HONEY, THE RATINGS ARE SHRINKING

Arre, yeh kahin ghate ka sauda toh nahin (hope this is not a losing
proposition) is the hot button whisper that one can hear increasingly
in IPL circles. Away from the hype and hoopla of the big cricket
whirligig, a deep undertone of cynicism dogs the bulge bracket Indian
Paisa League. Bottom line is that if you reside in India, you can run,
but cannot hide from the clutches of IPL. For team owners, sponsors,
advertisers, broadcasters, viewers, spectators and all those who form
the IPL eco system; the cricket economy has a buzz about it. Many
reckon that it is the early birds who actually got the worm. For
instance, Emerging Media (Rajasthan Royals) coughed up $67 million
for 10 years.. Let me do the math for you. At $67 million, the
franchise is a steal, for it works out to $6.7 million per year. If
you adjust that for today's exchange rate, it is Rs 34.17 crore. Shah
Rukh Khan also paid a relatively small sum of money in Season 1 -
$75.09 million. Have these franchise owners and others of their ilk
made money over the last four years? At $370 million, this is the way
it breaks down for late entrant Sahara. As a latecomer even after
getting a haircut by putting the board’s knickers in a twist, it has
to basically fork out $30 million or thereabouts per year. Now that is
a lot more than $6.7 million per annum.
Fatigue across this eco system is the single biggest threat percept to
this whirligig. Cricket fatigue impacts players, it hurts ratings and
consequently singes sponsors and advertisers. It also hurts gate
receipts because Bharat Army constituents don’t turn up at the stadia.
The linkages are too strong and fortunes inter-twined and inter
linked. For the franchises, it could well be like Sisyphus as he
attempts to roll the boulder up the mountain. Sisyphus, King of
Corinth, was given an assignment to roll a great boulder to the top of
a hill. Only, every time Sisyphus, by the greatest of exertion and
toil, attained the summit, the darn thing rolled back down again.
Ratings in season 4 were 25 per cent down from the previous year. The
World Cup that preceded the tourney responsible for the slip. This
season may well be worse, for India’s cricketing fortunes have taken a
massive dive, several top of the line foreign players will join in the
second half and a general ennui seems to have gripped the cricket
economy, grappling as it is with a perceptible economic downturn.
Chins may be up across the IPL, but look at the reality. The opening
ceremony ratings were a meager 1.1 which is a shocker, though I must
confess I was astonished at the enthusiasm shown by the Kolkata crowd
at the Eden on Thursday night when they stayed through the
thundershower to watch Irfantastic, one pull shot made the match as he
flat batted De Lange over mid wicket. At another level, Vijay Mallya
is a classic example of being hit squarely in the eye by the slowdown,
his airline Kingfisher needs immediate resuscitation. Yet the lure of
the game made him bid an excessive $2 million plus for Chris Gayle.
Despite not being able to pay his pilots and cabin crew.
How do the franchises make money is then the million dollar question. Simple.
The franchise owners are subsidised by the Cricket Board and its
extension IPL. This is the way it works: Broadcast revenues for one
were subsidising the franchises till the end of Season 2, but in
Season 3, Lalit Modi showed his worth as a marketer. He worked his
numbers in such a way that by clinching a panoply of new deals, he
managed to double the central revenue pool. Each franchise owner was
given Rs 67.5 crore from this pool in year 2. But with the catalogue
of new deals - YouTube, Colors, Karbonn, Maxx, MRF, vRock, et al; Modi
managed to make this particular revenue stream closer to Rs 130 crore
for each team owner. Now, believe me that was a God sent. So, if
Rajasthan Royals has to pay a fixed cost of $6.7 million only and in
turn is getting Rs 130 crore from the central revenue pool, then that
was a positive start. There were other revenue streams that opened up
when the tourney came back to India.. Of course, there is the
operating expenses part, which is equally heavy, but if you are smart
and some of these franchises are, then there is no way you can lose
money. Entry cost is critical, the lower the better. That way the
arithmetic is in the black and not in the red. People who bought the
franchises earlier and cheap stand to benefit. But even Mukesh Ambani,
who paid the most – $111.9 million or approximately Rs 447 crore –
forks out only Rs 44.7 crore as franchise fee annually to BCCI.
What are the major heads that one needs to look at? Revenues and
expenses obviously. Under revenues there is - broadcasting rights now
read central revenue pool, team sponsors, other income which is gate
receipts, in stadia advertising, merchandising sales, media tie-ups
and prize money. Under expenses there is - franchise fee, stadia fees,
team eco-system expenses, which include sales and marketing employee
cost as well as players and support staff payments, team promotion,
travel and hospitality cost and other variable expenses. Team
sponsorship also improved over time and the general average was
closer to Rs 40 crore for each team with Mumbai Indians and KKR
leading the way with Rs 50 crore or thereabouts. This was up from an
average of Rs 24 crore in the first couple of years. Even when the
league shifted to South Africa, logic suggested that the team owners
lost money. I must add that several clubs were given additional
handouts by IPL reimbursing them for hospitality and travel expenses
incurred in South Africa. While some of these figures are in public
domain, others have not been quantified.
The broadcasting revenues were directed to a central pool, 40 per cent
of which went to IPL itself, 54 per cent to franchisees and 6 per cent
as prize money. The money will be distributed in these proportions
until 2017, after which the share of IPL will be 50 per cent,
franchisees 45 per cent and prize money 5 per cent. IPL signed up
Kingfisher Airlines as the official umpire partner for the series in a
Rs 1o6 crore deal. Wonder whether he is still in a position to
continue given Kingfisher’s present financial health. DLF coughed up
Rs 200 crore as title sponsor for five years, and they too are not
keen on continuing after their contract runs out this year. Pepsi paid
$12.5 million to become the beverage partner. Of this, $2.5 million
went to the eight franchise owners every year. In 2008, it is believed
that teams like Kolkata Knight Riders, Mumbai Indians and Delhi
Daredevils earned around Rs 20 crore from ticket sales alone as the
capacity of their home stadia was larger. With ticket prices going up,
KKR (Eden Gardens), MI (DY Patil stadium), DD (Ferozshah Kotla) are
expected to earn in excess of Rs 25-30 crore this year from gate
receipts. All this if the crowds come in droves.

A research firm IIFL had prognosticated that BCCI would make revenues
of Rs 1,000 crore from IPL 2011.According to them the bulk was to come
through franchisee fees of Rs 656 crore. An estimated Rs 198.5 crore
was to come to BCCI from broadcaster SET Max. Central sponsorships
account for close to Rs 53 crore flowing into BCCI's coffers, while
the online rights for this edition will account for Rs 65 crore, said
the report. For broadcaster SET Max, the report suggested that
advertising revenues will touch Rs 939 crore, largely because of
pre-selling 80 per cent of the inventory on the basis of client
expectations from the property's previous edition. IIFL noted that 80
per cent of the inventory was pre-sold at Rs 5 lakh per 10-second
spot. It further estimated that the remaining inventory is likely to
sell at Rs 3.5 lakh per 10-second spot, thanks to a 20 per cent y-o-y
drop in ratings. Each IPL match allows 45 minutes of ad air time.
According to the report, the drop in ratings was attributable to
‘viewer fatigue following the euphoria of the World Cup, and also
large-scale personnel changes in the teams which has diluted some of
the loyalty built up over previous seasons. In any case, this fatigue
factor ensured that SET Max made a lot less than Rs 939 crore, in the
vicinity of Rs 700 crore only. According to data from TAM Sports, a
unit of TAM Media Research Pvt. Ltd, the average rating for the first
37 matches of IPL’s first three seasons was 4.81, and in season 4 this
dropped to 3.26. From the ratings perspective, IPL as a property was a
disaster.

The clarion call for battle has been given by B Town this time. Sajid
Nadiadwala is going head to head with IPL by releasing comedy caper
Housefull 2. I remember producer Vashu Bhagnani once telling me that
‘cricket is all hype, log kitna cricket dekhenge (how much cricket
will people watch), they need a break from it.’ While other B grade
releases dot April, Priyadarshan’s multi starrer Tezz is being
released on April 27 followed by Kunal Deshmukh’s Jannat 2 on May 4.
Ramu’s Department starring Amitabh Bachchan and Sanjay Dutt hits
theatres near you on May 18 when the IPL ‘fever’ will be peaking.

This is the year of reckoning for the floundering league. Buzz that
Rajasthan Royals is going to change hands and SRK’s KKR is looking for
a strategic investor is already doing the rounds. The defining moment
for Indian Paisa League has arrived. Make or Break time.