At present, the central broadcasting revenues, revenues earned by the BCCI and each franchise from SET MAX, the television broadcaster, typically are the largest chunk of revenues. The addition of two new teams in the fourth season will increase saleable airtime and consequently advertising revenues for broadcasters since the number of matches will increase from 59 to 93.
The second source of revenues comes from central and individual sponsors spending currently Rs 15-20 crore for each sponsorship slot. The expansion of the league coupled with increasing audience interest is expected to increase the value of these slots in future seasons. Local sponsorships, too, have added to the top line of the franchisees. Franchises have resorted to two types of sponsorship deals — fixed amount and barter deals. The wide reach of IPL, especially in the "hard to reach" youth and males target group, and the presence of iconic players and Bollywood stars in the various teams will continue to drive sponsorship income for the individual teams in the future.
In Season-I, ticket sales accounted for as low as 7 per cent of total revenues to around 15 per cent of total revenues for various teams. In season 2, most teams had planned an increase in their ticket prices and had intentions of applying a strict "no free tickets" regime. With the tournament moving to South Africa, the efficacy of these strategies could not be tested.
Season-III will witness teams focussing on this aspect and making all efforts to enhance this revenue stream. Internationally, ticket sales account for 15 per cent to 20 per cent of total revenues as a result of premium ticket sales and corporate boxes in addition to normal ticket sales. Infrastructure upgradation to improve the viewer experience is a must and the BCCI needs to work with the stakeholders to make this happen.
The sale of theatrical rights and licensing agreement with a leading general entertainment channel would add to the stream of revenues for the BCCI and each franchise. Licensing and merchandising is unlikely to be a major revenue stream in the near term, since this market is still nascent in India. With organised retail constituting only 7 per cent of the total retail market, an important supply chain enabler for merchandising is undeveloped.
On the costs side, the franchisee fee payable to BCCI forms a large chunk of operating expense for each team. However, with the reserve price for the two new teams fixed at $225 million (Rs 1,035 crore) each against $50 million (Rs 230 crore) each for the first auction, the franchisee fee for new teams is expected to be much higher and a major proportion of the total cost.
Player fee is the other major cost element for the teams. With two additional teams in Season IV leading to increased demand for players and the existing contracts expiring at the end of Season-III, player salary costs will be a key factor that will influence profitability for the franchisees. The current IPL contracts of the players with individual teams expire in 2010.
The salary contract rules, post-2010, have not yet been decided by IPL. The IPL auctions of 2008 and 2009 had salary caps of $5 million (Rs 23 crore at current rates) and $2 million (Rs 9.2 crore) respectively. The salary model that IPL opts for post-2010 will be a key factor in estimating operating costs for each franchise.
The IPL has proven that it has the ability to capture the imagination of not only the Indian public but also the world cricket lovers at large. Its challenge will be to sustain this early advantage through innovative marketing and targeting of new audiences. Also, key will be the ability of the league to tap revenue streams that have remained largely untapped.
— The writer is the National Industry Director, KPMG
