MS Dhoni's Chennai super kings are one of the biggest sporting franchises in the world with a whopping net worth of more than $900 million currently and have the greatest presence on social media with about 23.6 million followers. Its brand value has been ever-growing even though the team was suspended during 2016-17 due to the betting scandal. In the Article, we'll learn about CSK's Economic sense behind becoming a money-making machine.
Here we can see below the brand value of the CSK and IPL where note brand value is found by the PEG ratio (price/earnings divided by growth), which standardizes the expected growth to determine how much investors will pay for a dollar of earnings
The effect of the scandal can be shown in the graph below where no figures are provided however once it came back, its value rose which is in line with the league’s value itself rising which was due to lucrative sponsorship deals signed by IPL in 2018 which we had discussed in the previous episode/earlier in this episode. And The graph here shows here how when CSK wasn’t there, how brand value fell in 2016 showing the power of CSK in IPL.
From both graphs above, there seems to be a relation between IPL brand value and CSK value, to show this we can use spearman's correlation index. Where spearman's correlation finds the strength of the relation between two variables and to find this value, where the correlation value can be between -1 to +1, we use the following formula
First, we assign ranks from highest to lowest value. Now we take the difference between the brand value of IPL and CSK for the given observations which we can see in the third column and now we square up these differences then finally we take the summation of this hence that is the value of summation of di^2. And now knowing that the observations for CSK were 9 as CSK wasn’t part of IPL for two years so we take n as 9. Hence now plugging in these values we can find spearman correlation, which has been done in a research paper we plug where we got the following
From this table we find the correlation coefficient value as 0.854 which indicates a strong positive correlation between the brand value of CSK and IPL as CSK’s major revenue comes through the IPL earnings of broadcast rights, sponsorship money which the BCCI distributes to all IPL teams, this is called as the central pool revenue which one of the revenue streams of a franchise. However this is not the only revenue stream, there are other streams as well due to which the correlation we see here isn’t perfect, i.e=1. So let's talk about the revenue streams of CSK
percentage from the central pool revenue which we earlier talked about. This revenue stream is the largest because of the sum of investment in IPL where star rights for 4 yrs are worth over 16000 cr.
Coming to the revenue stream where IPL teams like CSK earn in various streams where one being,
1) Merchandise sales- where for example in 2012, CSK earnt Rs2.5 crores from Reebok sales and Rs1 crore from Cool Maal and this number is only expected to increase with CSK partnering with businesses like Souled store which is their current official partner for its merchandise
2) It gets an 18-22) then in terms of sponsorship, for example, the title rights purchased by Vivo were worth over 2200 cr for four yrs(2018-22) so even a small share of this revenue acts as a massive source of revenue for the franchises.
3) Brand sponsorship- where CSK is one of the most sponsored teams in the league with 22 sponsors which include-1. The MuthootGroup, 2. IndiaCements, 3. GulfOil, 4. British Empire, 5. ClearShampoo, 6. Nippon Paint, 7. Jio, 8. Khadim’s, 9. ACTFibernet, 10. Dream11, 11. Seven 12. B cricket, 13. Nova,14. HelloFM, 15. NACJewellers,16. ASAP, 17. Boat, 18. Sonata, 19. Muthoot Precious Metals Corporation, 20. Lilliputhub, 21. The SouledStore and 22. Cover Cup
4) Prize money- which CSK gets a substantial amount due to being regular in playoffs and having won the tournament several times where winning the tournament fetches about 20 cr rupees itself.
5) Stadium ticket sells which are predicted about 3-5 cr rupees per game
So now the question comes is that,
What makes CSK so successful?
It simply comes down to their performance, where since the inception of IPL in 2008, it has only missed playoffs in one year only which highlights how consistent they are, and having won four IPL titles, it makes it the second most successful team in terms of titles, only one behind Mumbai who has won 5 titles. Moreover, it is success on the field which attracts sponsors which is why CSK is sponsored by so many teams, and not to forget the major part of CSK's success is also due to the legend, Mahendra Singh Dhoni, who needs no explanation, the name is enough.
Before going on to the next point, let’s talk about how Mahendra Singh dhoni got to Chennai super kings. So when the IPL was introduced, every team had an option to get an icon player, where it was Sachin Tendulkar for Mumbai, Rahui Dravid for Bangalore, VVS Laxman for Hyderabad, and 'Dada' Sourav Ganguly for Kolkata, but there was no one from Tamil Nadu so CSK decided to pick someone else where they decided to go for dhoni because of their gut feeling that his youth icon could lead Chennai to glory and also because that he wasn’t an icon player so it made more economic sense to buy him from auction rather than picking an icon player.
Since, in the case of an icon player, you had to pay 10 percent plus what you paid on your most expensive player in the auction, Chennai was in a better position to get dhoni compared to other teams. Where what happened in the auction was that the other team bidding for dhoni was Mumbai Indians who bid until 1.5 million dollars but then gave up as they realized if they bid further then they would have paid Sachin more than 1.65 million making total spending on both players more than 3 million dollars where the budget was only 5 million dollars hence not being able to buy other players to complete the team. So CSK ended up buying dhoni for $1.65 million which seems like a bargain now considering the success he brought to the team.
Along with its performance on the pitch, Dhoni along with owners have focused on creating the right environment for the players where all the players in the team are treated like family as well as the fans with whom they have a great relationship which makes it stand out compared to other IPL teams and the loyalty of fans is unquestionable where even though CSK wasn’t in IPL for two years due to suspension but that didn’t affect their fan base at all, it in fact grew which highlights the greatness of this franchise.
Moreover, we can apply a theory to explain its success, which is Keller’s Brand Equity Model also called the Customer-Based Brand Equity (CBBE) Model. This model was developed by a professor of marketing whose name is Kevin Keller where the ideology of the model, according to him is that, in order to build a strong brand name, it’s important to shape how customers think and feel about your product or service. If there is the right type of environment created by the brand and with good enough performance on the field in the case of sporting teams then the audience will have a positive perception of the brand. And that would help to increase sales and create customer loyalty which we can clearly see in the case of CSK.