HOW THE IPL HAS GROWN
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The Indian Premier League (IPL) is a centrestage cricketing festival that attracts everything glamorous. And its next season is only going to be flashier, given the money being poured into it. Celebrity owners are strategising to pick a disparate mix of Indian and international talent at the upcoming auction to build formidable teams. The permutations are getting more complex. Rules for retaining favourite players have been overhauled and the introduction of a mid-season transfer window will ensure there’s never a dull moment in the competitive spirit of the 60-day tournament. New flavours will spice up cocktails at the VIP lounge where the ball travels in frequent sixers and new partnerships will spring from casual conversations. As cheers get louder in stadiums and more viewers tune in from their homes, the rich in cricket are set to get a lot richer. For the love of the game,
Tit’s time to get down to business.
The money roll for some IPL franchisees has been consistent, but not all have tasted soaring profits. Season 11 is set to change that. The teams that have been waiting to see the red ink disappear from their balance sheets are rejoicing at Star India’s audacious bid to broadcast the tournament.
Star India has won the global media rights, which Sony held for a decade, for a whopping ~16,347 crore. This gives Star worldwide exclusivity on both TV and digital media for the next five years. Breaking down the math, Star will spend ~55 crore per match against Sony’s ~17 crore last season.
This means IPL’s central revenues – 50 per cent of which are shared by the Board of Control for Cricket in India (BCCI) with the eight franchisees, including media rights and title sponsorships – will climb. Vivo’s staggering ~2,199 crore payout for the title sponsorship for five years adds more money to the pool.
Hemant Dua, CEO of Delhi Daredevils, estimates that each team will earn an additional ~100-120 crore. “We have all made huge investments in the last 10 years. The next five years will be payback time.”
On average, the balance sheets of the bottom-rung teams have fluctuated between a profit of ~20-30 crore and a loss of ~10-20 crore a year. “Now everyone will make good money and clear up any losses that teams may have accumulated,” says Dua.
VenkyMysore, CEO of Kolkata Knight Riders (KKR), seconds Dua’s profit estimates. KKR, one of the most profitable IPL franchisees, is expected to make over ~350 crore this season. “We expect EBITDA (earnings before interest, taxes, depreciation and amortisation) margins to go up as we will get an additional ~100 crore, at least, from the central revenues,” saysMysore.
Another tweak in rules in favour of the teams is the scrapping of the per-season fee that each franchisee paid to compete in the IPL. The fee — a total of around ~330 crore, annually — varied for each team, with Mumbai Indians paying the most. This has been replaced by a new revenue-sharing model. Each franchisee will now pay 20 per cent of its topline — which is a total of a team’s central revenue, franchisee sponsorships and sale of tickets — to BCCI.
Daredevil’s Dua says this is an equitable model and a win-win situation for everyone. If a team’s revenue grows, BCCI also ends up making more money compared to the fixed annual fee it charged the last 10 years. o ensure that players get a piece of this savoury pie, the IPL Governing Council SANJAY GUPTA Managing Director, Star TV India met this week to increase the maximum that teams can spend on buying players for the next three years— from ~66 crore in the last season to ~80 crore this year, which will go up to ~82 crore and ~85 crore in 2019 and 2020, respectively. The minimum reserve price paid to a young uncapped player— one who is yet to debut in international cricket— on joining a franchisee has been doubled to ~20 lakh. Capped players will make a minimum of ~50 lakh against ~30 lakh last season.
Whatmakes the decisive pre-game buys even more exciting is how teams will retain their star players from existing squads. The franchisees can reserve a total of five players from last year’s squad. Each team can pick a maximum of three capped players (spending up to ~33 crore on them from its auction purse of ~80 crore), two uncapped Indian players and two overseas ones.
The tournament has the potential to make cricketers among the best paid athletes in the world if you look at what they will earn per hour.
During the tournament, each player can appear for a maximum of 14 games. In the last season, Yuvraj Singh made ~16 crore playing for Delhi Daredevils. In a threehour game, he earned ~40 lakh per hour. The increase in reserve price and the maximum that a team can spend at the auction will earn the 200-odd players even more.
Among the unreserved players who will enter the auction pool, star players are set to gain the most. According to team managers, about 75 per cent of a team’s auction purse is spent on buying 25 per cent of the players. The average salaries of these celebrity players are slated to increase by over ~1.5 crore.
But even for the 150 other players, for whom IPL is a dream platform, the average salaries per player per season would breach the ~1-crore mark for the first time.
TVENKY MYSORE CEO, Kolkata Knight Riders he world’s richest cricket board is not complaining either. Thanks to Star India’s bid, the board will probably add another ~1,000 crore to its kitty this season. This cache will grow further as the revenues of the franchisees expand. But Star India has a steep climb ahead. The company is strategising to make its ~16,347-crore bid profitable. To ensure that advertisers willingly pay a premium per 10-second slot during the IPL, Star will have to ensure a massive increase in viewership on both TV and digital media. Says Venkatasubramanian Ramachandran, senior vice-president of Initiative, a media buying house, "Advertisers are mentally prepared to spend the extra money to feature in the IPL. They will either spend more or prioritise their yearly spends.” Star TV India Managing Director Sanjay Gupta is ready with an aggressive pitch. “As one company holds both digital and TV rights for the first time, we will offer advertisers a platform that has a much bigger reach, is seamless and provides a dramatic improvement in value for money. They will get a better return on their investments.” Star will work towards realising a 40 per cent increase in viewers (both TV and digital)— from 411 million in the last IPL to 550-580 million in 2018— and an increase in usage on both platforms, from 260 billion minutes to 350-360 billion minutes. No other property, says Gupta, can make advertisers reach out to 300 million viewers— that’s nearly one-third of India’s population— in a week.
The plan looks highly ambitious, considering that 780million people in India watch TV. But there is a method to the madness. Gupta says IPL has a dominant viewership in north, west and east India, but is yet to pick up in the south, which offers a huge opportunity to advertisers. The problem, so far, has been giving local language options.
Star’s solution is to launch Star Sports in Kannada, Telugu and Bengali. Its Tamil channel has already taken off. Star’s digital brand, Hotstar, will also telecast the tournament with language options.
“Star has a much more comprehensive coverage in the South compared to Sony. This alone will bump up the number of viewers by 20-25 per cent — a pure bonus for advertisers,” says Sandeep Goyal, chairman, Mogae Media, a marketing and
communications agency.
MatchesonHotsarlast seasonhadadelayoffive minutescomparedtothelive telecast. This, sayexperts, was donetoensureTVviewersdidn’t movetodigital. Butwhiledigital hasfar-reachingpotential, televisionscreenshavenotlost theircharm. Alargepercentage ofthosewhoareonHotstarwere incrementalviewers— theyused Hotstarasasecondscreen(95per centofhomesinIndiahavea singleTVset). Thisyear, Hotstar willwebcastmatcheslive withoutanydelay. Starexpects thiswilldoublethenumberof digitalviewersto200million.
Advertisers have much to gain from the convergence of TV and digital media, which will bring them a step closer to potential buyers. Digital media’s biggest advantage over TV is that it’s a two-way medium. For instance, a car-maker can advertise a new model on TV, but on Hotstar, potential customers can book a test drive while watching IPL.
Gupta candidly admits that Star does not expect to start making money immediately. To break even, Star has to generate over ~3,000 crore from advertising (TV and digital), annually— more than twice of what was made last year.
Insiders at Star say they’re looking at least a ~1,000-crore increase (from ~1,400 crore last year) for the first year from both the platforms. They will also cover part of the costs from subscription revenues, which are around ~500 crore and are not expected to go up at least in the first year.
“The ad rates are obviously headed north. My personal assessment is that TV ad rates will go up 50-60 per cent, which will be a very smartmove by Star as the expectation is for a much steeper climb,” saysMogae’s Goyal. The CEO of a leading broadcaster in India differs. “A dramatic shift in ad spends to IPL will not happen,” he says. “Globally, sports companies make up for a large part of the high investment on sports properties through a substantial increase in subscription revenues, and not just advertising. And that is the problem.”
Star’s gamble will also change the landscape of advertising spends in India. IPL could become a single property that cashes in over 8 per cent of the total TV and digital advertising spend of ~28,000 crore in 2018.
At present, Hindi entertainment channels command 27 per cent of the advertising revenue share. Star’s IPL success could see a dramatic shift from entertainment to sports. Gupta estimates that sports’ share of advertising revenue will soar from 8 per cent currently to 20 per cent in five-odd years. Many would not agree.
The game has only just begun.