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MUMBAI: Some say catches win matches. But success in the business of cricket takes more than a T20 game. Nobody knows this better than Lalit Modi, the BCCI man who has successfully passed the initial hurdle of selling the Indian Premier League (IPL) to franchisees and sponsors.

The 5-plus TRPs that the first 12 matches got have given IPL and Mr Modi a leg up. But, the challenge now is to ensure unblinking eyeballs, match after match. Because media revenues, in the form of advertising, will play a key role in making the game profitable for franchisees.Globally, a franchisee of a similar game format earns revenues from three broad areas, media rights, sponsorships and gate receipts. But the business model for IPL franchisees, at least in the initial years, will have to depend on media revenues.

As such, selling tickets at stadiums isn’t going to fetch much. IPL is a two-month event while EPL runs for almost seven months. Even assuming the best scenario of all the matches running at full capacity in the stadiums, all the franchisees put together would sell three million tickets. As per the arrangement, 20% of these tickets should be given to IPL.At an average ticket price of Rs 500, the revenue generated would be Rs 120 crore for all the eight franchisees. Back of the envelope calculations show that gate revenues at best would be 15% of franchisees’ revenues unlike 35% for EPL franchisees.

In the initial years, outdoor stadium activity is going to be a no-profit-no-loss business. This leaves the revenues, and profitability, riding on the media revenues for the franchisees. BCCI has sold the global broadcast rights to Sony-WSG for $918 million for 10 years. ET contacted Sony Entertainment Television president Rohit Gupta to understand the intricacies of the contract. “This is confidential and we can’t reveal it,” he said.But Alchemy Share Brokers which spoke to franchisees have mentioned the details of the contract in its latest report. As per the report, Sony would pay $316 million for rights of broadcast for the first five years, which would be shared between franchisees and BCCI.

The franchisees have a share of 80% in the first year, which falls to 60% in the fifth year. After five years, as per the report, Sony will pay $608 million “if this format has been remunerative in the first five years”. That gives Sony the option to back out in case the TRPs, and ad revenues, fall.The contract also mentions that while in the first year, payouts are equal for franchisees, “TRPs would drive payouts from the second year”. Which means unpopular franchisees would have to be content with lesser share of the media revenue pie. Getting sponsors will depend on popularity of the event and each team.

IPL teams, like EPL clubs, can make money from merchandising and trading players. But then, all that takes years. EPL took 15 years to get to where it is today. Mr Modi probably knows it, as he struggles with his bleary eyes to keep the interest alive for IPL. After all, eyeballs, in any colour, matter in this business.

Source :economictimes.indiatimes.com

Category: Indian Premier League News

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