IPL deal seems sweet for franchise owners

In what seems to be a lucrative deal for the owners of the Indian Premier League (IPL) franchise, nearly 60-65 per cent of their costs have been covered through sale of television rights to Sony-World Sports Group (WSG) for $1.026 billion, including $108 million by BCCI.

During the first and fifth year of IPL, the eight team owners will get 80 per cent of the total broadcasting revenues and 60 per cent from year six onwards.

As per industry estimates, roughly $6-7 million is what each franchise owners will earn each year from broadcasting revenues alone. However, this figure could go down in coming years as BCCI has the right to increase the number of franchises from the present eight, which would mean sharing the broadcasting revenue with more corporates.

The winners of the various IPL teams reckon they would break even the investment on Twenty20 league team between the second and fifth year.

To add to this, industry experts say that a gap of $3-4 million can be adjusted as a company’s advertising budget, because of the high mileage the corporate gets through its ownership.

BCCI is said to have raised a total off $ 1.749 billion (Rs 6996 crore) through the team auction.

P. K. Iyer executive director of Deccan Chronicle, the third highest bidder (after RIL and Mallya) with $107 million, is confident about breaking even in the second season.

“The nuances are something we will know in a couple of days after the team is final. We believe that it is a profitable venture,” he said.

On the other hand, UK-based Emerging Media, which bid along with Lachlan Murdoch and won the Jaipur team franchise at $67 million, feels it will break even only in the third year of the league.

“We won the bid at an economical price (least of the eight bids) and our forecast is that we will break even in the third season, if all goes well then in season two. The first year’s expense stands at $11 million, which also includes the franchisee fee ($6.7 million to be paid each year to BCCI) and the cost of acquiring players and maintaining the team. We are hoping the first year’s revenues will be around $9 million,” said Fraser Castellilno, CEO, Emerging Media. The company also runs the Leicestershire County Cricket Club in England.

Though RIL has bid at a whopping $111.9 million for the Mumbai team, given that advertisements and entertainment revenues would be lucrative in the city, RIL will break even in year four, according to experts. While others were most likely break even by year five, they said.

IPL will kick start its inaugural season on April 18, 2008, with 59 matches across 44 days.