April 14, 2008

Primetime bonanza for the Indian television market

The Indian Premier League (IPL), the world's richest domestic cricket tournament, begins this Friday in India. Launched along the lines of soccer leagues in Europe and professional sports leagues in the U.S. (NFL, NBA, MLB), IPL is a franchise model wherein corporates and sponsors are allowed to buy and run teams. Players are bought through an open auction. This is a first for cricket - the sport has never before been played in this franchise format anywhere in the world. For the inaugural tournament starting on Friday, eight franchises in India were sold off by the governing body for Indian cricket, the Board 0f Control for Cricket in India (BCCI).

IPL is expected to change the face of the global cricket. "Seismic," is how Telegraph UK characterized the effect of IPL on cricket in England, the game's birth place. Before even a ball has been bowled, IPL has already raised more than $1.8bn for its first 10 years through TV rights , franchise auction ($724M) and sponsorship ($108M). This amount is more than what the International Cricket Council (ICC), the official global governing body of cricket, will generate from all of its tournaments over the same period. Pundits are still in a state of shock.

Franchise owners include Mukesh Ambani, head of Reliance Industries and India's richest man, who paid $112MM for the Mumbai franchise. 78 of the world’s leading players were sold in February to the highest IPL bidders for ~$42 million. Earning up to There are obvious concerns for the wider game of cricket - IPL's astronomical salaries and scheduling demands in a busy international cricket calendar (managed by ICC) threaten the fragile balance of international cricket, and ultimately the autonomy of the ICC. BCCI has often been blamed for arm-twisting ICC, given that India's one billion plus cricket-crazy fans drive over two-third of the global cricket revenue. Then, tAndrew Wildblood, a senior vice-president at the leading sports agency IMG who has been involved in establishing the IPL: "There has never been anything like this in the history of sports. No competition has come from a standing start to where we are today in such a short space of time, or with more financial success."

What's driving this phenomenon? Several factors are contributing to this perfect storm in India.

While ticket sales will contribute to the revenue, the single biggest factor determining IPL's success will be television. India, one of the fastest growing economies in the world, has a huge untapped domestic market for new products & services. Its advertising market therefore is exploding. Indian TV advertising grew by over 20% per year on average for the 10-year period 1995 to 2005. Double-digit growths are forecasted for years going forward. Compare that to flat to declining television advertising in the mature U.S. and western European markets. The New York Times covered India's television potential in its aptly titled piece, In India, the Golden Age of Television is Now.

Cricket, a religion for Indians across its diverse national fabric, aggregates audiences like no other TV programming in the country. Cricket therefore provides the best platform for advertisers to get their message across all demographics. A nationwide, prime-time, cricket bonanza on the Indian TV every evening is a feast for hungry advertisers that will go on for over six weeks. This is bad news for the Indian media companies, who'll find it very hard to compete with cricket for TV ratings.

"India is a rapidly growing economy with an emerging middle class, but if you want to go out here you go to a movie and that's about it. There's a huge demand for entertainment, and we are providing the perfect product model," says IMG's Wildblood.

The IPL tournament is structured in the new Tewnty20 format, the shortest version of cricket that lasts for only three hours compared to One-Day Internationals (8 hrs) and Test matches (five days). Twenty20 is designed to attract the widest section of cricket fans - people can go to the game on weekday evenings after work; women with family responsibilities can easily take a three-hour break. In India, the Twenty20 format has proved successful in drawing in the young, socially mobile demographic that is fueling the country's economic growth. On top of that, India's win in the inaugural Twenty20 World Cup last Fall (organized by ICC) has driven the version's popularity and public expectation sky-high. BCCI wants to cash on it as best and as fast as it can.

Let the show begin!

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