next few seasons

The 2012 IPL season had everything you could want from a live sporting event. There was exciting cricket and there were packed, cheering crowds that created a carnival-like atmosphere. All the signs point to the league having entrenched itself in the social fabric of India as an entertainment and sporting spectacle.

But what about as a business? The IPL has been built not just on the back of a very lucrative television deal but also on an assumption that the franchises would develop independent sources of revenue as the tournament developed. Five years into the event, the franchises appear to be doing that, but other potential concerns have emerged. TV ratings have flattened over the last two years, while a worsening general economic situation has led to some companies putting the brakes on advertising, reportedly resulting in lower revenues for Multi-Screen Media, the tournament's broadcaster, this year.

The money that fuels the IPL comes from three sets of investors: the franchises, the broadcaster, and sponsors affiliated to the BCCI. The broadcaster, in turn, leans on advertising, while the franchises have their share of sponsors. This season the franchises had the most to cheer about, as a surge of paying customers flooded practically every venue. Gate receipts were estimated at about Rs 30 crores each for the likes of Delhi Daredevils and Kolkata Knight Riders. Sponsorships for individual teams grew as well, with companies local and national deciding that the franchises offer a cheaper route to being part of the IPL than becoming a BCCI sponsor.

Venky Mysore, the Knight Riders chief executive, said Eden Gardens had more than half a million fans pass through its gates this season, and that ticket sales were up by about 25% this year.

Amrit Mathur, the chief executive of the Delhi Daredevils, said the franchise was surprised by the strong support they received this season. Buoyed by a successful team - Daredevils topped the group stage - they were "just swamped by demand," Mathur said. "Tickets sold out much in advance." That fans were willing to spend money to go to a game is new for a city like Delhi, which, Mathur said, has traditionally had a strong culture of people wanting free passes. "It is a major change in term of perception and mindset when it comes to a sporting event. That is very encouraging."

It wasn't only the big cities. At Mohali in Chandigarh, home to Kings XI Punjab, the franchise claimed that many more families were in attendance this year. "It is the perfect outing," Arvinder Singh, their chief operating officer, said. The teams have learned to adapt to what the fans want over the years, so that they leave with a "satisfied feeling that it is money well spent".

While the franchises have many reasons to smile, the trend of television ratings falling from season one through season five is a cause of concern for MSM, which owns Set Max, the channel that broadcasts the IPL. Television still accounts for the vast majority of the league's income, and ratings for IPL 5 were just about in line with last season's. The overall tournament rating was 3.45, with a cumulative reach of 162.93 million, compared to 3.51 and 162.28 million a year ago, according to Tam Sports, a division of TAM Research, the leading television ratings agency in India.

"The stadium experience is still unsubstitutable," Santosh Desai, managing director of Future Brands and a social commentator, told ESPNcricinfo. "The TV experience is substitutable. That is the fundamental difference. The television challenge is: how do you sustain viewership in the absence of the freshness of an on-ground experience?"

Rohit Gupta, the president of MSM, said the channel had mixed reactions to the season. The initial poor ratings surprised them, given the marketing push led by the BCCI and MSM in the run-up to the tournament, but Gupta felt the quality of cricket did pull in viewers as the season progressed. Kolkata Knight Riders' win over Chennai Super Kings in the final was the most watched match of the season, posting a rating of 9.68, a substantial increase over the 2011 final's 6.96.

Gupta argued that too much was being made of the TV ratings in any case, and that the IPL had become a victim of its own success. He said the tournament should not be compared to itself but rather to other alternative entertainment programmes. He pointed out that IPL matches typically cornered five to seven slots among the top-rated entertainment shows each week. It is therefore the event's comparative advantage that makes it valuable to advertisers and why it remains "the biggest tournament on television".

"If the reach had come down, then there would be an issue of fatigue and people are moving away from IPL or the format, but obviously that is not happening. This is where it is going to be. This is where it is going to stabilise," Gupta said.

Jai Lala, a principal partner at Mindshare, a media and marketing agency, agreed with the assessment. "It is a consistent 45-day prime time event. It sort of blocks you out in prime time if you don't advertise [on it]."

The other attraction for advertisers is the tournament's ability to attract the same viewers over and over again. "It is a tournament that is a 'sticky'," Sudha Natrajan, the chief executive of Lintas Initiative Media, an advertising agency, said. "Large number of viewers that tend to stick."

Despite the IPL's attractions, MSM did have trouble selling out its advertising inventory following the drop in ratings last season. As late as two weeks into the season, they still had 35% to 40% of their inventory unsold, according to Gupta. Last year 90% was sold before the tournament started. MSM was able to negotiate with advertisers to sell most of its inventory by the end of this year's tournament, but media buyers estimate revenue will be in the region of Rs 750 to 800 crores (approximately US$140 million), down about 10% from 2011.

According to both Natrajan and Lala, part of problem for MSM was the general economic climate. A number of advertisers, among them Samsung and LG, stayed away because they simply didn't have the advertising budgets that would allow them to be part of the IPL action. Consumer-durable companies and auto companies - two categories that are typically big players on cricket and the IPL - also stayed away for economic reasons.

A possible explanation for the lower ratings is that non-traditional cricket viewers have returned to their traditional viewing habits, after a flirtation with the IPL. "The ratings for male audience has been consistent, but the ratings for females has gone down," Lala said. "I think the duration of the tournament... finally, if you are not a true cricket lover, 76 matches can get a bit too much."

Natrajan feels the ratings are still healthy and that more women watch the IPL than they do other form of cricket. "It is not just men; it is a healthy mix, including women and children. We don't have too many other shows that can give you that."

This year there was also a greater emphasis on speaking in Hindi during Extraa Innings, the IPL's pre- and post-match show. "We have a more mass-based audience and we have to make sure that we entertain that base," Gupta said. Advertising and sponsorships are sold separately for Extraa Innings, and the show delivered some impressive ratings. According to indiantelevision.com, the post-match show on May 14 was the highest-rated entertainment show for the period May 13 to May 19, with a rating of 5.9 (which meant it was most likely second only to the game it followed, Super Kings' last-ball win over the Knight Riders). The mid-match show during the final was the second-highest-rated show for the week ending June 2, with 4.34.

The IPL has been profitable for MSM over its first five years but it could get harder from here, as MSM's payments to the BCCI are set to increase. If the channel is to keep its margins intact, it must be able to raise its rates while selling out its inventory. Gupta is confident that the market will recognise the IPL is a unique property. "It will still command a premium value because there is nothing else."

So far the BCCI, especially with Lalit Modi at the helm, seems to have treated the IPL more as a television show than a sporting event

However, if the economic situation does not improve next year, it will be a tough sell, as everyone will be looking for a bargain. "The equation between the TRPs and the reach and the price which Max commands - it is still a premium event - that will need to be balanced out," Lala said.

Natrajan believes that if the economic situation improves next year, "all the [advertising] money will flow back [into the IPL]. But if it continues to be tight, then people will still negotiate."

MSM is also counting on the mandatory digitisation of the broadcast business in India, which is expected to boost subscription revenue (as opposed to advertising revenue) by allowing the channels to track the number of subscribers more accurately than is possible currently. The entire country is supposed to be digitised by 2014. Gupta therefore expects the IPL to remain very profitable for MSM for the remainder of the contract.

The franchises, meanwhile, will seek to build on this year's attendance figures and strengthen their own identities and philosophies as the league continues to evolve. To that end, they will need settled teams. A constantly rotating cast does not make for loyal fans, so frequent auctions are an issue that must be addressed. "It is very important for the league to recognise that all the hard work that has gone into building the connectivity with cities and fans has a lot to do with players," Mysore said. "Retention should not only be there but be a lot stronger."

The board, too, will be renegotiating its central sponsorship contracts with the likes of DLF, now that the initial five-year period is over. Hiren Pandit, Managing Partner-Entertainment, Sports and Partnerships, at Group M, a prominent media-buying agency, is uncertain whether the BCCI will be able to get sponsors at the value that it expects. "Board sponsorships cost money. You also need to spend a substantial amount of money activating the sponsorship and milking it. The combination of the two takes your numbers into the stratosphere."

According to the Times of India, the BCCI is expecting to more than double its revenue from the title sponsorship of the tournament. DLF signed a Rs 200 crore deal for five years, but now the board is targeting Rs 500 crore between 2013 and 2017. The board will be floating fresh tenders for all IPL rights this year and, the paper said, it is hoping to make between Rs 1000 to Rs 1500 crore in all.

Desai believes that the ability of the IPL to make the transition from commercial and entertainment venture to sporting event will ultimately be the key to its survival. "[If you don't develop] a strong sporting identity and [don't] value yourself on the basis of sport, and not on the basis of the owners and pushing their interests - the longevity of the tournament is under threat."

For Gupta, though, the league is both sport and entertainment: it is the mix of quality T20 cricket and the glitz and glamour that has surrounded it that has drawn in crowds and viewers alike. But he believes it is weighted towards the cricket. "As long as there are world-class quality players playing, [the IPL] will continue to grow."

So far the BCCI, especially with Lalit Modi at the helm, seems to have treated the IPL more as a television show than a sporting event. But television shows have a limited lifespan. If the IPL is to continue to grow and prove profitable for all those involved, the glitter that surrounds it will need to be pushed to the background and the sporting character allowed to take centre stage. In a sense that is already happening organically, as Gupta pointed out, but a more focused, inclusive approach from the board that takes into account the needs of the franchises and the other stakeholders is what the IPL needs to ensure it is here to stay.

Tariq Engineer is a senior sub-editor at ESPNcricinfo