Predictions For IPL 2009

• Revenues may be hit as ad budgets are cut by 25-30% by main companies
  
• Franchisees may go without brand ambassadors; icons, cheerleaders may go
  
• Break-even time for franchisees likely to be pushed back a couple of years
  
• Gate collections may not rise as people may prefer to watch IPL on television

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Movie star-stud Akshay Kumar will be missing in action, as may be Hrithik, Katrina, and even those fully-clad international cheerleaders.

"Some teams' costs are beyond control; their understanding of the business quite poor." Anirban Das Blah, CEO, Globosport

Get ready for a no-frills Indian Premier League Season 2. As team owners cut corners and advertisers slash spending, the gloom of the economic slowdown will descend on the IPL arena this year. If 2008 was a show of financial power and flamboyance, this year it's more a quest for survival. Make no mistake: team owners, or franchisees, are under huge financial pressure to justify the teams they acquired at astronomical prices.

As it is, only one franchisee—Kolkata Knight Riders (KKR)—made money last year. Having established their brand equity, all teams were hoping 2009 would prove to be the year of plenitude. But the tight economic situation has dashed their hopes. Compounding the teams' misfortune is the appreciation of the dollar against the rupee, which has made players' fees almost 15-20 per cent higher. While most franchisees did not acquire infrastructure, maintenance of offices, staff and training facilities over the last 8-10 months has added costs that were absent last year.

But the unkindest cut of all is the cautious approach of advertisers and sponsors—the franchisees' main source of revenue outside the assured central pool and broadcast revenues. This year, advertisers are showing restraint, sponsors are more demanding, and investors are wary of taking too large an exposure.

"Last year, IPL teams lost money. This time, the losses would be even greater." Meenakshi Madhwani, Managing partner, Spatial Access

Says Santosh Desai, CEO, Future Brands: "Everyone thought that this year would be a blockbuster after last year's show...it's difficult to imagine that someone would take a big bet as people are much more cautious about spending."

Advertisers that took big IPL exposures last year—and even resorted to IPL budgeting thanks to the big opening—are now going slow. For instance, LG Electronics, one of India's top advertisers, has cut down advertising spending by 35 per cent. Spending on IPL, that too at a higher cost than last year, is a clear no-no. V. Ramachandran, LG India's director marketing, says: "Many of us—with frozen or reduced budgets—are not coming on board, thinking it's not worth it." Companies are looking at avenues that are more likely to influence sales.

While negotiations are still on, the market feels overall ad rates would be lower this year. Meenakshi Madhwani, managing partner, Spatial Access, a media management firm says, "I'm surprised at the euphoria during the player acquisition.... Advertisers either do not have the money or are not willing to spend it. Ad revenues would be much less this year." Of course, with two months to go before the tournament begins, it's difficult to quantify. "Not everybody will have the resources to get on the bandwagon," agrees Rupam Ganguly, VP, Grey Worldwide.

How have the teams themselves reacted to such tight conditions? They're cutting corners—for instance, Delhi Daredevils will eschew Akshay Kumar's stunts and will go without a brand ambassador this year.

"Everyone knows cricket works. IPL is an attractive product, all are optimistic about it." Amrit Mathur, CEO, GMR Sports

The mood was also visible during the players' auction on February 6, when, unlike last year, all the team owners did not spend the entire amount available. Some even spent just a quarter of the kitty. Teams like KKR and Delhi Daredevils, which entered mostly into long-term or three-year contracts with sponsors and advertisers, would be somewhat insured. But those with annual contracts might find the going difficult.

The teams are, of course, putting up a brave face. "In a time of tightness, people tend to hold on to things which are safe. And IPL is one of the safer options today. For big spenders, IPL would be the obvious choice," says Jay Bhattacharya, director, KKR. Most teams are now trying new tricks to establish their brands and develop new revenue streams. While merchandising was said to be a way to garner revenues, barring KKR and the Delhi team none was able to cash on it last year. In any case, piracy can easily put paid to this model.

It's clear franchisees would have to go beyond the team to establish their brands and develop new revenue streams. Says Desai: "Using the players as assets, franchisees need to create secondary platforms outside the stadia to develop newer revenue models."

Some teams are being innovative: KKR is planning to play a few matches in Bangladesh. While captain Sourav Ganguly is a huge draw in that country, the franchisee recently acquired Bangladesh's Mashrafe Mortaza at a significant cost. This, the team hopes, would ensure a full house in Dhaka. According to sources, KKR and Rajasthan Royals are also planning to play a few matches in Ahmedabad, which has a cricketing audience but no home team. KKR has also announced initiatives like a TV reality show called Knights & Angels to select cheerleaders from the public.

Looking at the unpromising picture, the IPL management has also allowed the franchisees more room in their revenue management. Sources say franchisees have been granted extra logos on players' trousers and shirts. Also while only 12 of the 72 peripheral advertising boards were assigned to the franchisees last year, they'll get more this time. Will advertisers take the bait? Many marketers doubt this will work.

The meat is in advertising on TV—last year Set Max, the company with broadcasting rights, had scooped up millions. This year, given the market realities, Set Max is apparently offering flexible smaller packages to advertisers and sponsors who can pick up slots of 10 or so matches, instead of a full package of 59 matches.

IPL definitely had a dream opening—and there's no denying India's love, nay craze, for cricket. Sure, two months down, children's exams would be over and soft drink and ice cream companies would be warming up. Despite all that, doubts persist over the economics of the new format. "The two better managed teams may make some profit but at least three poorly managed teams may just go bankrupt as their expenses and costs are unsustainable," says Anirban Das Blah, CEO of sports marketing firm Globosport. With so much money at stake, expect lots of action—off the field.