Indian Premier League news October 30, 2013

Tighter ship could balance IPL's post-Sahara losses

The loss of the Pune Warriors franchise will hurt the BCCI financially. But in a volatile market, an eight-team IPL may work in the board's favour

The BCCI's decision to pull the plug on Pune Warriors, the IPL's most expensive franchise, after its protracted stand-off with Sahara India Pariwar will doubtless affect the board's revenues but an eight-team tournament could also have some positives for it.

At the moment, the BCCI is "highly unlikely" to replace Sahara with a new owner for the Pune franchise, as they did with the Hyderabad franchise ahead of IPL 2013. Officials believe the eight-team concept, which was the original plan for the IPL, would work better given the current volatile market. Those in the BCCI who have been involved with the IPL since its inception feel the fewer matches in an eight-team league - 60 matches as against 74 last season - will mean fewer afternoon games. This, in turn, will mean more evening games, with their higher eyeball quotient, and will also allow players more time to recover between matches.

There's no getting away, though, from the fact that the BCCI's revenues - and surplus, as a result - will dip with the reduction in number of teams. The BCCI's revenues from the IPL had already dipped from Rs 9.56 billion in 2011-12 to Rs 8.92 billion in 2012-13, according to its 2012-13 annual report. Ravi Savant, the board treasurer when the report was finalised, had attributed the dip primarily to the dip in annual franchise fees - from Rs 6.13 billion to Rs 4.6 billion.

Deduct Rs 1.7 billion, Sahara's annual franchise fees, and the BCCI's revenues for 2013-14 will reduce substantially. In fact, Sahara's annual fee was more than the combined fees of five existing teams - Delhi Daredevils (Rs 336 million, approx), Kolkata Knight Riders (Rs 300 million, approx), Chennai Super Kings (Rs 364 million, approx), Kings XI Punjab (Rs 304 million, approx) and Rajasthan Royals (Rs 268 million, approx).

The IPL sponsorship revenue, which had fallen from Rs 1.92 billion in 2011-12 to Rs 1.8 billion in 2012-13, will come down further with 14 fewer matches next season. Income from media rights - primarily from the broadcaster Multi Screen Media - is linked to the number of matches played every year and that too is expected to fall. All of this will affect the board, and there is no doubt the BCCI's actual surplus for 2013-14 will be much lesser than the budgeted Rs 3.89 billion in the annual report.

The BCCI taking a hit will filter down to its affiliated units, since 70% of the IPL's surplus is distributed among the board's 27 full members. The franchises, on the other hand, will not be as affected by Sahara's termination. The revised number of matches means MSM's annual broadcaster fees, which form a major chunk of the central income pool for IPL, will also be reduced on a pro-rata basis. According to the IPL rules, 60% of central income is distributed equally among all the IPL teams. And with only eight teams sharing the total income instead of nine, each team will get that bit more. In addition, franchises' operating costs will be reduced to some extent because of fewer matches.

Industry experts feel that the loss in revenue from Sahara's exit will not affect the IPL's brand value. "It's a simplistic calculation. The loss is not a bigger multiple than the value," says Harish Bijoor, a Bangalore-based brand strategy consultant. "Pune had not established itself as a brand. It was essentially a start-up, so I don't think the reduction in revenue will actually be more than what the actual value is. Had Royal Challengers Bangalore or Kolkata Knight Riders been removed, the actual loss would have been much more than the current figure; not so with Pune."

Hiren Pandit, a veteran of the media planning and buying industry, feels the BCCI will be prepared to take a financial hit for now. "They don't need to add a team this year since the full auction that is slated to be held before the 2014 IPL will create enough hype about the event. However, the BCCI has to make up for the losses at some point and the only option to do that is by adding teams, which I think they will do two years down the line."

Pandit also believes that the market will welcome the reduction in afternoon games: "From the TV's perspective, it will be healthier since there will be higher viewership. Anyone paying money (to the broadcaster) for catching more eyeballs will be happy. So except for the BCCI losing money, I don't think it (Sahara's exit) will have any significant impact."

Bijoor sums up the whole issue quite well. "I don't think the market will be really bothered about the BCCI's loss in revenue or profits. And anyway, for the BCCI, it's a small amount," he says.

Amol Karhadkar is a correspondent at ESPNcricinfo