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Auction replay ends, but will it sell?

The Indian Premier League is revolutionary, but does it make business sense? Saurabh Turakhia & Anita Sharan examine...
By Saurabh Turakhia & Anita Sharan | Hindustan Times, Mumbai
UPDATED ON FEB 22, 2008 02:08 AM IST

The Indian Premier League (IPL) is revolutionary all right, but does it make business sense?

The money forked out by franchisees like Vijay Mallya and Shah Rukh Khan, and the Rs 3,672 crore paid by Sony Entertainment Television for telecast rights, is eye-popping. But the question everyone’s asking is: ‘Can it be recovered?’

One of the unknowns is how the public will react to mixed-nationality teams. “There will be no India-specific passion, which will be very interesting,” Ravi Kiran, CEO (South Asia), Starcom MediaVest Group, pointed out.

Navin Khemka, vice-president, Zenith Optimedia, said: “IPL ad spends will be led more by corporates wanting to dominate the race for what everyone believes is the next big thing in cricket. Apart from the regulars, this first year of hype and hysteria will see sponsorships sold to surprise categories and stakeholders.”

It is estimated that Sony will have to price each 10-second ad spot at a whopping Rs 2 lakh to recover costs. “This would be at par with the Twenty20 World Championship rates,” said Khemka. Voicing a word of caution, he added: “Twenty20 delivered an average television rating of 5. IPL would not deliver more than 2.”

Kiran, though, felt that there would be takers for a Rs 2 lakh per 10-second spot. He said IPL’s rates would be close to the best cricket has fetched before.

M Machaiah, general manager at Mindshare, said Sony would probably recover 50 per cent of the cost in the first year, while the rest could be recovered the next year. “My guess is that Rs 75,000 to Rs 1.2 lakh per 10-second spot would work in the first year.”

Lynn D’Souza, director, Lintas Media Group, disagreed. She doubted whether the money could be recovered in the first year, but, she pointed out, the people who’ve bought in have already put up the money.

Sony, however, has no doubts. Rohit Gupta, president of Sony Entertainment Television India, claimed: “We have already closed two clients. In the next week, we would have signed the remaining eight to nine.” Since the available airtime per IPL tournament is only 2,000 seconds, he said, Sony is looking at 200 seconds per sponsor. Though Gupta refused to divulge the rates, sources in Sony said a price of Rs 3 lakh per 10-second spot is being talked about.

Khemka pointed out that all experiments have risks and costs attached. “The key question is: is efficiency on anybody’s mind in the short term? So, get in only with a long-term perspective, as IPL is here to stay,” he said.

Of IPL investors, Machaiah said: “They are here to make money and are keeping the long term in mind. There are eight teams, hence, eight potential partners to boost the property.”

MG Parameswaran, executive director of Draft-FCB-Ulka Advertising, felt that the cricket viewing market would expand with different formats — Twenty20, IPL, Zee’s Indian Cricket League. This was similar, Kiran pointed out, to inflection points in Indian television history — Mahabharat; the advent of satellite TV in the 1990s, Kaun Banega Crorepati. “At every stage, there was skepticism. However, advertisers did pay a premium and make sense of the investment,” he said.

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