Let's have some facts upfront. The operational cost of running one IPL team is between Rs 100 and 120 crore a year. This includes the wage bill (in the approximate range of Rs 40 crore), the franchisee fee (which varies from Rs 32.58 crore for a Rajasthan Royals to nearly Rs 50 crore for a Mumbai Indians). On top of this, you have the event cost — hosting seven matches, hotels, air tickets, miscellaneous staff support.
“From year to year, our basic operational costs will more or less be fixed, with only some variables,” a top team official told HT on Saturday, the day after the Goa auction. “The problem for us is that while the decrease in spend will be marginal, the decrease in money coming in from sponsors is likely to be substantial. Revenue is impacted much more as everybody’s affected by the slowdown.”
This could likely adversely affect things like advertising and gate receipts. “For instance,” says one owner. “We’d have to re-look at ticket pricing. If we know that people can’t afford to buy very expensive tickets, there’s no point having them on sale.”
So why continue an investment in something like the IPL at this time? “That’s easy,” comes the answer. “Because everyone expects cricket to work, to be less impacted than other businesses by the meltdown.”
Another official has a list ready. “It could add to the profile of the company — it’s a way to be in the limelight, as a stand alone business for some, for mileage to offset other things, just plain brand value.”
Says another, “It’s a constant process of rethink and reinvention. A Mallya or an Ambani for instance, can afford to write off a 50 crore loss a year, their advertising budgets are probably in the range of 400-500 crore. The others will look at their plans and try and figure out a new strategy to help them out.”
So where do they make the money? From sponsorships (team/clothes/in-stadia rights etc), from gate receipts, and from a share of the central (IPL) sponsorship. But it still gets tight, and, in times such as these, it’s a fine line.
They’ve all, in any case, gone into this with the idea that they would be looking at three to five years to get matters really going.
And even in the case of teams like the Kolkata Knight Riders, where they’ve publicly stated that they’re looking at an annual break-even concept, they’re sticking on, for the moment. While no one’s saying whether they actually broke even last year, it is generally believed that no one did.