10 Years — IPL Vs Flipkart
A detailed analysis played by each towards the growth of the Nation
10 years ago, Behind all the glitz, glamour and star players The Indian Cricket League was founded in 2007, with funding provided by Zee Entertainment Enterprises. BCCI started a new Twenty20 league that would rival the Indian Cricket League. In early 2008, the BCCI announced the launch of the Indian Premier League, a new franchise based T20 league, which is among the first of its kind in the cricketing world.The league was based on the Premier League of England and the NBA in the United States.
It all started with two former executives of the global ecommerce giant, Amazon — two IIT Delhi 2005 batchmates and Chandigarh natives, Sachin Bansal and Binny Bansal, began an online platform just for selling books in 2007. Starting from the first customer in October 2007, and being in business for 10 years, Flipkart has now become one of the biggest ecommerce marketplaces in India with a registered customer base of over 100 Mn, has more than 80 Mn products across 80+ categories, more than 1 Lakh + registered sellers, having raised over $4.55 Bn in combined funding and is now valued at about $11.2 Bn. These numbers show the trajectory of a company’s humble beginnings to its almost unprecedented success despite devaluations by investor and changes in leadership. The first product they sold was the book Leaving Microsoft To Change The World to a customer from Hyderabad.
The reality of the IPL is that it is brilliant if judged from the business standpoint. It’s a cricket tournament that’s developed primarily as a valuable commercial property. It offers companies an opportunity to aggressively market and advertise their businesses.
Behind controversies related to alleged betting and spot-fixing in the sixth edition of the cricket tournament held in 2013, filings by five of the tournament’s eight teams with the Registrar of Companies (RoC) show that three of franchisees made a profit for the financial year 2013–14, one narrowed losses and the fifth reported a loss. Jaipur IPL Pvt. Ltd, which owns the Rajasthan Royals, reported a profit of Rs.14.5 crore in the year ended 31 December compared with Rs.11.95 crore a year ago. Knight Riders Sports, which owns the Kolkata franchisee, also kept up its profit-making run while GMR Sports, which runs Delhi Daredevils, reported its first profit in four years. IndiaWin Sports Pvt. Ltd, which runs Mumbai Indians, narrowed its loss to Rs.5.04 crore.
The financials of an IPL team depend upon a number of factors. On the revenue side, each team gets a share of the broadcasting fees and (central) sponsorship income from BCCI. According to team officials interviewed in earlier years, about 70% of an IPL team’s revenue comes from this source. This segment got a fillip in IPL-6 owing to two factors. One, PepsiCo India Holdings Pvt. Ltd won the title sponsorship rights for five years starting 2013 for Rs.397 crore, nearly double what real estate developer DLF Ltd paid for the first five seasons of the league. Secondly, official television broadcaster Multi Screen Media Pvt. Ltd’s payout to BCCI increased to Rs.10.5 crore per match for IPL-6 and IPL-7, according to a 2010 agreement, rising from around Rs.7 crore in the previous two editions.
However, the other portion of a team’s revenue comes from ticket receipts, merchandise sales, in-stadia advertising, team sponsorships and prize money — and these can vary according to a team’s popularity and winnability. It also explains why some teams like Rajasthan showed a 30% increase in revenue in 2013–14 while the Kolkata team reported a 6.6% decline.
On the cost side, the team has to pay a franchise fee to the board, fees to local cricket associations for use of their facilities, players’ and staff salaries, and spend on advertising and promotion. For a team like Sunrisers Hyderabad, the franchise fee itself is a huge burden at Rs.85 crore a year. That’s one reason why it showed a Rs.30.8 crore loss at the operating income level in the 2012–13 financial year, the June 2013 results of its parent Sun TV Network Ltd show.
Every year the IPL gets embroiled in some controversy or the other; the property is a juggernaut and has reached a cult status. Whatever happens off the field, as long as the product on the field is good, there will be takers.
So what’s in it for investors of IPL?
India is mad about cricket, and the audience for cricket and the population, is growing in the largest democracy in the world. Everybody agrees there will never be a recession in the entertainment industry, and the IPL is just that — a heady cocktail of bollywood and cricket that promises entertainment, entertainment and entertainment.
The IPL ‘s business masterstroke is that it created an amazing synergy with industry and commerce. It was a way of allowing corporate India into Indian cricket’s dressing rooms. Never before have sponsors paid serious moolah to get their company logo on a player’s t-shirt. Some of the biggest companies in the world wrestled to be sponsors of the game.
Ever since the IPL started in 2008, very few IPL teams have generated any profits and that too only the cheaper franchises like Kings XI Punjab and Kolkata Knight Riders during one of the editions who have to pay a considerably less yearly retainer fee than the other franchises. However, overall the franchises have not been able to even break even and most of them are making losses year after year. The value of brand IPL is $4.16 billion.
A similar tale, of how a class of entrepreneurial legends and an entire ecosystem arose from who was once called India’s glorified bookseller, Flipkart and the various entrepreneurs, investors and startups it sprouted. With a valuation of $5.37 billion.
A quick overview of the data shows that there are over 233 former Flipsters who are now founders of startups spread across India. And more than 12 current and former employees, besides Flipkart and its co-founders, who are actively investing in Indian startups. Also, the company has acquired/acqui-hired some 11 startups itself, which are now a part of the company.
The Indian startup ecosystem is poised to grow 2.2X to reach over 10,500 startups by 2020, according to a report released by NASSCOM in collaboration with Zinnov, last year. India stands third globally, in the number of tech startups it hosts, warding off close competition from Israel and China.What is fuelling this acceleration is not only rising exposure to the Internet, technology, favourable government policies, foreign funding, but also legacy businesses that are now a decade-old and nurturing entrepreneurship in the country.
There are over 207 startups that have been founded by ex-employees of Flipkart. There are over 49 Indian startups that have been backed by Flipkart, Flipkart founders, and/or current and ex-employees. Almost three startups are added to the gang every month, taking the Flipkart Mafia’s strength to a massive 250+ startups.
This kind of entrepreneurial reach is self-evident for a company that has been in business for as long as Flipkart has, employing thousands of people since its launch and which currently boasts a total employee strength of 27,000 — of which 8,000 are full-time employees, along with 19,000 delivery boys and others. This sprawling staff is spread across 300 cities and is vitally important for an emerging economy.
Another probable cause that aided the Flipkart Mafia Myth is the fact that the Flipkart team is full of employees who are IIT and IIM alums. They have played pivotal roles in product management, design, marketing and so on. Their expertise makes them capable of understanding entrepreneurship, hold problem-solving capabilities. All of this together enabled them to fearlessly start their own businesses.
A quick look at the 207 startups founded by former Flipsters shows that most of these companies were formed from mid-2014 to 2016. One of the major reasons for the same can be Flipkart’s $1 Bn fundraise at an unprecedented valuation of about $7 Bn in July 2014 (some reports quoted this valuation as $5 Bn) which brought in a major surge in the funding environment for the startups in the country. As per Mohandas Pai, Infosys former CFO, Flipkart’s initial high valuation too has influenced many to venture out.
In 2014, over 29 companies were founded and the number rose to 82 in 2015. The number witnessed a fall in 2016, with only 59 companies coming out of Flipkart. The golden period was between mid-2015 and mid-2016 — a spike that can be attributed to the launch of Prime Minister Modi’s ambitious Start Up India Action Plan, which led to the launch of numerous startups across the nation.
If you give creative freedom to people, this is bound to happen. You know, this just shows that people are backing each other up, they have worked together in that entrepreneurial culture. There are so many ideas to pursue and everyone is trying to do that and while some would fail, some succeed, and some would try again and this is exactly what was needed and this is Flipkart’s biggest contribution to the startup ecosystem — giving inspiration to hundreds and thousands of entrepreneurs.
JFK famously said, “Ask not what your country can do for you, but what you can do for your country?”
While ‘Entertainment Entertainment and Entertainment’ hold all attention and gives pleasure; people often shoulder responsibilities much larger than their titles and experience. This freedom and responsibility have nurtured a lot of talent. People become confident of their abilities to create value. Initiative-taking is recognised and rewarded. Instilling a sense of ownership in starting up and failing, as it happens in life. Understanding the value of synergy (giving back to those who came after them), and the importance of never giving up — be it in terms of innovation, Unputdownable spirit of achievement or beating the obvious gender disparity.