Sports

Tough math on women’s IPL


The franchisee’s fight for rights will feature nearly 17 bidders who submitted their technical bids — or documents for eligibility review — on Monday. More than 30 companies have received bids, including team owners of all 10 male IPL franchises.

Graphics: Mint

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Graphics: Mint

While the team owners of Chennai Super Kings, Gujarat Titans and Lucknow Super Giants have yet to submit their technical bids, signaling a lack of interest, the remaining seven team owners have been given the green light by BCCI after. when they send.

Other companies that have submitted technical bids and are likely to be on the bid board on Wednesday include Adani Group, Capri Global, Amrit Lila Enterprises (Kotak Group), Torrent Group, Lancer Capital (Glazer Family). ), Haldiram’s and Shriram Group.

Five franchises will be decided from a list of 10 cities—Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Ahmedabad, Dharamshala, Guwahati, Indore and Lucknow—and the gap between supply and demand could lead to some activity. excessive and aggressive business behavior. The bid is not financially viable, felt by some owners and professionals. BCCI is counting on it.

The Mint experts spoke to said bidders will have a variety of reasons for being part of the league — from a desire to support or be seen supporting women’s cricket to get it. a seat at the same table with top team owners and from their brand extension. into certain markets to become part of the IPL ecosystem. “Profitability and economic significance certainly won’t be part of it,” one of them said.

A top executive from the IPL group, who placed the technical bid, said: “While BCCI doesn’t hold any reserve price for the auction, there is enough interest and the kind of hype that the they tried to create, I don’t think the team owner would want to take any chances. We like to be financially prudent and bid with an eye on the league’s economic viability, but we’ve seen in the past how the bidding for the IPL franchise has gone completely frenetic. “

He’s alluding to RP Sanjiv Goenka Group’s attention-grabbing bid $7,090 crore for Lucknow franchise in 2021. Second highest bid was CVC Capitals’ for franchise in Ahmedabad at $5,600 crore, higher than Adani Group’s bid $bid 5,100 crore.

In stark contrast, the original IPL franchise had a much lower amount. Reliance Industries paid the most—$111.9 million (approx $447.6 crore later) —for the Mumbai franchise in 2008. United Breweries, then owned by Vijay Mallya, bought Bangalore for $111.6 million ( $446 cores). The base price was kept at $50 million and one dollar was equivalent to 42 rupees then.

In 2010, Sahara Group acquired the Pune franchise for $370 million ( $1,702 crore), and a consortium called Rendezvous Sports World selected the Kochi team for $333.3 million ( $1,533 cores).

“Unfortunately, winning a bid for an IPL franchise for women will depend on their pockets and how much loss they are willing to accept,” said the executive.

According to Mint analysis based on industry estimates of potential ad revenue share as well as other revenue and cost sources—admittedly subjective—the only way for team owners to break even in the first 5 years is if they get the franchise at zero cost. However, team rights are permanent and inherently long-term visionary with a desire to make up for losses in the early years can find a way to make the math work, with a bit of optimism built into the model. Figure.

Under the current format, all brands will earn an equal share from the central revenue pool. The Board of Directors will share 80% of the revenue from the tournament, including media rights and ground sponsorship.

Viacom18 purchased the media rights for $7.10 crore per match, while BCCI is expected to sell sponsorships worth $250 crore for five years.

According to calculations, each franchise will receive about $30-32 crore from this central revenue group every year. Alternatively, they can sell team sponsorships—front and back of jerseys, headless arms and legs, headless arms, helmet backs, etc., for different prices. $10-15 crore per year for next 5 years.

“In general, our estimate after selling media rights is that groups can earn revenue $40-47 crore per season,” said a senior executive at another IPL franchise, who is seriously considering bidding for the rights. reverse-engineering cost analysis.”

Two current franchise owners told the Mint that in order to run the WIPL franchise, where player wallets are kept at $12 crore for the first year, the total cost will be $25-35 crore, excluding license fee.

“There are player fees, branding and marketing costs as well as administrative costs. All put together, it will be in range $25-35 crore for someone who already has a franchise and can leverage synergy,” said one of them, who requested anonymity. “If I go with the current estimate, we can make it $10-12 million per year if there is no franchise fee, but for newcomers it will be a loss from the start. Now comes the question of franchise fees. Can I get a franchise for $100-150 million ( $10-15 million per year)? Then I’ll not only break even but maybe make some profit in the first five years, but if it’s more $150 crore, it won’t be profitable.”

BCCI, internally, is expecting the bid to pass $1,000 crore mark, with interest.

According to an inverse calculation, at $1,000 crore, the contractor will lose about $400-500 crore for the first five years, which a BCCI official pointed out is “a small amount in the larger scheme”.

The BCCI official said: “We have seen the value of media rights, which is an important value for women’s cricket. high, and all of them are making more profit $400 crore per season. Many of them today own losing brands in foreign leagues. I don’t think serious players will doubt the value that WIPL will create in the long term.”

It’s difficult to calculate a 10-year outlook as the value of the next media rights cycle will depend on the league’s performance as well as the TV distribution landscape and digital penetration.

Meanwhile, for the current cycle, media rights holders Viacom18, which has outbid Disney Star by a substantial margin, is expected to suffer more losses. $600-650 crore over the next 5 years, Mint estimates.

A high-level sports broadcaster, analyzing the cost of broadcasting, the league, said, “ $951 crore which Viacom18 is paying BCCI for rights only. In addition, there is a production cost of about $40 lakh per match, equivalent to about $55 crore in 134 matches over the next five years. If you add the cost of bank guarantee, insurance, and other production, it’s a different story. $150 billion. And they will have to spend nearly $20 crore per year for league marketing to build it up. Overall, it will cost them $1,200-1,250 crore,” the executive said.

Now in terms of revenue, advertising revenue from the tournament over the next 5 years is expected to be around $400-450 crore, while expected revenue from distribution and subscriptions — both TV and digital — is approx. $200 crore according to different estimates.

Thus, total revenue for media rights holders is expected to be in the range of $600-650 crore in the next five years.

In the end, it can be a potential auction that leaves buyers with regret.

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