New IPL franchises likely to take a hefty hit

While the winning bid price of $370 million by Sahara Adventure Sports to own the Pune franchise and $333.33 million by the Rendevouz Sports for the Kochi franchise — both for ten years — is likely to bring cheer to IPL's Group-of-8 (Go8) first group of eight franchises on the valuation count in a short span of three years, the two new franchises are likely to take a hefty hit by way of investment for a number of years.

The two-slab business model created by the IPL in association with the IMG impressed the Go8; expecting to break even in the first five years and one or two even ending up in the black.


The agreement entailed disbursement of 80 per cent of the media rights to the franchises in the first five years and 60 per cent from years six to ten. The Go8 was entitled to keep 100 per cent of the local sponsorship.

The IPL 2008 generated a total revenue of Rs. 662 crore, out of which Rs. 289 crore was the Go8's franchise commitment to the Board of Control for Cricket in India (BCCI).

The income from media rights was Rs. 242 crore, sponsorship income Rs. 111 crore, interest and other income accounted for Rs. 20 crore. The franchises in return received Rs. 230 crore together as their share from the central sponsorship. The BCCI had a surplus of Rs. 15 crore after disbursing Rs. 202 crore to 27 member units.

Increased revenue

For the IPL season II that was played in South Africa the revenue is reported to have touched Rs. 774 crore; the break up being Rs. 355 crore from media rights, Rs. 289 crore from the Go8, sponsorship income Rs. 125 crore and other income accounting for Rs. 5 crore.

The Go8 received Rs. 303 crore as their share from the central sponsorship. The BCCI's member units received Rs. 202 crore. The BCCI incurred an expense of Rs. 808 crore and net deficit of Rs. 34 crore.

It's the responsibility of the eight franchises to market their team brand on the strength of the players they picked at the auction and create a sizeable revenue stream from the local sponsorship that included 100 per cent of the gate revenues, shirt sponsorship, licensing programme, uniform merchandising, hospitality of premium seating, match day concessions and promotions and media platforms.

In the first year the IPL signed central sponsorship deals with DLF at a total of $50 million over five years, Hero Honda at $22.5 million over five years, Pepsico at $12.5 million over five years, Kingfisher at $26.5 over five years.

This year the IPL added few more to the central revenue pool signing theatrical rights at Rs. 330 crore for ten years and with Google/youtube, Colors, Karbonn Mobiles, Maxx, V Rock, Bandelier Watches, at an estimate sum close to Rs. 400 crore.

While the contract with Maxx Mobile is worth Rs. 60 crore for three years, Lalit Modi, Chairman & Match Commissioner said the agreement with Karbonn Mobiles is much bigger than the Rs. 200 crore deal the IPL signed with DLF as title sponsor for five years.

But a significant percentage of the new agreements will accrue to the franchises only from 2011 onwards when 94 matches will be played.

Marginal rise

The new agreements are expected to fetch the IPL an additional sum of around Rs. 50 crore this year which is considerable because there was only an increase of Rs. 14 crore from the first to the second season. The franchises receive 60 per cent of the central revenue pool in the first ten years.

Conservative estimates put Sahara's expenditure around $45 million ($37 million being 10 per cent of its winning bid) and Rendevouz at around $40 million ($33 million being 10 per cent of its winning bid) for season 2011.

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Printable version | Dec 1, 2020 7:51:52 AM |

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