IPL franchises to see 20% reduction in revenues in 2014
Main reason is IPL’s shift to the United Arab Emirates for the first 20 matches say industry professionals
Mumbai/New Delhi May 7
Though the games in the seventh edition of the Indian Premier League (IPL) have lived up to expectations providing explosive cricketing action and nail biting finishes, theeight teams’ in the tournament, may not see such action in theirfinancials this year.
The reason – IPL’s shift to the United Arab Emirates for the first 20 matches say industry professionals.The Board of Control for Cricket in India (BCCI) had to shift halfof the tournament to UAE, thanks to the tournament clashing with the general elections making it impossible for the government to providethe requisite security. As a result of the shift, the franchiseshave incurred added cost for traveling and accommodation overseas andost out on gate revenues for the matches held in the UAE.
This means that franchisees could see asteep fall in their incomes by 20% to 25 per this year, denting their already strained balance sheets .Says Venky Mysore CEO of Kolkatta Knight Riders which is one of the few which have made profits: “Thefranchisees have been hit by a double whammy-costs have gone up andrevenues have come down because of the shift in venue.” He adds that sponsorship revenues have dropped by around 15%, gate ticket revenues for home matches have been partly lost, andoperational and logistics costs are up by 40% (they constitute for 15% of total costs) thanks to the shift to UAE.
Mysore also says that the IPL top brass has however said that they will “take care” of the additionalexpense, though there is nothing specific which has been given inwriting. KKR for instance made a profit of over Rs 10 crore in financial year 2012, but Mysore says that it still has to pay forthe accumulated losses in the initial years.
Last year franchisees made over Rs 1060 crore (combined for nine franchises) which included Rs 540 crore incentral revenues (60% of the total broadcast fee and IPLsponsorship fee earned by the BCCI / IPL), Rs 250 crore in gate revenues and close to Rs 270 crore in sponsorships.
An official associated with a franchisefrom North India reveals, “The franchises definitely have it toughthis year. There has been a drop of 30 to 40% in sponsorshiprevenues on an average apart from the loss in gate revenues formatches in the UAE. The BCCI is yet to communicate the revenue split from those matches to the teams. The drop in sponsorship comes purelybecause of the delay and uncertainty caused by the betting and matching fixing controversy.”
With the games shifting to UAE for the first leg of the tournament, brands saw less value and merit in associating with teams since on-ground activations would be futile, not to mention expensive to carry out. Additionally, the raging controversy around the betting and match fixing issue that broke out last year also threw as persions regarding the image of the tournament. The Supreme Court passing an observation to shelve the two teams in question, further threw a spanner in the wheels. Things got moving only when it was certain that the tournament will include all eight teams and will come back to India after the first 20matches.
However, the damage had already beendone since the franchises lost bargaining power in the hurry tofinalise deals and get on with the business of IPL.
The official adds that the hit on revenues is a bigger reason for strain on the balance sheets rather than the increased cost. While the players had to be flown from Indiato the UAE, the cost (of travel and accommodation) has been only marginally higher than the cost of traveling and accomodation across different cities of India.
Indranil Das Blah, COO, CAA Kwan adds,”The delay in signing deals has also been largely because most ofthe teams were completely revamped. Ideally, when the teams do nothave major changes, the franchises start pitching to prospective sponsors by November-December and finalise deals by February. This year however, the auctions took place in February and only after that did teams start pitching aggressively.”
Of the eight teams participating this year, only Mumbai Indians and Chennai Super Kings had retained the maximum five players allowed form last year’s team. Others like Delhi Daredevils and Kings XI Punjab saw an almost complete overhaul in the team constitution.
Blah also states that this year’s elections have played a dampener in the IPL festivities. The official from the north franchise agrees that the elections have taken a lot of sheen from the IPL considering brands have been cautious inspending.
With the initial response to the matches in India being lukewarm in terms of stadium attendance, franchises are hoping for a change in tides as the election feversubsides and IPL momentum builds up.