Business Today

Revenue machine

IPL spelt big bucks right from its birth. But in 2010, the league has taken a big leap forward and the business is set to explode by the time IPL 4 comes around.

Anusha Subramanian with Dhiman Chattopadhyay        Print Edition: February 21, 2010

When West Indies T20 specialist Keiron Pollard was snapped up by Mumbai Indians during the January 19 auction for the third season of the Indian Premier League, or IPL 3, team boss Mukesh Ambani reportedly coughed up $1.8 million (Rs 8.3 crore) for the batsman after three rival teams exhausted their original bid amount of $750,000 (Rs 3.4 crore). Under IPL rules, the bid amount was not disclosed but, if the number is true, it would make Pollard the most expensive IPL player to date. Much more than the $1.55 million (Rs 7.1 crore) each that Chennai Super Kings paid for Andrew Flintoff and Bangalore Royal Challengers for Kevin Pietersen, who were paid top dollar, in 2009.

If this is an indication of the success of IPL 3 even before the season has begun, then things can only go one way: up. "In Season-III, IPL's earnings could cross Rs 700 crore—over Rs 200 crore more than what it earned in Season II. And though it's early days, IPL 4 will see a big jump in revenues as well," says an official of the Board of Control for Cricket in India (BCCI), the mover behind IPL, on condition of anonymity.

UK-based Brand Finance had valued the IPL enterprise at $2.01 billion (Rs 9,200 crore at current rates) for Season-II; sources indicate this valuation could increase by 50 per cent. With two new teams, a base price of $225 million for the teams ($113 million higher than the most expensive team at present) and over 300 players set to go under the hammer in October 2010, IPL 4 is sure to get bigger.

It's All About the Money
The cash-spewing innovations have already started: Apart from TV rights, IPL will also rake in the moolah from theatrical rights. This year, IPL Chairman and Commissioner Lalit Modi has raked in almost $70 million (Rs 330 crore) by selling theatre-screening rights of the tournament to Entertainment Sports Direct, which, in turn, has partnered with UFO Moviez to screen IPL matches in HD quality in 800 screens across the country. Sanjay Gaikwad, CEO, UFO Moviez, expects box office collections from the IPL matches to touch Rs 30 crore in season-III. Says Gaikwad: "This is probably the first time that any sports league is leveraging this aspect of the business." The semi-finals and finals will be screened in 3D, a first for sporting events.

IPL will also have an awards ceremony from this year, based on 56 League games, Colors, the general entertainment channel, will telecast the awards night, after-match parties, events, fashion shows and related events. Says Modi: "We will give every type of viewer something to watch. Fashion, Bollywood and cricket will all be merged. Our partnership with Colors takes the IPL "cricketainment" quotient into a new orbit." The revenue of the tie-up will go to the franchises, he says. Then there is the online streaming of matches on YouTube in a deal with Google (see Marketing Machine).

Rohit Gupta, President, Network Sales, Licensing and Telephony, Multi Screen Media, the holding company of broadcaster SET Max, says, "With IPL back in India, we started sales in mid-2009 so that marketers have enough time to create and plan extensive creative or marketing communication." SET Max is commanding a premium of 20 per cent on advertisements over last year's edition. The broadcaster is commanding Rs 5 lakh for a 10-second ad spot for the matches. Last year, the average cost of a 10-second ad spot was about Rs 3.75 lakh. While 80 per cent inventory has been sold, the balance has been kept aside to be sold at a premium when the tournament is at its peak.

Vedam Jaishankar, Bangalorebased cricket analyst and author of Rahul Dravid's biography, says Modi has played a masterstroke this year. "The tickets for hospitality boxes will be sold at a minimum of Rs 50,000 each. Besides getting hospitality during the match, these people will be invited to the after-match parties," says he. The financial success of IPL 3 even before the matches start in February is luring new business into the league.

Signs of IPL's growing net worth were evident as early as February 2009 when Rajasthan Royals, the IPL champions in Season-I, sold a 12 per cent stake in their franchise for around Rs 70 crore, valuing the franchise at a shade less than Rs 600 crore , or nearly double the $67.5 million paid a year ago to acquire the franchise.

For Season-IV, the auctions for two new teams will be held by the end of February (eight months before the October auction for 300 players) with a base price of $225 million (Rs 1,035 crore) each. This is more than double the value of the costliest team currently— Mumbai Indians at $111.9 million (Rs 514 crore). All eight franchises will be given the choice of retaining any six players (four Indians and two foreigners) they want. IPL boss Modi, however, remains tightlipped when asked if a base price had been fixed for the players. "Nothing has been decided yet. The modalities for Season-IV auction are still being worked out," he says.

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