Looks good, but could be a sticky wicket

Cricket fans in our office are called ‘oldies’,” laughs Rajiv Mehta. The managing director of Puma South Asia is a keen sportsman who counts cricket among his many favourite sports but at 34, doesn’t take too kindly to being considered part of the senior brigade. But he values the derision for the insight it provides — the average youngster speaks more about football and social media. “Cricket is a mass sport and there is a certain uncool factor associated with it today. That is bad news,” he says.

It certainly is for Puma’s sponsorships. The German sports and lifestyle brand became the team kit sponsor of two Indian Premier League (IPL) teams — Rajasthan Royals and Deccan Chargers — in 2009 and, two years later, also signed on Yuvraj Singh as brand ambassador. Now, the market grapevine suggests that the deals with Singh and Sunrisers Hyderabad (as Deccan Chargers is now known) have been substantially renegotiated. Mehta refuses to be drawn into comment on this but does say, “We have now realised that cricket is far too expensive and comes with over-exposure. It just does not make business sense. We would prefer to look at other options that are far more effective for our brand.”

The other options include Bollywood. In the past, Puma has been associated with films like Chak De; more recently, it tied up with Student of the Year and ABCD, launching collections timed with the movie release and running events at Puma outlets, apart from promoting the brand in the film. Films are more affordable than cricket, says Mehta. “Besides, Bollywood is as mass as cricket and where cricket gives me a mostly-male audience, Bollywood cuts across genders.”

Puma isn’t the only company rethinking its association with cricket. The sport used to be considered almost a religion for most Indian men but that seems to be changing: viewership hasn’t really gone up in the past few years despite the launch of new formats like IPL. Meanwhile, advertising rates continue their stratospheric climb and many advertisers are raising questions on the return on investment the sport offers. So much so that some companies have slowed their game while others are talking about returning to the pavilion. But not in numbers that will alter the overwhelming trend — new advertisers get pulled in by the glamour and several marquee big spenders continue their association with the sport. Effectively, that has ensured the annual cricket advertising spend of ₹1,400 crore has remained more or less unchanged over the past few years. Still, the astronomical advertising rates did take a toll on IPL 5 last year, where some slots remained vacant due to lack of sponsors willing to dish out ₹5.5 lakh for a 10-second spot. Broadcaster Multi Screen Media (MSM) obviously didn’t want a repeat this year and, for the first time, announced a substantial 18% drop in its rates for the upcoming IPL 6. Is this a one-season wonder or could this be the beginning of a low scoring innings in cricket advertising? 

Out but not out

Last month, Hero MotoCorp announced it would not be renewing its contract as the associate sponsor of the IPL nor as the team sponsor of Mumbai Indians. The deals are estimated at about ₹50 crore annually. Meanwhile, its rival TVS Motor Company will not be the principal sponsor for Pune Warriors this year. “We have chalked out exciting plans for the coming year, which, however, do not synchronise with the timing of IPL. We shall, therefore, not be taking up team sponsorship this year,” says a TVS spokesperson, adding that participation in IPL through “other media avenues” isn’t ruled out.

Others like Shubhodip Pal have their own worries. The chief marketing officer of Micromax Informatics narrates a recent instance when he walked into a pub in Delhi during a peak interest cricket match and found customers watching football and a Formula One race on the TV screens. “I don’t agree that more households are watching cricket today — there is too much channel fragmentation,” he says. Pal’s theory is showing up in his non-committal stance on the possibility of Micromax sponsoring the Asia Cup next year — the handset manufacturer had sponsored the cricket tournament between India, Sri Lanka, Pakistan and Bangladesh in 2010 and 2012. “We are still evaluating it and may decide to go ahead only if there is a product to be launched. We need a clear reason to go ahead,” he says.

For its part, public sector giant Indian Oil Corporation (IOC) had a very good reason to invest in cricket advertising in 2004-05: it had launched branded auto fuels and needed to build brand recognition. Beginning with the title sponsorship of the Asia Cup in Sri Lanka, it progressed to co-sponsor other major ICC events such as the Champions Trophy as well as the World Cup in 2007. From 2009, IOC’s involvement with the sport has tapered off. “Cricket has outpriced itself in the past five years or so,” says N Srikumar, executive director-branding, IOC. “The investment required even for threshold visibility has trebled or even quadrupled and deliveries have not kept pace.” The result: IOC has quit the sponsorship route. But even so, it hasn’t given up on the sport completely. Advertising through pitch signage, some on-air exposure and perimeter boards continue.

Indeed, that’s the case with most companies that question cricket advertising — regardless of their doubts, they continue being associated with the sport. The ₹5,000 crore Parle Products is a case in point. Pravin Kulkarni, general manager-marketing, is no fan of the sport — or rather, of its impact on brands. “How can one justify cricket when its cost per rating point is not attractive enough?” he asks. “Not only does the game have too much clutter, it is also largely for male viewers, while our focus is on mothers and kids. There is no doubt that our money can be spent in better and more effective ways.” The strong words notwithstanding, for the past several years, Parle’s kept aside about 8% of its ad budget (₹60 crore in FY12) for cricket. Kulkarni recalls the quandary the company found itself in during World Cup 2011. “We had to be on air but were not keen on spending a fancy sum [₹3 lakh for a 10-second spot].” Ultimately, Parle took spots only on Doordarshan, which was airing only matches involving India and which was much cheaper at ₹1.2 lakh for 10 seconds. “That was perfect since 55% of our customer base comes from rural India and they still watch a lot of Doordarshan,” he smiles. This year, Kulkarni says, it may use IPL to promote its new launch, Gold Star cookies. Parle was also a sponsor of the recently-concluded Celebrity Cricket League held in Dubai for which, sources say, the company spent ₹3 crore. “It was a good experience and an affordable proposition. Cricket for us is a pick-and-choose medium,” defends Kulkarni.

That’s more or less the way Anil Gupta, joint managing director of Havells India, thinks as well. Of his ₹130-crore ad budget, ₹75 crore is spent on cricket, even though Gupta is quick to list the flaws in the cricket story. “Viewership seems to have peaked with the 2011 World Cup and IPL. Though we are long-term players, there is no doubt that investing in cricket is a very tricky decision as big money is involved,” he says. The electrical fittings company started advertising in the sport six years ago with the inaugural T20 World Cup, which India won. Now, Havells is continuing its association because Gupta believes it has increased brand recall, although he admits there is no way of measuring return on investment.

At the other end of the spectrum are companies that remain strongly convinced about the cricket story in India. For instance, there’s PepsiCo, which has been associated with the sport for nearly two decades. Now, the cola giant will be the IPL title sponsor for five years, starting this summer, after DLF declined to renew its five-year contract. While the contract with DLF was signed for ₹200 crore, the one with PepsiCo, which was announced in November last year, was for twice as much. According to Homi Battiwalla, senior director-marketing (colas, juices & hydration), there is no single format on media that delivers the cumulative viewership and reach like the IPL in the peak months of April and May. “The timing is ideal given that packaged beverages is an impulse category and nearly 50% of the consumption is during these months,” he says.

Nike, meanwhile, has taken its association with cricket beyond the Indian team. Last April, the sports major inked a deal to sponsor the Indian team for five years for a sum of ₹270 crore. But that’s just one side of the story. The company’s marketing director, Avinash Pant, speaks of being involved at a grassroot level. Since 2007, Nike has worked with the Mumbai School Sports Association, which brings to the fold 550 schools and about 40,000 children to participate in tournaments each year. “This is a more organised way of going about cricket and we are involved in camps as well. India is a cricket-crazy country and we are convinced it is important to reach out to our audience at an early stage,” says Pant.

A company like Nokia, which is the official founding sponsor of the Kolkata Knight Riders, stuck it out even as its team performed disastrously in the first three editions. “As a brand, we cater to a large number of customer segments and cricket gives us one platform. IPL allows us to show the fun and irreverent side of our brand,” says Viral Oza, director-marketing, Nokia. Then there’s Bharti Airtel, which is associated with cricket at various levels, the most prominent one being the ₹173 crore paid for 52 matches played in India between February 2010 and March 2013. Unsurprisingly, the company is banking on the interest in cricket holding out. “With a median age of 26 and moving towards 28 in 2020, India is one of the youngest countries in the world. We are looking for new ways to be relevant to the youth and there are very few things that come close to sports,” says Bharat Bambawale, the company’s outgoing global brand director. 

Ipl irony

When it was launched in 2008, advertisers, media planners and broadcasters pinned a lot of hope on the IPL. Surely the new format — international players in local teams and convenient timings — would entice viewers to turn out in hordes, both at the stadium and on their television sets. In a good year, ran the prediction, the IPL could end up cornering about half the ₹1,400 crore of cricket advertising spend. But, here’s the irony: five years since the IPL started, it has a television rating of around 3.6, meaning 3.6% of all television owning households tune in to watch the matches. The advertising rate for a 10-second spot on this year’s IPL, though, is ₹4.5 lakh (after MSM slashed rates), up from ₹2.5 lakh in season 1 when the rating was 4.7.

“The big worry today is that cricket is only an  impact generator as compared to earlier when it was a reach and impact generator,” says Kunal Jamuar, executive director (west), Havas Media. He agrees there is a certain reluctance towards cricket advertising given the falling returns. “Obviously, sharply escalating costs and dropping television ratings do not make for a great combination, serials on general entertainment channels and blockbuster films are better alternatives,” Jamuar adds. The numbers bear that out. Take Ek Tha Tiger, which notched an impressive 7 point rating when it was first aired on TV in December 2012. The rate: ₹4 lakh for a 10-second spot. Similarly, game show Kaun Banega Crorepati gets a 4 rating and costs ₹3.5 lakh for a 10-second spot, while daily soaps, which have a relatively small but loyal audience and a 4 rating, offer spots at ₹100,000 for 10 seconds.

Some advertisers have wizened up. Like Puma, Micromax has also turned to Bollywood, sponsoring the Micromax Colors Screen Awards. “If you ask me if we are only dependent on cricket, the answer is no. That may have been the case five or six years ago for most marketers, but it certainly does not hold good today,” says Pal. That’s a thought echoed by IOC’s Srikumar. “Sponsors and marketers always feel their wallets when it comes to spending. There are several options open these days for building brand saliency; cricket is just one of them.”

The IPL numbers proved this conclusively last year when sponsorship revenue dropped to ₹245 crore from 65 brands compared with ₹265 crore from 70 brands in 2011. Meanwhile, rating points also dropped marginally from 3.7 in 2011 to 3.6 in season 5. So, when MSM announced a rate of ₹5.5 lakh per 10 seconds for IPL 6, it found sponsors staying away or even backing out. Finally, in January, the broadcaster cut rates to ₹4.5 lakh per 10 seconds. Not surprisingly, Rohit Gupta, president (network sales, licensing & telephony), MSM, defends this decision, saying the revenue that will be generated will remain the same. “We still have an inventory, which will be sold as the tournament progresses. IPL has been a profitable venture and will continue to remain so,” he says emphatically. 

Someplace else

Gupta’s optimism aside, some IPL franchisees are finding the going tough. Raghu Iyer, chief executive, Rajasthan Royals, says unlike in 2010, it is difficult to ask for a 20-25% hike in sponsorship rates. “We are coping by bringing in small or regional players. Last year’s tie-up with Bikaji Foods for sampling opportunities was a key stadium revenue source for us,” elaborates Iyer. Also, not too long ago, a big cricket match meant empty streets, desolate malls and lukewarm business activity. That’s no longer the case. During the 45 days of IPL 1, only nine Hindi films were released. Last year, as the tournament played out over 54 days, there were 22 releases. Importantly, this included commercial successes like Housefull 2, Vicky Donor, Jannat 2 and Ishaqzaade. John Abraham, who produced Vicky Donor, laughs when asked if he was worried about cricket upsetting his film’s chances. “Too much of cricket leads to a fatigue syndrome and that is exactly what is happening today,” says the man who was a media planner before turning to the arclights.

Take a look at the viewership numbers and judge for yourself. While IPL numbers haven’t grown in the past couple of years, the test match between India and Australia in Hyderabad in March saw just 9,500 fans trooping into a newly-constructed stadium capable of seating 55,000 – and mind you, that was on the fourth day when the match was delicately poised. The television rating for the series, one where India has fared well, was barely 2. Simply put, that means a viewership of a little over 25 lakh across the country.  The numbers for the recent one-day and T20 series between India and Pakistan, for which Coca-Cola India was an associate sponsor, haven’t been encouraging either. Wasim Basir, director (integrated marketing communications), Coca-Cola India, is now clear that the company will now turn to cricket only if there is a product launch or something equally critical. “If your target audience is hardcore male, cricket works. If the target is the family, the entertainment channels are a better option,” he says. Of course, with a large advertising budget (about ₹200 crore a year) Coca-Cola can afford to take a chance here or there.

Consequently, interest in other sports is rising. Sanjay Gupta, Star India’s chief operating officer, narrates an incident during the Hockey India League in Ranchi in February. Gupta, whose channel Star Sports was airing the match, could not believe his eyes when the stadium filled to capacity with 8,000 people. “In the adjacent stadium, we had another 20,000 watching the match live on a wide screen. But of course, no sport in India receives the attention that cricket has, and the same holds true for hockey,” he says. 

Nose-bleed bouncer

Jigar Rambhia, client leader, GroupM Maxus, says cricket is extremely advertiser-friendly since there is a break after every six balls. “It is apparent that T20 has better viewership than test matches. That said, the big concern overall for cricket today is that while the number of people watching the game has increased, the time spent on watching it has dropped,” he points out.

None of that has hampered the soaring prices for telecast rights. A look at the story over the last decade presents an interesting perspective. MSM (then known as SET) won the telecast rights for two World Cups (2003 and 2007) and three Champions Trophy tournaments between 2000 and 2007 by paying $250 million. In 2003, when the tournament was played in South Africa, India reached the final and finished second to Australia. Four years later, when the marquee tournament was played in the West Indies, India was eliminated in the qualifying stages. And viewers did not watch other matches because of the time difference: matches would start in the evening and go well into the following morning. “In fact, 2007 remains a watershed year for the game. That was when people realised cricket was not necessarily the best platform for advertisers,” mentions Jamuar. It is estimated that SET made about ₹250 crore from the 2003 World Cup and around the same amount four years later. The Champions Trophy brought in another ₹300 crore, taking the total to a little over ₹800 crore against the ₹1,100-crore acquisition cost. “It was a big blow to MSM and a lesson learnt the hard way,” says a former SET employee, who was closely involved in the advertising deals for the two World Cup tournaments.

Clearly, the business model for cricket needed a review, although it is apparent that not much has changed. Just before the 2007 World Cup fiasco, in late 2006, ESPN Star Sports picked up the rights for an eight-year period starting 2007 for a whopping $1.1 billion, with other bids coming in between $800 million and $900 million. “If the bids had taken place after the 2007 World Cup, it would have been a different story,” says the former SET employee quoted earlier. This deal included the 2011 and 2015 World Cup tournaments, four Champions Trophy events and the T20 World Cup during the period (both tournaments are held once in two years). “Star wants to probably monopolise cricket telecast at each stage. It is a big gamble, though one that is hugely dependent on India’s performance as we have seen several times in the past,” says Jamuar. From Star’s point of view, it is banking on the simple premise that more people will watch the game. “Most of the cricket that is aired today is for an English audience and there is a huge opportunity in sports commentary in Hindi. Eventually, cricket has to go regional in every part of India,” says Star Sport’s Gupta. In April last year, a year after India won the 2011 World Cup, his network went the whole hog by acquiring the rights — telecast, internet and mobile — to broadcast all matches played in India.

The six-year contract came with a $750 million price tag. “Yes, the cost of acquiring broadcasting rights is a huge concern and there is no reason to believe costs will not go up further. The confidence for us comes from the opportunity that we believe exists in the form of the increasing reach of television, which continues to grow,” rationalises Star’s Gupta. Ebullience on the line projected by Star’s Gupta seems an industry trait. The gashes of 2007 weren’t a deterrent to MSM as it forked out ₹8,200 crore in March 2009 to buy IPL rights for nine years. Its belief in cricket and sports has also prompted it to launch Sony Six, a new channel that will air commentary in Hindi for the IPL. MSM’s Gupta says, “We are in the sixth season now and ratings have stabilised around 3.5-4, which is pretty good.”

Whether a fragmented audience with multiple options will continue to play ball and local language commentary will get more viewers to watch cricket is open to argument. Basir says, “To engage the youth today, television alone is not enough. We need to reach out to them through social media and other avenues. Besides, the 18 or 19-year-old today does not watch cricket like an 18 year old in the past. His preferences are vastly different.” Atul Pande, chief executive-sports business, Zee Group, is also among the skeptics. The Zee network owns sports channels under the Ten banner but has stayed away from cricket matches played in India. Instead, it holds the rights for all matches in South Africa, Zimbabwe, West Indies, Pakistan and Sri Lanka. Zee picked up the rights for South Africa (2013-20) for $180 million and Zimbabwe (2013-18) for $20 million, both from the respective cricket boards. “There is a serious mismatch between the costs versus the revenues cricket can potentially generate. Broadcasters have assumed that subscription (cable and DTH) revenues would take off after digitisation,” he says. While broadcasters agree that a 50:50 split between advertising and subscription would be ideal, currently it’s skewed 60:40 towards advertising for most and 70:30 at MSM, courtesy IPL. 

Zee’s Pande has been among the bidders at BCCI auctions and has stayed away from bidding wars because, “There are 6-10 crore cricket nerds in India and this audience will watch cricket anytime but we thought prices were way too high.” Will broadcasters like MSM and Star Sports, then, who have punted huge sums to buy cricketing rights, reap a worthwhile return? MSM’s Gupta maintains that IPL is profitable but refuses to provide any details on overall profitability for the investments made in cricket. Pande thinks given the pie-in-the-sky bids, there is a high chance that many broadcasters could come to grief. 

Let’s look at the math: MSM paid ₹8,200 crore to buy the IPL rights for nine years. If 76 matches are played in a season like in the last two years, the broadcaster could potentially make about ₹882 crore in ad revenues. That includes airtime of 2,400 seconds for each match (2,400 seconds per match x 76 matches @ ₹4.5 lakh for a 10-second spot = ₹821 crore) and another 800 seconds of airtime for match analysis and interview called Extraaa Innings (800 seconds @ ₹1 lakh for 10 seconds = ₹61 crore for 76 matches). Since MSM bought the rights in 2009, it has recovered ₹2,600 crore in ad revenues. Assuming that the ad rates stay the same and the entire inventory is sold, the broadcaster can earn roughly ₹4,400 crore in the next five years. 

But that is a big if — last year, MSM managed to sell only 80% of the inventory (and ran its own promos for the unsold airtime) and this year ad rates are down almost 20 per cent. Subscription revenues could bring in another 30%, but that may still not add up to an attractive return. According to Pande, the effects of the math could sink in over the next two to three years and there will be a shift into football and hockey. He sums up ominously, “As things stand, cricket is a financially-challenged business model. The more cricket you buy, the more money you lose.”