Friday Nov 15, 2024
Friday Nov 15, 2024
Friday, 1 June 2018 00:00 - - {{hitsCtrl.values.hits}}
The publication of Sri Lanka Cricket’s annual accounts a few weeks agowas undoubtedly because it had good results to show the public. It’s a pity that this is not a regular feature, irrespective of how it has performed, because we the stakeholders of Sri Lanka Cricket have a significant amount of emotionally-vested interest in this game and therefore we have a right to know how it is performing financially and not just on the cricket field!
Annual publication will force all those involved in running Sri Lanka Cricket to hold themselves accountable. This is done by most other cricket boards; there are some exceptions such as Pakistan, West Indies and Zimbabwe.
Brand Finance Lanka, a subsidiary of UK-based Brand Finance (www.brandfinace.com) which is a brand valuation and strategy consultancy used this opportunity of the public financial disclosure to carry out a valuation of the Sri Lanka Cricket brand. The purpose of doing so was to obtain a perspective of where the brand stood in the context of the Most Valuable Sri Lanka Brands which is annually published by Brand Finance. See http://brandirectory.com/league_tables/table/sri-lanka-100-2018. We felt this would give us a sense of the scale of the brand and some clues on what could be done to take it forward in the future.
Our analysis established that the brand value of Sri Lanka Cricket is Rs. 1.6 billion, which places it at No. 45 on the Brand Finance 2018 Most ValuableSri Lanka brands table. Brand value is a function of many factors, and scale of the business is one. The reality is that Sri Lanka Cricket is a medium-sizedbusiness in Sri Lanka. This is despite the massive fan base it has across the country.
Sri Lanka Cricket operates in the international cricketing arena and competes with other cricketing nation brands. Having a small population with a relatively low GDP does not help Sri Lanka Cricket when it comes to negotiations in a global context. Hence, despite the ardent following of fans locally, the challenge for Sri Lanka Cricket is to convert this into much higher revenue than that which they are currently able to generate.
Revenue primarily comes from global commercial brand sponsorships and through media rights. Not having Sri Lankan global brands that have the scale and mass appeal in world markets and who would pay a premium to sponsor Sri Lanka Cricket is certainly an issue. For example the current sponsor Dialog is relevant only for local audiences which limits the potential sponsorship value that can be garnered.
However, the potential for the Sri Lanka Cricket brand is immense. Whilst the institution of Sri Lanka Cricket needs to be professionalised and run like a corporate with a management structure and the right governance systems and transparency in place, it can also broaden the agenda beyond pure cricket into communities.
Sports such as cricket can make transformative changes in people’s lives and Sri Lanka Cricket is perfectly poised to leverage this. This new outlook should provide the credibility for local corporates to engage more actively with Sri Lanka Cricket and at a much broader level than that which currently prevails.
Of course, the quality of the team and type of winning cricket that we play is also paramount to ensure there is global appeal and spectators across the world would fill the stands to watch. To do so, the team has to include genuine talent like the country enjoyed in the 1990s and 2000s. Winning the World Cup in 1996 was a significant boost to Sri Lanka Cricket, as global audiences paid to come and watch our stars. There is no better way than winning to boost brand value!
The challenge then for Sri Lanka Cricket is the need to professionalise and update its business outlook in order to engage with a wider source of local corporate sponsors with whom they could jointly work with on mutually-beneficial initiatives, whilst it nurtures and develops cricketing talent in the country.
The value of Sri Lanka Cricket brand is estimated to be Rs. 1.6 billion. To compute the value, the method employed by Brand Finance is the Royalty Relief Methodology. This method is based on how much the brand owner would have to pay to use its brand if it licenced the brand from a third party. It uses discounted cash flow analysis (DCF) to capitalise future branded cashflows.
In determining the brand value, three main elements were looked at; which is the relative brand strength index against its competitors, the appropriate royalty rate to be charged and the forecast brand specific revenues.
The brand strength index is a balanced scorecard and composed of sector specific attributes which are broken to investment, equity and performance of the brand. In determining the Sri Lanka Cricket’s brand strength, we measured it relative to the other international cricket boards using publicly available information such as annual reports and ICC and ESPNcricinfo websites.
We used metrics such as ICC ratings score, percentage of winning on all three formats (tests, ODI’s and T20’s), profit margins of the current year, social media presence, marketing and development costs and ICC’s revenue distribution to compile a brand strength which is applied to the royalty range to arrive at a royalty rate.
Next, we determined the most appropriate royalty rate range by reviewing comparable licencing agreements sourced from Brand Finance’s extensive database of past similar clients and other online databases.
To compute the forecast revenues, we looked at Sri Lanka Cricket’s historical financial performance and its ability to generate future revenues. We also looked at external factors such as the long-term growth rate, tax rate amongst others.
Finally, the royalty rate is applied to the forecasted revenues to derive a brand revenue which is discounted post-tax to present thevalue of the brand.
