For Kings XI Punjab last year came to a good end with its dispute with the BCCI being amicably resolved. This means that it will finally break even this year according to Kings XI Punjab co-owner Mohit Burman. Next year is when it will start making profits.??Burman is also adamant about the fact that none of the co-owners are looking to exit. While the franchise will have sponsorship growth of 30 per cent there is still room for improvement says Burman given that the base is small. Indiantelevision.com’s Ashwin Pinto caught up with Burman to find out more about where the franchise is at and about the company’s plans.
Excerpts:
Q. What targets has Kings XI Punjab set for itself this year?
A. We will break even this year. Next year is when we will start making profits. The legal cost, bank guarantee cost are not there this year. We will get more from central revenue.
Q. Now that the issues have been resolved I assume that the co-owners are free to exit. Are you looking to do that?
A. No! None of the co-owners are looking at selling a stake or exiting the team. I am not a seller at any price. In the past, too, there have been rumours of stake sale which turned out to be untrue.
Q. What would be the valuation of an IPL franchise today?
A. It is difficult to provide figures. However, a sort of benchmark has been set with the new franchisee Hyderabad Sunrisers.
Q. Given that Sun TV is paying much more than what the Deccan Chronicle did, isn’t it surprising that stake sale deals have not happened?
A. A lot of people say that a franchise’s valuation has gone down a lot from what Sahara had paid. I am not surprised that other deals have not been done. I don’t think that there are that many people in the market willing to pay these types of prices.For people who came in at the start, the Central pool revenue covered them even if local revenue took time to grow. That has not been the case for people who came in afterwards. You don’t get so much from Central revenue compared to what Sun TV is paying.
|
‘They (BCCI) should work more closely with franchises though. The franchises’ health is not always on the top of their agenda’
|
Q. How do you see Sun TV faring?
A. I don’t think that they will break even for at least three to four years. But I don’t think that they are expecting to. We are breaking even after six years. No business model allows you to break even so soon. Sun TV would have calculated their business model with a five to a 10 year vision.
Q. Are there lessons to be learnt from Kochi’s failure?
A. I don’t think that there are lessons to be learnt. When Kochi bought the team I told those guys that they would lose Rs 1 billion a year. If you project revenues that are not possible what is the lesson? It is a simple business model. Your franchise fee and player costs are fixed more or less. Your central revenue is fixed. The money you can make from ticket sales and local sponsorship can be calculated. It is not difficult to figure things out. Having done all that if you are still going to pay so much money ($333 million) you are not going to survive. It is not rocket science.
Q. Is it fair to say that at one point a bubble was created?
A. I would not say that. I would say that the people who originally came in paid sensible prices. But because of the hype that was built up the two new teams that came in – Sahara and Kochi paid prices that were unsustainable. Clearly the third new party that has just entered – Sun TV has come in at a more realistic price.
Q. Does the BCCI need to work more closely with franchises and understand their needs so that they are more economically viable?
A. The BCCI has done sponsorship deals at a higher price this year. Pepsi has come in as has Vodafone. The idea is that the BCCI is also trying to bring value for all the teams.
They should work more closely with franchises though. The franchises’ health is not always on the top of their agenda but the BCCI also has the onus of doing a successful tournament.
Obviously their premier objective is to make profits for themselves. We come a little bit below. I don’t think that it is understandable but it isn’t surprising.
Q. Keeping costs under control is paramount in this regard. How do you do this?
A. We are into the sixth season of the IPL and have an experienced management in place. The good thing is that we know how things work and what is required. We use our funds judiciously and in keeping with the standards that we have set for ourselves.
Q. Could you shed light on the preparation that goes before the season starts?
A. When it comes to preparing for an IPL season all activities related to aspects such as sales and marketing, ticketing, venue operations, cricket operations, branding etc start approximately five months in advance of the due date of the start of the season. The IPL is a five-month activity of planning for us. What you see during the 45 day season is the culmination of a lot of effort. The sales and marketing part includes sponsorship sales, associations and partnerships, ticketing plans, licensing and merchandising. Other aspects include creatives, photo shoots, the social media, website and app plans.
In terms of venue operations we have to look at things like security, government licensing, hospitality, and stadium upkeep. From a logistics point of view one of this involves getting the best hotel and airline deals. We also prepare the season matrix.
Q. From a cost control point of view are you in favour of player retention and the current auction cap?
A. There are operational and player expenses. I think that the player costs are much higher than what they should be. I think that it should be a closed auction as then it would be fair to everyone. If it is a closed auction then the cap does not matter. In terms of player retention, if you are inviting new franchises then allowing player retention is not fair. At the same time as an existing franchise I want a certain amount of retention as teams to an extent are identified by key players. I would not want a completely new team next year. It is a catch 22 situation. But after the Sunrisers no new team will come in. So player retention is fine as nobody is at a disadvantage. If each team is allowed a few players it is not a problem.
Q. Doesn’t player retention raise your costs substantially?
A. But the player cost will also go up through open bidding. If you want to get a certain player back you might pay more compared to having done it through retention. This is a call that you have to make.
Q. This brings me to the issue that teams change frequently. Again next season the composition of all the teams will mostly change. Doesn‘t this create a challenge in terms of building team loyalty as there will again be confusion next year among fans as to who is playing for which franchise?
A. In my opinion, cricket is a team game and is not led by an individual. Therefore, fans have greater loyalty towards the team then an individual player. However, players do have their own fan following but if a franchise has established connect with its fans then player movement does not make a significant impact.We shall take a call on team composition post the culmination of the coming season.
Q. What is the revenue split between central and local?
A. I would say that is 65:35 in favour of central revenue. Central will always be more. The amount that the BCCI can negotiate from central sponsors will be more than what we can do from selling inventory on our shirt and other things.
Q. How has Kings XI Punjab fared in terms of sponsorship?
A. We were targeting a 30 per cent revenue growth in terms of sponsorship this year. But the base is low. So there is a lot of room for improvement which will happen next year now that the uncertainly about whether we will take part in the IPL is not there.
Having said that Mumbai, Delhi will always get more sponsorship revenue. Shah Rukh Khan’s team will also get more. We are a small catchment area. Also, due to factors beyond our control, like termination, companies were a little scared that we might not play. Now we are on a clear wicket. Next year we will get better amounts from sponsors.
Q. How much of your local revenue comes from sponsorship?
A. Almost 65 per cent of our local revenue comes from sponsorship. We got eight new partners this year in addition to the six existing partners which have renewed sponsorship deals.
This year NVD Solar is the title sponsor. The other companies with us include Lux Cozi is Official Comfort Partner, ACC, Arise Inverters and Batteries, Raindrops Basmati, USL and McDowell’s no. 1 as Official Team Partners.
Q. Did you approach sponsorship in a different manner this time around?
A. We were not happy with the revenues we managed last year. We felt that there was scope for improvement. So we dealt directly with sponsors this year rather than going through agencies. We created a team that approached companies, which made a big difference. Half of the deals done were managed by directly talking to them.
Q. Did it take a lot of convincing given the economic environment to get partners on board?
A. Some deals took three weeks to close this year while others took a couple of months. Some deals are for a year while others are for three years.
At the end of the day it is a question of sitting down with clients and understanding their business objectives. We have to match their objectives with our marketing parameters. We see if there is synergy in what we are doing and if a tie up is mutually beneficial. Different companies have different goals some want visibility, others want activation while some want to use our platform for better fan engagement.
Q. Could you give me an example of this?
A. NVD Solar came on-board as title partner since it is expanding its operations to North India. They are launching products using the franchises players as a platform. On the other hand, Lux Cozi does activation with their wholesale and retail people. They run gratification contests where people can see matches.
Q. Have you approached ticketing and hospitality in a different way this time around?
A. We have set a benchmark for the services we offer at the stadium and very closely monitor feedback on ‘customer experience’ to try and make it even better every year.
Q. The licensing and merchandising part has been slow for most franchises. How does Kings XI Punjab plan to grow this area with Miroma Entertainment?
A. Licensing and merchandising (L&M) is an integral part of our campaign as it is a valuable tool to reach out and connect with our fans. To give our fans a chance to adorn their favourite team‘s merchandise, we ensure that we offer them a variety of merchandise and licensed goods. We have a good long-term deal with our L&M partner and are on the right path. From the revenue perspective too there shall be an increase in returns from our L&M programme.
Q. What things do you do to keep the franchise alive during the off season?
A. We have undertaken a number of activities in the catchment area with the intent to strengthen our bond with our fans and these have been very well received.
We had organised The Kings XI Punjab Cup in the catchment area, which like every year saw huge participation and was a platform to promote cricketing talent at the grassroot level. We have also launched a mobile application for iPhone/iPad and android phones to keep our fans updated about information related to the players, live match data, music, photos, news and event updates, fixtures and the KXIP YouTube channel stream. Apart from this, a live in-app FanWall is available to allow the fans to engage with each other and the team by posting comments, likes and photos on Facebook and Twitter. For us, our fans are at the forefront of any activity that we undertake.
Q. Is Kings XI Punjab also looking at playing matches in foreign locations against clubs of other countries?
A. Yes! We are currently planning for such games overseas in ICC associate countries under the guidelines laid down by the BCCI.
Q. What impact do you think twenty20 leagues in countries like Australia will have on international cricket?
A. I don’t believe that globally so many leagues can work on one sport. The BCCI has stated that no Indian player can take part in any other league. So the other leagues are disadvantaged. Indian players are integral for a league to be successful.
Secondly I don’t believe that there is a window where many leagues can take place with all the good players. The other leagues will have second tier players or they will be bad copies of the IPL.As far as the IPL’s impact on Indian cricket is concerned it gives youngsters a platform to show how good they are. They will not choose the IPL over the country. But they will use the IPL as a platform to play for their country.
Q. The Champions Twenty20 League has not got the desirable viewership numbers. Where do you see it going from here?
A. Unfortunately it has not managed to get the numbers. I don’t know if it will continue to be there. I have my doubts. But if it continues then it is good for the IPL teams.
Q. What is the challenge that it faces?
A. The challenge is that people get confused. Players can play either for their home team or their IPL team. So suddenly teams become disjointed. Key foreign players in an IPL franchise might play for their local franchise and vice versa. There is confusion on which team is from where. Maybe it needs more time.
