SPONSORSHIP - INSATIABLE DESIRE FOR MONEY
Mar 22 - 28, 2010
Sponsoring sports events worldwide on humongous scale is part of the current evolution of modern day society triggered by consumerism and fired up by global media revolution providing immense opportunities to the corporate world to earn both power and pelf.
Media revolution is offering unheard opportunities to thousands of big and small firms across the world to go for the big piece of the financial pie which the consumerism offers them all.
Twenty four hour cable TV channels and IT technology catching billions of consumers unawares in the comforts of their homes have encouraged powerful corporate firms to seek every avenue to multiply their profits beyond once imagination and at an scale never heard of.
Supporting or sponsoring sports is one of the most sought of avenue which has both glamour and revenue generating. Sports is entertaining and exciting with high drama and has no time bar. Sports events take hours and days to complete and some times they last almost a month like the Football World cup where half of the world nations vie for national honor.
The first sporting event which attracted big sponsorship was Formula One car racing. No other sports including Olympics of world football cup provided the opportunity to the big automobile corporate world than the Formula One.
The big era of sponsorship of Formula 1 really started in 1968 when the Gold Leaf brand sponsored the Lotus cars. After that, sponsors began to flood into the sport exponentially. Big television companies of the USA suddenly found out that they could earn more money than from small scale advertisement of products on the screen by offering Olympic movement and football world cup money these two institutions had ever heard.
USA TV companies ABC and CBS in early eighties were the first to offer millions of dollars to the International Olympic Committee for exclusive rights for beaming live pictures of action of Olympics. The IOC already hard on cash suddenly found an unexpected source of income which created a revolution in sports sponsorship. The revenue earned from TV sponsorship filled the coffers of international sports federation who earlier had no money to run their sports. That was the beginning of big money finding its way in sports. Since then the sports sponsorship has broken all records. Be it golf, car racing, horse racing, tennis, Olympics, regional Olympics, football or cricket, you name it and sponsors open up the floodgates of money for these sports and many others.
Long before multi billion dollar Indian Premier League rose on the horizon, Sharjah's Abdul Rehman Bukhatir adopted the idea provided by Pakistani all rounder Asif Iqbal to launch Cricketers Benefit Fund Series (CBFS) which befitted both the game of cricket in general and the players in particular. It was based on the idea of Australian media tycoon Kerry Packer who started a revolution in the traditional game of cricket by bringing huge amounts of money and changing the whole face of the game as traditionally followed in the villages of Britain.
Pakistanis and cricketers of other British Commonwealth countries earned good sums from cricket in desert. Even the retired cricketers got good money from the CBFS. Pakistan's first contact with sports sponsorship came from English Biscuits where its MD Khawar Butt a Ravian and a known cricketer of early fifties sponsored a badminton event in seventies. Later on he sponsored many sports and other social events including journey on Indus River.
Pakistan Tobacco is also amongst early sponsors of sports in Pakistan. Pakistan Tobacco was the first to offer then BCCP a small amount to get title sponsorship of domestic events. The then secretary of the BCCP Arif Ali Khan Abbasi was quick to realize in eighties that even a small amount would start a revolution. Arif Ali Khan was the first to invite IMG, the company that employed Andrew Wildblood, the father of the IPL to help in getting sponsorship.
The PCB which replaced BCCP signed a lucrative ten year deal with Ten Sports of UAE which helped the cricket administrator to enhance test fee of Pakistani cricketers.
Cricket has been played internationally for 165 years and was once a contest at the Olympics. With 104 nations as members of cricket's governing body, it's one of the most popular sports in the world. But before the IPL, professional leagues had never truly been run as a business. Most leagues around the world are operated by nonprofit entities and teams owned by athletic clubs with thousands of members; often, making money is a low priority. National teams have always been cricket's top draw.
Advent of IPL in which the rich were offered to field teams to earn money and fame was the ultimate in sports sponsorship. It has brought so much money that even Fort Knox has no space to store it.
Board of Control for Cricket in India (BCCI) would be filthy rich with the launching of the IPL.
BCCI would be richer by Indian Rs.7.5 billion by organizing the IPLIII at home, thanks to a scrum of brands rushing to cricket's newest T20 version.
Three year deal with internet giant Google and general entertainment channel in January this year are worth at least Rs 80 crore and Rs 100 crore, respectively.
IPL also bagged sponsorship deals with Swiss watch brand Banderlier, Karbonn Mobiles, Indiagames, Maxx Mobile, V Rock Mobile and Global Cricket Ventures for merchandising, which collectively are worth at least Rs 125 crore a year. Tyre company MRF too joined the IPL bandwagon by sponsoring the blimp a balloon that floats over the stadium, in a deal said to be worth Rs 15 crore a year. New deals like the theatrical rights sold for Rs 330 crore for 10 years also helped boost IPL revenues this year, besides the many sponsorship deals.
Currently, the broadcasting rights and central sponsorship earnings are shared with the eight teams, with IPL keeping 20% of the broadcasting money and 40% of the central sponsorship pool.
Multi Screen Media, the owner of SET Max, along with World Sports Group paid around Rs 8,200 crore for exclusive broadcasting rights for nine years after the deal was renegotiated during the last season.
Existing sponsors of IPL such as Hero Honda, Vodafone, Citibank and Kingfisher, meanwhile, are believed to have increased their spending by nearly 20%. Vodafone, which paid around Rs 30 crore last year, is spending nearly Rs 35 crore in IPL-3. Hero Honda, Citi and Kingfisher had spent around Rs 20 crore in the last two seasons. Not only the BCCI and the owners of eight teams in the fray would reap rich harvest even the Government of India would get huge revenues.
According to reports, GoI will get approximately Indian Rs 2 billion tax from the third edition of IPL T20 cricket tournament. The taxes would be accrued as Tax Deducted at Source (TDS) from the remuneration paid to players, umpires, coaches, commentators amongst others under the income tax category while advertising, marketing and consultancy services of the sporting extravaganza will be taxed under the service tax bracket.
As per the estimate calculated by the field formations of the revenue department, the IPL will fetch about Rs 100 crore each under the direct (income tax) and indirect (service tax) categories.
The GoI had received Rs 91 crore as taxes under the TDS category from the first edition of IPL, while the second edition which was hosted in South Africa last year had fetched the department a "few crores" as income tax accrued from the BCCI and through other sources.
IPL launched three years ago had come a long way in such a short span. IPL's finances show the league generated $209 million in revenue in its second season, for an aggregate operating profit (earnings before interest, taxes and depreciation) of $89 million. The average franchise is worth $67 million, a 31% increase in just one year.
The IPL was conceived in 2007 near some hallowed ground for sports: in London's Wimbledon suburb. There, Lalit Modi, representing the Board of Control for Cricket in India (BCCI), the governing body of Indian cricket, and Andrew Wildblood, an executive at sports management powerhouse IMG, discussed the disconnect between cricket's worldwide popularity and the lack of commercial success of any domestic league.
In January 2008, eight IPL teams were auctioned for a combined $724 million (to be paid in 10 annual installments to the nonprofit BCCI, an umbrella for the IPL). Just three months later, the Redskins' "First Ladies of Football' were flown in to shake their pom-poms at the sold-out opener. Proceeds from the auction, as well as portions of national media and sponsorship deals, are reinvested, mostly in India's aging (as far back as the 19th century) cricket stadiums, including some of the 10 rented by IPL teams for $100,000 per match.
First season of the IPL in 2008 semifinals and final drew 62 million viewers in India, with a per-match average of 11% of the nation's total cable audience. IPL opted out of TV deals with Sony and World Sports Group, risking nearly $1 billion of guaranteed payments over the next nine years. The gamble paid off, to the tune of a 98% annual increase from those broadcast partners, both of which deemed the IPL too valuable a property to lose. One reason the league is so TV-friendly is its format: Matches are held under Twenty20 rules that speed up each contest to about three hours (a traditional cricket match can last days, with tea breaks). The format is sweeping cricket worldwide.
Revenue from TV, mobile and digital rights deals totaled $100 million for the latest season, of which teams split an 80% share equally. They also divvied up 60% of the $40 million in league sponsorships, including a cool $10 million from the league's title sponsor, DLF, India's largest real estate firm, and $5.5 million from motorbike maker Hero Honda.
Despite playing 5,000 miles away, Indian companies actually increased spending on team sponsorships, which grew by 60% to a collective $60 million. Ground staff scurried to change signage before every match so that none of the floating teams' advertisers were underrepresented.
The first season averaged 58,000 fans per match (80% more than a typical Major League Baseball game), and new investors clamored to climb aboard. In February, an ownership group that includes Lachlan Murdoch, the son of media baron Rupert Murdoch, sold a minority stake in the Rajasthan Royals to investors fronted by actress Shilpa Shetty in a deal that reflected the rapid value appreciation. Just last year, the Royals were auctioned for a league-low $67 million over 10 years.
With its deep-pocketed owners and global appeal, the Indian Premier League has shaken up professional cricket, luring top players from five continents with paychecks as big as $111,000 per three-hour match. That's a stunning sum in a sport where domestic leagues have traditionally been an afterthought to the international version of the game.
While cricket is one of the most popular sports in the world (it's played competitively in more than 100 countries), before the IPL launched last year, no domestic league was truly run as a business.
But with IPL teams now paying top players as much as $1.55 million for just a five week season, versus $500,000 to $1 million, depending on the country, for an almost year-long slate of national team games, cricket is in the midst of a dramatic shift.
Some of the sport's biggest names are already leaving their national teams to focus on the club game. Included is Sourav Ganguly, the former Indian team captain, who was paid $1.1 million to play for the Kolkata Knight Riders this year.
English star Andrew Flintoff is receiving less than half of his $1.55 million salary from the Chennai Super Kings. The IPL is home to the nine highest-paid cricket players in the world.
Mahendra Singh Dhoni, who plays for the Chennai Super Kings and tops our list as cricket's first $10 million-a-year man (that's $5,426 for each run scored). His $8 million in endorsements, from the likes of Reebok, General Electric ( GE - news - people ) and Pepsi (PEP - news people ), is 45% higher than any other player. Among all Indian athletes and entertainers, Dhoni's 17 corporate sponsors is second to only Bollywood star and co-owner of the Knight Riders, Shah Rukh Khan.
Cricket's second highest earner is Sachin Tendulkar. The holder of numerous offensive records, Tendulkar, known to fans as Little Master, is considered among the greatest batsman in cricket history. Now in the twilight of his career, he's one of five IPL players who have been bestowed "icon" status, meaning he automatically receives a paycheck 15% larger than his highest paid teammate. Tendulkar's $1.1 million salary from the Mumbai Indians helped push his total earnings to $8 million over the last 12 months.
IPL encourages spending on players and punishes teams that don't pay them enough. Last year he fined the Rajasthan Royals $600,000 for spending $300,000 under the league's minimum threshold at an auction where teams selected players. He also raised the salary cap from $5 million per team in 2008 to $7 million this year.
The Kings XI Pubjab's highest-paid player is Yuvraj Singh, who earned just over $1 million from the team and another $4 million from endorsements, primarily from Reebok and Fiat (FIATY.PK - news - people ), making him the third richest cricketer over the last 12 months. Singh, who's 27 years old, was once awarded a Porsche 911 and $250,000 as a prize for his batting achievements in a tournament.
Emirates, an international airlines based in Dubai has been committed to sponsorship in both the UAE and around the world for over twenty years, beginning with the first powerboat race held in Dubai, in 1987.
HH Sheikh Ahmed bin Saeed Al-Maktoum, Chairman of Emirates, sees sponsorship as vital in the airline's marketing strategy.
"We believe sponsorships are one of the best ways to connect with our passengers. They allow us to share and support their interests and to build a closer relationship with them," he said. Emirates have sponsored a number of events, stadium and clubs. It is official FIFA World Cup Partner. Areas where Emirates have invested heavily include Arsenal FC & Emirates Stadium, AC Milan, The Emirates Cup, Paris Saint Germain, Hamburger SV
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