IPL turns a decacorn in valuation terms - Santosh N

D and P Advisory recently announced the release of a study valuing the Indian Premier League (IPL), one of the biggest athletic events in the world, for the year 2022. According to the research, titled ‘Beyond 22 Yards’, the value of the IPL Ecosystem has increased by 75% since 2020 and is currently worth $10.9 billion. The IPL was worth $6.2 billion in 2020. With this price tag, IPL will become a Decacorn (a company worth more than $10.0 billion) within 15 years of its founding. The value produced by the IPL as a company is represented by the IPL Ecosystem. 

The auction of the IPL media rights for 2023 to 2027 was a historic occasion this time. The monopoly of one firm was broken for the first time by the distribution of media rights among many broadcasters. Media rights for the league have been auctioned for $6.2 billion, a three-fold increase from the previous 5-year cycle in 2017. The tournament in 2022 also attracted a record-breaking 426 million viewers across broadcast and OTT channels. 

In conversation with Adgully, Santosh N, Managing Partner, D and P Advisory, speaks at length about the report and what makes IPL a decacorn, monetisation of the League, and much more. 

What are some of the key findings of the report? What makes IPL a Decacorn this time, could you please elaborate? 

We have estimated the value of the IPL ecosystem at $10.9 million and that is largely contributed by the new broadcasting rights renewal and the expanded IPL with 10 teams and more number of matches (going up to 94 in 2027 season). 

In this report, we have also compared the IPL with other leagues in terms of ad rates and also how IPL is inspiring other sports to start their own leagues in India and other cricket playing nations to start their own leagues. IPL franchise owners are also expanding their exposure to sports by investing in other sports and also other global cricket leagues. 

What makes IPL the second biggest sporting league in the world? What are the reasons for the surge in valuation?

It is very difficult to compare IPL with other large global leagues. IPL is just a 14-15 year league as compared to the others, which are multi-decades old. Calling the IPL the second biggest sporting league by comparing the leagues just on one metric like per-match broadcast value may not be right as it ignores the size of the other global leagues in terms of matches and seasons. It would also put a question mark on the future potential of the league in terms of revenues and valuation if it is perceived as the 2nd largest league. 

In terms of ad rates, IPL is significantly behind other global leagues and that leaves a lot of room for growth in ad revenues going forward which would impact the broadcasting rights valuation positively going forward.

There is significant headroom for these numbers to improve and the league to become much bigger.

What kind of growth have you seen in the IPL ecosystem since 2014?

IPL has seen a huge growth from being a $3-odd billion valuation to becoming a decacorn. IPL is now a 10-team affair with 74 matches a season and going up to 94 matches in 2027. The number of advertisers have increased, it has become a benchmark for other global cricket leagues, it’s an inspiration for other sporting leagues in India, has inspired BCCI to start women’s IPL, it has single handedly changed the broadcasting landscape and has become the biggest property in terms on content for both digital and liner broadcasters. All the metrics have grown multiple times over since 2014. 

What are your views on the rise of new cricket leagues across the world and what does this trend represent? Do you think this will bring valuations of IPL down?

It is very clear that cricket is going the football way in terms of moving from a national sport to a league sport. It may still take a few years, if not decades, for it to become a league sport over national sport, but it is moving in that direction. This change is very good for the sport as the opportunities for budding cricketers increases and it is being perceived as a serious career alternative to many kids and parents. 

The increase in the number of leagues would not have any negative impact on the value of IPL as it only strengthens the interconnected ecosystem. 

What are the challenges in monetising the current IPL viewership?

The concept and the business model of OTT platforms is relatively new and still evolving. We are seeing companies still figuring out if they want to be a subscription only model (like Netflix till now) or advertisement only model (like YouTube till a few years ago) or a hybrid model (like Hotstar). In the business models with advertisement, the companies are yet to get their act together on how they can monetise their content. The traditional linear broadcasting is a well-established industry, whereas the digital/ OTT platform business is nascent and evolving. Lower ARPU in India will be the biggest hurdle, which is an industry wide phenomenon and hence, broadcasters will have to get their act together in terms of monetisation of the viewership. 

How are team owners pioneering the multi-club ownership model? Your thoughts on the same? 

Multi-club ownership model is well established in the developed world and in football and some of the North American sports. The team owners are running these businesses and as any other business, they have to look at investments to stay relevant, to expand their reach, enhance their brand strength and use their resources efficiently. All these can be achieved only by making investments in other leagues. IPL has provided a platform for some of these franchisee owners to build large and global sports brands. 

IPL has been valued as Decacorn in the report, where do you see the future from here?

The broadcast revenues are the biggest contributor to the central pool and also the franchisees are contracted for the next 5 years. The number of matches to be played is also known. Since these two biggest factors are known and fixed, we expect the IPL valuation to be stable for the next few years. 

We expect to see the next major jump in value when the number of teams and matches per season increases or when the next broadcast rights renewal happens.