By V. Krishnaswamy, IANS
New Delhi : Indian cricket was auctioned for a whopping $718 million Thursday. That alone is a figure that may have been unimaginable till a few years ago, but when $1.02 billion, which flowed into the coffers following the sale of the TV rights for the Indian Premier League (IPL), is added to it, it becomes mind-boggling at $1.72 billion.
But when the dust is settled and the fine print has been combed, the figures will still seem large, but not as large, simply because it is a sum that will come only over a period of 10 years.
For the present, the Indian Cricket Board is laughing its way to the bank. But then the franchisees who are going to be shelling out all that money are not complaining either, for such is the lure of the cricket in India.
The likes of Bollywood’s mega star Shah Rukh Khan and business tycoon Vijay Mallya, were thrilled at their ‘victories’ Thursday, but their task has only just begun.
While the issue of TV rights and bidding for the teams is over, there is still a lot left to be done. Among them are issues like building a team, bidding for players, organisational expenses and finally who makes what and from what source.
Even as everyone is talking big bucks, IANS tries to unravel some of the money questions arising out of the IPL:
How much does the Board get:
— The winning bidders will immediately need to pay only 10 percent of the price they offered to buy each of the teams, which means Mukesh Ambani’s Reliance Group needs to pay a little over $11 million for the first year. But remember, they have committed to a similar amount for the next 10 years.
— So, the total of $718 million, which was bid for the eight teams, will bring the Board just under $72 million each year.
— The Board, which owns complete rights to the IPL, also gets the money raised from the sale of TV rights. The sum of $1.026 million, which was put up by Sony and World Sports Group comprises $918 million for TV rights and $ 108 million for compulsory promotional activities. That amount is also to be paid over 10 years, but of that $306 million is for the first five years and the rest for the remainder five years.
— So, the total inflow for the Board from sale of TV rights and bid money is about $133 million each year for next 10 years.
— The $133 million is made up of $ 61.2 million (one-fifth of $ 306 million) per year from TV rights plus $ 71.8 million (10 per cent of the total of winning bids of just $ 718 million made for the teams on Thursday).
— The Board will also make money from sale of title rights to the IPL, T-shirts of teams, a certain number of in-stadia boards at each venue and a portion of income from various other sources.,
What are the main expenses for the Board?
— The main expense for the Board is raising prize money, which will be 16 per cent of the money raised from TV rights.
— The Board will also take care of part of the organizational expenses for each match, but most of the expenses, including hiring of the stadia – which have already been decided by the Board – will have to be borne by the franchisee.
How much does a team cost the franchisees?
— While the franchisees have already committed a certain amount – the winning bid – they will need to pay that only over a period of 10 years, with 10 per cent being the outflow each year.
— Apart from coughing huge amounts to buy the teams, the franchisees will further bid for a minimum of 16 players, each of whom will get a minimum salary of $50,000 per season.
— The franchisees will also pay for the training of the team, the coaches, the support staff, their own promotions in media.
— The franchisee will also bear most of the expenses, including hiring of the stadia – which have already been decided by the Board – for each match.
— The franchisee will also need to look at expenses for security, promotion of their teams and other aspects, which go into the running of a team and the organisation of seven matches at home.
What are the revenue streams for the franchises?
— Of the amount raised as TV rights for each year – one fifth of $306 million for first five years and one-fifth of $602 million for next five years — the Board keeps 20 per cent and a further 16 per cent set aside. The remainder 64 per cent is distributed among the eight franchise owners as their income from TV rights.
— The franchisee gets the receipts of the gate, after keeping back a certain portion of tickets/ seats for the Board. That figure is about 20 per cent.
— The franchisee can also raise further revenue from avenues like logos on T-shirts, but not the principal naming rights; merchandise and other promotions. But each of these will need to be cleared by the Board.
What are the teams fighting for?
— The tournament, involving eight teams, will be held in eight cities under floodlights for 44 days beginning April 18. The prize purse will be approximately $4 million.
— Each team will play 14 matches, seven at home and seven away