What slowdown? It’s a high sixer for IPL

What slowdown? It’s a high sixer for IPL
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First Published: Sat, Feb 07 2009. 12 52 AM IST

 Star power: (Clockwise from top) Rajasthan Royals’ new stakeholder Shilpa Shetty and IPL chairman Lalit Modi ( at the season 2 auction proceedings; Preity Zinta arrives for the bidding; as does UB Gr
Star power: (Clockwise from top) Rajasthan Royals’ new stakeholder Shilpa Shetty and IPL chairman Lalit Modi ( at the season 2 auction proceedings; Preity Zinta arrives for the bidding; as does UB Gr
Updated: Sat, Feb 07 2009. 12 52 AM IST
Panaji: A Bangladeshi fast bowler went for 12 times his reserve price. A 34-year-old domestic South African player got six times his base price. And two others, both former England captains, became the world’s highest-paid cricketers. The Indian Premier League’s (IPL) second round auction on Friday in one of Goa’s priciest hotels seemed unaware of any slowdown.
Star power: (Clockwise from top) Rajasthan Royals’ new stakeholder Shilpa Shetty and IPL chairman Lalit Modi ( at the season 2 auction proceedings; Preity Zinta arrives for the bidding; as does UB Group chairman and Bangalore Royal Challengers’ owner Vijay Mallya. Pictures by Rozario Estibeiro / AP, PTI and Satish Kunkalkar / AP.
England’s Kevin Pietersen and Andrew Flintoff were signed for $1.55 million (Rs7.55 crore) a year each, topping the $1.5 million the India Cements Ltd-promoted Chennai Super Kings bid for India cricket captain Mahendra Singh Dhoni last year. Flintoff will play for the Chennai franchise and Pietersen for the United Breweries Ltd-owned Bangalore Royal Challengers.
“Look at the way they bid,” Lalit Modi, chairman and commissioner of IPL, said after he announced the bid prices for Pietersen and Flintoff. “… Without a doubt, it (cricket) is recession proof.”
The 17 foreign players on the table were sold for an average $450,000, compared with the average $571,343 spent on 67 players in last year’s inaugural Twenty-20 IPL championship.
The eight IPL teams spent an aggregate $10.06 million, or about 63% of the available $16 million on selecting these players from an available pool of 50 cricketers. They had up to $2 million each to bid for the players.
“It was a conscious decision” to buy Pietersen, Vijay Mallya, chairman of United Breweries, told reporters at the sidelines of the auction. “I was prepared to pay up to $2 million for Kevin Pietersen.”
Other teams such as Hyderabad’s Deccan Chargers, which spent some $3 million last year on Andrew Symonds, Adam Gilchrist and Shahid Afridi, spent only $250,000 for two players this year.
Also Read On the spot coverage of the IPL auction (Reporters Diary)
“The slowdown hasn’t affected us. We bought players to bring balance to the team,” said Darshan M., the team’s vice-president (commercial).
Deccan Chargers had ended at the bottom of the league last year, with Mallya’s Royal Challengers last but second.
For this edition, which runs from 10 April to 29 May, IPL has increased the number of foreign players allowed in each team to 10 from eight last year.
Some franchisees acknowledged the overhang of the global economic slowdown, but are confident this edition will fetch them more revenues than the last one. The Kolkata Knight Riders and Rajasthan Royals are even planning to stage some games in so-called “catchment” areas such as Bangladesh, Orissa and Gujarat to bring in more crowds.
Following the success of the Indian national team in the inaugural Twenty-20 World Cup in 2007, the Board of Control for Cricket in India (BCCI), the world’s richest national governing body for cricket, floated IPL on the lines of football leagues in Europe. IPL earned about Rs9,000 crore from selling broadcast rights and sponsorship deals.
The Kolkata team paid $600,000 for Bangladeshi fast bowler Mashrafe Mortaza, who had a reserve price of $50,000. The reserve price is typically decided by IPL in consultation with the player, who puts a value on his services. Mukesh Ambani’s team, the Mumbai Indians, bought South African Jean-Paul Duminy for $950,000, at least three times his reserve price.
“The slowdown is not going to affect us much. Most of our sponsors are locked in for the long term,” said Jeet Bannerjee, who is associated with the Kolkata franchise.
Others such as N. Srinivasan, chairman and managing director of India Cements, echoes the spirit. “India (referring to the national cricket team) is doing well,” said Srinivasan. “I see a lot of enthusiasm for the game.”
Some industry watchers such as Anirban Das Blah, chief executive of Globosport India Pvt. Ltd, aren’t buying that argument, citing the high prices paid for players and rising expenditure on operations. Television revenues account for only about Rs20 crore annually and franchisees have to recover their money from other avenues such as merchandizing and sponsorships.
“From a business perspective, most of them bled last year,” said Blah. “No one has talked about new income streams, which is pretty much the same as last year, but they are still spending.”
To be sure, television advertising deals for IPL’s second edition are being offered at a discount, as Mint reported on Thursday. Sony Entertainment Television (SET) MAX, the entertainment channel of Multi Screen Media Pvt. Ltd, is selling 30% of its spot inventory—the commercial airtime sold as independent 10-second advertising spots—as discounted packaged deals.
Most of the teams are talking of three-year break-even plans, but none are willing to disclose financial details.
“We are ahead of the three-year plan. We focused on only cricket last year and are now planning to build a brand,” said Ravi Krishnan (no relation to the writer), chairman of the Rajasthan Royals franchise.
This team, which spent the least last year in terms of buying the franchise and spending on players, won the first edition of the competition. This year, it sold an 11.7% stake for $15.4 million to Bollywood actor Shilpa Shetty and Raj Kundra, CEO of Dubai-based Essential General Trading Llc., a deal that values the franchise at $140 million, at least double the price it was bought for.
Krishnan’s view finds an echo in Mahesh Ranka, general manager (India), RelayWorldwide, a unit of the Starcom MediaVest Group, who says franchisees haven’t really spent too much this year.
“Everyone wants to put his best foot forward,” said Ranka. “A few crores here or there won’t affect the profits of the franchises. Just look what it will do to the valuation if a team does well.”
The amounts in the auction are annual contracted fees for the players and will be scaled down according to the number of matches they play. The two most paid English players are expected to feature only in the first three weeks of the six-week long tournament.
Bloomberg contributed to this story.
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First Published: Sat, Feb 07 2009. 12 52 AM IST
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