The League of the Indian Premieres

Having completed just three seasons with fourth on the way, the Indian Premiere League has become the highest-flying league in sports entertainment in the world. Right from its inception IPL has grabbed the eyeballs and imagination of not only the viewers and cricket enthusiasts but of the business houses, industrialists, celebrities, Bollywood and media. The mixture of glamour, money, entertainment coupled with the slam-bam shorter version of the game has paved the way for the success of IPL in the cricket frenzy nation.

It’s all about the money

The Board Of Control For Cricket In India (BCCI) valued at a staggering $1.5 billion (by Forbes in 2006) is the richest cricket association in the world. In the same valuation, Forbes pegged International Cricket Council (ICC) at $200 million only whereas the England and Wales Cricket Board and Cricket Australia were valued $270 million and $225 million respectively. It is no surprise that BCCI alone contributes approximately 70% of the cricket expenses incurred by ICC.

Stirred by the growing potential of the T20 format of cricket and inspired by the club model of the English Premier League, Subhash Chandra of Zee TV with an initial investment of US $23 million and assistance from Kapil Dev created the Indian Cricket League (ICL) in 2007. Though receiving a lot of accolades and hype, the ICL ceased to exist in 2009 after just two seasons. There are many reasons cited for its demise such as restrictive media rights and financial issues and lack of transparency but the major reason for its fall was the lack of support from the BCCI and ICC.

Sighting a good opportunity for achieving its financial and sporting objective, BCCI initiated the Indian Premier League in 2008. The IPL involved not only the cricketers from across the globe but also the leading Indian corporate houses and businessmen who were able to induce money in the mega-event. From the very first season, the money involved in the IPL has grabbed headlines across the world, not only the franchises but the astronomical sums of money used to buy individual players has caught the fantasy of people. But are these huge sums of money truly justified, let’s look at the revenue and cost drivers of the various franchises. 

Revenues	Costs
Central Media rights: Shared between the IPL and the different franchises.	Team franchising costs: Each franchisee has to pay 10% of its total team costs every year to IPL.
Central Sponsorship rights: Around 60% of the amount is distributed among the franchises.	Marketing costs: incurred for the team promotion. Stadium contract expenses
Franchise level sponsorships: varies drastically for franchises from sponsors to team partners to entertainment partners.	Player costs: along with the cost of managers and coaches. (Each franchise has 18-22 players on a 3-year contract and tradable after a year)
Gate receipts: collected by franchises, they form a major source of revenues.	Administration expenses around the conduct of matches.
Merchandise: range from apparels to memorabilia to souvenirs and gift items.	Other event management expenses.

The huge costs have kept the financial pundits busy in calculating whether the model is feasible, when the new franchises that have paid huge sums of money (Pune $370 million, Kochi $333 million) would be able to breakeven. But perhaps the entity that has been most excited with the event is the Income Tax Department, who has not only received loads of earnings from the franchises and the team player auctions but has kept its officials busy with doing the background check on the various parties involved. 

The huge influx of money has affected many other aspects of the society. The increased number of promotional activities has given a new dimension to the Indian events management industry. Parental groups are more open to children taking up sports as a career and this has also triggered an increase in the cricket coaching and practices in the country. On the other side, it has put another stab in the ailing condition of other sports in the country. A similar model was adopted by hockey, through the Premier Hockey League (PHL), but apparently the national sport was not able to get enough support and is now defunct.

Advertisements and the ICC World Cup 2011

The IPL has been positioned as an entertainment source rather than a cricket event (‘Manoranjan ka Baap’). The success of this can be gauged from the viewership that IPL garners which is from a much wider demographic set, as opposed to a male-dominated World Cup viewership. Result, a large number of FMCG and women-focused brands are focusing on IPL 2011 instead of WC 2011. 

But is the high ad rate in IPL really justified, in IPL- 3, the ad rates later escalated to approximately Rs 8 lakh and Rs 10 lakh per 10 second slot from the initial rate of Rs 4-5 lakh. Advertisers argue that during the IPL, viewership on other entertainment channels on television drop by 20-25%) restricting the alternatives for them. This belief has further been reinforced by the increasing number of sponsors for IPL. But studies have shown that the investments made by advertisers do not necessarily lead to heightened visibility or increase in awareness of the brand. As per a report, “Out of 65 brands that were associated with IPL 2010 in some form or the other, only four brands garnered unaided awareness of 25 per cent or more.” This is a clear indication that just buying an advert during the matches or acting as a sponsor to the IPL or any of its franchise does not result in greater visibility. Greater return on investment will depend on a combination of factors like overall media visibility of a brand, likeability of the television commercials, and advertising proposition among other factors.

In conclusion, it may be premature to predict the sustainability of the IPL model as of now, but one thing is for certain that it has seen an unprecedented initial response and the immediate future seems bright. A lot would depend on the fourth edition of IPL this year that follows the World Cup. It can be said that IPL-1 was a more of an experiment, IPL-2 held in South Africa did not provide a good basis for future evaluation, IPL-3 though should have been a good peek into the future, the changes brought in IPL-4 with 10 franchises (10 teams, 94 matches, over 60 days in all; against the present 8 teams, 60 matches, 37 days) competing for IPL media, sponsorship revenues and resources will truly set the standard for any extrapolation of IPL revenues and valuations, and also answer the apprehensions raised around the economic uncertainty, overdose of cricket and the possibility of saturation from the T20 format.

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Japan Crisis: Can the Phoenix resurrect itself from the ashes?

Trodden houses scattered over ‘wasteland’, bodies washed away and nothing but debris all around. That is all that physically remains of Rikuzentakata, a town that once held more than 23,000 people. It started with a massive earthquake measuring 9.0 on the afternoon of March 11^th. It is the largest earthquake in history of Japan – equivalent in power to 30,000 Hiroshimas. As the quake lifted the ocean floor, it triggered an enormous tsunami that ripped apart with ease some of what were considered to be Japan’s best coastal defences. The damage has been immense with more than 16,000 people are feared dead and about half a million people are in emergency shelters reeling through a bitterly cold snowstorm. Transport infrastructures including roadways, railways and airways have also been demolished and survivors are facing excessive shortage of food, petrol and electricity.

The plight of the people has been aggravated by another mounting concern: that of a meltdown in the damaged nuclear power plant at Fukushima Daiichi. Although three of the six nuclear reactors were offline for maintenance and were assumed not to pose any major problems, some of the spent fuel was still in the storage ponds. The tsunami led to an explosion in the nuclear power plant leading to a fire at unit 4 which was accompanied with rise in the radiation levels and this raised the suspicion that spent fuel must have been involved. Left on their own, spent fuel rods would eventually boil their ponds dry and then react with air and start melting generating radioactive emissions. The radiation levels have increased and the region within 30 km radius of the plant has been evacuated.

Economic impact of the calamity

With the interest rates almost touching zero percent and growth at a standstill for more than a decade, it cannot get any worse for Japan. Although the extent of damage from the tsunami is not completely known, experts estimate that cost of rebuilding homes, factories, bridges and roads and getting the supply chain in place could be as high as $200 billion. Apart from these direct costs, the harm to the world economy (let alone the Japanese economy) could be huge. Japanese majors such as Toyota, Hitachi and Sony have shut down their manufacturing facilities for at least another week. If the danger of the radiation persists, many businesses might shut down their facilities which would deter investments and eventually hamper the rebuilding and hurt the exports.

The nervous mood has already created a financial upheaval which is evident from the fact that Japanese market plummeted 10% in a single day and 16% overall - the worst two day fall since 1987. It was not only the Japanese markets that suffered the blow, but even the U.S, Asian and European markets were under pressure with stocks down by at least one percent after the crisis. As per the latest IMF projections, if the growth in Japan flattens, there will be a 0.1% decline in the global growth rate. Moreover, the fiscal deficit of Japan would rise further to manage the export infrastructure which has been badly damaged. Even if the nuclear accident is brought under control, the nuclear dilemma concerned with safety will have a huge impact on the nuclear industry as a whole.

A ray of hope                                                                                   

It is said that “The economic impact of a natural disaster is often short lived. But would this be the case with Japan?” It is not the first time Japan is going through such dire circumstances. There have been severe calamities earlier as well, be it the great Kanto earthquake in 1923 or dropping of the atom bombs during the Second World War or the Kobe earthquake. However, every time a disaster has struck Japan, the zeal to come back has been remarkable. Japan spent huge sums of money in using shock resistant construction methods, raising public awareness on disaster management and new earthquake system after the Kobe earthquake. An early-warning system was launched by the Japan Meteorological Agency in October 2007. It provides brief advance warning by television and radio before the earthquake actually strikes. A warning was issued shortly before the earthquake struck Japan on March 11. It is believed that the damage caused by the earthquake is far less both in terms of lives lost and economic impact due to the proactive measures taken by the Japanese government.  

Although disaster does not stimulate the economy but in the year when the Kobe quake happened, the Japanese economy grew by 1.9 % as opposed to 0.9% in the previous year. Moreover, Bank of Japan has injected $180 billion to stabilize the economy after which the IMF said that Japan won’t need its help as it has adequate financial means to get through the disaster.  So, there is a hope that this terrible event will not cause a long lasting impact on the Japanese economy. The impact might be visible in the short run with a few percentage point dip in their GDP but in the long run, after the healing and rebuilding starts, it may bounce back strongly. Reconstruction will provide business for builders and producers of capital goods which might offset some of the negative impact of drop in the output.

The amount of discipline and resilience Japan has showed during the crisis has been tremendous. There have been no instances of looting and the people have not created much of a panic which highlights their strong determination. Japanese people should look at this catastrophe not as a time of grief and mourning but as a time of rebirth.

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“Teach your old doc new tricks”

Its 9:00 AM, you walk into your office and open Outlook to check email, start on that report on MS Word and build the model alongside on MS Excel. Within an hour you’re in the conference room giving a presentation you made on MS Powerpoint to the boss. Seems like just another day right? In all of this, what would you have done without the companion which has become a part of your life like none other - the ubiquitous MS Office.

One of Microsoft’s profit havens, MS Office as a concept was challenged by Google Docs, a product that helps users create and edit documents online. MS Office has been the suite for editing and saving documents, excel sheets and powerpoints for years. Its products are user friendly, feature rich and most importantly, widely used. Hence, replacing them by a web-based document system is not an easy task. Started in August 2005, Google Docs had fewer features than MS Office and did not achieve high adoption. Although it is extremely useful for collaborative work, old habits die hard, and making people switch completely to a browser based system has not worked yet.

In Feb 2011, Google announced a new ace up its sleeve – Cloud Connect, a toolbar that will “teach your old doc new tricks”. It can be added onto MS Office and then used to save documents online or edit them collaboratively. This appealing feature added to the comfort of a familiar software has the capability to emerge as a winner. From MS’s point of view, it is a downright cheeky move – a free application that sits right inside MS Office and connects all documents to the web.

Cloud Connect is a service that allows you to access the Google Cloud via an MS application. It is the first step to moving all computing onto the cloud and will go a long way in familiarising users with the concept of an online operating system.

‘The cloud’ is another one of those technical buzzwords doing the rounds today which refers to the concept of offering software as a service. The next battle is touted to be on the cloud – a place where Google has definite advantage over MS. Google has developed its cloud technology over the years since fundamentally, cloud computing is closer to Google’s current way of operating than MS’s way of on-premise software.

It is nothing new for Google to challenge a market leader. Apart from specialising in creating entirely new markets and needs for web-users, the company has become famous for challenging companies on their own turf and emerging with flying colours. Starting with search, Google has slowly entered MS’s profit havens by bringing out its own operating system – Android, internet browser – Chrome, documents sharing and editing system– Google Docs and mobile apps - YouTube, Maps.  To counter Google’s moves MS invested heavily in its search technology and released Bing, a ramped up version of MS Live Search in May 2009. It also bought over Yahoo’s search technology to challenge Google Search – which currently has 65.4% market share. 

With the boundaries between online applications and offline software getting blurred, MS and Google are now at loggerheads to gain supremacy in the computer users’ world. While MS went for Google’s bread and butter by re-entering the online search market, Google has encroached on MS’s Office, Internet Explorer and Windows turf. MS is famous for being a master at imitation, and with its pockets full of cash and an army of developers, it has the capability to crush Google products in the same manner that it crushed Apple’s Mac. However, Google has successfully challenged MS in every arena so far, emerging as MS’s strongest competitor.

While we’re teaching our MS docs to do Google tricks, the war between the two technology giants has just started.

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