IPL in UAE, suggestions for changes in financial model.
I have been wanting to start a blog since 2015, but I could never reach that critical point where I would just start writing. Finally, after five years of procrastination, and some interesting write-ups at my disposal, I am writing my first blog today. Special thanks to Tejas Khadilkar for making this write up more sensible.
The Problem:
The cancellation of IPL was expected to cost BCCI Rs 2000 Crore[1] in losses. But now that the IPL is scheduled to be held in September in the UAE, the extent of these losses is limited for the BCCI. However, since the matches will be without a live audience, it is bound to hit ticket sales, sponsorship and brand values. The franchisees would be more significantly hit due to these changing conditions and several dependent industries like hospitality, travel, and tourism would be hit the strongest. Further, IPL faces increased costs of conducting the tournament overseas. The IPL needs to make some changes in its business to tide over the crisis.
Relevant Data & Preliminary Analysis:
Major Costs:
Prize Money: The BCCI currently pays a total of Rs 50 Crore as prize money to the top 4 teams; this prize money must be slashed down to around Rs 25 Crores[2].
Operational Costs: This includes the opening ceremony and the matchday expenses, the matchday expenses cannot be avoided, but the opening ceremony is extremely extravagant and cancelling it off will save costs to the tune of Rs 20–25 Crores[3].
Commission: The BCCI pays a commission to the foreign cricket boards to avail the players under them, this commission can be negotiated, however since every other board is also facing financial crunch due to the COVID-19 situation, the negotiation won’t be too effective and only minimal cost savings can be done.
Revenues:
Broadcasting rights: organise three exhibition matches among IPL XI, Europe XI and America XI. This will increase viewership among the natives in the non-cricket playing regions (Europe and America), and will also help in increasing the brand value of the IPL. Net revenue increase through exhibition matches Rs 214 Cr. (Rs 71.42 Cr per match).
Advertisement revenue: The audience seating area can be converted into advertising space, thus monetising space which would otherwise be free. To leverage the viewership gained from new exhibition matches and reach the critical mass, advertisements targeting the non-cricket playing regions can open new avenues.
For incremental revenues generated: Average annual fee for 80 seconds (4 strategic time-outs) per match of screen time banner ad (e.g. CEAT Tyre, strategic time out): 13.5 Cr Per year. Assuming a total screen time of 12 minutes (approx. 5% of total match time) per match (Ad space in the audience stands), Estimated Incremental Revenue generated = Rs 120 Cr. To compensate franchisees for lost ticket sales revenue, this incremental revenue would be shared (50% to franchises and 50% to BCCI).
Final Recommendations:
1. Organise three exhibition matches, to generate broadcast revenue and gain viewership in European and American countries.
2. Convert the seating spaces in the stadium to advertisement spaces.
3. Region-specific (On-Ground) advertisement on a rotation basis
4. Cancel the extravagant opening ceremony
5. Financial cooperation with foreign cricket boards
6. Lower prize money by 50%
Sources: Economic times[1], Business Standard[2], Hindustan Times[3]