Brand Finance values trademark of emerging global brand

Valuation of the IPL Brand and its franchises provides insights to investors. IPL or the Indian Premier League which is just in its second year has invested considerable capital and time to building brands and a loyal fan following throughout the world, including in Sri Lanka.

Despite the massive investment, there are still concerns with regards to its business viability. While the general consensus is that the Board of Control for Cricket in India (BCCI) promoted IPL Twenty20 tournament has been a huge marketing success, whether the property will actually deliver returns to investors, stakeholders and advertisers still remains under a cloud.

It is in this context that Brand Finance UK, in collaboration with Brand Finance India and Sri Lanka carried out a valuation of the IPL brand and its franchises in order to provide an objective view to explain the value of the brands under their control.

n times such as these, it makes even greater commercial sense to objectively discuss the allocation of a business’s working capital and this cannot be done without a hard headed discussion about the value of the franchisee brands and their loyal fan base in financial terms.

In doing so, BCCI and the franchise owners are able to better manage their brands in a more financially robust way. This approach makes long-term brand building investment decisions such as future promotional expenditure, and the host of other activities that combine to build brand value, much more likely to succeed. It also enables the clubs to raise finance secured against their brands.

Based on calculating the brand value of IPL to the franchise teams plus its value to the BCCI, the total value of the IPL trademark is calculated at US $ 311.94 million. When this is compared to the world’s most valuable football club brand, Real Madrid for example, with a value of US $ 327 million, the task ahead for the individual franchises becomes clearer.

IPL and the franchises will need to appreciate the long term value of the brands and the fan base they are developing and align strategic, marketing and financial decisions accordingly.

The challenge therefore is in converting positive fan relationships to commercial revenue. The individual clubs aim should be to move an aware fan to one that is attached by increasing the level at which the fan identifies with the club. Fans move from aware to attracted to attached.

The attached fan devotes a larger part of their day to their club and therefore has a larger propensity to purchase goods and services relating to their team and their sponsors. Knight Riders and Mumbai Indians seem to be focused on this high impact brand value lever.

In order to develop the relationship with the fan, the reasons why a fan follows a particular sport, chooses a particular team and supports a club need to be understood. In understanding these factors, such as identity, escape and nostalgia, the club is better able to relate to the fans and use this understanding to develop the attachment.

Brand Finance has used the Royalty Relief methodology to value the brands. This method is based on the notion that a brand holding company owns the brand and licenses it to the operating company.

The notional price paid by the operating company to the brand company is expressed as a royalty rate. The net present value (NPV) of all forecast royalties represent the value of the brand to the business.

Brand Finance has considered each franchise as a brand owned by IPL which it leases out to private parties for a certain amount and tenure (10 years). The forecasted profits has been calculated using publicly available information, in terms of income and expenditure, and having applied a common rate of tax to these profits (33.66 percent), it is discounted back to their NPV. Revenue comprises of broadcasting, IPL sponsorships, team sponsorship, merchandise and gate receipts.