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'Break-even year for first eight IPL teams'' : GroupM ESP managing partner Hiren Pandit

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The Indian Premier League (IPL) has seen an erosion in brand value due to governance issues. Two franchises got termination notice from India‘s cricket board but are still alive in IPL 4.0 as the court has come to their rescue.

In an interview with Indiantelevision.com‘s Ashwin Pinto, GroupM ESP managing partner Hiren Pandit talks about how the IPL can still be a revenue earner for the franchises as new advertisers take to the sport.

Excerpts:

Will there be revenue pressure for the IPL franchisees to break even now that two teams have been added?

The first eight teams that came in have done well for themselves - and will continue to do so. They will operationally break-even this year.

The two new franchises, however, will have to have a serious ace up their sleeves to achieve their numbers. It is a tight situation and will take at least eight to nine years for them to break-even.

Is it a good time for a franchise to sell a stake?

At any point in time, people will be in the market trying to find the value that they can get. The question is whether they need the money or if they can hang on. Now a lot of feelers have been in the market. Kings XI Punjab was nearly sold at one of time, but then issues came out.

Deccan Chargers were in the market after the first year, but now they have Saina Nehwal with them. They seem to have a sports strategy in place. They are trying to have a play in sports by building sporting properties and icons.

What about Sahara?

Sahara picked up Pune and it could be related to Amby Valley. They might try to make each property feed of each other. Otherwise, they should have chosen Lucknow. Obviously, the play goes beyond owning a cricket team. It makes sense for them to leverage the IPL across other properties.

Can Kochi run a smooth ship given that there are so many owners?

My first take has been that the strength of a team is as good or bad as the strength of a franchise. If the people who are there cannot run and act like a team, then the players will not fare well. This could be an internal problem and if they have resolved it then good for them. Team owners buy a team and give to a professional body or a professional set of people to run.

They are responsible to deliver for the team. In Kochi‘s case it is the team owners who are trying to run it. The scary part here is that the glamour element that is so huge and you can‘t hobnob with the team. If this is not managed properly, then it can become a problem. I have a feeling that Kochi still has to get its act together.

They came into the market with serious sponsorship numbers which they are not getting. This is going to have an impact on their cash flows.

How has off-the-field controversies impacted the IPL?

The off-the-field activities affected the IPL itself. It impacted when the auction was held. All this is behind us. However, certain issues will have to be addressed after IPL 4 is over. It is not that the off-the-field issues have disappeared; it is just that they are on the backburner.

With India lifting the World Cup, what viewership gains do you expect?

IPL should get a boost from the World Cup. Viewers will want to see more of the Indian players. But I don‘t see a dramatic change in viewership. Keep in mind the fact that team compositions have changed drastically - except for Mumbai and Chennai.

How is GroupM ESP involved with the IPL this time around?

Maxus is the agency of IPL. In the first year, we did the deal with Citibank, which continues this year. GroupM ESP has got in Volkswagen as car partner for the IPL.

We also went outside GroupM and did deals with outside clients who wanted to be associated with the IPL franchises. It could be awareness tracks, helping a client taking on competition or helping them form an association. We have also done licensing and merchandising deals that help the brand.

‘The Champions Twenty20 League is a great initiative that happened may be a little too early. It will become serious five years from now. But I am not so sure if it will be as big as the IPL‘

What growth in revenue will franchises see this time around?

Two new teams coming in means that the central kitty will be distributed among eight to 10 teams. The franchises will see growth from stadium income.

Some franchises went to the market with high sponsorship price points. They then had to reduce their prices. Good marketing and good performances have helped.

Mumbai and Chennai have done well and will see substantial revenue growth. Then you have Kolkata and Delhi in the middle. I have a feeling that Pune will pull through while Kerala will struggle.

In terms of ticket revenues, the Wankhede Stadium will make a big difference to Mumbai. It is in the heart of the city. It is also possible that Mumbai will make more money on licensing and merchandising than any other team.

The key to success is to reduce the heavy dependence on the central pool. Do you this happening this year?

While some franchises may manage to up their local revenues, the Central pool may stay stagnant. But Chennai and Mumbai, and perhaps Kolkata, may manage to change the percentage ratio between central and local revenue in favour of the latter.

The World Cup meant that franchises could not carry out activation with sponsors in the lead up to the IPL. What has been the impact?

Every sponsor was aware of this problem. But if sponsors are smart enough, they will look at it from the longevity point of view so that they can build an association. Some companies like Luminous are doing activities. It is a tight situation, though, with players not being available. Sponsors will do such things during the IPL.

Also, with the team structure changing, the task of building a fan base becomes that much more harder. Chennai and Mumbai are, of course, better positioned to strengthen their existing fan base.

Rajasthan brought in Floriana which is a company that has never advertised in cricket. Are we going to see more of new advertisers taking to the sport?

You will see a lot of newcomers as there is a churn happening. Some sponsors got in due to the glamour of the IPL without understanding what their objectives were; their relationship with the franchise owner may not have been good.

In years four and five, you will see this settling down. Sponsors now have a clearer idea of what they want; franchises also realise that you cannot have a revolving door policy where you take money and not do anything.

Which brands have done a good job?

Nokia and Aircel are some of the companies that have stayed on with the franchise. Vodafone has benefited with the Zoozoos as its idea. Those sponsors who only looked at it as a piece of real estate for a logo are the ones who got screwed.

 

Will we see more advertisers this year?

The number of advertising opportunities on clothing will stay the same. This year, though, we will see advertisers coming in as partners and doing on-ground activation. An entrepreneur in a city like Hyderabad could decide to open two restaurants and bars named after the Deccan Chargers. The logo part is static, but the number of partners can increase.

You will see more people moving in to the licensing and merchandising space. The franchises also have to look at this more seriously. At the same time, it is a slow burner.

Wearing the team colour is the starting point; you will see clothes, watches, etc. But a pub or a shop like what Manchester United has is still a long way off. However, licensing and merchandising will still be a small part of a team‘s revenue.



Two more teams mean more ad clutter. Is this going to be a major challenge for brands?

Clutter was there with eight teams. Anybody who wants to break this, must do something different.

Of all the brands that were associated with the ICC World Cup, the one that stands out is Pepsi. The whole creative concept that they did like the ‘helicopter shot‘ gave it a different flavour. The viewers saw something different, which stood out.

 

Some feel that having two groups was the BCCI‘s way of trying to solve a problem of 10 teams. Do you agree?

This is a format issue. You would have had 94 games. This is a lot of games. I remember traveling the first year with the Deccan Chargers. I wasn‘t even playing, but I was still tired. If you expect people to play so many games, it is unfair.

The BCCI has tried to fit things in the best possible manner. They will review the current situation. But the window available is 45 days; this is not going to increase.

 

What we have seen so far over three years is loyalty to the IPL and not so much for teams. Will this situation change this year?

This has changed. In the Mumbai versus Chennai match, the yellow and blue colours were very dominant. People were talking about teams. This time it might get affected due to a new team structure. But over a period of time, the relationship will build. Team loyalty should grow for certain franchises.

 

Some franchises were thinking of forming alliances with clubs globally. Will this concept work?

It is great to have a relationship. The question is what is that relationship built on? Rajasthan went abroad to play matches in the first year. It cannot just be a piece of paper, though; both parties must benefit. How many franchises have built a school to develop cricket and build a base that will feed into their team? These things need to happen. Just tying up with a foreign club is not the solution. Not enough has been done during the ‘off season‘. At the same time, money must make money.

 

Can the Champions Twenty20 League be declared a dud?

It is a great initiative that happened may be a little too early. It will become serious five years from now. But I am not so sure if the Champions Twenty20 League will be as big as the IPL.

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