Team-building exercise

So why is IPL II inevitable? Why all that show-must-go-on rhetoric? Why can’t the Indian board do without the tournament?

The reasons are many but one reason is more important than others —safe money. The IPL is not as much about cricket and entertainment as it is about business. The IPL is first a business venture, next a cricket tournament. Ask Nita Ambani or any franchisee owner and they would tell you faster about the money sharing ratio between the IPL and franchise than about the highest run scorer of their teams. The count is about millions not about sixes.

If the South African and British Governments had said no, Lalit Modi would rather have had the tournament in Papua Nu Guinea than not have it at all. So big are the stakes that the IPL’s survival, future and credibility are in its continuation, not in suspension.

Each franchisee has committed about $80 to 120 million each year and the return on that money comes only if the tournament is staged. No owner uttered a word when the tournament was moved out of India. Modi’s African Safari, in fact, got eight cheers.
As per the arrangement between IPL and the franchisees, 80 per cent of the television revenue goes to the owners in the first two years. In the third and fourth years, the revenue sharing formula is 70-30. From fifth to 10th year, it would be 60-40. Each frachisee has signed up for 10 years.

So how much money each team would get from the television revenue? Simple mathematics. The IPL has sold the television rights to World Sports Group and Sony combine for an exorbitant sum of Rs 8200 crore for nine years after scrapping their earlier deal of about Rs 5,000 crores for 10 years. The TV price of the tournament has gone up by more than 40 per cent in one year. You never know how many more times the television deal will terminated and resigned in the next nine years.

The revised deal fetches over Rs 900 crore in one year out of which Rs 720 crore is shared among eight franchisees which is about 90 crores per team. You can be sure, that is not all.

Then the franchisees have a 60-40 sharing ration from every sponsorship deal the IPL signs. For example IPL has a Rs 200 crore five-year deal with DLF for the tournament’s title sponsorship. It means every year it would get Rs 40 crore and 60 per cent of that money would be divided among the team owners. Other sponsors of the IPL are Pepsico, Vodafone, Hero Honda, Kingfisher and Citibank.

Besides each franchisee can keep all its income from the gate collections from matches (each team can host seven matches although it would be different this year). The team owners can also keep the total income of their title sponsors, merchandising and ticketing.  If it is held in India, each team earns about Rs 5 crore — through various sponsorships and gate collection - from each of its seven home matches. This year, of course, it would be different. The IPL has promised to take care of this.