Inside Story

New IPL deal may reduce BCCI’s bargaining power

Written by Vishwas Gupta

With uncertainty looming over the future of Vivo as title sponsor, IPL has suddenly slipped into unfamiliar waters. Industry experts feel it would be difficult to find another sponsor which could match Vivo’s yearly commitment of Rs 440 crore. And if that happens, brand value of the league every cricketer aspires to play in might suffer.

Given the popularity of cricket and IPL the brand, finding another sponsor might not be difficult. But state of economy is one factor and lack of time is another, which will come in the way of the BCCI lining up a like for like alternative.

The worrying part will be the future because if the value of IPL decreases, BCCI’s negotiating power may not remain the same.

“Even though this is not by design, if there is a markdown from the existing amount (Vivo was committed to Rs 440 crore per year), there will be an impact on the value of IPL. This may not be that significant if the new deal is only for one year. But if they sign a new three-year contract for a lesser amount, the valuation may suffer. Going forward, the BCCI’s bargaining power may change,” said Santosh N, managing partner of D and P India Advisory Services LLP and external advisor to Duff and Phelps, which studied brand IPL for six years and estimated it at Rs 47,500 crore in 2019.

Since inception in 2008, IPL’s stocks have only risen. DLF, the first title sponsor, gave around Rs 200 crore for the first five years. Pepsi signed a new deal in 2012, wherein the amount got nearly doubled. Although Pepsi pulled out in 2015 following the spot-fixing and betting scandal of 2013, IPL soon found Vivo which paid Rs 190 crore for 2016 and 2017 before agreeing to Rs 2199 crore for five years from 2018.

This shows that despite bad publicity in 2013 and 2015, IPL’s brand value did not suffer and increased manifold soon after.

Santosh, too, does not see the present situation as a dead end, saying that things depend on the kind of response IPL gets this year. “In certain ways, numbers of 2020 will decide the numbers of 2021 and onwards. With not much for the public by way of entertainment due to the Covid-19 situation, a lot of
people will watch IPL this year. If the event does blockbuster business in terms of viewership and advertisement rates, things can change. If the numbers reduce this year, the BCCI may not be in a situation to negotiate next year.”

A professional with more than 15 years of experience in valuation and financial advisory services, Santosh is sure IPL will get a sponsor, but not so sure about the amount the new sponsor may offer. “Probability of the IPL being held without a title sponsor is low. But at such short notice and considering the economic situation caused by Covid-19, it will be difficult to match the amount given by Vivo.”

About the author

Vishwas Gupta