Prabhakar Sinha/TNN
New Delhi, May 30: Many eyebrows were raised and heads shaken when it first emerged how much the Indian Premier League franchisees were shelling out. Would they be able to recover their huge investments, asked skeptics. Well, it looks like the franchisees will be having the last laugh - all the way to the bank.
The whopping success of IPL has not only ensured that teams like Jaipur, Kolkata and Mohali are likely to break even in the first year itself, but also transformed the fortunes of its telecaster Sony Set Max, says a report prepared by the equity research division of Alchemy Shares and Stock Brokers. The biggest gainer, though, is arguably BCCI - which is projected to rake in a profit of Rs 350 crore from IPL in the first year itself. This would be more than BCCI's profit of Rs 235 crore for all of 2007. In all, IPL will bring revenue of Rs 1,200 crore a year into cricket, more than double the government's entire sports budget of Rs 490 crore.
Set Max, too, seems to have a winner on its hands. The channel's revenue marketshare has risen from a pre-IPL level of 5.7% to 28.8%, says the report. Its share of prime time has gone up to 29%, higher than the cumulative marketshare of the top nine Hindi general entertainment channels. From next year, Sony is projected to gross about Rs 650 crore in advertising revenue for about 45 days of IPL, which would be 7% of the entire estimated TV ad revenue of around Rs 9,000 crore for the whole year.
Ad rates for 10-second spots, which were at Rs 2 lakh per 10 seconds at the start of the tournament, have climbed rapidly to Rs 5 lakh and look set to rise further to Rs 10 lakh for the final, says the report. This would be even more than the Rs 8 lakh per 10 second rate for the nailbiting T20 World Cup final between India and Pakistan last year. Interestingly, the TRP viewership rating of the World Cup final was 9.21. Arnab Mitra, who prepared the Alchemy report, says the TRP rating of the first few IPL matches was around 8.2, which later fell but remained over 5 - higher than any other program running on TV.
IPL's success has also rubbed off on the franchisees. According to the report, teams like Jaipur, Kolkata and Mohali, which have not spent much on franchisee fees, are likely to break even in the first year itself. Kolkata Knight Riders is projected to make an operating profit of Rs 15 crore due to its huge earnings from local sponsorship, amounting to Rs 32 crore, and gate ticket sales of Rs 20 crore. Similarly, Team Jaipur will also be making a profit of Rs 10 crore. This is mainly because it bid a mere Rs 27 crore as the annual franchisee fee, almost half the sums bid by the UB group for Bangalore and by Reliance for Mumbai.
However, even the loss-making teams are expected to earn revenue ranging from Rs 48 crore-76 crore. With cash inflows into cricket getting ever bigger in India, expect this figure to rise further. Valuations will rise correspondingly. In the international sports market, a team is normally valued at three to four times of its revenue. As growth prospects in India are much brighter, an IPL team could get even higher multiples.