IPL yet to develop a robust business model

The aura around the IPL is not quite what it was for those putting money behind it.

How does one assess the Indian Premier League (IPL) after Thursday’s auction in which the Sun Group won the right to the Hyderabad franchise? Those who fall on either side of the divide of the BCCI will see the glass as either half full or half empty.

Being a neutral — but hugely interested observer — I am unsure which side is correct.

But this auction, I would venture to say, has perhaps redefined the eco-dynamics of the IPL. I am not being a fence sitter in saying this. The IPL has been on an unending roller-coaster ride since its inception and it is almost impossible to say with any certainty what could happen next.


For the present though, let’s see how the various franchise owners and the BCCI would be reacting to the new development: a) The Sahara Group, I would imagine, would be mighty miffed, even shedding some tears, so to speak. It might be recalled that they had bought the Pune franchise for approximately Rs 170 crore per annum, or twice what the Sun Group has paid this year.

That the value would diminish so much in two years might be difficult for Sahara to digest, but in stock market parlance, that’s the risk one runs when picking up a high value stock at the apex of a bull run as it transpires.

b) By the same token, the Sun Group would manage a chuckle or two. Having entered the ‘market’ during a bear phase, they have been able to pick up the franchise at a considerably knocked down price. Of course, whether this is a bargain, the optimum value, or still overpriced (as some analysts argue) remains to be seen. Their strategies for revenue generation are still unknown, but they would know it’s not going to be a cakewalk.

The advantage for them is they will have learnt from the mistakes of others.

c) The other eight franchise owners, while thanking their stars that unlike Sahara they bought the property at the base price, may still be displeased at the massive erosion in the value. More so for those who have been interested in selling the property lock, stock and barrel or some part to get fresh capital infusion. This will entail a whole new set of calculations for generating revenue through sale of stake or other instruments like sponsorships, merchandising, ticketing etc.

d) Where the BCCI is concerned, after Thursday’s auction some officials would have us believe that the Board would be laughing all the way to the bank.

My belief is that they would have been greatly relieved to have found a buyer.

While Sun’s bid is a 100 per cent increase on the base price, it is pertinent to note that only four corporates bought tenders this time and only two bids were received. The clamour of old for being part of the IPL was not in evidence.

All of this adds up to a reality check which suggests that the aura around the IPL is not quite what it was for those putting money behind it.

Apart from the turbulence faced by two franchises — Kochi and Hyderabad — being disqualified in just five years, the several controversies that have accompanied it since it started will have obviously impacted the broadcasters as also sponsors.

The broadcast rights have been sealed for 10 years but the title sponsorship, which was with the currently beleaguered DLF group, is up for bidding again.

What value the BCCI can extract from a money market that is tight should provide some idea of whether the IPL remains as seductive as earlier.

By all accounts, the IPL has also fallen short of providing a robust business model (as yet) which would make franchise owners gleeful. The initial flush of excitement and ego trips is over, now the pennies — spent and earned — are being counted in right earnest.

It is no fault of the BCCI if franchise owners can’t manage their affairs. But clearly, making money is not as simple as was earlier thought. Future valuations — of the franchises as well as the IPL itself — therefore, will be more hard-boiled.

All this, of course, does not deny the IPL’s appeal for spectators.

This is still the tournament’s biggest ally. Even last season, in spite of widespread scepticism, the tournament was a rousing success where spectatorship — in stadia, TV and digital streaming — is concerned.

By simple logic, fan approval is half the battle won. But this support cannot be taken for granted.

Like the T20 format itself, this can be fickle unless standards of credibility are thoroughly established.

Given the record of the past few years, there are several challenges that still lie ahead for the BCCI to consolidate the IPL into a foolproof situation.

The writer is a seasoned journalist.


Get stories like this on the Yahoo app and discover more every day.
Download it now.