Cricket is definitely the most lucrative of markets for sponsors in India: anything related to cricket sells! There are many cricket tournaments that happen round the year but as per as the Indian sponsor is concerned there is none greater than the IPL. The Indian Premier League or IPL is currently valued at 3.7 billion USD – 4.1 billion USD(according to various estimates) which makes it the 6th highest valued sporting event in the world and higher than even the ICC Cricket world cup. Compare another piece of interesting data. The ad rates during the recently concluded ICC Cricket world cup for a 10 seconds slot were at INR 3.5-4lac ( it reached a high of INR 17-18 lac during the India-Pakistan semi final match). The ad rates for IPL3 were at 4.5-5 lac for a 10 second slot and it is expected to see a rise of 30-35% this year, which implies an ad rate of around 6-6.5 lac INR for IPL4 that is more than 1.6 times the Ad rates for cricket’s biggest tournament held once in 4 years. According to a global sports salaries review, IPL is the second highest highest paid league based on first team salaries on a pro rata basis, next only to NBA.
But amidst all the success for IPL, one question still lingers on: Why did ICL ( Indian Cricket League) , its predecessor, fail to replicate the IPL success story despite having the first mover advantage in the market. Let’s analyse the reasons and the business lessons that can be drawn from it:
1. First Mover- Not Good Enough: The ICL was started in the year 2007 by Zee Entertainment Enterprises under the leadership of Mr. Subhash Chandra. The timing of this launch was extremely well planned as the Indian cricket team had just returned after a humiliating first round defeat in the World Cup. Moreover ICL managed to rope in its plans cricketing legends including Kapil Dev. The plan was simple creating content for its own sports channel and also generating revenues through advertisements in various forms. They quickly managed to attract some of the best Indian new talent and a bunch of retired foreign players. They expected the BCCI(Board of Control for Cricket in India) to draw out an olive branch and come to the negotiation table. Instead the move backfired !
The BCCI barred the ICL from using its stadiums and also managed to ban the foreign( with the help of other cricket boards) as well as the Indian players who had associated themselves with the league from representing their national sides. The BCCI also promised to launch its own league within a year. This flexing of muscle by the BCCI literally crippled the ICL and blew the air out of their baloon.
Similar event in history: Netscape challenging Microsoft’s dominance in the segment of web browser before finally getting sold out and losing the battle to Microsoft.
Business lesson drawn: As a newbie it is always better to attract less attention, maintain a low key and look for alliances. The time to challenge the leader will arrive if one can build a strong foundation
2.Total Control vs Franchise model: The ICL model was one which was based on total control by Zee right from managing the event to the team.They believed that their model was new & innovative and hence they should reap the maximum benefit out of it. But they overlooked a very simple fact- the replicabilty of their model. The BCCI in its own league IPL opted for a franchise model- it not only brought additional expertise on the discussion table but also minimised the risk for BCCI considering it to be a financial gamble at that time. The ICL did realize their mistake and even managed to sell a stake in their Kolkata team ( Bengal Tigers) to actor Mithun Chakraborty for an undisclosed sum, but it was too little, too late !
Bottomline: There is no substitute for collective wisdom- so do consider the pitfalls if you tend to ignore it !
3. The Target Market: The target market for ICL was India but it failed to attract any of the star players in its lineup from the Indian Team due to the stern warning issued to players from the BCCI. The IPL on the other hand featured each of these star players and hence created a greater association of the audience with the franchises, right from its inception.
4.An Open vs Closed system: The IPL team as well as player auctions were done in a more transparent and open manner and was even telecasted live on television. An open system naturally enhanced the credibility factor for IPL. On the other hand ICL was all about undisclosed sums and rumors doing the rounds.
5.A late mover does win at times: The IPL started late and hence identified the loopholes in the business model of ICL to a full extent. Being a first mover is an advantage for certain, but sometimes being a late mover enables one to identify the challenges that one will face in business in a much better way.
Similar event in history: IBM made the first touch screen phone, Simon, in 1992- Apple made the iPhone more than a decade later yet today it leads the touch screen phone market
Similar event in history: IBM made the first touch screen phone, Simon, in 1992- Apple made the iPhone more than a decade later yet today it leads the touch screen phone market
In a country where Cricket is a religion and attracts the best of sponsors from Pepsi to KingFisher to Hero Honda, there is little doubt that the valuation of IPL is all set to grow- but a bigger question still lingers on: Has the IPL reached its prime?
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