Press Release

ISL could be the IPL of football in three years

16 October 2014

While the football league may not prove to be as dynamic as IPL in terms of revenue, it could break even faster because of lower expenses.
The Hero Indian Super League is already a few matches old. After a glittering inauguration at Kolkata's Salt Lake stadium, the league has got down to the serious business of providing entertainment to football fans while, at the same time, giving a fillip to the sport in the country. In other words, football has arrived in India with this Rs 800-crore event promoted by IMG-Reliance and Star India. Modelled largely on cricket's successful Indian Premier League, ISL's promoters and franchise owners believe the league can change the face of football in a country where cricket is almost a religion. More importantly, they feel the event will prove a financial success. IPL had the advantage of cricket already being a massively popular sport when it began. ISL, in contrast, will probably take a few years to win the confidence of the advertisers. "It's the first time that something of this scale has been attempted for football in the country and the execution of the inaugural season will set the course," says Karthik Lakshminarayan, COO, Madison Infinity, a media planning and buying agency, "ISL does have the potential to become the IPL of football, but the stakeholders may have to wait for two to three years." Dhirendra Singh, associate vice-president & head planning at BPN, a media planning and buying agency, says advertisers stand to benefit from ISL because of the effort its organisers are putting in creating awareness about the event and keeping the audience engaged.Who gains and who loses
For sponsors and advertisers, the formative years of ISL will entail an element of risk. "For instance," points out Lakshminarayan, "you do not see the e-commerce players as ISL sponsors this year because they would not want to take a risk at this stage in their growth cycle." But some others have seen potential in what is India's most extravagant football event ever. Led by Hero Motocorp as the title sponsor, Maruti Suzuki India has also endorsed the league as an associate sponsor, while brands like Puma, Pepsi, Muthoot and Amul have come on board as official partners.
The first season of IPL made an estimated Rs 450 crore in advertising revenue for Multi Screen Media, the official broadcaster of the event. In seven years since, the advertising and sponsorship revenues have more than doubled to Rs 950 crore. While the football parallel might not prove so dynamic in terms of monetary growth, it is still encouraging, say media planners and buyers, that ISL's journey has started with television ad rates in the range of Rs 50,000 to Rs 75,000 for 10 seconds. This may seem low given that in its first year IPL commanded spot rates of Rs 1.5-2 lakh for 10 seconds, but it was largely owing to cricket's relative strength as a mass sport. "Since the base is smaller than the cricket league, the football event can hope to grow faster over the next two to three years," says a media planner.
For the franchises though, the story is quite different, because they can look at shorter break-even schedules, unlike in IPL, where with significantly higher investments, most of the franchises are yet to break even after seven years. The IPL franchises also face volatility in the fees because they are fixed in dollars, and are dependent, therefore, on the performance of the rupee against the dollar.
"Football is a sport that needs to be pushed in India and the organisers knew they had to offer stability to the investors to encourage participation. Thus a decision was taken to denote the franchise fees of ISL in Indian rupees," says a person close to the promoters. In a similar vein, the base price for the auction of the franchises was kept the same across cities at Rs 12 crore. In the case of IPL, the base price differed from city to city.
The average franchise fee in ISL is Rs 15 crore, while the estimated expense of a team for the first season is Rs 45-50 crore. This includes player acquisition, promotion and team management. Analysts say that the franchises can hope to recover close to Rs 20 crore in the first year from gate revenues, central revenue (on-ground and on-air sponsorship) and sponsorship revenues.
Playing it safe
In addition to factoring in an incubation period of three to five years, some franchises have also started hedging the risk from the first year itself by getting on board new investors. Late in the day, Indian cricketer Virat Kohli picked up a minority stake in the Goa franchise as did Indian cricket captain MS Dhoni in the Chennai team. Actor Hrithik Roshan happily filled in for his senior in the fraternity, Salman Khan, who backed out as recently as a week ago.
"I personally feel that while people are ready to wait for three years to near break even on their profit-and- loss account, some teams may prefer to stay in the near break-even phase and ramp up investments in building valuation for their teams," says Gaurav Modwel, CEO of Pune City FC. "In such a case, the fourth and the fifth year would be used to up the premium of the outfit to attract investors rather than chase profitability. It will depend on where the respective team stands at that point in time."
With three co-owners, the franchise promotership of Chennaiyin FC is settled as of now, but co-owner Abhishek Bachchan does not rule out the possibility of getting more people on board "as long as they share the passion for football and bring value to the team". He is optimistic about ISL, given his experience with the Pro Kabaddi League in which he owns the eventual winners, the Jaipur Pink Panthers. "In Pro Kabaddi, I had factored a three-to-four-year break-even period. But given the response to the league and our team's performance, I can now hope to break even as early as March 2015 and possibly move into profits the season after that," says Bachchan.
In the case of Mumbai City FC, the promoters feel that if at all they would divest a stake, it would be to an established foreign club. Others like the Den Networks-promoted Delhi Dynamos may look at investors in the second year as well. But these are for the future. As Bachchan puts it, "It's all about getting the league on the ground this year. Next year, people will be better oriented to take a call on strategy and build on the work done in the first year."
Source: Business-standard.com
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