Huge IPL rights deals to leave franchises richer

The biggest media rights deal in cricket means that the IPL's eight franchises have had their finances doubled with the stroke of a pen, even before they formulate plans for the 11th season of the league.

Going forward, each IPL franchise will pocket INR 150 crore (US$ 23.4 million) from the central-revenue pool, twice the amount they had been working with in the first ten seasons. Each franchise, as a result, is likely to have a profit of about INR 50 crore (approx US$ 7.8 million) per season for the next five years.

This doubling of revenue is the result of the BCCI's two whopping five-year contracts signed around the IPL this year: Star India paid INR 16,347.50 crore (approx US$ 2.55 billion) for the media rights this week, and Chinese mobile manufacturer Vivo retained the IPL title rights in June by paying INR 2199 crore (approx US$ 341 million).

Without accounting for any other sponsorship deals the IPL has struck, based on the Star India and Vivo monies alone, the overall central revenue pool would be around INR 3500 crore (approx US$ 546 million) per season, after offsetting the operations costs of around INR 200 crore (approx US$ 31.2 million).

A revenue-sharing agreement was central to the original contracts signed between the BCCI and IPL franchise owners for the first ten years. The franchises were assured a percentage share of the income from central rights, after deduction of franchise fees. Between 2008 and 2012, franchises got 80% of the income from central rights and between 2013-17 it was reduced to 60%.

From the 2018 season onwards, under the new rights deals, franchises will receive 50% share of the central-rights income, which amounts to about INR 1750 crore (approx US$ 273 million) and is split across the eight franchises - that is, about INR 218 crore (approx US$ 34 million) per team. Of this, 45% is the standard franchise share while the remaining 5% is variable based on where the franchise finishes at the end of the season.

Also, from next year, the old franchise fee has been re-defined. Previously the owners paid 10% of the amount they had originally paid to procure the franchise in 2008 as an annual fee. From 2018, the BCCI will charge a 20% levy on the franchise's overall revenue. The overall revenues not only comprise the money the franchise gets from sponsorship, ticketing and any other ancillary contracts, but also the IPL central-pool payment derived from the media-rights income.

Till now, the average overall revenue for franchises has been in the region of INR 200-250 crore (approx US$ 31.2-39 million). With the injection of more funds derived from the Star India and Vivo deals, if we peg the overall revenue at about INR 280 crore (approx US$ 43.68 million), each franchise would then need to pay INR 56 crore back to the BCCI as the required fee of 20% their income. Despite this, even accounting for player payments and operations costs, it would leave the franchises richer by at least INR 40-50 crore (approx US$ 6.2-7.8 million) on average.

In the first ten seasons of the IPL, the franchises' central-rights income had been in the range of INR 70-85 crore (approx US$ 11-13 million) with some of them making a modest surplus of a bit more than INR 15 crore (approx US$ 2.34 million) at the end of the year. In the wake of the mega deals struck by the BCCI, the surplus is likely to be at least three times that figure. While the franchises are delighted by the bonanza, they also want the BCCI to acknowledge the role they have played.

Venky Mysore, the managing director of two time IPL champions Kolkata Knight Riders, wants close synergy between the franchises and the BCCI going forward with regards to the development of the league. "The franchises have played a very important role in the success the league has achieved and in building the value of the league," Mysore said. "One would hope that BCCI/IPL take the franchises into confidence as important stakeholders and create greater collaboration."

At the same time, Mysore said, it was imperative that new ways be found to keep the fans' attention on the IPL. "One of the challenges for all the franchises and the league as a whole is to keep building the fan base and to keep improving the fan experience. The attention span of fans is getting shorter and in addition there are competing entertainment options. So it is imperative for all stakeholders to be innovative in building the fan base and creating new levels of engagement."

Another benefit for franchises would be the opportunity to offset any losses accrued over the years. "It [the new media-rights deal] will help all the franchises, and if any franchise has built up losses those would be negated absolutely," Hemant Dua, the Delhi Daredevils CEO, said. "It will help franchises build stronger and better brands, and also to provide a better fan experience."