The daunting math of women’s IPL

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There will be a tussle for the franchise rights among around 17 bidders who have submitted their technical bids – or documents for qualification – on Monday. More than 30 companies, including team owners of all 10 franchises of the men’s IPL, had received the tender documents.

Graphic: Mint

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Graphic: Mint

While the team owners of Chennai Super Kings, Gujarat Titans and Lucknow Super Giants have not submitted their technical bids, indicating lack of interest, the remaining seven team owners have received the go-ahead from the BCCI after their submissions.

Other companies that have submitted technical bids and will be on the bidding table on Wednesday include Adani Group, Capri Global, Amrit Leela Enterprises (Kotak Group), Torrent Group, Lancer Capital (Glazer family), Haldiram and Shriram Group .

The five franchises will be decided from a list of 10 cities—Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Ahmedabad, Dharamsala, Guwahati, Indore and Lucknow—and the gap between demand and supply could be somewhat irrationally encouraging and financial That’s an unviable bid, some owners and experts feel. BCCI is counting on it.

Experts who spoke with Mint said that bidders will have a variety of reasons for wanting to be a part of the league – from the desire to support or support women’s cricket to getting a seat at the same table as top team owners and promoting their brand. to expand. In some markets just to be a part of the IPL ecosystem. One of them said, ‘Profitability and economic sense will certainly not be a part of it.’

A top official of the IPL team that made the technical bid said, “Though the BCCI has not put a reserve price for the auction, there is a lot of interest and the kind of publicity they have managed to generate, I don’t think Team owners will want to take any chances. We would like to be financially prudent and bid keeping in mind the economic viability of the league, but we have seen in the past how bidding for IPL franchises has gone completely berserk.”

He was referring to the eye-catching bid of RP Sanjiv Goenka Group 7,090 crores for the Lucknow franchise in 2021. The second highest bid for the Ahmedabad franchise was from CVC Capitals. 5,600 crores, outside the Adani group 5,100 crore bid

In contrast, the initial IPL franchises went for a much smaller amount. Reliance Industries paid the highest amount of $ 111.9 million (about Rs 100 crore) 447.6 crores then) – for the Mumbai franchise in 2008. United Breweries, owned by Vijay Mallya, bought Bangalore for $111.6 million ( 446 crores). The base price was kept at $50 million and one dollar was then equal to Rs 42.

In 2010, the Sahara Group acquired the Pune franchise for $370 million ( 1,702 crore), and a consortium named Rendezvous Sports World bought the Kochi team for $333.3 million ( 1,533 crore).

The executive added: “Unfortunately, the winning bid for a women’s IPL franchise will be a function of deep pockets and how much they are willing to lose.”

According to Mint’s analysis based on industry estimates for potential advertising revenue share and other revenue and cost sources – subjective of course – the only way for a team owner to break even within the first five years is if they Franchise rights are available for zero cost. However, team rights are for life, and those with a long-term outlook with an appetite to absorb losses in the early years can find a way to make the math work with the optimism built into the modeling.

As per the current format, all franchises will earn an equal share from the central revenue pool. The board will share 80% of its revenue with the league, which includes media rights and ground sponsorship.

Viacom18 has already taken the media rights for this 7.10 crores per match, while BCCI is expected to sell the sponsorship price 250 crores for five years.

As per calculations, each franchisee will receive approx. 30-32 crore from this central revenue pool per year. In addition, they can sell team sponsorships for other things—the front and back of the jersey, the leading arm and leg, the non-leading arm, the back of the helmet, etc. 10-15 crore per year in the next five years.

“Overall, post the sale of media rights, we estimate that the teams can earn 40-47 crore per season,” said a senior executive of another IPL franchise, which is seriously considering bidding for the rights. “Now we know the revenue potential, and we have done the cost analysis backwards. work done.”

Two current franchise owners told Mint that to run the WIPL franchise, where the player’s purse is kept 12 crores in the first year, the total cost will be 25-35 crores, excluding license fee cost.

“There are player fees, branding and marketing costs, and management costs. Put all together it would be in the range of 25-35 crore for someone who already has a franchise and can leverage the synergies,” said one of them, requesting anonymity. 10-12 cr per annum if there is no franchise fee, but for a newcomer, it will be a loss right from the start. Now comes the matter of franchisee fees. can i get its franchise 100-150 crores ( 10-15 crores per year)? Then I will not only break even but make some profit in the first five years, but if it is more than 150 crores, it will not be profitable.”

The BCCI, internally, is hoping to cross bids 1,000 crore mark, interest paid.

By back-of-the-envelope calculation, but 1,000 crore, the bidder suffers a loss of approx. 400–500 crores in the first five years, which a BCCI official described as a “small amount in the larger scheme of things”.

“We have already seen the media rights value, which is important for women’s cricket,” the BCCI official said. higher, and they’re all making more profit 400 crores per season. Many of them today own loss-making franchises in foreign leagues. I don’t think serious players will have any doubt about the value of WIPL in the long run.”

Calculating a 10-year outlook is difficult as the value of the next media rights cycle will depend on the performance of the league as well as the distribution landscape of TV and digital penetration.

Meanwhile, for the current cycle, media rights owner Viacom 18, which has left behind the Disney star by a significant margin, is expected to lose. According to Mint’s estimate, Rs 600-650 crore in the next five years.

Analyzing the cost of telecasting the league, a senior sports broadcaster said, The 951 crores that Viacom18 is paying to the BCCI is just for the rights. up and up, the cost of production is approx. 40 lakhs per match, which comes to approx. 55 crores in 134 matches over the next five years. If you add the cost of bank guarantee, insurance and other production, it will be the second 150 crores. and they have to spend close to 20 crores every year on its marketing to make the league. Overall it will cost them 1,200-1,250 crore,” said the executive.

Now on the revenue front, the league is expected to survive around advertising revenue for the next five years. 400-450 crores, while the estimated revenue from distribution and subscription- both TV and digital is approx. 200 crores according to various estimates.

Thus, the total revenue for the media rights holder is expected to be in the range of 600-650 crores in the next five years.

Ultimately, this could be an auction rife with the potential for buyer’s remorse.

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