Team India's Troubles Test Advertisers
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With each defeat, with every dismal dismissal, the nerves of Indian cricket team sponsors fray that little bit more.
You cannot blame them. All is not well in the cricket bazaar -- the original 800-pound gorilla when it came to mass market outreach. An estimated $100 million is spent every year on cricket sponsorships, endorsements, broadcast rights and prize money.
Adidas reportedly signed Virat kohli for Rs 10 crore over five years. The captain Dhoni rakes in an estimated 100 crore in the same period. It is not reassuring for a brand spending that much money when a batsman is not performing well. For big sponsors it is a double whammy - first, the huge sponsorship bill, and then a negative message being broadcast to the world in the flops on the field.
It makes the entire endorsement deal look like a very expensive mistake.
The real costs are far higher -- in terms of producing advertisements and buying media for creating events around the star who has endorsed a brand. Kohli alone endorses about 13 brands, including Toyota, Pepsi and Cinthol. A poor run from a top player affects the whole ecosystem of brands.
Time was when poor performance abroad did no matter. India lost abroad, came back home, started winning again and the money continued to flow. It was one endless party. Those times have changed. Cricket consumption in India has gown many times. With commentary now live in both Hindi and English, Twitter and mobile apps keeping an estimated audience of 20 million involved, players face intense scrutiny from their fans.
Too much of cricket has created another problem for brands. With so many games being held throughout the year, the crucial emotional attachment has gone down for particular games or series, barring the World Cup or some marquee events. So, if a player performs poorly in one game, it doesn't trouble his fans that much these days. Even the most diehard fan takes heart from the fact that there is always another game coming up.
Harinder Singh, managing director of Percept advertising and a leading sports marketing honcho, told Business World, "Player endorsement contracts usually do not have a provision for reduction in base fees subject to performance. However, the bonuses for good performance would be lost if the poor form continues. At the time of contract renewal, some renegotiation may happen. That's subject to the player being in the team after consistent poor performance."
Bonuses are an important component of a contract, but since the contracts are opaque it's tough to tell just how much they matter in a players' payout. During the current England tour, India's cricket team suffered one of its worst defeats in test matches. However, another bad outing when India travels to Australia next could be disastrous for endorsement value of the cricket stars.
The real challenge for a brand when the performance of a player declines is that the player endorsing a product could get dropped from the team. That is the biggest blow for the sponsor as the player disappears from the consumers' mind, and the endorsement for the period that the player is out of the team becomes a sunk cost.
At least two players may be dropped for the next test series and that will hurt several brands.
Senior sports journalist Vidhanshu Kumar, who has written extensively on the business of sports, said: "Bad performance overseas does affect brand value. We have precedence, just recollect 2007 ICC World Cup in which India was knocked out in the first round. That year cricketers lost value and space on TV. If we continue losing, it could easily happen again. Often at these times we see brands that invest big in cricket return to Bollywood."
Cricket also loses endorsement money in times of bad performance because top players such as Kohli and Dhoni command huge price tags and advertises are reluctant to invest large sums unless they get good returns.
Even before the England series, India lost back to back overseas tours without a single test win in Australia and England. The results were apparent. The broadcaster Star was the only bidding sponsor in the field and paid about 1.92 crore per test match to sponsor Team India. This is about 30 per cent less than what Sahara used to spend for each match.
The team's poor performance has created opportunities for bargains though. Micormax, the telecom firm, has signed a deal for the 2014-15 season as title sponsor for Indian matches for a reported sum of 18 crore. This is at least 20 per cent less than what it would have cost the firm had India been on a winning spree.
Some other brands that could not afford cricket earlier may now look at the game. Madhukar Sabnavis, vice chairman and country head of discovery and planning for Ogilvy & Mather advertising agency, said, "Rates on TV for cricket would drop as bad record of India would make advertisers skeptical that viewership of cricket, especially five-day (test match), will drop with the drastic drop in performance."
India is doing well in the one-day tournament underway in England but the pressure will intensify, especially given the fact that the World Cup is around the corner. India has to deliver goods abroad consistently to justify the price tag the team and players carry. Brands would be hoping that Team India rides back to form, for they have invested far too heavily in the game.