Five elements that contribute to the valuation of the Indian sports industry
It has been ten years since the first Sporting Nation in the Making Report was released. That year - i.e. 2012 - the Indian industry valuation clocked in at just under 4,500 crores. Ten years later, the report is going strong, and so is the Indian sports industry.
2021 has been the Indian industry’s best year. The industry was valued at just over 9,500 crores (INR 9,530 crores to be precise), after having grown a mammoth 62% year-on-year. Over the course of the ten years that the report has been released, the sports industry has cumulatively grown by 54%.
Many believe that had it not been for the pandemic, the Indian sports industry would have crossed a valuation of 10,000 crores in 2020. Nevertheless, we are at the cusp of the milestone that, unless something unexpected happens, we should cross in 2022.
As has been the case since 2012, the biggest contributor to the total valuation is Media spends, which amounted to INR 6018 crore in 2021, while franchise fee was the lowest contributor coming in at INR 236 crores. Expect to see a huge jump in that number when it takes into account the franchise fees for the two new IPL teams in 2022. A stand out number from this year's breakdown comes from Endorsement Fees which crossed the INR 600 crore mark for the first time.
At Sporjo, we are always keeping a keen eye on growth in any element of the sporting industry. Growth encourages further investment, and that leads to more job roles to fill up. Sports jobs and sports employment naturally see an uptick whenever the sports industry climbs.
What does the valuation account for and what do the elements mean?
The report includes five broad elements when valuing the sports industry. They are:
On ground Sponsorship
On ground Sponsorship
This refers to how much brands spent on wanting to be associated with a sport on or at the ground. India is unique in this regard. On Ground or in-stadia sponsorship is often reserved for the league. While team sponsors do get some placement, a majority of the brand placement inside the ground, court or arena is reserved for league sponsors. Sponsors pay a premium for their brand to be visible during a game. Fans stay glued to watching the game, and brands that are willing to bear the costs can have their logos appear on primetime television. On-ground sponsorship has grown by a cumulative of 59% over the ten year period.
This refers to sponsorships that professional sports teams in India have raised on their own. Sponsors who deal directly with a team usually have their brands present on the team’s uniforms - jerseys, tracks, shorts, helmets - and/or on their promotional material. Brands choose to associate with teams depending on multiple factors. For some brands, the star quality of players on a team is a factor. For other brands, the city in which the team is based or represents is a factor. Team sponsorship has cumulatively risen by 26% over the ten-year period, i.e. it went from INR 669 crores to INR 902 crores.
This refers to the amount that teams pay to be part of a particular league. Franchise fees usually help leagues bear the costs associated with running the league. Leagues take care of and manage a lot of the major expenses that come with running a league. Costs such as match officials' management, broadcasting etc. Some of these costs are set off against central sponsorships. But since central sponsorships are also, in some cases, distributed amongst the franchises, it is prudent for leagues to take a franchise fee to set off expenses. A Franchise fee is also a revenue source for the leagues, or in the case of the Indian Premier League, for the BCCI as well. Franchise fees have cumulatively dropped from INR 481 crores in 2012 to INR 236 crores in 2021. This will see an uptick in 2022 once the franchise fee for the two new IPL franchises kicks in.
This refers to the endorsement fees paid out to the top Indian athletes. Brands seeking ambassadors for their products or services often relied on Bollywood stars, and some top cricketers. With the emergence of new sporting icons, and sporting development programs churning out global stars, brands now have a bigger pool of ambassadors to choose from. In 2020, despite the pandemic, endorsement fees climbed up 13% - the only category to see an uptick. In 2021, this number has climbed further by 11% to finish out at 625 crores. A large part of this growth, as mentioned earlier, has come from a larger pool of sports ambassadors. From footballing stars like Sunil Chhetri to Olympian stars like PV Sindhu, Indian brands are spoilt for choice now.
This refers to sponsors spending money to be associated with the broadcast of a sports event. This could be part of a league like the IPL or ISL, or an event or tournament such as the Olympics or a World Championships. In India, there is a desire and a hunger for international sports as well. Channels do well to engage Indian brands that want to reach out to Indian audiences that are fans of International sports. For e.g. per data released by the English Premier League, over 150 million Indians follow the league or at least one of its teams.IPL still reigns supreme with nearly half of media spending - INR 2950 crore - coming from TV advertising associated with the annual cricket league.
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