The Indian Premier League (IPL) is caught in the midst of a storm with dark clouds hovering over team ownership issues, sources of funding, corruption and match-fixing charges.

Lalit Modi, the architect of the IPL, is being accused of holding hidden stakes in some of the franchises. Income-Tax sleuths have broadened their probe into the financial details of the IPL by conducting nationwide raids cut across Multi Screen Media (MSM), World Sport Group and the franchise owners.

So how will these chain of events affect the brand value of the IPL pegged at $4.13 billion?

In an interview with Indiantelevision.com‘s Sibabrata Das, Brand Finance India managing director Unni Krishnan says the risks for brand value erosion are significant if the IPL does not quickly put in place proper management systems and processes.

Excerpts:
 

 
With controversy swirling around the IPL, is there a need now to downgrade the brand?

It is too early to take a call on this. The probe has started and we will have to wait for the government to come out with a final report on the investigations before we can comment on whether the IPL brand is fractured.

But in our February report, we had cautioned that the IPL branded ecosystem is rapidly approaching an inflexion point. We had predicted this to happen in the next 6-10 months. This has come sooner than that.

Surely, there are definite weaknesses regarding brand value governance and transparency, management systems and processes. But have we got a revised value of the IPL brand? Not yet.
 
 

Does this mean that there is no brand erosion at this stage?

The risks for brand value erosion are significant if things are not managed swiftly and the stakeholder relationships start weakening. But the truth is that the IPL is a very valuable brand created in a very short period of time. The wealth that can be created by the brand is going to be substantially significant for many stakeholders. A conducive ecosystem has to be created to move the brand to the next level.

 
 
But will it be safe to say that the IPL brand has got tainted?

The fault is not with the IPL brand. Some people are commenting that the property be nationalised. That is not how you run a global commercial property like the IPL. Iconic brands such as the IPL are national assets and a source of wealth creation. The question is whether we have the capability and determination to put systems and processes in place to manage one of the best brands we have produced. If we fail to do so, and all the allegations also turn out to be true, the brand will take a big knock.

 
 
Enough dirt is thrown on Lalit Modi, the architect of the IPL. Now it looks like the man who created and built the IPL property would be thrown out. Will that not damage the IPL brand?

Let us not confuse the individual called Modi with the business and the brand. One individual is not capable of running such a complex business ecosystem like the IPL. The need is to fix the weaknesses.
 

 
Are you suggesting a proper balance of power system?

As the architect of IPL, Modi has done a great job. But for such a large-scale property, we need 10-12 key members. We are not sure if the IPL governing council acts as a rubber stamp. We need to go through these questions urgently if are to create a sustainable brand property.

The IPL brand is a set of complex relationships with fans, franchises, sponsors, business houses and players. This can create huge value in future if properly managed - not by one individual but by a system.

  
‘The IPL is a global commercial property produced from India. The unfortunate part is that if we don‘t do a clean-up action, we would be destroying it not due to any competition but because of our own action‘

 
 
A fundamental problem being raised is that the revenues do not match the sudden flood of investments that have gone into the IPL. Are you worried about a possible nexus between the IPL organisers, the politicians, the big corporates and the Bollywood celebrities?

There is an entry price to every business. Substantial investments are required and the revenue potential is huge. If there are misconducts like match-fixing and betting, then obviously the guy watching the game will turn off. So will sponsors. Years ago, when the first match-fixing charges were made, there was a brief period of lull. But that does not mean that cricket has died in India. The key question is governance and transparency.

 
 
Is there inherent strength at the IPL franchise level?

There has to be transparency at the ownership level too. Media reports are suggesting murkier deals. We don‘t know at this stage what is the truth. But sporting properties have to be run like proper businesses. Look at how the English Premiere League (EPL) has hurt itself. The club owners chased iconic players and made unrealistic purchases through a huge load of debt. Sports businesses can be lucrative but proper regulations have to be in place.
 

 Is the IPL an overheated economy?

Is there value to be created? Yes. There are strong revenue and marketing opportunities.

Most of the clubs, however, have not yet put the systems and processes in place to manage these opportunities. Take the licensing and merchandising (L&M) business which is pegged globally at $108 billion. This is not a Mickey Mouse number. Manchester United has 25-30 per cent of its revenues coming from L&M. But in India, this revenue stream is not visible in many of the clubs. We have to build the requisite bandwidth to monetise these opportunities.

 
Is this a struggle between the old and the new India?

As a country, we need to move away from intrigues and corrupt systems to a phase where we develop international properties. We can‘t run these properties with the same baggage as we move from a developing to a developed country. The tussle between the old and the new India will lead to pain and tribulations. But the fact is that we have created a positive property in the IPL which can provide sustainability in the long run for various stakeholders.

People are seeing a new India through the IPL. This goes much more than cricketing business; it is about brand India. On a much broader level, IPL has demonstrated the coming of age of India‘s commercial prowess on a global stage.

 
Does this remain as a dream at this stage?

The developed world is looking at the IPL as a global property produced from India. The IPL has changed the very perception of India in the global stage. The unfortunate part is that if we don‘t do a clean-up action, we would be destroying IPL not due to any competition but because of our own action. The moment of truth has arrived for us. We have to face it with independence and courage. Can we live up to the expectations that we have created? It will be a sad essay if we don‘t deliver.

 
How do we move the IPL up from one-third its value ($4.13 billion) to a level that it can sit along with the EPL ($12 billion)?

That is only an indicative figure we have given to compare a property developed in one part of the world with another that has achieved maturity status. The IPL has hardly scratched the surface. It has a long way to go and a considerable value to realise before it lives up to its full revenue and brand potential.

 
Brand Finance has more than doubled the brand value of the IPL from its first evaluation. What are the reasons for this?

We are seeing a remarkable increase in revenues from broadcasting (as deal was renegotiated) and sponsorship. We have also considered the IPL‘s capability to draw in fans and viewership.

 
Why have you upgraded Chennai Super Kings (CSK) to the top as the most valued IPL franchise (Rs 2.24 billion, up 35.5%)?

There are 3-4 breakaway clubs. We have looked at teams who have managed cricket as a product and blended this with marketing and commercial excellence. The two performances have to be done simultaneously.

CSK is beginning to put the various pieces together, synergising between their enterprise (India Cements) and their IPL business. We are also seeing Mumbai Indians show a remarkable revival this year, both in performance on the field and in their commercial activities.

 
 Why has Kolkata Knight Riders (KKR) slipped in your latest brand value estimate (Rs 2.13 billion, up 20.6%)?

KKR topped in our first round as it has an iconic brand like Shah Rukh Khan. This gives it an undue advantage. But they are not able to exploit this to the maximum. Their performance as a cricket team has also been bad. If this trend continues over the next few seasons, then it will seriously erode the brand value of KKR.