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BW Businessworld

On A Sticky Wicket

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It has been a welcome reprieve for the embattled UPA government. Media focus and citizen concerns have moved from scandals in the political corridors to the scams rocking the Indian Premier League (IPL). Ever since the Rajasthan Royals trio were arrested on 16 May on spot-fixing charges, IPL began shredding like a stinking onion — a peel a day. As a brand, tournament and business proposition, IPL has seen serious erosion in the past few weeks. Will IPL fall under its own weight? Or, will everything be forgotten by the time IPL 7 begins next April?

Brand Finance, a UK-based consultancy hired, ironically, by the now sacked IPL commissioner Lalit Modi, estimated that the overall value of the league had slipped over a billion dollars from its peak of $4.13 billion in 2010 to $3.03 billion in 2013. In a statement, Unni Krishnan, Brand Finance’s global strategy director, warned: “It would be foolish to brush ethical infractions under the carpet. There is a problem… The latest set of incidents is another self-inflicted wound on the IPL ecosystem… If not addressed, viewers and other stakeholders will eventually lose all real and serious interest in the IPL.”

Make no mistake, with its entertainment value, IPL has been a favourite with advertisers. This season, there were over a 100 brands and nearly Rs 1,500 crore of advertiser investment riding on it. PepsiCo, which unseated DLF as the presenting sponsor, paid Rs 396.8 crore for five years (nearly Rs 80 crore a year) compared to DLF’s five-year contract for Rs 200 crore. Other sponsors — Vodafone, Star and Yes Bank — are paying close to Rs 28 crore a year. Ten-second spots sold by SET Max were in the range of Rs 3.75-4.0 lakh compared to Rs 1.5 lakh for similar airtime for the best-performing soaps on Star Plus.

However, with a wavering fan following and dropping TRPs (television rating points), many sponsors and advertisers are doing a serious rethink. PepsiCo says it is reviewing its relationship with IPL. Vodafone too, though it has not released a formal statement, is worried about the rub-off effect and is reconsidering its long-term relationship with the scandal-ridden IPL, company sources say.

“Considering the muck and bad publicity, we should be pulling out,” says Harish Thawani, chairman of Nimbus. Nimbus, in alliance with the Times Group, has the Internet and international broadcasting rights for IPL, bought for Rs 386 crore for five years in an auction. But he clarifies that he will have to consult with the Times Group before taking a final decision.

Nikhil Rangnekar, joint CEO of media monitoring firm Spatial Access, however, disagrees and expects the brouhaha to blow over by the time IPL 7 kicks off. “There has been no serious dent in advertiser enthusiasm for cricket as displayed in the ongoing Champions League,” says Rangnekar.

Former Board of Control for Cricket in India (BCCI) president N. Srinivasan mocked a reporter who said cricket fans were turning away from IPL: “The stadium for the finals at Kolkata is sold out; that answers your question.” Television audience figures tell a different story though. “Television ratings for IPL were down 14 per cent from last year, and 37 per cent from peak,” says Nimbus’s Thawani, adding: “After the spot-fixing scam hit the ceiling, the play-offs’ ratings were down 18 per cent compared to last year.” Television Viewership Ratings (TVRs or percentage of the entire television viewers’ universe) corroborate this story. From a high of 4.63 TVRs for the opening week of IPL 4 in 2011, viewership fell to 3.9 for the opening week in 2012; and further slid to 3.8 TVRs for the opening week of IPL 6.

Out Of Control
The blame for the state of affairs in IPL and Indian cricket has to be laid squarely at BCCI’s doorstep. Over the years, by dint of its monopolistic position in Indian cricket, the board has generated huge revenues and on that strength exercised a vice-like grip over the administration of the game. For FY12, the board generated revenues of Rs 849.44 crore and a whopping surplus of Rs 382.36 crore. The surplus is more than double the previous fiscal year’s net surplus of Rs 189.73 crore on revenues of Rs 581.3 crore.

Besides financial muscle, the pyramid structure of international cricket, with the International Cricket Council (ICC) — of which BCCI is a full member — at its summit, has made what is essentially a privately registered body under the Tamil Nadu Society Registration Act, a de facto regulator and the last word on who and how the game is played. This de facto status has papered over the fact that there is very little built-in room for critical analysis or self-correction.

In a 8 February 2013 ruling, the Competition Commission of India (CCI) slammed BCCI for shutting out rival cricket leagues like the Subhash Chandra-promoted Indian Cricket League (ICL). “BCCI, in its dual role of custodian of cricket and organiser of events, has on account of role overlap, restricted competition and benefits of competition. The objective of BCCI to promote and develop the game of cricket has been compromised,” the CCI noted.

During the last decade, a string of senior BCCI officials have been charged with malfeasance, cheating and fraud. Jagmohan Dalmiya was charged by BCCI in 2006 for cheating and forgery after he lost the election for president to Sharad Pawar. The case was later settled out of court, and the Bombay High Court quashed proceedings in August 2011. Similarly, Lalit Modi, who takes credit for introducing the Twenty20 format to India, is now a fugitive in London. He faces arrest if he returns for manipulating broadcasting rights awarded to SET Max, that unauthorisedly allowed payment of Rs 425 crore as commission to World Sport Group for its ‘untenable’ role of  ‘facilitator’.
A Spot Of Bother: (From left) S. Sreesanth, Ajit Chandila and Ankeet Chavan of Rajasthan Royals; Gurunath Meiyappan, team principal of the Chennai Super Kings

Will IPL Survive?

“BCCI’s economic power is enormous as a regulator that enables it to pick winners. BCCI has gained tremendously from the IPL format of cricket in financial terms. Virtually, there is no other competitor in the market, nor was anyone allowed to emerge due to BCCI’s strategy of monopolising the entire market,” the CCI notes.

The CCI has been categorical in its order — to stem the rot within, the BCCI has to forego its monopoly and allow competing leagues. Finding BCCI guilty of abusing its position, it imposed a fine of Rs 52.24 crore. It also directed the board “to cease and desist from denying market access to potential competitors” and “to cease and desist from using its regulatory powers… on any matter relating to its commercial activities”.

A bit of a pyrrhic victory for the ICL, which was bullied into shutting down by BCCI. Subhash Chandra, who floated the ICL as a parallel league to IPL, is noncommittal about making a second attempt. “We are watching the IPL scenario very closely,” says Chandra.

But ultimately, there is too much riding on IPL; and the seven-week extravaganza will continue to muddle its way out of trouble. Sony/Multi-Screen Media (MSM) has paid $1.026 billion (or Rs 5,640 crore) for a 10-year global broadcasting package. Broadcaster MSM has raked in a net advertising income of close to Rs 700 crore this season, up 45 per cent from the Rs 470 crore generated last year. All the franchisee teams have also paid big money to represent the various cities. The Hyderabad Sunrisers, for example, owned by Sun TV, paid Rs 425 crore for five years — Rs 85 crore per year.

Star, one of the sponsors of IPL 6, says that it is betting long, and adds that there is no move afoot to review its association with the platform. “We know that serious challenges have arisen; but we are confident that these will be addressed,” says Sanjay Gupta, COO of Star India. 

According to the returns filed by the cricket board for FY12, of its Rs 382-crore surplus for the year, as much as Rs 265 crore — or 68 per cent of the surplus — was accounted for by IPL 4, played in April-May 2011. IPL is BCCI’s key property. Dalmiya, at one point, advocated a temporary suspension of IPL for a ‘clean-up’. This was before he was anointed interim BCCI chief. He will probably eat his words now.


(This story was published in BW | Businessworld Issue Dated 01-07-2013)