Investment in IPL Team

I: Your client is a P&E firm, and they are looking to invest in an IPL team. They are primarily looking to triple their revenues in 3 years timeframe. Let’s start discussing by exploring what can be the key levers to their growth before asking for any information. Post that, we can explore on how they should go investing in it?

C: (Reiterates PS, then..) Discussing levers to growth, I would like to explore them in those that are derived from the IPL team’s internal environment and those due to its functional external environment. For analyzing the investment decision, I would explore the attractiveness of the industry, ways to create competitive moats, and potential risks. Can I go ahead with this approach to enlist and discuss them in detail?

I: Sure, this approach sounds great. Go ahead.

C: When I mean to refer to the internal environment of the IPL team, I was including the management structure, quality of support staff (for players and decision-making) and sound financial status (e.g. debt holdings, equity shareholdings, profitability). In the external environment, we need to look at the performance of the team in league, the existing fan base, presence of marquee players, merchandise and ticket sales and advertising efforts across media when discussing growth possibilities.

I: Great, it sounds comprehensive. You can start rest of analysis and ask any questions you have.

C: I would like to know more about the IPL setup currently i.e. number of teams, profit splits across teams, and popularity of teams. Further, I would also like to know more about any financial constraints and other objectives especially in long-term sough out by client.

I: Good you pointed these. The selected IPL team should give high growth for the next 5-6 editions of IPL and IPL 2022 template can be taken as a reference. Also lets discuss on which can be a potential target to invest for client: Established Team like Mumbai Indians/ Mid Table teams like KXIP/ New team like LSG.

C: Sure. Based on my understanding, as growth in multipliers is expected for revenues over a considerable period, the best option seems to be to invest

C: Then would it be safe to invest in a new team and build it from scratch relevant to changing fan preferences and carve a loyal fan base via offerings, marketing efforts, marquee player buys, etc. The other option can be to take a mid-table team and analyze their shortcomings in performance and outreach and implement steps to improve on them to develop more engagement with their fans.

I: Comprehensively stated. With the information given, can we proceed with the analysis? Assume that IPL is already well established and is expected to stay lucrative in long run too.

C: Sure. I would like to analyze the attractiveness of investing in an IPL team, followed by looking at the brand building process and analyzing key risks to achieving the targets. Is this approach fine going forward?

I: Sure. Let’s restrict our discussion to the attractiveness of the team and and risks involved in the process

C: Okay, so, then, I would like to first delve into looking at the attractiveness of investing in a new IPL team by looking into revenues and costs that the decision may bring onto the investor. Is there any area that I need to focus on during the analysis?

I : Let’s focus on the revenues of the prospective IPL team predominantly for the analysis. Go ahead and discuss the revenue streams

C: The major revenue streams for an IPL team are sponsorships, media right sharing, merchandise sales, ticket revenue sharing with BCCI, Prize money (as a function of performance in the league) – arranged in decreasing order of relevance to an IPL franchise. Anything specific that we can pickup and take a deep dive into?.

I: Comprehensively put. The client is looking for an IPL team that can give high returns in merchandising-related revenue aspect. For reference, take a well-established team like MI to make 150 cr+ in merch sales. The new selected team, let’s say, has projected sales of 20 cr in first 1-2 years. How do we boost it by 5x in next 2-3 years or so?

C: Got it. So, a team like MI has a widespread loyal fanbase and I believe it makes maintaining such a high volume of merchandise sales easier. Hence, I would like to explore the ways our invested team can build a loyal fan following predominantly via brand image creation to get the sought-after multiplier growth. For it, I propose to divide the financial year into Just before IPL > During IPL> Just after IPL> Rest of the Year and look into possible strategies that can be followed at each stage.

I: Sure, sounds great. We can look at the brand-building exercise as suggested in stages.

C: Ok. In the time period just before IPL, the focus should be on creating buzz and focusing on consumer activation, and helping recall via digital media- TV Ads, Internet, YouTube, etc. and traditional media-Newspaper, Posters, packaging, etc.,& introducing marquee players.

Also, during IPL the initial efforts must be continued and delivered upon with increased efforts on the lines of ensuring engagement via incentivization and continuous recalling of the team and their progress in IPL (e.g., react, participate and win on the scores scored- Swiggy, Sunstone Scholarship, etc.).A focus on advertising to boost ticket sales via tie-ups, loyalty programs promotions needs to be brought here at this stage.

Post-IPL, the exploits of the team must be spread further to attract enthusiasts and remind loyal watchers of their favorite moments in the short run. In the longer run, engagement must be done primarily via social media posts, and occasional TV & paper ads over the rest of the year to keep the buzz going and engage larger audiences.

I: Great. Do you think that target is feasible or too steep? Give reasoning based on your understanding of the cricket viewer market in India.

C: Sure. The merchandise sales are directly related to engagement quality, the popularity of the team, and the presence of marquee players. Given the tight schedules of the cricketing season and the presence of teams like CSK&MI with a strong and rich IPL legacy and fan base across the nation, it is indeed difficult for a new team to carve out a sizeable loyal fan base quickly with 1-2 years.

I: Correct. So, we can continue with the analysis and suggest what should the team focus on?

C: Sure. At start, the team should start acquiring players at auction who have excellent fan followings or are potential match winners. There needs to be an aggressive digital marketing campaign to attract customers to the Website/app to purchase merchandise. Also, tie-ups need to be set up to procure, sell and promote merchandise in modern trade outlets. The product mix design for merchandising also needs to be kept in mind and varied as the team gains popularity over time (start with more of lower cost items initially – keychains, badges - along with the official team kit and later keep on adding items such as memorabilia, collectibles, special edition merch. etc.).

At a later stage on the development of a stable purchaser base, the merchandise range can be expanded to areas such as training kits, exercise jackets, seasonal wear, etc. This I believe will help to maintain buzz and create engagement even in the period between the seasons.

I: Nice. Can you enlist your framework & KPIs for short-term and long-term for boosting merchandise sales to conclude the case.

C: Sure.

In the short-term (1-2 years):

Invest in Crowd pulling players > Design content (theme song, logos, etc.) & look for exclusive niches >Decide on merchandise mix to be sold > Invest in Digital Marketing >Estimate & Invest in setting up procurement> Monitor and Engage throughout the year

KPIs: Impressions, CAC, Bounce rate, Reshares (for posts), Sales Growth

In the long-term (2-3 years)

Track and monitor market response to merchandise > Expand Merchandise Product Mix if needed > Engage in special and seasonal events/sales of merchandise > Develop tie-ups/loyalty programs to create regular buyers of merchandise

KPIs: Sales across Mix, CLTV

I: Excellent. We can end the case discussion now.