No bids to sponsor Indian Cricket Team; experts debate why

Excerpts from Your World at 10 on CNBC-TV18 Watch the full show » Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty?

On November 2, the Board of Control for Cricket in India (BCCI) floated a tender inviting sponsor bids for the Indian Cricket Team. Twenty days later not a single bid has come in. The BCCI is now planning, we hear, to float new tenders by the base price for Test, one day international (ODI) and T20 matches will be lowered. The current sponsorship with Sahara ends on December 31, 2009. Why did no bids come in, is the asking price simply too high?

In an exclusive interview with CNBC-TV18, Shailendra Singh, Joint MD of Percept and Pradeep Magazine of Hindustan Times discussed the issue.

Below is a verbatim transcript of the interview. Also watch the accompanying video.

Q: What is the matter, no bids to sponsor the Indian cricket team? Is this finally a statement that advertisers are making that the BCCI is simply asking for too much or is there simply little money in the system and they want a better deal?

Singh: The issue, predominantly according to me, is timing. Also, the fact that it came back to back with the announcement of the fact that Indian Premier League (IPL) season 3 will now have 90 games. Therefore, IPL becomes a potent product that sponsors could look at for sponsorship and association.

Also, the third factor from the fact that T20, ODIs as well as Test matches are all trying to fetch the same price, we all have understood the fans, the media that these three products are getting different kind of ratings. Therefore, they require different kind of pricing. So all these little factors have made a huge difference on the impact of the sponsors and investors and they personally feel that they should wait and watch, and hopefully, they will get a better deal in future.

Q: Mr Singh pointed out two-three very clear reasons, would you say that the IPL phenomenon is going to be a double-head sword for the BCCI when it comes to getting values out of the other forms of the game?

Magazine: It obviously will be because if IPL is sold out to be the event for advertisers and for sponsors and then you have India playing and also the format gets split into three now even IPL is T20. India will also play a World Cup--there are three formats. So probably the greed of the board, if I may use the word, that if they want to generate more and more money for themselves, they have to be realistic and realize that after all there is so much money which advertisers or companies can spend in. Beyond that they also have to look and they also have to balance their budgets.

Q: You know about the Sahara sponsorship very closely; between 2001 and 2005 a little less than Rs 100 crore, between 2005 and 2009 a little over Rs 300 crore, 2009 to 2013, double that roughly is what the BCCI is asking for, is that correct?

Singh: Yes. We have been fortunately part of both the bids for Sahara and we have been associated with it from day one. However, I also feel that in the current market environment, like Mr Magazine mentioned, the sponsor is looking for a better return on investment (ROI). Therefore, if you look at a particular potential sponsor with this kind of number, he is actually dedicating practically nearly 60-70% of his outlay in the top ten sponsors. That is a lot of money because the ROI is playing a factor in the market today. People or clients want better ROI, and therefore, may want to allocate their budgets on short-term little buzz for their products and sales. Therefore, this becomes a long-term investment and this becomes more about branding and perception, which I think Sahara has enjoyed till today. But now the numbers play a crucial role even for sponsors.

Q: If there are no takers, does the Sahara Association continue? Give us a bit of a detail on that.

Singh: It is a dangerous question but Sahara has enjoyed the association with the team sponsorship but in the last bid, they were top ten contenders from the country and they were quite close to the bids in the final round. So, there is a desire for many top brands to be associated with the Indian team. However, Sahara enjoys that comfortable position and I think if the price is right then not only Sahara but even in brands like Airtel, IOC and Reliance there is a lot of keenness. However, I think ROI is playing an important role currently in the market environment.

Q: Mr Singh is saying that there will be interest, advertisers are waiting for the right price, is that the way you are interpreting it as well?

Magazine: Even I would guess so because the kind of money, which the BCCI is asking for, obviously the advertisers or the companies are not willing to pay. So they would want the bid to be a lower one, they would want the base price to be lower obviously that is why they haven't bid.

However, the other point I would want to raise and this is purely from a cricketing perspective--since I am a cricket man--it is something to worry for a cricket fan that if there are no takers in a way for the price that BCCI is quoting for Test format and ODIs and T20 where the national team comes in. That means that there are advertisers who are willing to spend money on IPL which is basically a club kind of venture where franchises have bought in teams. That is where their priority lies.

Secondly, I would like to point out that even in IPL, franchises have invested huge money and so far in these two years, despite whatever projections have been made in the media. It is obvious that nobody apart from the board has made any money. They have suffered losses, so obviously now to put in more money wherever they will put in cricket, they will be extra careful.

Q: What would be an interesting, acceptable proposition from the BCCI where advertisers are concerned because the news is that the BCCI will have to refloat tenders, isn't it?

Singh: Indeed, it is difficult to commit what I think is right or wrong because the dimensions of the game and its pricing were completely reformed by Mr Modi's entry. He has changed the goal post and so has BCCI in the recent times for broadcasting rights, sponsorship rights. Nobody imagined a team being sold over USD 200 million, etc. So it is a bit difficult to say what is the right price. If the demand and supply proposition and also in terms of classification, I personally feel that Test match is institution of the sport, we must respect Test match cricket and we must keep it alive for the sake of sport. ODIs and T20 come in a different bracket, I don't know about the right prices but if you could break these products up differently, possibly there could be more potential sponsors in Test and therefore T20 could demand a higher price.

Q: But you don't have a problem with the pay-per-match model that is being talked about?

Singh: The issue is that every client will now evaluate the ROI. So if you ask for Rs 10, whether it is worth or not all the clients have got scientific with the recent meltdown and the recession. Everybody is cautious with their money. Earlier, it was a lot of pride in association with the Indian team and putting your logo on the chest of the Indian cricket team, but I think now it goes beyond that. People want to know whether they are going to get their money return. In such large sponsorship, there is another rule that we must know and we must follow that when you invest, it is generally a 1:1 ratio but in this case it could be 1:0.5. You invest Rs 500 crore, you need to put another Rs 250 crore to popularize the idea that you are associated with the Indian team. So you need to have deep pockets to even make this sponsorship work for you.