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Socio-Economic Impact of Ipl

Essay by   •  January 8, 2012  •  Case Study  •  3,143 Words (13 Pages)  •  2,967 Views

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Abstract

The Indian Premier League (IPL) marks an epoch in Indian sports and entertainment industry. This short and exciting form of cricket has received immense popularity and unmatched revenue as compared to any other event in India. The success of IPL is truly highlighted by investors willing to shell out hundreds of millions of dollars to own an IPL franchise as well as advertisers rushing to book airtime. The league's brand value has already more than doubled since its inception; the brand value of the franchises also continues to rise steadily. IPL has been a profitable venture to all the investors associated with it. This report seeks to analyze the socio-economic impact of the league. The report begins by introducing the business of cricket in India and further highlights the inception of IPL. We have then analyzed the impact of the league on various industries as well as in job creation; followed by its impact on the sportsmen, the fans and on other sports in the country. The conclusion reached is that the IPL while performing admirably on the economic front has yet to engage itself sufficiently towards social causes.

Word Count: 189

Introduction

Sports have always been popular in India and recently it has turned out to be a profitable business. Sports marketing (Exhibit 1) which consists of marketing of sports events, teams and non-sports products through these sports events is a business worth Rs.20 billion. This business has grown at a rate of 20%. Cricket which is the most popular sport in India has a market share of 90% in the sports marketing business (Brand Reporter 2008). The sports scenario in India has always been dominated by cricket. The 2007 Cricket World Cup had 113 million viewers, whereas the 2004 Olympics and the 2006 Football World Cup had a combined viewership of 104 million in India (The Economist, 2008). This immense popularity of cricket helped to successfully launch the IPL which has been modelled on the lines of the English Premier League (EPL). IPL was an exciting and entertaining event for Indians. Each game was to last for 3 hours; eight city based franchise teams were introduced and each team had a combination of domestic and foreign players. These franchises were auctioned to major corporations, Bollywood actors and investors for a cumulative value of Rs.29 billion (Exhibit 2). A pool of players was created and the franchises bid for these players in an auction. MS Dhoni was the most expensive player of the inaugural season at a price of Rs.60 million. Every team had an iconic Indian player as its captain. The television channel Sony bought the broadcasting rights to the event for a record $1.2 billion for 10 years. The franchise owners were to pay for their team in 10 annual installments and receive a share of the broadcasting and sponsorship revenue earned by IPL. Apart from this the franchises also earned revenue from their individual sponsorship deals (Exhibit 3). It would be fair to say that the franchises have had a good return on investment as four successful IPL seasons have already been held. Brand IPL is now valued at more than $4 billion (The Economist, 2010). Individual brand value of the franchises has also increased significantly and is expected to keep increasing over the years (Exhibit 4). In fact IPL has been so successful that the last two franchisees i.e. Pune and Kochi were auctioned off at $370 million and $333 million respectively (The Economist, 2010).

IPL viewed from a Socio-Economic perspective

The Indian Premier League has had an immense impact on the game of cricket. Initially this league was conceived as an effort to help young players showcase their talent and to provide them an opportunity to play with the best cricketers of other nations. This new exciting form of cricket gained huge popularity among cricket enthusiasts all over the world. TV viewership was impacted, stadiums filled up with fans and marketers found a new avenue to advertise. Bollywood stars, cricket and cheerleaders made an exciting, glamorous and entertaining combination. IPL became the second highest paying league after the American National Basketball Association League (Times of India, 2010).

IPL - An Economic Outlook

The year 2008 saw the rise of a new monolith that straddled itself on the backs of cricket and Bollywood, a new amalgam that dazzled onlookers with glamour, glitz and overweening vanity at about the same time that Wall Street began its mammoth slide from similar heights into the current and oft-repeated state of "cautious optimism". The land where material renunciation and abject poverty went hand in hand shrugged off the last vestiges of oriental mysticism and entered the league of full-blooded capitalists with an appropriately stretched out drum roll and all the associated fanfare.

IPL was the complete entertainment package that the Indian customer could have aspired for. The tournament's first edition final grossed a TVR of 9.86, till date the highest ever for a domestic tournament. The IPL trail blazed an entirely new avenue of business in Sports Marketing, something that was non-existent in India until recently and showcased the route for aggressive entrepreneurs and existing powerhouses to vivaciously sell the next complete entertainment package in cricket and other sports.

IPL was the first of its kind in India, a domestic league which modeled itself on international football franchises in the sense that it had a global audience, investors, players and broadcasters. It was expected to pave the way for similar franchises and operations throughout the country, and with the inevitable rise of new private leagues in the country it is but evident that sports broadcasting acquisition rights also become a highly competitive and fast growing market. A prime example would be the ESPN-STAR TV's 10 year deal to acquire exclusive broadcasting rights for the T20 Champions League, which in monetary terms translated to a per match cost that was easily three times the corresponding cost for IPL. In terms of scalability, it implies that advertising rights were sold at a rate that much higher; post IPL the scale of the game as a medium of entertainment has breached new barriers. In terms of benefits accruing to the state in lieu of IPL, the Government collected Rs.180 crore in taxes from IPL 3 and expects to raise the bar to Rs.350 crores for IPL 4.

Impact on BCCI Financials

In 2005-06 the total revenue earned by BCCI stood at Rs.430 crore. A large part of this income was derived from the sale of global media rights to Nimbus

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