Armed with new tricks, IPL teams eye big hits
KKR & KXIP REPORT PROFITS, BUT LOWER THAN PREVIOUS YEAR LOSS-MAKING RCB, DD LOOK FOR WAYS TO GET IN THE BLACK
From measuring money value of media coverage to relooking team composition, the top teams of the Indian Premier League (IPL) are leaving no ball unscored in their pursuit of a stiff target of profitability. A couple of them have succeeded but others are still running short. Business Standard analysed the latest annual reports of five of the six teams that have survived since the first IPL in 2007 — Mumbai, Bangalore, Punjab, Delhi and Kolkata. These are run by companies called Indiawin Sports, Royal Challengers Sports, KPH Dream Cricket, GMR Sports and Knight Riders Sports, respectively.
Of these five, Knight Riders Sports and KPH Dream Cricket reported profit for financial year ended March 2016. However, both these teams saw profits fall sharply due to falling revenues. At the other end of the spectrum, Royal Challengers Sports reported a loss of ~44 crore, which was up 46 per cent, compared to FY15.
Sunrisers Hyderabad team operates as a division of the listed broadcaster Sun TV and does not report segregated financials. An email sent to Sun TV spokesperson did not elicit any response.
Two new teams Rising Pune Supergiants and Gujarat Lions are still in their first year.
Knight Riders Sports continued to be the most profitable team in the IPL although its profit was down 56 per cent over the previous year. This franchise attributed this to the “decline in the league standing of Kolkata Knight Riders (KKR) in the 2015 season.” KKR was placed fifth in the 2015 season and had the won the 2014 tournament. This fall from the top seemed to have cost KKR almost ~45 crore – with no prize money, bonuses or the opportunity to rake in additional moolah by qualifying to play in the Champions League. Shahrukh Khan’s Red Chillies Entertainment, that controls the entity, did not respond to questions sent.
Also impressive has been the financial performance of Kings XI Punjab (KXIP) despite its abysmal on-field run since the tournament first started. KXIP is the only other team apart from KKR that made profits in FY16 even though they declined 74 per cent. The Preity Zinta-promoted franchise, which has been bleeding since the start of the IPL, had to dig into its own ‘promoters sources for unsecured loans’ to mobilise ~58 crore to ‘renew the franchise.’ This new-found enthusiasm was the result of KXIP finishing second in the 2014 tournament. But the infusion doesn’t seem to have worked, as the team ended at the bottom of the table the following year. Punjab’s spokesperson redirected questions sent but no response was received till the time of going to press.
Indiawin Sports, that runs Mumbai Indians, saw its losses fall to ~21 lakh, even as revenues rose by a quarter to ~193 crore, the highest among teams analysed. A Reliance spokesperson did not respond to an email seeking comments.
However, it is the loss-making teams that exhibited a keen eye for new revenue streams. Though Bangalore increased its revenue by 41 per cent to ~135 crore, it continued to report the biggest losses - a price it pays for its star-studded line-up that includes superstars Virat Kohli, Chris Gayle and A B de Villiers.
Royal Challengers Bangalore (RCB) had the most detailed of annual reports recording its various initiatives to identify revenue streams. It talked about how the team values its media coverage in the print medium at almost ~192 crore, while its online media coverage is valued at almost ~13 crore. This ~205crore ‘value of media coverage’ is calculated by the franchise as a sum of the following – 895 wire agency articles, 750 desk copy articles and 1,547 filed by journalists in their own name. This translates to every article in news organisations that contributed to RCB’s brand building being valued at ~6.5 lakh.
“As the saying goes - if you can’t measure it, you can’t improve it. This is why we added media tracking and analysis to our media/public relations (PR) plan. We are, therefore, able to report the following high-level online and print media exposure over the 2015 IPL season, with the aim to improve on these levels in future seasons,” RCB said in its annual report.
RCB’s spokesperson did not respond to queries. An executive with the team’s PR firm expressed inability to offer comments. Similarly, GMR Sports, that runs Delhi Daredevils (DD), listed steps it was taking to improve numbers. GMR reported a loss of ~6.16 crore, down from ~20.4 crore in the previous year. It admitted to its stakeholders that the team’s rough patch in the IPL was eroding its “fanbase and profitability.” The franchise promised to rationalise player salary structures and prune support staff to reduce its financial woes.
RCB launched differential pricing on match tickets at its home venue M Chinnaswamy Stadium for the first time. Other efforts include fan engagement efforts led by RCB Diva, RCB Sketchstar and RCB Insider. On the other hand, GMR Sports said in its annual report that the IPL was going to announce a new broadcast deal for the league. “It is estimated the new broadcast deal will help the franchise revenues grow by at least 25-30 per cent from 2018.”
“Teams that do better onfield also tend to do much better financially. In India, it is still also about star value but crowds are maturing and they want to see improved performances from their teams. We have been in four semi-finals but haven’t gone the distance yet. The last two-three years have been tough when the team hasn’t really performed. Once a mistake is made at an auction, it takes at least three-four years to course correct,” said Hemant Dua, chief executive officer, DD.
RCB’s media offensive is not without benefits. It claims to have achieved 1.2 million website hits during the 2015 season, while its YouTube channel got over five million hits. It got the postal department to issue commemorative stamps featuring its top players and introduced a differential ticket pricing strategy against its opponents. This involved pricing tickets of its matches with top performing opponents like KKR, DD, Chennai Super Kings and Mumbai Indians at a ‘premium’. For other low-rung teams of the tournament tickets were cheaper. RCB calls this strategy ‘successful’.
“At the end of the day even the losing team is getting the same eyeballs as the winning one. It’s also where I think there is no link between on-field and financial performance. Many of the teams don’t even need the money. Given that cricket is religion in India, it’s a great platform for brands, irrespective of the jerseys they are displayed on,” said Jitendra Jha, vice-president of Adfactors (sports division).