On Monday evening, when the numbers got announced, and it came to the fore how no single bidder had put up a sum of less than Rs4,000 crore for any of their preferred cities, it was clear that India’s T20 dream machine had taken its next giant leap of faith.
It has to be a leap of faith for now, and not necessary a leap of assertion at least, because the next few years will determine if the two winning bids from the RP Sanjiv Goenka Group – of Rs 7,090 cr for Lucknow; and CVC Capital – of Rs 5625 cr for Ahmedabad; can be justified for the amount that’s being spent.
Here’s a look at what’s possibly going to be at play between now and the next two months as the sports industry, in India and globally, begin crunching numbers to figure if these new franchise values will stand the test of time.
In the last five years, all existing franchise owners have made profits in the IPL. The question is, going forward, will the two new teams also make money?
The BCCI, that did a commendable job in conducting a very transparent tender process, is going to come up with a new tender for IPL’s next media rights cycle. In that lies the secret to what kind of value-unlocking the new franchises can do in the next rights cycle.
“The Board will conduct an e-auction of media rights and right now, the industry expectation is that the value will touch around Rs 35,000 crore. With ecommerce companies like Amazon in the play, the value can get driven further,” say those tracking developments.
Even at Rs 35,000 crore, 10 franchises – at 50% of that value being distributed over five years – will end up pocketing Rs 1750 cr each, i.e. Rs 350 crore per season. Add to it, sponsorships, merchandising, ticket sales and hospitality – each franchise will rake in close to Rs 450 cr per year if marketed well.
“Now, how these new franchises save on costs will determine the eventual delta. Even a net-net of Rs 300 cr each year will see the franchises earn back Rs 1,500 cr in the first five years. Now add to that, revenues from title sponsors and official partners of IPL that also work on a 50:50 model,” they add.
Global players like CVC have added quite a bit of flavour to the BCCI/IPL profile overnight. It is the RPSG Group that will have to sustain the battle to break-even far longer than the other players. As the group’s chairman Sanjiv Goenka was quoted as saying, the franchise will keep generating revenues. It’s the additional (approx. Rs 3,500 cr) delta that they’ll have to work on.
While franchises get busy figuring it out for themselves, the BCCI realizes it has just scaled up in size. It expected top-dollar from the industry and has got more than that in return.
Can the BCCI now live up to the industry’s expectations and drive professionalism in Indian cricket?