22 May 2008

IPL The Money Game !!!

The much waited IPL, the T-20 format of funfair, has started. Pundits jumped in quickly to announce it as hit, in terms of revenue, TV viewrship and on the field tickets being sold.

If we look at the business side of this format, it really makes great sense. And I think the concept of the game, revenue generation model, team ownership and even the concept of cheer leaders, is being lifted from American sports industry. The whole business behind IPL to me looks like a MLB, NFL or NBA, except one change, BCCI (Or body like BCCI) is not the ultimate beneficiary there! Every dollar earned comes back to franchisee.

The basic revenue model for the franchisee is; in-ground ticket sales, in-ground marketing revenue, and other in-ground sales revenue. Considering the amount of money they spend on team players, and other costs they need to take care, it might not be possible for franchisee to break even in first couple of years.

However, if the great rush continues and people keep coming to ground and keep watching; no question; it really makes sense from business perspective. After all, every franchisee should make money by end of the season.

I do see few challenges as well; first thing is to manage the entire team in a professional way. As I can’t stop drawing similarities between a MLB and IPL, this format of the cricket should bring out competitive side of every player and players should not treat this like an exhibition match. Also, for owners, there has to be a tight monitoring of the revenue generated vs. cost incurred for team, otherwise, like any business, owners will end up loosing money.

The IPL matches have brought money and only money to the fore and in the beginning, at least, the Indians could not reconcile with the fact that a cricketer could be ‘auctioned’ at a price of six crore rupees. Many didn’t like the idea while some leaders rushed letters to the Board of Control for Cricket in India (BCCI) chairman Sharad Pawar to somehow stop this sale of cricketers. Some analysts felt that purchasing teams for prices ranging from Rs 268 crores (Jaipur Royals) to Rs 448 crores (Mumbai Indians) with two other teams also selling for more than Rs 400 crores (Bangalore Royal Challengers 446, Hyderabad Deccan Chargers 428) (prices of other teams: Chennai Super Kings 364, Delhi Daredevils 336, Kolkata Knight Riders 300 and Kings XI Punjab at 300 crores) does not suit India at least as of now since India is not yet in the thick of the globalisation era of the world. It has only transited from the Nehruvian socialism to the culture of liberalisation and as such, this phenomenon may be too early for India to entertain.