The Indian Premier League (IPL) is set to revolutionise the cricketing economy, draw in a new bunch of younger audiences with the T20 format, reinforce India’s superpower status, create club cultures, and build market values that are in line with the English Premier League (EPL).

Just two years into birth, the IPL is enjoying a brand value of $311.44 million (IPL brand value of $240.72 million and IPL brand value to BCCI of $71.22 million) and an eye-popping enterprise value of $2.01 billion, according to UK-based brand valuation consultancy Brand Finance.

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There is no stopping Shah Rukh Khan. Not even a dismal performance at the IPL. Kolkata Knight Riders, the team that the Bollywood star owns, leads the pack of eight with a valuation of $42.1 million. Mukesh Ambani’s Mumbai Indians walks into the crease at the second spot with a brand valuation of $41.6 million, followed by Rajasthan Royals with $39.5 million. The others in the pecking order are Chennai Super Kings ($39.4 million), Delhi Daredevils ($39.2 million), Bangalore Royal Challengers ($37.4 million), Kings XI Punjab ($36.3 million) and Deccan Chargers ($34.8 million).

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The IPL and the team franchises will have to prepare for a long slog if they are to reach anywhere near the value of the EPL and its member clubs. They will have to induct professional management teams, introduce rigorous corporate structures, and chalk out strong commercial streams including merchandising and licensing.

In an interview with Indiantelevision.com’s Sibabrata Das, Brand Finance India managing director Unni Krishnan talks about the wonderful start the IPL has made, the potential it has in creating a global fan base and the things that need to be done to stretch the value of the brand and its market capitalisation.

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Excerpts:

Sceptics have questioned the rationale for valuing Kolkata Knight Riders at $42.1 million. Does the performance of the team get a low weightage in comparison to the high-profile value of Shah Rukh Khan as the team owner?
The valuation process was on 2-3 months before the second edition of the IPL and, in many ways, you can’t predict the future. Having said that, enough data is available to prove that KKR has customer loyalty, a high degree of fan following, and amount of viewing for the matches that they play. Shah Rukh is able to generate an identity for the team. KKR is also able to tie in high-profile sponsors and sources of licensing and merchandising (L&M). Brand value is nothing but an ability to create fan base and convert that into cash.

Even in the inaugural edition of the IPL, KKR didn’t fare too well. And in the second season, its performance has actually skid. So is there scope for a re-rating of the team franchise’s brand value?
Unlike the EPL clubs which have created a track record, the IPL is new. When we went into the exercise, the performances were just a year old. Which is why we can’t yet form a strong view of a clear winner. The valuation of the eight team franchises falls within a tight range of $42.1 million and $34.8 million.

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KKR is one of the clubs which has made money from the first year itself. But valuations are not chipped in stone. When we carry out our second exercise after a few months, we will weigh in certain factors like KKR’s performance, captaincy and blogger issues that could have had an impact on the commercial revenue streams and the value of the brand.

How come a recent study by UK-based Intangible Business and MTI Consulting has almost halved the team valuations that you have arrived at?
Valuations are based on opinions and the quality and strength of assumptions. We have conducted a rigorous exercise.

Has IPL’s shift in home to South Africa for the second season created a disruption in the fan build-up process and hence a dip in valuation?
The IPL property is not under-rated because it has gone to South Africa. We are, in fact, seeing the beginnings of a global iconic brand. In the cricket-following countries like England, South Africa and Australia, it is creating a new interest among the youth, who had moved away to other sports. A whole new set of fans and audiences are being created,breaching ethnicity and race. Led by a blend of Indian and foreign players, it will take the next 4-5 years to build a global fan base for the teams, cutting across the identification of countries. We are going to see a global brand coming out of India much like the Tatas. That is the potential of the property that IPL is.

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But the IPL will not have a clear run in this T20 form of cricket. There are other countries like South Africa and England who are going to have their own form of IPL. Serious competition is going to come. But having said that, the foundations and start of the IPL have been a huge success. The value is just not in marketing but also with a lot of economic substance embedded into it.

Do the IPL teams have the potential of becoming as big as the EPL clubs?
The EPL clubs have a heritage of 100 years and have moved towards corporatisation and rigorous structures. Some of the values of these clubs are in the wide range of $100-600 million. The IPL does not have that kind of legacy or magnitude built into it yet. But it has a lot of headspace for value creation, though much depends on how an organised management process and system is being set up. We may have the teams being listed and huge value being created going forward.

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When do you see listing of these teams happening?
There is a lot of money and Bollywood thrown into the system called IPL. Listings can happen in the next 3-5 years after revenue streams, cost drivers and the need for professional management teams are clearly understood. Sustainable value needs to be built. Some teams may even opt for private equity.

How IPL is going to impact the business of sports marketing in India?
It will be a game changing moment for sports marketing and merchandising in India. The global L&M market is $108 billion and is a significant industry on its own. Manchester United and Real Madrid have a vey strong licensing and merchandising model. India is taking its first baby steps. IPL is the medium under which these processes will come into the country. Bangalore Royal Challengers has already started focusing on sports marketing. L&M has a strong commercial role that needs to be developed, going forward. The IPL teams have appointed top legal firms to protect their IPRs. The leakages inside the system have to be plugged or you will have a case of lost opportunities.

What are the steps IPL needs to take to scale up?
More teams and seasons need to be introduced. But IPL can’t consider the T20 format as its personal fiefdom because competition is already starting. We are yet to see the teams take to the professional management skills that the EPL clubs have imbibed. But the teams are on the right track.

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Will Test cricket be severely impacted because of the T20 format?
The Test format will be in crisis unless there is a reinvention in its game architecture. It is especially dying out among the youth in the developed countries. The T20 game has given a new lease of life to cricket. Whichever format is innovative will succeed. But T20 certainly has an edge.