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Business News/ Sports / Cricket News/  Even the pandemic can’t derail the IPL juggernaut

Even the pandemic can’t derail the IPL juggernaut

Thanks to the bumper 2018 media rights deal, the IPL and the franchises are expected to weather the pandemic impact with relative ease

Photo PTIPremium
Photo PTI

In December, the body that governs cricket in India announced it was planning to add two more teams to the lucrative Indian Premier League (IPL) in 2022. The timing of that statement was significant. It came just two months after IPL 2020, which was first postponed, then held outside India without spectators, concluded. Even that compromised outing has given the Board of Control for Cricket in India (BCCI) the confidence to expand the league beyond the eight teams it has had since 2014.

While IPL 2020 was a compromised event, it wasn’t financially compromised to the degree that most other global sporting events were. Without saying if the BCCI made a profit, treasurer Arun Dhumal said IPL 2020 earned revenues of 4,000 crore, reduced costs by 35% and increased viewership by 25%.

In a normal year, analysts estimate revenues of 4,000-5,000 crore and 2,000 crore surplus for BCCI from IPL. This suggests even IPL 2020 was respectable, if not profitable. This augurs well for IPL, especially as it looks to expand and jump to a new revenue trajectory for the second time.

The first time was in 2018, when BCCI sold the broadcasting and digital rights for IPL to Star India for five years for 16,347 crore. The per-year realisation for BCCI, of 3,269 crore, was 3.5 times its previous deal with Sony. IPL’s brand valuation spiked 40%, according to Brand Finance, a consultancy.

Broadcasting rights play the dominant role in the IPL’s economic equation, both for BCCI and the teams. In a typical year, the BCCI earns another 700 crore from sponsorships. Half the revenues earned by BCCI from media rights and sponsorship constitutes the ‘central revenue pool’ (or roughly, 2,000 crore). This is distributed equally among the franchises.

Regulatory filings of the company that owns Kolkata Knight Riders (KKR), one of the most bankable IPL teams, shows the importance of this central pool for a franchise. In 2018-19, KKR earned revenues of 448 crore. Even a less bankable franchise like Kings XI Punjab earned revenues of 377 crore that year. The 2018-19 numbers for franchises are partly inflated by financial year 2018-19 covering all of IPL 2018 and part of IPL 2019. For a single IPL, a franchise’s revenues would be in the 300-400 crore band.

About 75% of KKR’s 2018-19 revenues came from the central pool alone. Sponsorship and ticket sales - which are affected by a TV-only event - make up smaller slices of the revenue pie. In other words, with this revenue composition, IPL franchises would have preserved 80-90% of revenues in IPL 2020.

For European football clubs, which have a global following, the share of domestic TV rights in total revenues is about 40%. Broadcasting income remaining unchanged in 2020 alone ensures a sound revenue base for IPL franchises even in a pandemic year.

However, other revenue heads took a hit. In August, amid growing tensions with China, Chinese-owned mobile phone manufacturer Vivo dropped out as IPL title sponsor. While Vivo paid 440 crore annually, the new title sponsor, Dream11, paid 222 crore, meaning lower revenues for both BCCI and franchises. Franchises have also reportedly earned less from sponsorship deals in 2020.

But franchises have also saved on costs. IPL 2020 was played in just three venues, close to each other, and franchises spend less on travel and hospitality. However, the two main expense heads, franchise fees and player salaries, have remained unchanged. Therefore, the franchises, which have similar operating dynamics, are expected to report lower profits for IPL 2020.

Promoters who have been there since the beginning, such as those of KKR or Mumbai Indians, have reaped the benefits of staying the course over the past few years. The big surge came from the 2018 media rights deal. For instance, KKR’s share in the central pool increased from 80 crore in 2017-18 to 337 crore in 2018-19. The franchise fees also increased, from 22 crore to 83 crore. On balance, however, it added more to KKR’s revenues than costs—and, hence, profits.

The 2018 media deal also catapulted existing franchises to a new revenue trajectory—from the 150-200 crore band to the 300-400 crore band. As businesses go, IPL teams operate in a limited growth range. But as IPL 2020 shows, it’s a low-risk business that offers immense visibility.

New franchises won’t have the benefit of the revenue bump the older ones got. They will also have to pay more to BCCI to participate. So far, IPL ownership has been defined by business groups, industrialists and actors. Institutional capital, which is increasing its presence in sports leagues globally, has largely been missing. If the IPL juggernaut continues, and original ownership seeks exits, that might change. is a database and search engine for public data

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Published: 05 Jan 2021, 01:28 PM IST
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