It is the biggest auction that has taken place in the history of Indian cricket, probably the biggest since our independence has seen across any genre of auctions in this Independent India. 
 
Owner of one of India Premier League’s franchisee - the Chennai cricket team - N Srinivasan, Vice Chairman & MD of India Cement said that 10% of IPL cricket tournament’s TV revenue would be accrued to India Cements. He is confident that the company will fully recover its investments from its share of TV revenues alone.

Likewise, PK Iyer, MD of Deccan Chronicle said that the company will not incur losses due to its investment in the IPL.

There are five who have acquired teams and bid for players over the last few days at the most recent player auction that took place. 
 
CNBC-TV18 speaks to N Srinivasan, Vice Chairman & MD, India Cements; PK Iyer, MD, Deccan Chronicle; Yogesh Shetty, CEO, GMR Sports; Kaushik Roy, President - Branding, Reliance Industries and R Balachandran, President and Chief Marketing Officer, Reliance Retail. 

Excerpts from an exclusive interview:

Q: What was it that drove the valuations of each player in the auction just 24 hours earlier? Was it more potential in terms of revenue generating as you go ahead or was it strictly to do with performance?

Kaushik Roy: I think both, clearly we were looking at match winners and we were very clear right from the beginning that we would have brands to play for the team that are indeed match winners, who can not only perform, but can also ensure that they can get the crowds in. I think it goes hand in hand. So from a branding perspective, that was very clearly reasoned why we put those value up for their names.

Q: Specifically with regards to you, since you are one of the listed entities that has actually listed from this perspective what has driven you for this value creation that you are essentially hoping to garner with the kind of investments that you have made and also is this something that you would consider from a listed entity point of view?

N Srinivasan: There is a good revenue model and we are going to get 10% of the TV revenue, the media revenue, so even if you say that we have offered to invest USD 90 million for this franchise, we will get USD 90 million back in terms of TV revenue over the same period. We paid USD 90 million over ten years and we will get USD 90 million over ten years.

The cost of the player is what we have recovered and other cost which we get because other title sponsorship has been sold for Rs 200 crore and there we get all the revenue at the stadium, we get all the gate revenue, plus branding players and I think there are many revenue streams here. So while it appears that okay we have bid USD 90 million, but actually we are paying USD 9 million a year, we are getting the same money back in terms of TV revenue.

So it is not like a great capital investment has been made and we as a company have been supporting cricket for the last forty years and cricket as a medium to promote your product. Everybody has used, including our own competitors, in our own industry. So I think from a listed company’s point of view, it is a win-win. In fact really we get mileage with very little expense.

Q: There are two particular revenue models that stand out, there is a centralized revenue where you would get the media rights in the title sponsorship and then franchise revenues, and the merchandising that goes with it. Do you suppose that this is an attractive proposition at least for the first couple of years with the kind of investments that are going in what is the gestation period in terms of a breakeven, do you think that a proposition such as this could endure?

PK Iyer: I think Mr Srinivasan has already elaborated that, I do not think any of us are going to lose money, it is not a very capital intensive thing because BCCI has balanced out the broadcast and the main sponsors, so I do not think this is an issue.

As a media company we are very excited by this because for us after Dashehra and Diwali, where we have the maximum amount of spends, the next large thing is cricket. If you have a World Cup, we are going to run full house, if you have a season we are going to run full house and fifty days of intensive cricket gives us a great opportunity as a media company to leverage it.

It is going to be across the country and it is going to be in the prime season, April-May when the holidays are there, the schools are closed. I think BCCI has done a great job of timing it, has done an excellent job of balancing out revenues and multiple revenues, branding, media spend, leveraging I think we are all going to see a huge amount of value getting created in these assets.

There are examples, if you take Manchester United or if you look at their individual revenues stream those valuations are big and as a nation cricket is very large that attracts probably the largest thing after cinema.

Q: Since you are a man from the marketing field, how do you propose to actually go about marketing and generating marketing revenues from hereon? You have four players such as Sanath Jayasuriya, Sachin Tendulkar and of course Harbhajan Singh who has been in the news a lot off late. How does this marketing strategy work for you in terms of leveraging on these players reputations for your products and Brand Reliance as a whole going forward?

R Balachandran: Any marketing person will tell you that the first real effort actually comes with building a great product. Critically, that’s what we have actually embarked on. If you take the players who are going to play for us - Sanath Jayasuriya and Sachin Tendulkar - have been referred to as possibly the most destructive opening combination in the history of cricket. You have people coming shortly after like Robin Uthappa, you have got Loots Bosman and you have bowling strength in Lasith Malinga, you have Shaun Pollock and Harbhajan who again is possibly one of the most valued Indian players that you can actually imagine, then there is Dilhara Fernando.

Now the issue is the critical aspect of building a great product, which is a match winning combination, made up of the core of a team as well as people who can actually go out there and turn a match. That is the fundamental of really building a great product. The good thing is that unlike many incipient leagues, which started long ago, in this case players have come with fantastic track records and that’s really why of course the bidding happened the way it did, and the auction happened the way it did. Each of them is a great icon; each of them is a great player. So that’s the fundamental.

What I think we will have to craft in terms of marketing is the fact that we build them into a great team that’s very important. But then again it helps that at the international level, all of these players have actually played with each other, they know each other, they know their strengths and in fact outside of the field, they have actually bonded and been friends. So it’s a question of getting them into one team.

The second and very important aspect is building the fan base. I think that has actually already started with the anticipation. We have a huge and enormous sort of advantage there with somebody like Sachin Tendulkar. Sachin Tendulkar is somebody for whom I think ‘Mumbai’ and that’s the phrase has not just awe, not just respect, but absolute love and affection. That’s really what happens when you build a great brand.

Great brands are not just respected or brought or admired, they are loved - people see them as their own and that’s really where the marketing works. There is going to be a lot of brand building. Then what actually happens in the context of manufactured brands or service brands because in a largest sense, this is a cricket brand. There are aspects of performance here - huge aspects of performance, aspects of entertainment, aspects like temperature being affected not just for how cold it is but how fast the wind is blowing, there is a wind-chill factor here. 

The speed, the timeframe into which everything is going to be packed from April 18 to June 1, a tremendous tournament action packed with 59 matches, a tremendous weekend of semifinals and finals is going to build a viewership and a fan-following. At the end of the day everybody in the catchment and well beyond is going to be empathizing and resonating with the team. That’s really from a marketing viewpoint what a lot of other people will look to make it work for them in terms of a leverage.             

Q: We are talking about the price money that’s more than double of what the World Cup that just went by had to offer. We are talking about 12,744; 10-second advertising slots are available on television during the course of this entire tournament. Do you think that progressively the expenditure that’s garnered on this particular tournament will have to go up and consequently if that is a case, as it should be with the kinds of volumes that Mr. Balachandran was just referring to that the advertisement spends and specifically with the kind of investments that players such as yourself have to make would consistently go up, as the gestation period of this tournament goes on?

Yogesh Shetty: I would concur with what other speakers have said. First of all, you have got to look at this, as a franchise we have territorial rights and what we as individual franchises have to do is make it work as a business model. From a GMR perspective we are looking at it as a business model.

Now anything that happens beyond the turn of the first tournament is more of a cost of acquisition. What we do believe is this franchise model will grow. You have got to understand this is just a start. We are talking about cricket here and this is something new - this is revolutionary, the thought process will become internationalized.

As we are talking, we are talking about international tournaments, we are talking about 20-20 going to the women format, the dynamics are totally different. So yes, there would be extra spend below the line, but above the line revenue will go on increasingly dynamically that I truly believe, because my involvement in sports sponsorship, especially in Formula 1 or even Football, it is the community that engages and that is, why I truly believe this format is closer to the community, is pretty compact and more importantly this is a media savvy game.

I think this will take off big time, BCCI has done a great job. Let us also understand, if we have to start a business, somebody has to set up cost, these are amortized costs. We actually already know what our topline revenues are and it will go on growing. The kind of contacts we are getting right now, the engagements we are getting right now is second to none. We are very excited about it and it’s not challenging time, it's creative time and actually working with the public. One last thing - this is a sport, this is about cricket, as long as we keep the integrity of cricket and the community, we are all winners here.

Q: We would like to know the possibility on how you would leverage individual players that you have bid for having paid so much for the time already? Is there a specific marketing strategy that will come in for each player that will work as a revenue generation model going ahead or will you essentially look at generating individual value from all of your players?

Srinivasan: I explained to you that there are huge revenue streams coming in. All of us have gone with what we think is going to be matchwinning team or combinations. Ultimately the quality of cricket we deliver is what is going to bring in the people. We believe the stadiums will be packed, we believe we will get excellent crowds. We are not looking at this as some kind of proposition where we will lose money.

There are two separate aspects. One is, we want to bring in good quality cricket. We are people who have been associated with cricket for a very long time. We believe we have a match-winning combination.

The second aspect is we believe that this is also not going to be a losing proposition and ultimately the value of this franchise is like a right in a territory. This will grow by leaps and bounds. I do not know what you are trying to get at. But we believe it is a win-win situation, win for the players, win for the public, and win for the franchise owners.

Q: A reference was made to the EPL a little earlier in this conversation, some football franchises globally have actually considered listing of their teams as they go ahead. While we are still early in this entire process as Mr. Srinivasan was talking about multiple revenue streams, is that something that corporates could actually look at say 3-5 years from now given the success of tournaments that a team could actually be listed to harness revenue potential going on?

Shetty: Could you explain what you mean by listed?

Q: Listing the actual team. In English Premier League or Spanish Primera Liga, you actually have teams that are listed on their respective exchanges to raise capital to fund the requirements of the team; do you think similar could happen if the IPL actually becomes successful to some extent?

Shetty: It is an open agenda at the moment. It is a blank canvas. I think somehow people are thinking there is something negative going to happen here. Everything that is happening is positive.

We are talking about the English Premier League, if you look at what is happening to the transfer fees paid and then look at the fan base of cricket in India you suddenly realise the potential. As things evolve, each individual franchisee will start looking at the business model and start realising how do they take it forward to actually leverage the revenue potential. It could be capital realisation or various other methodologies. But these are early days.

But the most important part I would tell you is you just have to look at outside looking inside. If somebody had to compare football with cricket and look at the fan base, India is an untapped market. This is a true franchise, and the reality is that there will be different dynamics coming in, in the next 2-3 years. But they will all be positive for cricket.

Q: It cannot all be positive. It is a formula that has never been tried and tested before. It was something that was suggested by Lalit Modi in 1996 but never saw the light of day. I respect the fact that all of you will have gone in and put in bids for it. But there have got to be challenges to meet for a particular league that has not even taken off. If you just reference yourself with the ICL, it has not taken off as successfully as people would have thought. But there have got to be challenges. What do you see that would actually unfold over the first season itself that would require you to recount or rework certain strategies you may have?

Iyer: We have not gone out and paid USD 107 million yet. The USD 107 million that we have committed to pay has already had a contract with the broadcasting rights. So, first remove the USD 107 million. The player expenditure of USD 20 million has also been capped. For that USD 20 million, I do not think it is going to be difficult.

The amount of verticals one can exploit is limited by your creativity and imagination. You have to agree that cricket is successful and big in India. Anything that rides on that with an international player format and compact, concise action packed has to work.

One media company works while another doesn’t. A soft drink sells and another one doesn’t sell. But in this case, BCCI has been successfully running this thing.

We definitely know that this game has a following. If you look at football worldwide and look at the sheer fan base of cricket in India, I think it is a million times over.

So, I am very convinced that challenges will be there. I am not saying it is not there. The challenges can be in logistics. For example- we are playing a match on April 22 in Hyderabad, we are on April 23 in Kolkata and somewhere else on April 25. So, those are the kind of challenges I see.

I don’t see revenue challenges or cost overruns. Those are not our concerns. We are concerned because this is a great model. But those are challenges and probably branding is a challenge. Building verticals on your fan base is a challenge. But they are all positive challenges.               

Q: What is the sort of returns that a format like IPL could generate going ahead? How do you think branding would unfold over the next 10 years, since this is an initial 10-years proposition? Do you see any challenges on that front? What kind of returns do you see from IPL as a whole?     

Roy: From the branding perspective, it is the key constituent and the performers in this. It is a kind of a performance-based programme. Therefore, you have to see the performance as distinct players and players who are supposed to be doing distinctive things.

So, we have to look at how we are going to exploit each one of them. Each one of them will actually be going across to build a certain kind of brand image. The whole DNA will actually emerge out of how these people perform on the field and how they bring to the fore their key specialization.

So, that is something that is going to be one of the branding challenges as to how at the end of it you will use a very diverse and distinctive kind of characteristics and yet bring them together as a single team. It should be a single team, which connects with your catchments and neighborhood and should actually go on to break the loyalty. We may see that in the long run.

The Mumbai team need not be restricted to Mumbai alone. When it travels, it will have a certain segment of people, may be in another city, who would want to be part of Mumbai. That is the real brand. It should be able to do something to the viewers, to the people on the ground, to the fans to make them start believing that they love this team.