UNLIKELY as it may seem, the IPL’s Kochi franchise has all the stars aligned in its favor to be an unprecedented success when it comes to value creation and long-term profitability. While the jury is still out on whether or not $ 333.33 million was the correct valuation for an infant team in a toddler league, the fact remains that the IPL is likely to see more peaks than troughs in the foreseeable future, and with few debts to speak of or potential seismic shifts in the offing, the next expansion too might see a tripling of the cost price for the next two teams.
With the cost of owning a team at today’s valuations (actual, or imputed where the original owners remain in control) nearing $ 50 million a year for the next 8-10 years, it won’t be easy to offset the expenditure and make a profit. Except that this is the IPL we are talking about, and as the new batch of sponsorships are negotiated at the end of the initial tie-ups for the central revenue pool, one might see a similar multiplier effect on the values of endorsement and sponsorship deals the next time around. What this would mean is that each team is likely to recover a significant proportion of its expenditures through the future renegotiated central revenue pool deals, in an equitable manner, alleviating the pressure from the increased outlay.
Believe it or not however, if Kochi plays its cards right, there’s no telling how far it could leave the other nine teams behind from a long term perspective. There are so many reasons why, it’s difficult to decide where to begin. First and foremost, Kerala is not a one-sport state, and cricket is nowhere close to reaching saturation levels. In fact if anything, cricket has not even close to its potential in terms of popularity and widespread dissemination, due in part to the fact that there haven’t been too many local cricketing demi-gods. This is unique in a country where the battle between other sports is for position number three: behind cricket and its shadow. However, in Kerala soccer might actually compete with cricket in terms of popularity. This is a blessing in disguise for the Kochi team for a number of reasons. Professional team sports in Kerala are a tried and tested commodity: there is an established and rabid fan-base for professional team sports, obviating the need to instill team loyalty principles, or to try and promote gate revenue.
Team loyalty leads to merchandise sales, and the creation of a lucrative brand- the team itself. Gate revenue is a stream that is yet to be a factor for most other teams, but in Kochi the audiences are already addicted to the live match phenomenon, due mostly to the popular soccer team. Also, since there are limited opportunities to sponsor sports events or athletes in Kerala, it is likely that the team will be able to tap numerous sponsorship deals from a captive and eager pool waiting for an opportunity such as this. In the future, local revenue streams will distinguish the contenders from the also-ran franchises, and the Kochi team is ahead of the game in this respect.
A stadium is in many IPL teams’ future plans, but in all honesty, it will be hard to justify one for a team that only competes annually for less than two months, especially in the absence of it being used to host matches for another popular sport or team. Unlike most other cities, Kochi might just be able to take advantage of this thanks to the popularity of soccer. Keeping in mind that one of its owners has clearly stated the intent to build a stadium, and the relatively low cost of land compared to most other teams’ home cities, Kochi might just be the first IPL team to own the ultimate asset.
On their own these are solid value-generating aspects. When compared to their big brother however, these advantages pale into insignificance. If all goes well, Kochi will be the first franchise to go international in the absence of Force Majeure events (i.e. South Africa for IPL deux), and that too, to the Gulf region. If this does happen, one can’t even start to describe the potential of this development. Even if it doesn’t, the indications thus far are that there is likely to be significant interest by investors/sponsors and other potential business collaborations are also being mentioned. Not to mention the IPL Carnival announcement Friday, where the commissioner mentioned the Middle East as a potential destination. If any IPL team is to ever host matches abroad during the regular season, Kochi is likely to be the chosen one for every conceivable reason.
Ceteris Paribus, it’s good to be the Rendezvous Sports World consortium, and if they leverage their comparative advantages this could be a success story for the ages. Divine intervention, one could say; fittingly, in “God’s Own Country”.
The author is a Sports Attorney with J. Sagar Associates.
(The views expressed here are those of the Author and SportzPower need not necessarily subscribe to them).
