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Indian businesses brace for impact of IPL switch

Indian businesses brace for impact of IPL switch
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First Published: Wed, Mar 25 2009. 11 33 AM IST
Updated: Fri, Apr 17 2009. 04 32 PM IST
Mumbai: Indian businesses from street vendors to multi-million dollar advertising agencies are braced for a financial jolt following the Indian Premier League’s (IPL) switch to South Africa.
Organisers of the hugely popular Twenty20 tournament announced on Tuesday the eight-team league would be staged in South Africa from 18 April due to security reasons and would return to India next season.
Cricket board (BCCI) wanted to stage the event overseas after failing to get government clearance for security cover as the tournament’s dates clash with the country’s general elections.
The IPL, which involves many of the world’s leading players, was a huge success in its inaugural edition in cricket-crazy India last year, primarily because it is structured around city-based franchises with a fan base in home and away matches.
Some analysts feel the shift would erode sizeable value from the Indian market for the second edition, adding to the woes from the global economic downturn.
“It will not be the same as having the tournament at home,” Latika Khaneja, director of Collage Sports Management, said on Wednesday.
“Advertisers will renegotiate their deals following the unfavourable change (of venue). The market is already down because of the recession.
“From what I understand the BCCI is to bear the losses incurred by the franchises,” she added.
Owners of the franchises include a leading Bollywood actor, one of the world’s richest men and a Formula One team boss.
The commercial success of the first edition saw the IPL contribute close to Rs1 billion ($19.65 million) to the exchequer last year, but the BCCI does not expect to make much profit this time due to huge extra costs involved.
VALUE FOR MONEY?
The BCCI has reportedly sanctioned an initial $10 million to the league to cover the costs of the switch and is willing to triple that sum. It is also ready to underwrite a part of the franchises’ expenditure.
Indian media has speculated the loss of revenue to small ancillary firms, merchandising companies, local sponsors and entertainment companies alone could be between Rs500 million and Rs750 million.
The loss from gate receipts is estimated at over Rs500 million.
“The hospitality industry will especially suffer,” Lokesh Sharma of 21st Century Media, a sports management and syndication firm, said. “That’s 10,000 rooms per night. Also the airline industry and tourism (will be hit).”
However, the shift might actually add value to the IPL, added Sharma.
“It will now be viewed as a truly international tournament and that’s value addition. I don’t see the major sponsors being affected, I think they will gain from it.”
A spokesman for title sponsor DLF, India’s largest listed property firm, said the league was still value for money despite the overseas shift.
“It’s a TV event. 99% are TV viewers. We’re confident of getting as much brand visibility as last year,” DLF’s Sanjey Roy said.
The IPL has said match timings will suit prime time television in India, enjoying global cricket’s largest viewership and the game’s financial hub.
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First Published: Wed, Mar 25 2009. 11 33 AM IST
More Topics: IPL news | IPL | Downturn | Slowdown | Recession |