Has PepsiCo paid too much for IPL title rights?

On November 21, PepsiCo announced that it had bagged the title sponsorship rights of the Indian Premier League (IPL) Twenty20 cricket tournament, after making a bid of Rs 396.8 crore. It will own the rights from 2013 to 2017.
 
This is Pepsi's largest-ever investment in cricket in India.

But is it paying too high a price? The previous title sponsor, real estate company DLF Ltd, paid about half as much for the title rights in 2008. And that has raised some eyebrows, because viewership of the IPL, which features clubs with both Indian and foreign players, has been diminishing in recent years .

According to Brand Finance, a firm that specialises in brand valuations, the IPL's brand value has gone down from $4.1 billion in 2010 to $2.9 billion in 2012.

Still, the sponsorship makes sense for Pepsi considering that the IPL takes place in summer, when sales of cold beverages peak. That, combined with the mania for cricket in India, could get Pepsi good value for its money.

The company could also get access to star cricketers for promotions, depending upon the terms of the deal, which are not known yet. Plus, rival Coca-Cola could be hindered from advertising at game venues, again depending on the terms of the deal.

Nevertheless, the investment is not without risk. Any game can only be as big as its fan base. With scandals overtaking the IPL and viewership declining, Pepsi may yet have cause for worry.