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'All IPL teams should be able to break even by 2011' : Hiren Pandit - GroupM ESP managing partner

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The Indian Premier League (IPL) promises huge space for revenue growth. The team franchises will have to focus on building the brand consistently, project a healthy personality and take the sponsorship value to a different level.

It is not wise to draw sponsors just on the back of winning and losing. Performance is a factor, but it is not the only thing.

In an interview with Indiantelevision.com's Ashwin Pinto, GroupM ESP managing partner Hiren Pandit says there is value in T20, but warns that it should not be at the cost of the other formats.

Excerpts:

How have the franchises fared financially in the second edition of the IPL?

Our assumption is that there are two who have not made a profit - Deccan Chargers (Hyderabad) and Royal Challengers (Bangalore). They had their own brands on their T-shirts, which could be looked at as an investment rather than a loss. The others have broken even at the operational level. This was due to the rise in television rights fees. The question is whether they have wiped out the losses of last year. I expect everybody to break even by 2011.

In terms of sponsorship revenues between the team and central revenues, the IPL got Rs 3 billion. Last year it would not have been more than Rs 2.5 billion. Kolkata Knight Riders (KKR), Chennai Super Kings (CSK) and Delhi Daredevils have got the most in terms of local sponsorships, followed by Mumbai Indians, Kings XI Punjab Rajasthan Royals (RR).

And what about sponsorships?

CSK and KKR did a particularly good job. But you would have a team like Royal Challengers (RC) which is not interested in outside sponsorships. That franchisee put its own brands on display.

How about defending champions Rajasthan Royals?

RR has broken even because their payout to the BCCI is much less as compared to the others. They only shell out $6.5 million each year. Having said that, I am not so sure that finishing number one necessarily translates into higher sponsorship revenue.

Then what matters?

You need to look at what a team stands for. Is its branding consistent? Does it show on the ground? Does the team overall project a strong and a healthy personality? Are there characteristics in the team that can take sponsorship value to a different level?

If an IPL team draws sponsors on the back of winning and losing, then you have a problem. Performance is a factor, but it can't be the only thing.

While KKR did well in terms of getting in sponsors, somewhere down the line they or the brands associated with it made the mistake of going down the performance route. That is a dangerous platform to walk on. The amount of bad press it got did not help the franchisee nor the brands that were associated with it.

On the other side, Idea did an outstanding job with the Mumbai Indians. Their activation platform was brilliant and had nothing to do with winning or losing. It gave fans the opportunity to aspire to talk with their favourite players. Even though Mumbai Indians lost on the field, the aspirational value is still there.

What was Group M's role in this IPL?

We did a few deals with some clients for having their logos appear on T-shirts. We lost out big time, though, as the IPL moved out of India. We had a smaller role to play compared with last year. We are now not involved with the Deccan Chargers.

'Revenue growth will come from local sponsorships. If you are heavily relying on the central pool, then the franchise has not built itself properly. Building up local sponsorships and fan base will be key'

Do you see yourself playing a bigger role going forward?

Yes! We have knowledge on brand activation around the IPL. We have got a good understanding of this space and the valuation process. We can give clients a fair idea of what they should pay for a logo, depending on the position they take. We are also open to associating with teams.

The IPL is looking at doing another event each year abroad, possibly a smaller one. Is this the best way forward?

The aim appears to be to develop cricket in smaller, non cricket markets. Is there a window available? Are players available? These issues have to be addressed.

Where does KKR go from here?

They have to relook at what they have got. They are not a bad team per se. They have a high profile owner and they need to look at the relationship between owner and team.

Secondly, they had too many people like Buchanan and Ganguly trying to become high profile. The bigger you are, the harder you fall and that is what has happened.

Kolkata's sponsorship is on the back of Shah Rukh Khan and not because of the team. They could rejig what their brand stands for - and then sponsors will come in for the team's values. That is a call that they will have to take. What you will find is that franchisees will move away from performance as a platform for brand activation.

Going forward, the growth of revenues will come from local sponsorships - and not so much from the central pool. If you are heavily relying on the central pool, then the franchise has not built itself properly. Building up local sponsorships and fan base will be key.

How would this happen?

The IPL will move away from being just a 45-day event. Franchisees will do activities over a longer period of time to build a fan base. They would do things like promotions, interactions and meets.

There is talk that with the IPL the focus is shifting away from individual player sponsors and more towards team sponsorship. Are players like Dhoni going to lose out on lucrative deals going forward?

When a team association is done, three to four players are used. Even if you are associated with CSK, you can only use Dhoni as far as IPL is concerned. This makes sense when the IPL is on or just about to start. But in December if the team endorses a brand, what will a viewer take out of it? The viewers are not stupid. If people believe that they are getting a Dhoni for free by associating with his IPL franchise, then they have a short term approach to the business.

You could associate with a team to get national reach. If you associate with a player, it would be due to his characteristics. It is not necessary that the characteristics of the franchisees will be the same.

When the IPL adds more teams in 2011, what would be the likely cities?

Gujarat and UP have opportunities. You could see another team from Maharasthra - perhaps Pune or Nagpur. Kerala also has a chance if some NRI is interested. The payout could cross $200 million. But the interested party will have to work his maths out properly. Otherwise, it will be difficult to recoup your investments. The parties that shelled out the most for a franchisee the last time around are just about making it. The lower end of the payout table are more comfortable.

Also keep in mind the fact that after 2010 all player contracts are up for grabs. The whole scenario will be reworked and changed. There should again be a cap on money that can be spent or there will be teams that will be far stronger than the rest. The IPL could then turn into a two or a three horse race which will take away from its appeal. Some deals, though, might be done outside the bidding. We will see more performance-related deals. Player loyalties and disloyalties will also come into the equation.

Next year England starts P20. In 2011 South Africa, Australia and New Zealand start a joint league along the lines of the IPL. How do you see this affecting international cricket?

The question is with so many leagues happening, what happens to Tests and one-dayers. Is there enough of a window for this to happen? There was a league that started in the West Indies, which subsequently got killed.

Can the other leagues generate the kind of money that the IPL gets? I don't know if Kevin Pietersen will get $1.5 million a year in those leagues.

Then you must look at it from a player's perspective. He plays around 35 ODIs, 15 Tests, 20 T20 games a year. Does he have time to play anything else? Remember also that T20 is successful in India as it is a country sport first. Then it is a club sport.

Could we see players bypassing the international grind and just focusing on league cricket which is lucrative?

The question is whether a player wants to play cricket for a living or does he want to represent his country and make money. You cannot have somebody only focus on the T20 format. This is something that this edition of the IPL brilliantly showed.

The players who did well like Kumble, Gilchrist and Hayden are seasoned campaigners who have excelled in the other formats as well. T20 is not a wham bam affair. It is about playing proper cricket. If a cricketer chooses league cricket over his country, then he might be asking for trouble. Most of the IPL players got there as they made a statement by playing for their country. Then there are youngsters who did well in the IPL and are now playing for their country. I do not think that it is a choice of one versus the other.

What impact will India's exit in the T20 World Cup have on ESPN Star Sports?

Ratings will take a hit. Already we are seeing that clients are not getting enough of a return when India does not play.
How do you see the Champions T20 League faring?

You need to let it happen once. Some players play for two teams and so will have to decide where their loyalties lie when this event starts.
Would playing at night help Test cricket?

This is not a bad idea. What has happened is that T20 has had a positive impact on the other formats. The run scoring in Test matches is quicker which is forcing results. This is desirable. Each format lives off the other in some form or the other.
There will be lots of T20 cricket happening. Are you concerned that the overdose might kill the format?

It could lose its flavour. You cannot have too much of one format. There is value in T20, but it should not be at the cost of the other formats.
What challenges does the economic downturn pose for Group M ESP?

We need to work harder. We need to give more value to clients. It is a partnership in good times and bad. We need to find better opportunities for clients but it is not as though we need to think differently.
What progress has Group M ESP made in the celebrity endorsement and management space?

We have moved away from this. Keeping in mind the Indian mindset towards celebrities, we did not believe that it was a scalable model. We focus, among other areas, on branded content in film and television. The strike affected us but hopefully the films have only been shifted and not cancelled. We have done regional tie ups with brands.

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