WHILE any analysis on sports sponsorships usually begins with cricket or along those lines, in recent months there has been a trend that has little to do with cricket, and more to do with core business practices. Today, there are lessons that corporations dabbling in sports sponsorship or ownership models have learnt, and not all of them are mutually exclusive to corporations’ business strategies. But, business strategies and low-hanging fruit aren’t often synonymous with visionary market reach synergies, and today what seems to be a last ditch mass exodus from the pricey cricket club ownership and/or sponsorship models is instead more likely a long term vision set into motion by demand/supply considerations, and a recognition of inter-spatial growth ceilings.
Whether we like it or not, cricket will dominate every discussion when it comes to sports in India for many years to come. As a front-runner, and for the longest time the only contestant in the race to monetize the business of sports, it has earned the right and privilege to be recognized as the national sport of India. It has created stars, made household names of its sponsors/owners of its properties, and for any corporation that would like to make a bold and far-reaching statement with its domestic market strategy, there is no other such opportunity on this continent that can compete, despite its hefty valuation. So, for corporations such as Pepsi, Micromax, and Videocon to name a few, investing in cricket is undoubtedly the best way to disseminate brand recognisability through sponsoring cricket in any of its variants in India. One could contest the pricing or the artificiality of the valuation floor, but the fact is that cricket today has an inflexible and inelastic price floor, so it will likely not buckle in its estimated pricing, at least in the short term.
However, cricket is becoming synonymous with a domestic growth strategy because it appears to have maxed out its growth model and footprint across the world, and understandably so. It’s a technically counterintuitive sport to embrace for Asians, Europeans and both North & South Americans, and for those countries where Baseball or Softball are rooted in society, it’s a tough nut to crack. American football and the National Football League (“NFL”) in the US are facing a similar limitation to the sports’ growth. Clearly the most popular sport in the U.S. for the last 40-50 years, the NFL has become the most powerful and lucrative professional sports league in the U.S., expanding into new territories as its might increased manifold over the last four decades. But, a grim reality for the NFL is that the sport isn’t likely to increase its footprint and in fact may have maxed out its growth projections. Today, the league and its owners are bracing themselves for a much smaller revenue pie, and already the impact can be seen in the renegotiated broadcast dealings and the lower salary structures for superstars such as iconic quarterback Tom Brady of the New England Patriots.
The NFL has historical projections and precedents to lend it a more viable vision ahead of time, but the impact on owners, sponsors and teams could alter the dominance that the NFL had over the other North American leagues, and the international map is shrinking with respect to its expansion plans.
Cricket too will have its share of shrinking avenues, a natural and artificial growth ceiling and at some point the competition will get a look into sharing the pie, whether inter-sport or intra-sport (domestic or international). So, the future for investment in cricket will need to take into account a domestic-heavy stakeholder make-up and a ceiling on revenue generation. It will also need to take into account the metamorphosis that its traditional investors and its competitor sports will likely undergo sooner rather than later.
There is a change in the global sponsorship strategy that the leading corporate stakeholders are incorporating in this next phase of market penetration and footprints. And the first lesson that the top Indian corporations who sponsor sports with an international outlook (“Sponsors”) have learnt, is to stay away from owning and managing professional teams in Indian or international leagues. Not only is the Indian professional sports domain too narrow and restricted, it also does not have the fiscal and managerial growth model to justify running a professional team in India or abroad.
This may change over time, but a look at the most successful and imprinted Sponsors, shows the clearly demarcated sponsorship over ownership model that the Sponsors have deployed. Recognizing that advertising without immersing in a nascent sports domain is the best way to channel passion with responsibility, Sponsors have ensured that the valuations of the properties that they invest in, have a clear global brand recognition index (“GBRI”) that far outweighs the rupees or dollars that they put into the sports event.
Indians don’t have the historical expertise or knowledge of how to monetize sports properties or infrastructure, so we either have to test our skills and take our lumps along the way, or we have to outsource the management and sponsorship responsibilities to firms from sports jurisdictions where the expertise exists. The former often ends up being an inefficient and backbreaking lesson for some team owners/property owners, either in India or abroad (more on that later), and the latter is an expensive proposition and often may not help build the core business learning skills of young Indians in the sports management and sports events spheres. More importantly, ownership of a team doesn’t necessarily mean a viable revenue model, and as sports become competitive, this trial by fire may end up scorching some of the sports investors.
There are a few Sponsors that have shown a consistent side when it comes to choosing and supporting sports properties that are on the upswing, and which over time help their footprint yield positive GBRI’s from the get-go. Venky’s was the first to make an international statement by sponsoring international athletes, and by purchasing the Blackburn Rovers. While the latter has had mixed results due to a bevy of factors, the fact remains that Venky’s has, for a fraction of what global Sponsors pay, made an international footprint that supports its positive GBRI. Perhaps it ventured a bit too early into ownership and management of an EPL club with a hostile fan-base, but still, it had the vision to tread where other Indian firms had not. Its other forays into Sponsorship have also been futuristic and laudable.
