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Startup slowdown: Will IPL 2023 take a hit?

While some experts feel these companies will have to re-look the big spends they incur on IPL, others say it is too early to say anything about the league’s next season as a lot can change by then

e4m by Kanchan Srivastava
Published: May 27, 2022 8:47 AM  | 6 min read
cricket

As the 15th season of Indian Premier League (IPL) is in its final legs, some of the top sponsors of the tournament have now adopted a cost-cutting approach. 

Edtech brand Unacademy, for instance, which is the official partner of IPL 2022 and is also sponsoring the Kolkata Knight Riders team, recently laid off around 600 employees which is about 10 per cent of the company's total workforce. 

Meesho, the sponsor of IPL’s official broadcaster Star Sports and the Gujarat and Rajasthan teams, has laid off 150 employees from its grocery business. Similarly, Disney+Hotstar’s sponsor Swiggy is also scaling down operations of its subscription-based morning delivery service SuprDaily. 

Funded by venture capitalists, many of these tech startups are among India’s top advertisers, thanks to their investment in big-ticket sports properties like IPL. 

The bleak startup story in the first quarter of 2022 is in stark contrast to the euphoria in 2021, where India minted a new unicorn almost every week despite being hit by the Covid-19 pandemic. Reason: A spike in inflation, hike in interest rates, rising fuel prices and Russia-Ukraine war have prompted many venture capitalist funds to cut down on investments to public and private markets. 

Investments into startups by venture capital funds halved to USD 1.6 billion across 82 deals during April 2022, which resulted in a 27 per cent drop in investments, a report by industry grouping IVCA and EY said last week. India has over 100 unicorns right now.

Meesho, Unacademy, Swiggy are looking to prune costs amid tightening of larger-sized funding rounds. 

The development has raised a concern in the advertising and media industry about whether the tech startups would be able to maintain their AdEx in the IPL in the coming year. 

“While many IPL sponsors have not hinted about layoffs and fund crunch, they might go for cost-cutting, sooner or later, considering the market conditions. This might reflect on the AdEx growth in general and the IPL in particular,” a senior ad executive said, requesting anonymity. 

The advertising sales of the IPL has reportedly crossed the ₹4,000-crore mark this year for the first time since its inception 15 years ago, as per media reports. The total sponsorships revenue of the IPL, teams and broadcasters is estimated at Rs 10,000 crores. 

 

60 Startups in IPL

The ongoing Tata IPL 2022 has turned out to be an extravaganza for startups with more than 60 such companies coming on board as official on-ground partners, streaming partners and team sponsors. 

Official broadcaster Star Sports has roped in 14 sponsors. Eight of them are startups – Dream11, Tata Neu, Byju’s being co-presenting sponsors; and CRED, PhonePe, Spotify, Swiggy Instamart and Meesho being associate sponsors. 

Similarly, Disney+Hotstar has taken onboard 18 sponsors, with 12 of them being startups: Dream11, CRED, Tata Neu, Zepto, Spinny, Pristyn Care, Swiggy, RuPay, Ather, Livspace, NiyoX, Spotify. 

At least 40 startups are supporting various teams as well, with some of them backing more than one franchise. 

According to industry observers, with more than 400 million views in the 2021 season, the league has emerged as the biggest platform for new-age tech companies to get noticed by both young consumers and global investors. 

Rahul Vengalil, Managing Partner of Isobar, a dentsu group company, says, “With VC fundings, most tech startups spend 30-40 per cent of their revenue into sponsoring big-ticket properties like IPL for quick customer acquisition. Traditional brands usually spend 10-15 per cent of the revenue on ads. With venture capitalists withdrawing their funds or may be rationalizing their investments, there is definitely going to be a crunch in the advertising budget, given the condition of the economy.”

Vengalil adds, “This will affect the IPL revenue as well. The target that BCCI has kept for ad rates may be over the top and unachievable. It is likely that they innovate in the price structure and meet the numbers. A perfect example is YouTube moving away from exorbitant full day masthead cost into smaller palatable costs for advertisers.”

Businesses have to stay accountable to their stakeholders. For most companies, profitability or the path to it, is the key criterion to evaluate the company’s performance by their investors and stockholders, says Lloyd Mathias, business strategist and angel investor.

Mathias explains, “With the overall tightening of liquidity, VC funding slowing down and FDI funding diminishing, there is increasing pressure on companies to focus on the bottom-line. In this context, many companies will have to re-look at the big spends that they incur in sponsoring mega-properties like the IPL.”

However, as the IPL is a year away, many things may happen. The economy may pick up – hopefully with the pandemic on the wane and if the Ukraine crisis ends, says Mathias. 

He adds that while some sectors may be more cautious, many new categories may open up. “Remember, categories like FMCG and automobiles, which used to dominate big-ticket events, have been subdued with the onslaught of the new-age companies.  This could change,” he opines. 

Ad veteran and chairman of Madison group Sam Balsara agrees with Mathias. “Next season is 12 months away! A lot can change in one month, leave alone 12 months. No bad news lasts for six months,” he mentions.

Ad veteran and MD of Rediffusion Sandeep Goyal, says, “It is too early to say anything about the next season. The companies burning money in any case are well funded and unlikely to be impacted by any fluctuations in investment today. Most of them are soonicorns or unicorns already.”

R Venkatasubramanian, President & National Head - Investments, Havas Media Group India, agrees with Goyal and Balsara. 

“Startup companies may reduce on-air TV spends compared to this year, but they will definitely be present and engage with IPL 2023.  Dream 11, Unacademy, CRED, Upstox, Rupay, Swiggy Instamart, Paytm - all of these brands will be there next year too as on-ground sponsors, given they have already signed deals with the BCCI,” says Venkatasubramanian. 

e4m approached Unacademy, Meesho and Swiggy to get their side of the stories. Their response was awaited till the time of publishing this story.

 

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