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Image credits: BCCI IPL: The Decade Edition A concise report on brand values in the Indian Premier League August 2017
Image credits: BCCI
IPL: The Decade EditionA concise report on brand values in theIndian Premier League
August 2017
Duff & Phelps 2
A Concise Report on BrandValues in the Indian PremierLeague
Contents Page No.
Foreword 3
Summary of Values 4
10 Years of IPL: A decade thatchanged the cricketing landscape inIndia
5
IPL and Social Media 8
Understanding the Brand Value ofIPL
10
Valuation Approach andMethodology
12
Conclusion: Heading in the rightdirection
13
TABLE OF CONTENTS
Duff & Phelps 3
FOREWORD
Dear Readers,
Welcome to the fourth edition of our IPL franchisee brand valuation report. This yearIPL completed ten years since its inception, and what an eventful decade it hasbeen! During this period, there were several highs as well as a number of lows. Butto put it in cricketing terminology, IPL not only negotiated a tough pitch but alsoultimately came out on top as a true winner.
This IPL season has grabbed the eyeballs for all the right reasons with a relativelycontroversy-free tournament, coupled with some scintillating on-field performanceswhich have brought the spotlight back on the game. On field, Mumbai Indians wereby far the best team throughout the season and were deserving winners for a record3rd time. Rising Pune Supergiant (RPS), who were playing in the IPL for the lasttime, went out with a bang. Underdogs at the start of the tournament, RPS had agreat tournament piggybacking on Steve Smith, Ben Stokes, Imran Tahir andJayadev Unadkat. Pre-tournament favorites, Royal Challengers Bangalore (RCB)had a shocking season, finishing as the wooden spoon holders. However, this hasnot had much of a negative impact on the RCB brand, as the positives (star power,cricket crazy city and brand recall) out-weighed the negatives.
Over the years, we have seen multiple instances of scandals surrounding thepremier sporting event of the country, but in almost every single year, the IPL hascome out stronger and more popular than before. Brand IPL’s credibility andpopularity was further enhanced by the renewed Vivo title sponsorship deal for awhopping INR 2,200 crores for the next five years which is significantly higher thanthe earlier title sponsorship deals. Broadcasting rights (Satellite and Digital) whichwill be renewed later this month will be keenly watched. The renewed deal isanticipated to be significantly higher than the one signed by Sony nine years ago.Broadcasters also had a great IPL 10. Sony’s ad revenues crossed INR 1,300crores this year while Hotstar’s ad revenues from IPL rose to INR 120 crores, morethan double the previous year. Television viewership also touched new heights, withnearly 45% of viewership coming from rural India, which shows the reach and pull ofIPL.
The above evidence is also reflected in our valuation analysis. The overall value ofIPL as a business has increased to USD 5.3 billion from USD 4.2 billion last year.Factors such as the renewed title sponsorship deals and favorable currencymovement contributed to this growth in IPL business value (in USD terms). For ouranalysis this year, we did not value RPS or Gujarat Lions (“GL”) since theirassociation with IPL came to an end after this season with Chennai Super Kings(“CSK”) and Rajasthan Royals (“RR”) expected to come back after serving theirsuspension next year. Mumbai Indians have maintained the lead over KKR in ourbrand valuation for the second season in a row while RCB and SunrisersHyderabad continue to maintain 3rd and 4th position in the ranking.
We hope you enjoy reading this report and look forward to your feedback.
Varun Gupta
Varun GuptaManaging Director,Duff & Phelps India
Leader, South Asia & Japan
Duff & Phelps 4
$106mn$78mn
$99mn$77mn
$88mn$67mn
$56mn$41mn
$44mn$34mn
$41mn$31mn
Mumbai IndiansRank: 1
Previous Year’s Rank: 1
Kolkata Knight RidersRank: 2
Previous Year’s Rank: 2
Royal Challengers BangaloreRank: 3
Previous Year’s Rank: 3
SunRisers HyderabadRank: 4
Previous Year’s Rank: 4
Delhi DaredevilsRank: 5
Previous Year’s Rank: 5
Kings XI PunjabRank: 6
Previous Year’s Rank: 6
Image credits: BCCI
IPL VALUE CREATIONValue generated by the IPL as a business
US$ 5.3 BILLION
36%
31%
37%
SUMMARY OFBRAND VALUES
26%
29%
29%
32%
BrandValue
2017
BrandValue
2016%change
Duff & Phelps 5
INTRODUCTION
10 Years of IPL: A decade thatchanged the cricketinglandscape in India
The Indian Premier League has emergedas the premier sporting event in Indiawith a global viewership and a fan-following unmatched by any othercricketing league. Within a short spanof just 10 years, the IPL has morphedinto a media beast that could soon rivalthe decades old major sporting eventsacross the world. No one could havepredicted that IPL would become such ahuge hit when it was first conceptualizedin 2007 and when the franchises werefirst awarded to a group of corporates,individuals and celebrities.
The continued unprecedented responsefrom advertisers, broadcasters, sponsors,affiliates, partners and the viewing publicyear after year, has made the IPL themost keenly awaited event in thecampaign calendar for advertisers andthe most viewed sporting event for TVviewers in India. So much so that evenBollywood takes a step back and filmdistributors delay new releases until theend of the IPL season.
Along with all the highs, the 10 years ofIPL also saw significant lows. There werematch fixing scandals, controversiesinvolving celebrity owners, playerconflicts, etc. CSK and RR got bannedfrom playing in two seasons, and teamslike Deccan Chargers, Pune Warriorsand Kochi Tuskers had their contractsterminated due to factors such as non-compliance with IPL financial code andpoor corporate governance. Pepsiterminated its title sponsorship dealmidway into its five year contract. Therewere rumors of misappropriation inawarding franchise rights and eventuallythe Supreme Court came down hard onthe franchisees. All of this has had somenegative impact on the IPL brand.
While many anticipated thesecontroversies to shake the belief andtrust of sponsors and corporates alike,the league continued to surge evenhigher after each controversy. The everincreasing sponsorship deals, the
renewed blockbuster Vivo titlesponsorship deal and the huge interest inthe broadcasting (both television anddigital media) deals is a testimony to thefact that despite its shortcomings, the IPLwill continue to be a mega brand formany more years.
IPL 10 was considered one of the mostprominent and buzziest installments ofthe tournament. It was mentioned onTwitter over 6 million times, twice asmuch as last season. It witnessed asurge of followers and cricket enthusiastswho support their teams with the same, ifnot more zest, as they do with the Indiannational team. Credit must also go toBoard of Cricket Control in India (BCCI)who created a massive buzz around IPL10 by hosting 8 opening ceremoniesinstead of just one event as donetraditionally. This kind of buzz not onlyhelped in getting more fans, followers,popularity and tweets but also fetchedhigher IPL viewership than before with anincrement of 40% more viewers in theopening week alone as compared to lastyear.
The massive success of IPL 10 wasevident in the Broadcast AudienceResearch Council (“BARC”) India datareleased last month, which mentionedthat IPL 10 had 1.25 billion impressionsacross the five Sony television channelsbroadcasting IPL (an increase of 22.5%over last year when 1.02 billionimpressions were recorded). Of the 1.25billion impressions, nearly 45% of thetotal viewership came from rural Indiawhich is further evidence of IPL’s pan-India reach. This increase is aligned withthe change in demographics, TVownership and connection type, to namea few factors. Leveraging on thepopularity of the 10th season, Sony Max
102123
144 160 163 176 190 192
361400
0
50
100
150
200
250
300
350
400
450
IPL 1 IPL 2 IPL 3 IPL 4 IPL 5 IPL 6 IPL 7 IPL 8 IPL 9 IPL 10E
IPL’s Cumulative TV reach (unique viewers in million)
Source: Forbes India news article
Duff & Phelps 6
(the official broadcaster of IPL) becamethe most-watched television channelacross genres during the second week ofthe season.
Social media platforms such as Twitter,Facebook and Instagram suggest thatIPL and individual franchisees havewitnessed an upsurge in support by thefans. We compared the number offollowers a month before IPL season 10commenced with the followers right afterthe conclusion of the season. On anaggregate of the 3 social media websites,the IPL official page alone was able towitness a 45% increase in its followersaltogether. As per a report published byMaxus, IPL 10 registered the highestnumber of conversations ever across thesocial media platforms. A total of 6 millionmentions around IPL were registeredduring the current season which wastwice the IPL 9’s mentions. MS Dhoniwas the most popular cricketer on Twitterduring the IPL 10 followed by Virat Kohli,Gautam Gambhir and Rohit Sharma.Virat Kohli was the most talked aboutplayer on Facebook and Mumbai Indianswere the most talked about team onFacebook.
Bagging its third trophy, after beatingPune Supergiant in what turned out to bea Maharashtra derby, Mumbai Indianswas also the most popular team on bothInstagram and Twitter followed by KKRand RCB. Mumbai Indians continues tobe one of the most followed teams with2.68 million followers on Twitter, 1.3million on Instagram and 12.25 millionfollowers on Facebook.
Constant celebrity presence like that ofShah Rukh Khan also added up inmaking Kolkata Knight Riders a visiblebrand on social networks. KKR is themost followed IPL team on Facebookwith 15.74 million fans along with 2.83million followers on Twitter and 0.4million followers on Instagram. RoyalChallengers Bangalore was anotherwidely followed team with 2.23 millionTwitter followers, 1.3 million Instagramfollowers and 9.15 million Facebook fans.
IPL was one ofthe fastestgrowing sportsleagues onTwitter with 4.81million followers.
IPL Facebook fanpage grew byover 1.8 millionfans during IPLSeason 10.
0.02.04.06.08.0
10.012.014.016.018.020.0
Followers on Social media (Facebook, Instagram andTwitter) in Millions
One month Before After the conclusion
“IPL has killer content,which is exactly whatcontent hungry mediaorganisations want.What IPL has achievedin such a short time-scale is phenomenaland there is still hugepotential for exponentialmedia revenue growthin the next decade.”
- Harsh TalikotiAssociate Vice President,
Duff & Phelps
Duff & Phelps 7
With the internet pricing war amongst thetelecom players heating up coupled withthe attempts made by Hotstar to increasetheir reach, the online IPL viewership isbelieved to have increased by 30% fromlast year. Due to the absence of someblockbuster players such as KevinPietersen, Mitchell Starc and R Ashwin,this season witnessed the excellencefrom some fresh faces, which kept theball rolling for the teams.
Hand in hand with its breakthrough 10thseason, the Indian Premier Leaguecontinued with its immensely popular FanPark initiative for the third consecutiveyear. Launched in 2015, initially in 16cities, the 10th edition of the Fan Parkwas held in 36 cities in 21 states,bringing fans across India closer to theirbeloved sport. These included 14 newcities that hosted the Fan Park for thefirst time. The 9th season saw a massivefootfall of approximately 3 lakh cricketenthusiasts who experienced the IPL live.And for the 10th edition the organizersleft no stone unturned in making theconcept a big hit.
The massive fame and popularity ofcricket players like MS Dhoni and ViratKohli contributed to the merchandisemarket of IPL 10. According to someanalysts, 15-17% of Kings XI Punjab'srevenues come from merchandising.Virat Kohli’s fame also made IPL 10 avaluable season with millions of fanshoping to watch RCB give them the everawaited win.
The sea of red, black and gold in almostall the home games of RCB as well as invarious pubs across Bengaluru wasevidence that merchandising has come along way from IPL Season 1.
The merchandise is sold at most of thematch venues, but the growth is largelyseen on e-commerce websites, drivenprincipally by tier II and III cities. Amazon,Flipkart and Shop Clues are some of themany e-commerce platforms who havepartnered with several IPL teams tofacilitate merchandise sales, helping thebrand as a whole. Merchandisingrevenue has always been quintessentialto the world of sports. Big brands likeEmirates, Etihad, Yokohama Tires,Adidas, Nike and Chevrolet amongothers have paid large sums to sponsorthe big football premiere league teamsfor a very long time. These sponsorshipsdeals have not only generatedsubstantial revenue for the teams buthave also helped the sponsors to taketheir brands to every corner of the worldas their brand names will be part of theofficial merchandise sold by the clubs.With the growing popularity of IPL as afranchise, merchandising sponsorship forthe respective teams can substantiallyhelp the revenue streams for both IPLand the respective teams.
Demonetization evidently had no impacton the advertisement expenditure by thecorporates. A 10-12% growth inadvertisement revenues was estimatedby Sony Pictures Network, amounting to
approximately INR 1,300 crores ascompared to INR 1,200 crores earned inIPL 9.
Adding further to the strength of the IPLbrand are the title sponsorship deals.DLF, Pepsi, Vivo have paid significantamounts in the past for being the titlesponsors. Each one of these titlesponsors have paid a large premium overthe earlier title sponsors.
With the end of the 10th season, the titlesponsorship rights were also up forrenewal. The mobile manufacturer Vivoretained the title sponsorship for the nextfive years starting August 2017 with asky-high INR 2,200 crores. The annualbreak-up of the deal works out to nearlyINR 440 crores per annum, an exorbitant500+ percent more than the previouscontract.
IPL has also shown the path to successto many other sporting leagues in India.Pro Kabaddi League, Indian SuperLeague and International Tennis PremierLeague are other leagues modelledaround IPL. Celebrating the decadeedition marks a path of various eventsthat occurred during the 10 years sincethe commencement of this season. It willnot be wrong if we say that this seasonhas multiplied in grandeur and this sportin the limited-overs format has achievedmany milestones during this period.
7
10
1213
0
2
4
6
8
10
12
14
IPL 7 IPL 8 IPL 9 IPL 10E
Advertisement revenues of SonyPictures Network (in billion)
500790 1,000
4,480
0
1000
2000
3000
4000
5000
DLF (2008-2012)
Pepsi (2013-2015)
Vivo (2016-2017)
Vivo (2017-2022)
IPL Title Sponsorship fee per year(INR million)
Source: Financial Express and Forbes India news articles
Duff & Phelps 8
Some fans are stadium enthusiasts, while the other set prefer to enjoy the match ontheir couch; however, one thing remains constant - their social media engrossment!
Also, with the blessing of reduced data costs and improved connectivity, digitalplatforms are becoming a vital source of live streaming of sports. A few years back,sports was a medium of entertainment restricted only to live games on the television.The trend has changed now. Today, viewers have started watching sports at a timeand place of their convenience, following their favorite teams/players on social media,watching videos/live content before and after matches, and much more.
Smartphone penetration in India has multiplied in recent years and has led to asubstantial increase in digital consumption. As per statistics, the number of smart-phone users in India is expected to cross 450 million by 2021. Also, about 60 to 70percent of the smartphone users are believed to be using the internet on their phones.Internet users have been benefiting from the price wars amongst the telecom-munication companies. As mentioned earlier, various factors like reduced data tariffs,roll-out of 4G and various initiatives by the government to increase Wi-Fi access inpublic places shows that the users are going to go online more often with time.
It will not surprise anyone that this increasing trend in internet consumption has showna directly proportional trend in the increase in the digital content consumption for IPL.Thanks to the Over The Top (OTT) platforms, sporting enthusiasts are able to catch-upon the live matches on their mobile phones. Hotstar won the three-year digital broad-casting rights for IPL in 2015. The viewership has shown an upward trend year-on-year with 41 million viewers in 2015, 100 million in 2016, and is expected to havereached a 130 million mark in 2017. The average time spent per user for an IPL matchon Hotstar is 40–45 minutes, up from 30-35 minutes during IPL 9, which is on par withSony’s average viewership of around 45 minutes per user.
“The numbers are quitesmall on social media’sbig three – Twitter,Facebook andInstagram, relative tothe cricket watchingpopulation for IPL andits franchisees. Withinternet penetration intosmaller towns and ruralIndia, we can anticipatethe teams to have multi-fold growth in theirsocial media followingwithin the next fewyears which will driveand support enhancedvaluations.”
- Trevor BirchManaging Director, Duff & Phelpsand Ex-CEO of Chelsea Football
Club
IPL AND SOCIAL MEDIA
A force to be reckoned with.
239
292340
382416
445468
050
100150200250300350400450500
2015 2016 2017 2018E 2019E 2020E 2021E
Nu
mb
ers
ism
illio
ns
Year
Numbers of smartphone users (in Millions)
Source: Statista, The Statistics Portal
Duff & Phelps 9
Corporates have been investing in advertising ondigital platforms due to the growing exposure. Basedon the KPMG India – FICCI, Indian Media andEntertainment Industry Report, 2017, the digitaladvertisement spend is expected to increase to INR294.5 billion by 2021 as compared to INR 76.9 billion in2016. Hotstar announced Vivo and Maruti Suzuki asthe co-presenting sponsors for streaming of thisseason. In fact Hotstar’s advertising revenues doubledto INR 120 crores compared to IPL Season 9, bankingon INR 20 crores sponsorship deals each with Vivoand Maruti Suzuki.
This splurge in online streaming of IPL and the gainingmomentum of OTT as a medium to watch sports onlinehas led to an increased sense of willingness in thecompanies to acquire digital rights for streamingsporting events. There are about 35 to 40 OTT playersin India currently. The continued success of IPL is likelyto result in a bidding war for broadcast rights amongstthe companies. This year is a vital year for the future ofOTT in the Indian sports market since the IPL mediarights (both TV and digital) are up for renewal for theseason starting in 2018. Both the satellite and digitalrights will be for a term of 5 years. Aggressive biddingfor the rights is expected as Reliance Jio, Facebook,YouTube and Amazon are said to have entered thecompetition along with Sony and Star.
Digital content is becoming a very strong medium ofsocial media engagement for the sports viewers. Thefollowing are some astonishing statistics that reveal thegrowing significance of content in today’s sportscontext:
• The number of tweets pertaining to IPL has crossed8.5 million and is still growing.
• A total of approximately 6 million mentions on socialmedia were registered in the 10th season (morethan twice those of the last season). The 9thseason had clocked about 3.1 million views.
• Mumbai Indians had an incredibly successful digitalmedia strategy attracting over 83 millionengagements across Facebook (50 million),Instagram (29 million) and Twitter (3.95 million).
With the increasing popularity of IPL in social media, itis inevitable that an abundant amount of content inform of videos, images, tweets, etc. will be generated.This is resulting in sports moving away from itstraditional form to becoming a multi-faceted socialmedia bubble. This bubble appears to be growing insize with every passing year, and is attracting biginvestments from the OTT giants; thus proving thatdigital-business is definitely not a ball to be ducked.
“Broadcasting rights (Satellite and Digital)which will be renewed later this month will bekeenly watched. The renewed deal isanticipated to be significantly higher than theone signed by Sony nine years ago. ”
- Varun GuptaManaging Director,
Duff & Phelps
77102
134
174
227
295
0
50
100
150
200
250
300
350
2016 2017E 2018E 2019E 2020E 2021E
Digital Advertising spend in India(INR billion)
0%
50%
100%
150%
200%
250%
300%
350%
MajorLeagueBaseball(MLB)
NationalBasketballAssociation
(NBA)
NationalFootballLeague(NFL)
UEFAChampions
League(UCL)
IndianPremiereLeague
(IPL)
Growth % in number of Tweets(2014 to 2016)
Growth % in number of Tweets (2014 to 2016)
IPL Annual Viewership on Hotstar
27 million(2014)
41 million(2015)
100 million(2016)
130 million(2017)
Source: KPMG India – FICCI , Indian Media and Entertainment Industry Report, 2017
Source: International Business Times news article
Duff & Phelps 10
Management Strength and On-FieldPerformance
For an advertiser / sponsor, beingassociated with a team that isconsistently performing at the top of thetable is a key factor in assessing brandpotential. A look at the largest deals inthe sponsorship space not only in theIPL, but also internationally will revealthat teams that are better on-fieldperformers garner higher sponsorshipvalues. In the IPL, the estimated leadsponsorships (lead chest and limitedplayer promotions) were valued at a100% premium for a top ranked teamover its lower-rung peer.
Of course, a team that consistentlyperforms at the top of the table is not theresult of a pre-fixed formula. Teammanagement plays an important role insquad selection, talent acquisition,performance management and admin-istrative support. Clearly, a winning teamis the result of a winning combination ofseveral factors including the strength ofthe management team.
Geographical Location
The geographical location of thefranchise determines the population of itssupport base and is an important factor inassessing the strength of an individualteam brand. In general, it is likely that ahigher density of teams in a particularregion of the country will split the fanbase and impact the ability of a team togarner support outside of its immediatelocation. However, for the last ten yearssome franchisees have seen pan Indiasupport primarily on account of the brandof cricket played by them along with themarquee players associated with theseteams. MI had support across India dueto the presence of Sachin Tendulkarwhile CSK had the MS Dhoni factor.Currently, RCB is also enjoying widesupport due to the presence of ViratKohli, AB De Villiers and Chris Gayle.This goes well with IPL’s intention of notsplitting support based on the vernacularlines.
Great sporting brands across the world have been built over several decades of fan following, successful performances, theability of a team to attract great talent, and continued association with large companies, partners and sponsors. Teams like theNew York Yankees, Dallas Cowboys, Manchester United, Chelsea, Real Madrid, Barcelona, Los Angeles Lakers and the likehave become much sought after brands by advertisers and represent brand values in billions of dollars.
In the IPL, brand value is derived from a wider variety of factors keeping in mind the Indian viewer’s association preference forvernacular proclivities, cricketing knowledge and celebrity influence. Accordingly, drivers of brand value in the IPL can becategorised under the following broad heads.
BRAND VALUATION
Understanding Brand Valuein the IPL
“I’ve been intrigued towatch how IPL hasmarketed and protectedits own brand valueseparate to the clubs.With my experience ofhaving worked withsome of the biggestclubs in the EnglishPremier League (EPL),I feel the one thing IPLhas done really well isthe way it has marketedand protected it’s ownbrand. Most of the EPLclubs are bigger brandsthan the EPL branditself, whereas in IPL, itseems to be Brand IPLwhich is much morepowerful compared tothe individualfranchisees.”
- Trevor BirchManaging Director,
Duff & Phelpsand Ex-CEO of Chelsea FC
Duff & Phelps 11
Governance and Transparency
Over the last few years, some teams orpromoters of those teams were accusedof professional misconduct or embroiledin controversies which had a negativeimpact on brand perception. However,the IPL governing council has tried itsbest to weed out the negativitysurrounding IPL. As a result, the last twoseasons for IPL have been relativelycontroversy free which favorablyenhanced the IPL brand perception.
Mumbai Indians and KKR were voted asthe best performing teams when it comesto effectiveness and transparency of theirmanagement teams along with a highperceived brand strength. Ourassessment of the brand values of thevarious franchises takes intoconsideration the rankings of variousfranchises for the effectiveness andtransparency of their managementteams.
Social Media Engagement
The ability of a franchise to engage fanson a regular basis, particularly during theIPL has been crucial in building positivebrand perception. Over the last fewseasons, we have seen dedicated Twitterand Facebook campaigns organised bythe franchises with the intention ofengaging fans regularly and keepingthem up to date with the events of theindividual teams. RCB’s PlayBoldhashtag and the RCB Insider show withMr. Nags were a major hit on socialmedia along with Mumbai IndiansCricketmerijaan hashtag and KKR’sAmiKKR hashtag. We have givenadditional weights to teams that have alarge social media presence in estimatingthe brand values of the variousfranchises.
The social media ranks indicated for theindividual franchises are provided on theside of this page.
Celebrity Influence and MarqueePlayers
The presence of key marquee playersand celebrity owners in a franchisebrings additional popularity to theindividual team brands. Case in point isRCB, whose brand value has soaredpiggy-backing on the likes of ViratKohli, Chris Gayle and AB De Villiers.However, it may be added that cricketis a team game and no one person canchange the fortunes of a badlyperforming franchise. In addition, whilea franchise may be able to ride on thebrand of a celebrity owner or amarquee player, they are also open tothe risk of damage in cases where thesaid individual is embroiled in acontroversy, even if that controversy isoutside of the IPL.
Social MediaRanking basedon thefranchisessocial mediafollowing
SocialMediaRank
CombinedFacebook,
TwitterInstagram
andFollowers
(Mn)
Kolkata KnightRiders
1 19.0
Mumbai Indians 2 16.2
Chennai SuperKings
3 14.6
RoyalChallengersBangalore
4 12.7
Kings XI Punjab 5 10.2
SunrisersHyderabad
6 7.3
Delhi Daredevils 7 5.6
RajasthanRoyals
8 4.2
Gujarat Lions 9 2.5
RisingSupergiants
10 2.3
Marketing Strategy
Based on our analysis, it is estimatedthat on average, franchises spendanywhere between 15% and 25% of theirrevenues towards marketing andpromotion. Some teams, like KolkataKnight Riders, who invested significantlytowards brand building in the early part oftheir IPL existence, have seen fantasticsupport from sponsors and partners. IPLevents, television advertisements,merchandising, in-stadium freebies andother such promotional activities drivenby the franchise go a long way ingarnering exposure and supporttranslating into brand gains.
Merchandising in the IPL is presently in anascent stage and most franchises arestill coming to terms with the bestpossible way to monetize differentstreams. We believe that this will be agame-changer for franchises that areable to crack this difficult market andidentify new monetization streams bytapping into their existing fan base.
“Merchandising is a greatrevenue generator for anyleague / team. However, it’sa tough nut to crack andthe league and clubs needto have solid professionaladvice on the whole area ofprotecting and valuingtrademarks, licensing andpatents, etc. to protectfuture revenues. Many EPLclubs are only nowbeginning to fully get togrips with this complex areaof law and for many yearshave suffered from piracy.”
- Trevor BirchManaging Director, Duff & Phelps
and Ex-CEO of Chelsea FC
Duff & Phelps 12
METHODOLOGY
Valuation Approach andMethodology
There are several methods andtechniques that can be applied inestimating the value of a brand, of whichthe most popular is the Relief fromRoyalty Method. The Relief from Royaltymethod is premised on the royalty that acompany would have to pay for the useof the brand/ trademark if they had tolicense it. Here, royalty is expressed asa percentage of sales, for its use. Thepresent value of the after-tax costsavings (i.e., royalty relief) at anappropriate discount rate indicates thevalue of the brand.
The first step in the valuation of the IPLfranchise brands was to estimate thefuture revenue expected from thesebrands. We developed a detailedbusiness model for each of theindividual franchises after extensiveresearch and limited discussions withindustry players. The model was builtkeeping in mind the various contractualrevenue sharing agreements betweenthe BCCI and the IPL franchises. Eachbusiness model of individual franchiseswas developed keeping in mind thefranchise’s current performancestanding, its brand rank and otherqualitative factors which could impact itsbusiness value.
The second step in the valuation of thesaid intangible would be development ofthe fair royalty rate. As part of ouranalysis, we researched a number ofBrand and Trademark licensingarrangements across internationalsporting leagues such as the EnglishPremier League (EPL), the NationalFootball League (NFL), the NationalBasketball League (NBA), Major LeagueBaseball (MLB), etc. in concluding anappropriate royalty rate for the valuationof the IPL franchise brands.
This estimated royalty rate is applied tothe appropriate level of revenues ofeach franchise to calculate the royaltysavings attributable to the brand owner.The royalty savings are then tax-affected and discounted to present valueusing an appropriate required rate ofreturn to estimate the value of theindividual brands.
IPL Valuation Creation Methodology:
The value created by IPL as a businesshas been valued using a variant of theIncome Approach known as theDiscounted Cash Flow (“DCF”) Method.
The DCF Method is a valuationtechnique that provides an estimation ofthe value of an asset or a businessbased on the cash flows that an asset orbusiness is expected to generate overits remaining useful life.
The Income Approach begins with anestimation of the annual cash flows ahypothetical buyer would expect thesubject asset or business to generateover a discrete projection period. Theestimated cash flows for each of theyears in the discrete projection periodare then converted to their present valueequivalent using a rate of returnappropriate for the risk of achieving theprojected cash flows. The present valueof the estimated cash flows is thenadded to the present value equivalent ofthe residual value of the asset (if any) orthe business at the end of the discreteprojection period to arrive at an estimateof value.
The Relief fromRoyalty method ispremised on theroyalty that acompany wouldhave to pay for theuse of the brand /trademark if theyhad to license itfrom a third party.
IPL value creationis valued usingDiscounted CashFlow Approach
Duff & Phelps 13
CONCLUSION
A Global PhenomenonThe value created by IPL as a business hasnearly doubled since the first time weperformed this valuation. After IPL 10, thetotal value of IPL as a business stands at amind boggling USD 5.34 billion up fromUSD 4.16 billion after IPL 9, an increase of26% over last year. In February 2014 whenwe first performed the IPL valuation aftertaking into account the data available untilIPL 6, the value of IPL stood at USD 3.2billion. The current value represents a threeyear CAGR of 13.9%. The incrementalvalue (over last year) can be largelyattributed to factors such as the expectedreturn that an asset generates, an increasein the value of title sponsorship (Vivo), theanticipation that IPL will also get a similarmark-up for the associate sponsorshiprights, increase in value of sponsorships atthe individual franchisee level, amongothers. USD-INR currency appreciation alsoplayed a small role in the value mark-up.The IPL broadcast rights may furtherincrease the IPL business value if thebroadcast rights are renewed at a higherprice than our estimates. In our analysis, wehave assumed the renewed television rightsto be around USD 1.8 billion for a five-yearperiod and the renewed Internet and Mobilebroadcasting rights to be around USD 210million. Given the popularity of thetournament as well as the increase in thenumber of bidders, it would not be asurprise if the broadcasting rights arerenewed at a much higher rate than whatwe have estimated.
The individual franchisee brand values haveseen a significant increase compared to lastyear. Various factors contributed to the risein brand values of individual franchisees.With the end of IPL 10, franchisees will nolonger be required to pay the fixedfranchisee fee as mandated in the originalagreement with BCCI. Going forward theywill be required to share a percentage oftheir profits with BCCI as a franchisee fee,which along with the renewed titlesponsorship deal helped bump up thefranchisee brand values.
Mumbai Indians buoyed by its record 3rdtitle win, saw their brand value grow by 36%compared to last year to reach USD 106million, consolidating their position at thetop. Kolkata Knight Riders maintained
the second spot with brand value of USD 99million (a growth of 29% over last year),while Royal Challengers Bangalore withUSD 88 million was another significantgainer on account of the changesmentioned above. Though RCB finished atthe bottom of the points table, this did nothave a material negative impact on theRCB brand as the positives (star power,cricket crazy fan base and brand recall) out-weighed the negatives. SunRisersHyderabad were the biggest gainers inpercentage terms with their brand valuegrowing by 37% over last year to reachUSD 56 million. Delhi Daredevils (DD) andKings XI Punjab (KXIP) also saw theirbrand values appreciate to USD 44 millionand USD 41 million respectively. DD, inparticular, drew crowds due to some fineperformances from some of its rookieplayers. Holding on to future stars such asRishab Pant and Sanju Samson will augurwell for DD in the long run.
Duff & Phelps did not value Gujarat Lionsand Rising Pune Supergiant as both teamswill no longer be part of IPL.
IPL continues to be a cash cow for BCCI. Ithas come a long way since its inception in2008, steadily expanding its foothold in theglobal sporting scene. The value created bythe IPL in such a short time is significantdue to the minimal initial investment byBCCI. The renewed sponsorship deals aretestimony to IPL’s popularity. The newbroadcasting rights auction will be one ofthe keenly watched developments over thenext couple of months. The BCCI is clearlyset for a huge windfall. We could be lookingat a television broadcasting deal of recordproportions in India. As mentioned by uslast year, this deal may follow the precedentset by some of the big-ticket broadcastingdeals across the world (EPL, NBA andMLB). These other leagues have seen aconsistent multi-fold growth in theirbroadcasting rights.
Ten years of IPL has provided us with aglimpse of what to expect in the next 25years. It will be safe to say that for theforeseeable future, the months of April andMay will stay demarcated as IPL territorywhere nothing else sells. Not evenBollywood!
Our analysisindicates that thetotal valuecreated by theIPL hasincreased by26% over the lastyear to US$5.3billion fromUS$4.2 billion in2016
Santosh NManaging Director
Duff & Phelps
“IPL continues to be acash cow for BCCI. Ithas come a long waysince its inception in2008, steadilyexpanding its footholdin the global sportingscene.”
- Santosh N
Duff & Phelps 14
Varun Gupta is the Country Managing Director for India. He set up the firm’s operations inIndia and is responsible for its overall growth and strategic direction. Additionally, he overseesthe Southeast Asia and Japan operations of the firm.
Varun has over 20 years of experience in valuation and financial advisory services. He hasadvised clients across a wide range of industries including IT/ ITES, energy (conventional aswell as renewable), pharma and life sciences, infrastructure, internet and eCommerce,telecom, sports, media and entertainment, etc.
His prior experience includes stints with the valuation and financial advisory arms of Deloitteand PricewaterhouseCoopers.
He is a regular and sought-after speaker on the valuation of trademarks, intangible assets,early stage companies and eCommerce companies and has spoken at forums organized byASSOCHAM, ICAI, INTA, IVCA, VCCircle and other similar bodies. He is also regularly quotedby the financial press on evolving issues related to valuation of brands, celebrities and sportsfranchises.
Varun GuptaManaging Director
Mumbai
Santosh is a Managing Director at Duff & Phelps and is based in Bangalore. Santosh is apart of national management of the India office. He is responsible for overseeing keyengagements, relationships and strategic initiatives for the Indian operations.
Santosh has more than 15 years of experience in valuation and financial advisory services.In the last 15 years, Santosh has managed and has provided a range of financial advisoryservices including due diligence, valuation, IFRS and US GAAP assignments, business planreview, M&A, internal audit, accounting assistance and risk advisory services.
He was heading the Financial Instrument Valuation practice in American Appraisal (AA) Indiaearlier and used to chair the global Complex Financial Instruments Valuation committee inAA. In his earlier stints, he was South India Valuation leader in Deloitte and was part of thefounding team in Grant Thornton Bangalore.
He has been a speaker at several seminars/ workshops, including those organized by theInstitute of Chartered Accountants of India (ICAI). He was an International key note speakerin a conference on business valuation organized by RICS in London.
Santosh NManaging Director
Bangalore
Trevor Birch is a Managing Director in the London office operating in the sport industryacross all service lines.
Trevor is one of a small number of people who have successfully combined a professionalsport career with that of professional services. Initially a professional footballer he then re-trained as a chartered accountant and went on to become a partner with a big 4 globalaccountancy firm.
After 20 years in the profession he left to undertake a number of senior corporate rolesincluding CEO of five Premier League clubs and COO of the largest sports rights businessin Europe, SPORTFIVE GmbH based in Hamburg.
As CEO of Chelsea FC he led the £200m sale to Roman Abramovich in 2003 and achievedsimilar success at Leeds Utd FC.
He has also acted in a number of high profile, complex Administration cases including mostrecently Portsmouth FC and Heart Of Midlothian PLC.
Drawing on his extensive experience advising the sports sector, he works across allpractices to provide support on valuations, M&A transactions, restructuring and corporateadvisory. He is currently working for and with a number of sporting institutions and investorsadvising on value and strategy in M&A transactions and financing.
Trevor BirchManaging Director
London
CONTRIBUTORS
Managing Directors
15American Appraisal India Private Limited 15
LIMITATIONS TO THE STUDYThe analysis and estimates presented in this report are based on extensive research on secondary sources ofinformation, limited primary discussions with industry participants and the results of our IPL Sponsorship Survey.We have not undertaken any independent verification or carried out any due diligence on the data used orconsidered, nor have we verified its factual accuracy in the current context. Brand values may differ based onactual information available with individual teams. The conclusions provided in this report shall not be construedas investment advice and the valuations provided in the report shall not be used for any other purpose other thangeneral research and media consumption. Each of Duff & Phelps and its affiliates expressly disclaims all liabilityfor any loss or damage of whatever kind which may arise from any person acting on any information and opinionsor analyses relating to the valuations contained in this report.
The valuation of a business or intangible assets is not a precise science and the conclusions arrived at in manycases will of necessity be subjective and dependent on the exercise of individual judgment. There is therefore noindisputable single value and we normally express our opinion on the value as falling within a likely range.However, for the said purpose, we have provided a single value. Under normal circumstances, our assumptionsand methodologies are supplemented by discussions with the management and insights provided by them on themost likely course of business over the near term. Our current assumptions for the valuation are based oninformation derived and analysed from a combination of primary interviews and secondary sources. Accordingly,our assessment and estimates are based on market perceptions and most likely trends of growth for the IPLfranchises. Others may place a different value on the various brands.
All trademarks, trade names, or logos referenced herein are the property of IPL, BCCI and the respectivefranchises.
Editorial Team
Chief Editor: Harsh TalikotiTeam: Jash Shah, Kshitij Patel and Shradha Verma
Contact UsVarun GuptaManaging [email protected]
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M&A advisory, capital raising and secondary market advisory services in the United States are provided by Duff &Phelps Securities, LLC. Member FINRA/SIPC. Pagemill Partners is a Division of Duff & Phelps Securities, LLC. M&Aadvisory and capital raising services in Canada are provided by Duff & Phelps Securities Canada Ltd., a registeredExempt Market Dealer. M&A advisory, capital raising and secondary market advisory services in the United Kingdomand across Europe are provided by Duff & Phelps Securities Ltd. (DPSL), which is authorized and regulated by theFinancial Conduct Authority. In Germany M&A advisory and capital raising services are also provided by Duff & PhelpsGmbH, which is a Tied Agent of DPSL. Valuation Advisory Services in India are provided by Duff & Phelps India PrivateLimited under a category 1 merchant banker license issued by the Securities and Exchange Board of India.
