Shashi Tharoor and Lalit Modi may be battling it out, but Indian Premier League (IPL) franchisees are laughing their way to the bank.
According to the franchisees and research firms, each team is expected to see its earning go up by an average 20 per cent to 30 per cent this year, due to higher revenues earned from sponsorships, merchandising and gate money.
Experts say, on an average, a team will make revenues of Rs 130 crore, including free cash generation of nearly Rs 25 crore from gate receipts, team sponsorships, in-stadia advertising, merchandising and, of course, a share of the broadcasting revenue.
| BRIMMING KITTY Profit expectations of individual teams | ||
| Average | Least profitable | |
| REVENUES | ||
| Central broadcasting | 67 | 67 |
| Central sponsorship | 10 | 10 |
| Team sponsorship | 22 | 15 |
| Gate receipts | 13 | 10 |
| In-stadia advertising | 5 | 5 |
| Merchandise sales | 5 | 5 |
| Media tie-ups | 5 | 0 |
| Prize money | 1 | 1 |
| Total | 129 | 114 |
| EXPENDITURE | ||
| Franchisee fees | 50 | 50 |
| Player salaries | 30 | 28 |
| Stadium fees | 3 | 3 |
| Travel and stay cost | 4 | 4 |
| Team promotions | 12 | 5 |
| Other costs | 5 | 5 |
| Total | 103 | 95 |
| Profits | 24 | 18 |
| Figures in Rs cr | ||
“This is close to 20-30 per cent increase in earnings per team over last season,” said India Infoline Analyst Akash Chattopadhyay, who is tracking the event.
Chattopadhyay’s views are also endorsed by franchisees. A senior executive of Kolkata Knight Riders said: “We signed on at least four new local sponsors to boost local revenues. Our revenues would be at least 25 per cent higher than last year.”
Sources in Mumbai Indians told Business Standard: “Our revenues will be much higher than last year, simply because we have earned a lot more from sponsorships this year. For instance, we have bagged Rs 50 crore worth of sponsorship for 2010, which is an increase of 25 per cent over last year. We have a total of 14 sponsors this year, of which four or five are new.”
Rajasthan Royals, which broke even in the first season itself, expects its earnings to increase ‘significantly’ in 2010. Team CEO Raghu Iyer said: “We expect our revenues and profits to be significantly higher than last year, as ticket sales and sponsorship revenues have increased over last year. We have got 12 sponsors this year, up from eight last year and four in the first. We broke even in the first year itself because we were the winners and got a prize money of around Rs 4.8 crore.”
Chennai Super Kings (CSK) expects its earnings to increase by nearly 30 per cent over last year, when the venue had to be shifted to South Africa on security concerns. CSK Marketing Head Rakesh Singh said: “This year has been particularly good and we expect higher revenues because our merchandise sales, sponsorships and ticket sales have gone up. Usually, sponsorship deal sizes range between Rs 1 crore and Rs 15 crore, depending on the capacity at which the brand will be present. But, new sponsors coming on board this year are paying a premium of 30-40 per cent, compared to the first edition of IPL, while the existing sponsors are increasing the rates they were paying by around 15 per cent.”
Each team has introduced a range of new merchandise this year to cash in on the opportunity. Some are even setting up stalls inside the stadia to push impulse purchase by fans.
According to India Infoline’s Chattopadhyay: “We estimate Ebitda (earnings before interest, taxes, depreciation and amortisation) of the teams to be in the range of Rs 19-43 crore. Total earnings per team should be close to Rs 130 crore on an average, while free cash generation per team should be around Rs 25 crore.”
This season alone, each team would receive Rs 78 crore from the central pool. A team also stood to earn Rs 30-50 crore from gate receipts, team sponsorships and in-stadia advertising and other sources, taking their combined income to Rs 130 crore, India Infoline said.
Franchise fees and player salaries form the bigger part of costs. Depending on the price at which each team was bought, the franchise fee was Rs 30.80 crore for Rajasthan Royals, the lowest bidder, and Rs 51.50 crore for Mumbai Indians, the highest. Similarly, teams’ expense on players’ salaries are between Rs 17 crore and Rs 30 crore.
