Deal with WSG could help IPL partially recoup losses

The Bombay High Court’s refusal today to grant Sony Entertainment Television’s plea for an injunction against the Board of Control for Cricket in India (BCCI) to sell Indian Premier League (IPL) television rights to another party could help the tournament partially recoup losses anticipated from relocating the second edition of the event abroad.

The BCCI has signed a fresh deal with World Sport Group (WSG), which won the rights last year and had tied up with Sony to broadcast the tournament. Sony bought the domestic rights for Rs 220 crore a year for five years last year. It then went to court earlier this month, after BCCI cancelled the deal, alleging that Sony had violated several contractual obligations.

Under the new deal, WSG has agreed to pay BCCI Rs 335 cr — or around 50 per cent more — for the broadcasting rights. WSG is free to resell the rights to any broadcaster and is in talks with Sony to strike a new deal, sources said.

The IPL can now use the additional Rs 115 cr from WSG to underwrite the losses of the eight team owners. Yesterday, IPL Commissioner Lalit Modi had said IPL would sustain losses of about Rs 200 cr to ensure that the eight team owners don't have to bear the loss of shifting to a new venue.

Amrit Mathur, CEO of one of the teams, Delhi Daredevils, said: "IPL could look at various options. The additional money earned from broadcasting is one; it could also change the revenue-share model, so that we get more. Alternatively, it can give us a one-time grant this year."

BCCI shares broadcasting fees in an 80:20 ratio in favour of the team owners. Thanks to the new WSG deal, the teams will get additional revenue of over Rs 92 crore, partly compensating their losses. If BCCI foregoes its share of the broadcasting rights, franchisees would earn an additional Rs 67 crore.

BCCI also earns Rs 40 cr a year from central sponsorships (such as realtor DLF’s title sponsorship) which is shared 60:40 with franchisees; this can also be partly foregone this time. The cricket board also has a cushion of another Rs 289 cr that it earns from franchisees every year for giving them the rights to own a team.

Sponsors of one or more of the eight franchisee teams may ask for a reduction of around 20 per cent in their contracted deals, owing to the tournament’s relocation outside India. The franchisees together earn Rs 100-125 cr from the team sponsorships.

A team sponsor derives about 80 per cent of the value from logos on player uniforms and in-stadia advertising. Value from these will be intact, since the matches will be broadcast during prime time in India.

The remaining 20 per cent of the value comes from free tickets, opportunities to meet the teams, entry to practice sessions, pouring rights to soft drink companies in the stadia or airline ticket revenues for the official airline. “These will disappear," said a senior executive of a consumer goods company that holds sponsorship rights for several teams.

Franchisees fear they will lose around Rs 100 cr from ticket sales, and pay around Rs 100 cr more to fly players abroad and finance their stay. They could also lose Rs 25-30 cr if team sponsors renegotiate their contracts.