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Is sports the next goldmine?

Are sports the next goldmine for India Inc? If IPL is any indication, it appears so. Consider this: the reserve price for bidding of new IPL teams has been fixed at $225 million which is more than double the highest priced team —Mumbai Indians — that was bought in $111 million three years ago.See graphics |Padding up for big money

business Updated: Mar 19, 2010 22:50 IST
Gaurav Choudhury

Are sports the next goldmine for India Inc? If IPL is any indication, it appears so.

Consider this: the reserve price for bidding of new IPL teams has been fixed at $225 million ( about Rs 1,035 crore) which is more than double the highest priced team —Mumbai Indians — that was bought in $111 million ( about Rs 510 crore) three years ago.

UK based consulting firm Brand Finance has estimated IPL’s brand value at $ 4.13 billion or about Rs 19,000 crore.

In three years IPL’s brand value has reached a third of the $ 12 billion English Premier League, one of the world’s most after soccer event.

Growth of the sports broadcasting genre

According TAM Media Research, cricket accounted for 85 per cent of the Rs 2,000 spend on sports sponsorships in 2008 and will continue to account for the lion’s share of sports revenue which expected to grow by 25 per cent.

The frenzy over IPL and cricket has only pushed up television programming in this genre significantly and that is what pushing growth.

“The prices of rights for sports broadcast has appreciated over the past decade and are expected to rise further,” said a white paper on sports development in India brought out by industry body Federation of Indian Chambers of Commerce and Industry (Ficci).

The slam-bang T20 cricket tournament continues to remain among the most sought after property of the television world.

Apart from the Rs 7,500 crore broadcast deal, new slices have been carved out on television and Internet platforms.

General entertainment channel Colors has reportedly paid $130 million ( about Rs 600 crore) for a three year licensing deal, which will be split between the eight franchises.

The theatre rights have been sold to UFO Moviez. While the value of the deal is not known, industry sources said the theatre chain owner could expect revenues worth Rs 40-50 crore revenues in the first year.

In another deal the entire IPL 2010 season will be broadcast live on Internet on YouTube

Sponsorship in sport

Global sports sponsorship is estimated to rise from $42.7 billion ( about Rs 1,96,420 crore) to $ 60 billion (Rs 2,76,000 crore) by 2012.

“Sponsorship is the fastest growing marketing tool in the world with a projected growth of around 12.6 per cent as compared to 3.9 per cent for advertising and 4 per cent for sales promotion,” said the Ficci study.

IPL is no different. Sponsorship revenues of each of the team franchisees are expected to nearly double from Rs 24 crore on an average to about Rs 40 crore this year.

Buyouts and stock market listing ahead?

A string of top Indian companies are likely to vie for two new Indian Premier League cricket teams up for grabs next month, a sign that the snappier version of the game is getting swankier, bigger and commercially more lucrative.

Experts, however, had a word of caution.

“In the next one or two years, one will see revenue from the IPL central pool stagnate or decline as more teams are launched and competition increases from all sides, “ said Unii Krishnan, managing director of Brand Finance India.

“Most of the franchisees will met an inflection point and need to work towards commercial sustainability with great discipline.”

A senior executive of an IPL franchisee, who did not wish to be identified, said some of the teams could be preparing for a stock market listing in the next couple of years.

“At least one team, owned by a major conglomerate, is planning hive off its IPL-team owing entity as a subsidiary that would be listed on stock markets,” said the executive.