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October 25, 2012
The Sun TV Network's successful bid for the Hyderabad franchise of the IPL on Thursday has led to a quandary over an accurate answer to a simple question: has IPL has appreciated or depreciated in value?
Sun TV, a media and entertainment conglomerate which primarily caters to an audience in the four southern languages of India, paid Rs 425.25 crore (approx US$79.4 million) for the Hyderabad franchise for five years. The annual breakdown of Rs 85.05 crore for the successful bid amounts almost half of what the Sahara Group paid for the creation of Pune franchise in 2010. Yet, Sun TV's bid is almost double of what Deccan Chronicle Holdings Ltd paid for the Hyderabad franchise over the previous five years. Deccan Chargers had signed a deal worth approximately Rs 428 crore ($107.01 million at Rs 40 per USD) for a 10-year period when the IPL was first launched in 2008; Sun TV Network would be paying almost as much over the next five years.
"The price that we paid is a very attractive price, because the last deal [the Sahara Group's] was almost at Rs 170 crore per annum and we got it for 50% of the last transaction price," SL Narayanan, chief financial officer of Sun TV Network, said after signing the franchise agreement. "We have a fair understanding of the inflows and expenses; we have done our maths and this is going to be a very attractive deal for us."
While the buyers chose to hold up the figures of the 2010 Pune bid as a comparison, the sellers used the original Hyderabad franchise model as their standard measure. BCCI president N Srinivasan said the outcome of the bidding process had worked in the board's favour. "If you see, this is twice the value of Deccan Chargers," Srinivasan said. "If you take into account the sharing of central rights compared to the earlier expansion of franchise, you will find that this bid represents a higher value; it is a very good value.
"More importantly, it is a very credible franchise owner who is in the media, so they will add a lot of value to the league. That is something to be very happy about."
When the IPL began in 2008 and even when the two new franchises were bid for in 2010, the tenure of the contract was always said to run for ten years. The Sun TV contract has only been signed for five. What had kept the BCCI from offering a 10-year franchise agreement for the new, remodelled Hyderabad franchise? "That is because the original eight franchises have ten-year contracts so five years are left [in their contracts]," Srinivasan said. "After 10 years, the revenue sharing [agreement] is that you don't pay a franchise fee but you pay 20% of your income, that is consistent for all of them."
Pune have a 10-year contract despite the fact that they they came into the IPL late, in 2010. Referring to this, Srinivasan said: "That [Pune's terms] was different, but we've tried to become a lot more consistent now. At the moment, the Pune franchise, he tried to explain, "gets 80% of the central revenue, but from five years onwards the other franchises get 60% so there is a difference in the income. You have to factor that in."
The BCCI has also looked to address the issues around the future of the Chargers' players. "The franchise now has the choice to retain whoever they want; they have to decide by October 31," Srinivasan said. "As far as the players' interests are concerned, they are completely protected and they have also been paid for the last year [IPL 5]."
Narayanan confirmed this: "What the BCCI has said is that we could retain the entire team. We also have opportunities to get more players.
"There are outstanding cricketing names here like Dale Steyn, Kumar Sangakkara, Cameron White, JP Duminy, Shikhar Dhawan and Ishant Sharma [in the squad]; it is a great team but we will decide on the actual composition of the team and support staff over the next few days."
Meanwhile, a PIL has been filed by a social worker in the Guwahati High Court on Thursday, challenging the BCCI's overlooking of Guwahati in the list of cities for which bids were invited. Not having Guwahati was an "act of discrimination by a body which is recognised by the government of India" the petitioner's counsel said. The BCCI tender had invited bids with respect to 12 cities: Ahmedabad, Cuttack, Dharamsala, Hyderabad, Indore, Kanpur, Kochi, Nagpur, Noida, Rajkot, Ranchi and Vizag.
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