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IPL 7: Why many teams won't make money?

15-April-2014
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IPL 7: Why many teams won't make money?

The seventh edition of IPL has been action oriented even before the tournament has started on ground. The shift in the venue, SC judgment over betting and fixing charges, subdued economy and last but not the least general elections has dented the sheen of the tournament on ground. The year was also a year of renewing old contracts in some cases and for some this was an opportunity to switch sides and prioritize their association with IPL at a different level altogether.

Bottom lines affected
The shift in the venue has added to the challenges of the franchisees as the ticket sale revenue, of which 40% goes to franchisees is expected to go down in phase 1. All the teams have to pay taxes (entertainment) to their respective states which usually come from ticket sales.

BCCI has also cut broadcast payout revenues for the franchisees by 20-60% this year, which was a part of the central revenue pool for all the franchisees. The board has been able to command a higher price from the broadcaster MSM this year, but has cut down the payouts to the team. This year BCCI has commanded Rs 10 crore-Rs 11 crore per match from the broadcaster. The amount is higher by nearly Rs 3.9 crore than what the board got last year.

However, analysts and experts mention that the overall payout is similar to the amount franchisees received last year. It is learnt that the payout has just not been increased keeping with the increase in the principal amount BCCI will receive this year. The amount franchisees will receive as payout will be similar to what they received last year.

As the first phase of the IPL shifts to UAE and Dubai, the Board of Cricket Control in India is subsidizing a part of the expense franchisees have to bear. Experts and brand consultants opine that BCCI, which is under fire not only from the brands but also from the apex court over betting, fixing and mismanagement has been cutting, spends from some corners.

However as far as subsidies are concerned franchisees opined that there is a genuine lack of clarity over the ‘subsidies’ in the tournament this year.

A senior official at one of the franchisees mentioned “We do not understand how this will pan out. This year there are many such areas where the board has not been able to communicate and ideate strategies. Some things are only understood best by them. As far as revenues are concerned there is a stress on the bottom line. The year is tough and brands getting associated have options over deliverables. This is putting pressure on franchisees.”

The CEO of Kolkata Knight Riders Venky Mysore in a recent interview to a newspaper mentioned that the franchisee would be witnessing a loss this year. Other franchisees too do not look very robust on paper as of now.

People dealing with the financial matters of the tournament daily mention that only MI and CSK look robust on paper this year. Coupled with all these factors the franchisees are also handling sponsorship issues with a lot of persistence as this year was tough to get on ground sponsors.

The board has also cut the budget of the opening day ceremony by almost Rs 10 crore. This is also an effort to keep the tournament low profile.

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