Brand Finance plc today releases its valuation of this year’s eight 20/20 cricket teams playing in the current IPL tournament in South Africa. The IPL brand alone has a value of over $311million and has generated huge economic value for its owner, the Board of Control for Cricket in India, and the eight team franchisees. The entire enterprise is valued at US$2.01billion.
Brand Finance’s methodology takes into account the following revenue lines: broadcasting, IPL sponsorship, team sponsorship, merchandising and gate receipts as well as the effect of performance, the catchment population of the city, the capacity of the stadium and the presence of iconic players. With India’s huge passion for cricket and its growing economy, the IPL has become the Asia’s premier sporting showcase and attractor of revenue.
“The ultimate proof of the success of the IPL Branded System will come when the franchisees decide to list their teams. This is a real possibility in the next 2-3 years,” commented Unni Krishnan, Managing Director of Brand Finance India.
Despite propping up the bottom of this year’s edition of the IPL taking place in South Africa, the Kolkata Knight Riders (KKR) are the most valuable franchise brand at US$42.1million. Celebrity co-owner Shah Rukh Khan’s hard-selling of the KKR brand has counteracted the team’s poor on-field performance.
Rajasthan Royal’s brand value of US$39.5million at 59% of its franchise fee of US$67million, makes the reigning champions – part-owned by Bollywood actor Shilpa Shetty – IPL’s most profitable investment.
“When determining our brand ratings we have paid particular attention the ability of the franchises to generate advertising revenue, as well as the potential size of their support base. Rajasthan and Kolkata scored highly in these respective measures,” said Brand Finance’s sports analyst, Alexander Bird.
“The success of each franchise will ultimately depend on its ability to attract and retain supporters who come to watch the team, and not just the players.”
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Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.
Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.
Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.
Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.
Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Discount post-tax brand revenues to a net present value which equals the brand value.
Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.
The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.