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Impact of Recent Controversies on IPL Brand Valuation

18 April 2010
This article is more than 11 years old.

“Commercial sustainability of IPL will largely depend on the development of brand value governance principles and policies and aligning all the stakeholders towards long term value rather than narrow, short term gains. If these critical factors are not swiftly addressed by the BCCI there is a significant risk to IPL’s brand value addition capabilities in the future ” – M. Unni Krishnan, MD Brand Finance, February 2010

In Feburary 2010 Brand Finance had observed in its annual research on the value of the IPL brand, that the “IPL Branded Ecosystem is rapidly approaching an inflection point in the next 6‐12 months”. BrandFinance had summarised that whilst the IPL brand had added significant value in a relatively short period of time, there are significant risks in terms of brand value governance & transparency, management systems & processes, and stakeholder alignment to future proof the exponential value generation capabilities of the brand.

The IPL brand along with its stakeholder relationships are the largest assets of the BCCI today and any damage to it will adversely impact its future.

IPL’s brand value erosion will send a shock wave through the entire ecosystem of stakeholders covering fans, corporates, sponsors, players and franchisee owners. This will be a dampener on the fledgling sports, merchandising and licensing business in India.

On a much broader level, IPL has demonstrated the coming of age of India’s commercial prowess on a global stage and this will have implications on Brand India.

Iconic brands such as IPL are national assets and a source of wealth creation and especially so for a developing nation like India. It needs to be protected and governed in a manner befitting its importance. Locating the stewardship and governance frameworks to protect and sustain this valuable asset is a decision that cannot be postponed.

For further details contact - Mr. Rishav Kumar Jain.

Media Contacts

Konrad Jagodzinski
Communications Director
Brand Finance
Florina Cormack-Loyd
Associate Communications Director
Brand Finance

About Brand Finance

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.

Methodology

Definition of Brand

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

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 Valuation Approach

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.

Disclaimer

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.

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