Sustainability of the League

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  • http://www.scribd.com/doc/53506048/What-is-Research-Onion
  • Sustainability of the League

    1. 1. THE GROWTH OF MULTIBILLION DOLLAR SPORTS LEAGUE & ITS FUTURE DISSERTATION SUMMARY PRESENTATIONCoventry University London Campus MBA Global Business Management Presented by: JayeshKumar V. Gupta Thanks to Prof. David Horton Sept 20, 2012
    2. 2. INTRODUCTION Justification of the topic as MBA research  Sports has become and industry.  A phenomenal growth of a business in a short span of time.  The business model was chosen to be one of the best in the industry (World sports fraternity and analysts). Background  Started in 2008 and brand value of US$ 4.13 Billion in 2010 (Brand Finance, 2010)  More importantly, first every professional sports league in India, an emerging economy not categorised as developed nation with high amount of disposable income classes.  IPL is names as the second highest paid league in the world after NBA of US with an average player salary of £ 2.5 M per season (Espnstar, 2011).  Forbes (2009) published that IPL is the hottest sports league in the world today and it is the fastest-appreciating sports business on Earth.
    3. 3. RESEARCH OBJECTIVES To analyse the most appreciated IPL business model. To identify the key variables that were responsible for the Phenomenal success of the model. Evaluating the future prospects of the business. RESEARCH QUESTIONS What are the factors responsible for the growth of IPL in India? What is the sustainability of the business model? How long would it be viable for the related businesses? What are the threats to IPL? What is the future of sports as a business in India?
    4. 4. Summary of Literature Review The Strategy: Market entry, competitive advantage, growth and sustainability. The probability of achieving profitable growth is higher whenever an organization has a clear growth strategy and strong execution infrastructure (Liabotis, 2007). ◦ The ‘Exploring Strategy Framework’ (Source: Johnson, Whittington and Scholes, 2011)
    5. 5. Summary of Literature Review Sustaining Business ◦ Managing financial, social, and environmental risks, obligations, and opportunities. ◦ Respond to inevitable changes. ◦ Customer focus ◦ Focus on leadership and strategy execution processes (Liabotis, 2007). ◦ Marketing is one of the important factors on evaluating the long term business prospects. Marketing is all about attracting more customers and increasing revenue for the organisation (Kotler, 2010). ◦ Three Horizons Framework ◦ Horizon 1: Protect and extend ◦ Horizon 2: Innovate ◦ Horizon 3: Explore internal capabilities and enhance it. Source: Baghai, Coley and While, 2000)
    6. 6. Summary of Literature Review Competitive Advantage  Achieving competitive advantage strengthens and positions a business better within the business environment (Porter,1998).  Bain (1951) described Monopoly is a market structure where there is only one firm and it is as large as the market. The ‘Stakeholders theory’  This vision of the firm is defined by addressing the levels of stakeholders and their interest & involvement with the type of returns they deserve (Freeman, 1984).  Sloane (1971) suggested that profits are not the only factors that should measured while calculating the success of a sports league. Various stakeholders involved within have different sets of goal other than financial gains.
    7. 7. Summary of Literature Review Market Entry Strategy ◦ Theory of Internationalization, or the Eclectic paradigm is a theory of economics also known as the OLI paradigm (Dunning, 2004). ◦ Franchising Mode (Daniels, Radebaugh and Sullivan, 2011). The Business Cycle (Autry and Navarro, 2010) ◦ Prosperity Phase : Expansion or Boom or Upswing of economy. ◦ Recession Phase : from prosperity to recession (upper turning point). ◦ Depression Phase : Contraction or Downswing of economy. ◦ Recovery Phase : from depression to prosperity (lower turning Point). Sports Entertainment and Business ◦ A fan follows the game or his favourite team from anywhere in the world whether they watch it live, on TV or internet and now available on the move via Phone updates (Rowe, 2003). ◦ Today sports play an even bigger role in the society then it used to be earlier (Delaney and Madigan, 2009). ◦ Sports is an industry with unparallel global reach and power. To total revenue generated is equal to 3 percent of the total world’s economic activity, worth US$ 141 Billion every year (Klayman, 2009).
    8. 8.  Demand for Sports & its Sociology ◦ The sociology of sports is a sub discipline of sociology focusing on relationships and behaviours between sport and society (Delaney and Madigan, 2009). ◦ It is necessary for a brand to maintain its fan base and keep them satisfied. ◦ Any controversy with their favoured team or player may reduce their interest. Other reasons of lose of interest being less competition, expected or similar outcome every season. ◦ Media is one of the top factors to highlight the issues. Professional sports get in the public interest reported every incident, and report by the media which is then widely discussed by the fan and have had to face criticism (Rosner and Shropshire, 2010). ◦ Binary Opposition (Levi-Strauss): Teams Oppositions / Conflicts ◦ Parallel Narrative (Richard Dyer) / Narrative Image (John Ellis): Players personal lives. (source: Chandler, 2010)
    9. 9. RESEARCH DESIGN & METHODOLOGY A methodology used to clearly sought out the research is best known as ‘the research onion’: - The research philosophy – Realism The research approach – Inductive The research Strategy – Case Study Research Choices – Mixed Method Research time horizons – Longitudinal StudiesData Collection Primary Data – Phone Interviews with a few sports related professionals. Secondary Data – Past five years of IPL statistics and findings. (Source: Saunders et. Al, 2007)
    10. 10. INDIA AND CRICKET Cricket is the most favoured game in India. It is followed like a religion with a lot of passion and emotions for the game. It is the second most watched game in the world after football because of the sub continental population. More than a billion people around the world watches a game Indian players features. Indian cricket is powerful over the other nations in relations to ICC as it contributes about 80% of the total revenue (Espncricinfo, 2011). The world cup 2011 final match featuring India Vs Sri Lanka was watched by 135 million viewers on TV alone and passed over a billion on all platforms - 23.2 TRP (TAM, 2011) . The 2011 Cricket World Cup semi-final between India and Pakistan is reported to have been watched by about one billion people across the World in cable & satellite, terrestrial and DTH homes (BBC, 2011) with 21 TRP (TAM, 2011).
    11. 11. THE BUSINESS MODEL The format is the most exciting and popular version of cricket. Business model based on a long term Franchise Model. 9 teams with a mix of domestic, international and young players (IPL, 2012) Teams franchised to corporate houses and firms in a 10 year. IPL was a well planned business model with low risk strategy (Economic Times, 2011). Direct stakeholders are BCCI, Franchisees, Broadcasters, Players, viewers and Advertisers. Indirect Stakeholders being media. Integrates three of the most popular categories in India – Cricket, bollywood, and corporate houses. IPL was a well planned business model with low risk strategy and appreciated by most of the sports fraternity of the world (The Hindu, 2012). Most importantly, it is governed by the most influencing Cricket board in the world, BCCI. Hence, it has a good hold on the international market and other boards along with ICC because of its financial capabilities (more than 90%) (Espncricinfo, 2011).
    12. 12. Monetary Streams – BCCI (IPL) Auction of broadcasting rights – TV, Online, Radio Title sponsorship and corporate sponsorship Gate receipts – 20% IPL, 80% franchisee Official umpire sponsorship Auction of franchisee rights Cost – Tax (saves as a non profit organisation credibility), CSR (Source: IPL, 2012)
    13. 13. Monetary Streams - Franchisees Central Pool  Franchisee level ◦ Revenue  Revenue  Central broadcasting Rights o Team sponsorship  Title and Central Sponsorship o Gate receipts ◦ Cost o In-stadia advertisements  Franchisee fee o Merchandizing o Media tie-ups o Hospitality partners  Cost  Players & official’s Salaries  Travel Cost  Team promotions  Stadium fees  Other Admin Fees (Source: IPL, 2012)
    14. 14. The Business Model IPL ensured that all the stakeholders contribute equally to the success of IPL. The risk was equally divided. The three sets were BCCI, broadcaster and Franchises. BCCI, gets 20-50% of the central pool revenue along with the franchise fees. The only risk to them is losing on future broadcasting and sponsoring interest from the commercial sector if IPL fails. Broadcaster with Sony investing 918 million dollars has been given 12744 ten seconds ad spots for every season which they sold for an approx. 2.5-3 lakh rupees and gained around US$ 91 million in the first year itself. This amount can go up to 8 lakh rupees later. The franchises pay the amount to BCCI in a ten year instalment which is from US$ 6.7 million to US$ 37 million yearly. Each get an assure US$ 75 million from the central pool even if the tournament does not get the expected response. The franchises will get a huge kicker from the brand sponsors and visibility entails. According to the journal articles, most of the franchise owners were ready to take the risk of heavy investment and a few losses in the first years as they understand that the risk is low as compared to the gains in the next 10 years to come. (Source: Shashidhar and Anand, 2012)
    15. 15. The Business Model – Main participants The most biggest benefiters are the players. Earlier it used to be only 11/12 players places and only one team available who could reach the International level and can market themselves. With IPL and its format of 8 domestic and only 4 international players, also with 4 under 22 years, the players are getting good exposure to the international level cricket (IPL, 2012). Playing at the highest level with the bests of the game is an incredible experience. Already seen a large pool of talent coming up and showing potential. Most importantly the monetary benefits to the players ◦ Average player salary of £ 2.5 million per contract (Espnstar, 2011). ◦ The star players such as Sachin Tendulkar, MS Dhoni and Kevin Peterson receives more then £ 1.55 M for a season.
    16. 16. Brand Value 2009 - US$ 2.01 B  2011 - US$ 3.67 B 2010 - US$ 4.13 B  2012 - US$ 2.92 B Brand Value (US$ M)543 Brand Value (US$2 M)10 2009 2010 2011 2012 Source: Brand finance (2012) mentioned in Espncricinfo (2012 )
    17. 17. TEAM BRAND VALUE 2012 Chennai Super Kings $ 85.13 m Mumbai Indians $ 63.58 m Kolkata Knight Riders $ 57.576 m Royal Challengers Bangalore $ 55.13 m Delhi Daredevils $ 40.85 m Deccan Chargers $ 38.76 m Kings XI Punjab $ 35.75 m Rajasthan Royals $ 33.78 m
    18. 18. Reasons of Decline in the Brand Value Controversies have always created issues for any sports brand across the globe. IPL is no different. The main reason for the decline in the brand value are some of the biggest issues like: ◦ Money laundering claim forced BCCI to suspend its IPL commissioner, Lalit Modi with alleged acts of individual misdemeanours and the government had launched a multi-agency investigation into "the functioning of the IPL", later the Kochi Franchise has to be terminated (The Guardian, 2010). ◦ This also led to suspension of IPL pioneer, Mr. Lalit Modi. ◦ 2012 spot fixing case involving 5 domestic players resulting into their suspension from the game. ◦ Franchise contract issues – Kochi Tuskers (terminated), Pune Warriors, Kings XI Punjab, Deccan Chargers, Rajasthan Royals. ◦ These are a few more incidences which decreases the fan interest from the game and hence reducing the viewership Source: (Espncricinfo, 2012 )
    19. 19. IPL PROFITS The main reason for the healthier bottomline is a jump in the share of revenues from broadcasting. Last year, each franchisee got Rs 25 crore from IPL as its share of the central pool. This year, that has risen to Rs 67.50 crore each. In 2008, teams like Knight Riders, Mumbai Indians and Team Delhi earned around Rs 20 crore from ticket sales alone as the capacity of their home stadiums was large enough to accommodate over 70,000 and the crowds just poured in. In 2009, IPL 2 held in South Africa, RR claimed a profit of Rs. 35 crores (US$ 6.3M), KXIP of Rs. 26 Crores and KKR with Rs 25.8 crores. All being at the bottom of the rankings but having bollywood stars for the promotions. The MI being at the bottom of earning profits with Rs. 7 crores. In all, IPL will bring revenue of Rs 1,200 crore a year into cricket, more than double the government’s entire sports budget of Rs 490 crore (IPLT20, 2012).
    20. 20. Future Broadcast rights to Nimbus (2006-2010) US$ 100 M Team sponsor deal to Sahara (2006-2010) US$ 12 M Team kit sponsor deal with Nike (2006-2010) US$ 0.9 M Broadcast rights in non-ICC countries to Nimbus US$ 32 M (2006-2010) IPL broadcast rights to Sony (from 2008 for 10 years) US$74.6 M IPL team rights deal (from 2008 for 10 years) US$ 53 M Live Streaming deal with Youtube (from 2008 for 10 years) US£1 Billion Others (including IP, team sponsors ground, team auction, etc) New Title sponsorship yet to be disclosed which will be a huge amount. Bid of more than US$ 900 made recently to buy troubled Deccan Charges. Most of the international players have and are willing to play IPL on the cost of national games Many country’s national selectors follow IPL to source for new talents (IPL, 2010) Source: sportingintelligence.com, 2012
    21. 21. QUESTIONNAIRE1. What do you think about the model of IPL?2. Do you think that the stakeholders involved in this are actually benefiting by partnering in the league? and who according to you are the biggest benefiters?3. What according to you is the motive of IPL? Entertainment, business? Why?4. What Are the reasons of the quick success of IPL?5. IPL is considered to be non risky model for its stakeholders. Do you consider this to be correct?6. Do you think the main reason of its success is it being in India than any other cricketing nation?7. Would this model result same for other games in India or cricket in other nations?8. How long would you think that this image if IPL remain productively popular?9. With a few controversies like of Lalit modi and Kochi Tuskers, do you think that the popularity of IPL had gone down and with it the brand Value? What doest the future holds for IPL as a brand?10. How long would it sustain itself in the same way? what is IPLs future after 2018 when the franchises finish their terms?
    22. 22. Findings summary and conclusion IPL is has strategically strong position in the market with no competitors and a very high fan following. IPL has the political and financial power to hold on for a long time IPL is here to stay for a very long time, same as EPL, NBA or MLB, but the league is on a maturity stage now and will certainly have its ups and downs. Average will remain profitable for all stakeholders because of its strategic model. IPL will remain the most productive of all the other sub-continental leagues for certain years to come until BCCI commits suicidal measures to lose it. The time has come for IPL to be a more mature business which will be less exciting than the initial years. IPL is successful in binding the three strong elements of current Indian culture – Cricket, Bollywood and Corporate, it a unique mix of value for all. Still remains the best way of promotion in India with integration of Bollywood, cricket and other business giants together. Cricket in India has the highest followers but other games such as Tennis, golf and motor race are increasing interest. Games like hockey, basketball, football, badminton, athletics are also gaining traction but are limited to loyal fans only. Competition in the neighbouring countries with their own version of premier league has initiated but still IPL has its lustre to shine.
    23. 23. Recommendations IPL administrators need to understand the demise that a controversy creates to the brand. Stakeholders like sponsors and franchisee are need to be handled with care and support. Needs to be more innovative in creating excited audiences. India is still available to be explored geographically. Gate receipt revenue can be increased by having matches on more grounds. This will increase its reach to the people and can attract more revenue through sponsorship. Strategic changes according to the result of the previous actions are required to sustain itself. New opportunities needs to be discovered to get interest of a major percentage of population that is women, which seems to have the least viewership interest.
    24. 24. References Autry, G. and Navarro, P. (2010) Leveraging business cycle ups and downs, Financial Executives International, Jan. Baghai, M., Coley, S. and While, D. (2000) The Alchemy of Growth, Texere Publishers. BBC (2004) Letter: Indias cricketing religion, 14 Sep, [Online], Available: http://news.bbc.co.uk/1/hi/programmes/3734038.stm [22 Jul 2012]. Business standard (2012) Brand IPL comes under a cloud, 01 Jun, [Online], Available: http://www.business-standard.com/india/news/brand-ipl-comes-undercloud/475920/ [22 Jul 2012]. CNN (2008) Lalit Modi: Crickets billion-dollar brain, 22 May, [Online], Available: http://articles.cnn.com/2008-05-22/entertainment/ta.modi_1_cricket-ipl-indian-premier- league?_s=PM:SHOWBIZ [22 Jul 2012]. Daniels, J., Radebaugh, L. and Sullivan, D. (2011) International Business: Environments and Operations, 13th edition, Essex: Pearson. Delaney, T. and Madigan, T. (2009) The Sociology of Sports: An Introduction, Jefferson, NC: McFarland. Dunning, J. (2004) The eclectic paradigm as an envelope for economic and business theories of MNE activity. Economic Times (2011) Business lessons from IPL: Franchise model is risk free, 10 Apr, [Online], Available: http://articles.economictimes.indiatimes.com/2011-04-10/news/30154793_1_brand-finance-ipl-chennai- franchise [20 Jul 2012]. ESPNSTAR (2011) IPL is the second highest paid league, SEP, [Online], Available: http://www.espnstar.com/cricket/indian-premier-league/news/detail/item418969/IPL-is-the-second- highest-paid-league/ [16 May 2012]. ET Bureau (2011) IPL-4, 7 Apr, [Online], Available: http://articles.economictimes.indiatimes.com/2011-04- 07/news/29392570_1_brand-finance-indian-premier-league-ipl [16 May 2012]. Forbes (2009) The Worlds Hottest Sports League, 27 Aug, [Online], Available: http://www.forbes.com/2009/08/27/cricket-india-ipl-business-sports-ipl.html [20 Jul 2012]. Freeman, R.E. (1984) Strategic Management: A Stakeholder Approach, Boston: Pitman. Gupta, A. (2011) Sport in Society: Cultures, Commerce, Media, Politics, The IPL and the Indian domination of global cricket, vol. 14, no. 10, pp. 1316-1325.
    25. 25. References (cont’d) Johnson, G., Whittington, R. and Scholes, K. (2011) Exploring Strategy, Ninth edition, Harlow: Pearson. Kotler, P. (2010) Principles Of Marketing: A South Asian Perspective, Pearson. Liabotis, B. (2007) Three strategies for achieving and sustaining growth, Ivey Business Journal., Aug. Porter, M. (1996) What is strategy?, Harvard Business Review, Dec, p. 60. Porter, M. (2004) Competitive Advantage, NY: Free Press. Rosner, S. and Shropshire, K. (2010) The Business of Sports, 2nd edition, Sudbury: Jones and Bartlett Learning. Rosner, S. and Shropshire, K. (2010) The Business of Sports, 2nd edition, Sudbury: Jones and Bartlett Learning. Rowe, D. (2003) Sport, culture and media, 2nd edition. Saunders, M., Lewis, P. and Thornhill, A. (2009) Research methods for business students, 5th edition, Harlow: Pearson Education Limited. Tamara, R. and Maloney, M. (2008) IPLs Economics Demystified, Business Today, vol. 17, no. 11, Jan, pp. 62-64. The Hindu (2012) IPL ideal business model for sports fraternity: Aus researcher, Jun, [Online], Available: http://www.thehindu.com/sport/cricket/article2128800.ece [22 Jul 2012].
    26. 26. THANK YOUI hope I have reach to a certain limit to the expectations

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