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IPL 2021 suspended: BCCI and Star India could lose up to 40% of revenues

After the Board of Control for Cricket in India (BCCI) decided to suspend the 14th edition of the Indian Premier League due to multiple COVID-19 cases amongst the players and staff, a lot of tough questions remain to be answered. Both BCCI and official broadcaster of the tournament Star India will have a tough task answering to sponsor partners and advertisers on board for IPL 2021.

According to media reports, advertisers were already looking at renegotiating deals with the broadcaster after overall viewership fell by 9.5% in the first two weeks of airing the tournament, as per BARC India data.

Also read:

BCCI suspends IPL 2021 as more players test COVID-19 positive

Star India supports BCCI’s decision to postpone IPL 2021

Count of advertisers & brands fell by 3% & 9% in first 22 matches of IPL 14: TAM AdEx

Short term impact on advertisers

The head of a media buying agency, on condition of anonymity, said, “Clients are upset, but there’s more cricket to look forward to for the rest of the year so I guess we all will patch up. (BCCI and Star India) will have to make some tweaks, but no monies will be liable for matches that are not played. Some brands may choose to discontinue advertising altogether – it all depends on how BCCI manages and the COVID-19 situation. Since money has already been sunk into the property, pulling out will not be an easy decision. 40 per cent of the value revenue may be lost.”

It is a certainty that a certain bucket of advertisers may pull out of the event entirely. Jai Lala, CEO, Zenith India, explained, “IPL sponsorships are broadly divided into two buckets. For one set of advertisers, IPL is a good impact window at a certain period of time. The timing of the IPL tournament matters a lot. Therefore, suspending the IPL impacts these advertisers, because their marketing efforts are concentrated during this part of the year. If IPL is getting postponed by more than a week, they will have to rethink their entire marketing strategy around the T20 tournament. For the other bucket of advertisers, the time doesn’t matter. For them, even if IPL gets postponed they would continue to associate with cricket. It depends on the clients’ plans.”

Varun Gupta, Managing Director and Head Valuation Advisory - APAC, Duff & Phelps, A Kroll Business, remarked, “If the tournament had merely been suspended and restarted within a week or two, it might not have made much of a difference to the revenues of the IPL or that of the franchisees. Yes, there would have been some logistical problems and some additional costs may need to have been incurred. However, given the overall size of the IPL juggernaut, those costs and inconveniences would not have been material.”

Adding further, Gupta said, “However, it appears that that the tournament is postponed indefinitely, which would have the following impact:

  • IPL would suffer significant revenue losses for the current season. There will be loss of sponsorship and broadcasting revenues for BCCI. The league was already coping with loss of revenues from ticket sales and in-stadia F&B, besides the loss of revenue last year due to VIVO pulling out for the 2020 season.
  • The teams will also suffer revenue losses on account of reduced revenue from the central pool and loss of team sponsorship revenues.”

Speaking about the impact on advertisers, Ashish Khazanchi, Managing Partner, Enormous Brands, said, “Suspension of IPL will certainly have near-term adverse impact – both in terms of business objectives of advertisers and even more importantly, on the market sentiment. Heavy investments may be held back because there’s going to be unpredictability on how the returns on investments may turn out to be.”

He added, “The cancellation is somewhat likely to cast a little shadow of uncertainty even on the world cup. But only the next few months will tell us the way for sure.”

A leading FMCG advertiser noted, on condition of anonymity, “Too many of our brands have invested in IPL. More than anything else, Star has to respond to a lot of our queries.”

Advertisers expected the tournament to be cancelled

Another leading FMCG advertiser, who did not wish to be named, told Adgully, “It is only suspended at the moment in view of impending lockdown. Companies must save advertising money, because if sales don’t happen, it will be money wasted. Hence, IPL suspension must be a welcome change for advertisers.”

Chetan Asher, Founder & CEO, Tonic Worldwide, commented, “With the bio bubble breached and the current situation in the country, suspension of IPL was inevitable and probably the right thing to do. For advertisers, the impact will be in terms of redrawing their plans, redirecting their investments to other mediums and maybe even evaluating if advertising investments allocated for IPL can be directed towards driving support and on ground impact in worst affected cities. More so for first time advertisers, they can be nimble, drive change and emerge stronger.”

There will be a spillover effect

A leading personal care advertiser, on the condition of anonymity, noted, “This decision will impact TV buying, where GEC, Movie and News genres will benefit from a spillover effect. There will also be a shift to digital with film releases scheduled on OTT platforms. Businesses are also in trouble to moving to digital and better RoI driven platforms will be the way forward.”

Khazanchi added here, “This is the first time advertisers are probably going to be the least daunted, going by my extensive work with them. For a few important reasons. One, their businesses are heavily digital enabled. That part of the world will roughly continue unfazed and may actually gain shares at the expense of the traditional business models. Two, a much higher risk appetite than traditional business. The older businesses are usually in a consolidate mode, while all start-ups are in an aggressive growth and acquisition mode. They may actually take advantage of lesser media saturation to build share of voice.”

Industry supports BCCI’s decision

Ashish Bhasin, CEO - APAC and Chairman India, dentsu, remarked, “Given the prevailing pandemic situation, I think it is the right decision to postpone IPL for now. The health and safety of all the players and everyone involved, I think, is paramount and keeping in mind the situation in the country and the prevailing mood in the nation, in my view it is the right decision.”

He further said, “IPL is the single largest property on television in India and something that appeals to a wide target audience, across the geographies. It has unparalleled reach and has always proven to be an excellent vehicle for brands and I think that will continue to be so and that will not change. Given the fact that several parts of the country are going into lockdown, there are emergency measures been taken in different cities and towns to curb the pandemic, the severe shortages and difficulties being experienced, lives being lost to the pandemic, I think it is more appropriate to focus on that than on commercial issues for now. I’m sure the commercial issues will get discussed and resolved in an appropriate manner.”

Gupta concluded by saying, “One must also acknowledge that while it was on-going over the last few weeks, the IPL provided 3-4 hours of much needed diversion and relief to the Indian masses, who are reeling under a barrage of bad news on the COVID-19 front. IPL’s ability to pull TV audiences continues unabated. Secondly, the value of any enterprise is based on its future cash earning capacity. To our mind, while there will be some revenue loss this year, the future revenue generation ability of the IPL is undiminished.”

Meanwhile, in an interaction with News18.com, Brijesh Patel, Chairman, Indian Premier League, stated that the remainder of the IPL 2021 matches would be “completed whenever we can’, and added that a window could be looked at October-November 2021, before the start of the ICC T20 World Cup or after the World Cup.

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