Ipl Strenght and Weakness Essay Example

Ipl Strenght and Weakness Essay The bidding process for the eight franchises that will compete in the Indian Premier League has officially begun with the release of the prospectus for the inaugural Twenty20 competition beginning in April 2008. The tender inviting bids for the franchises will be announced sometime in December. Potential franchisees can submit bids for more than one city-team and must state the total fee they are offering for a franchise for the first ten-year term. The auction of players will immediately follow the awarding of the franchises. The prospectus also laid out the manner in which the IPLs revenue would be shared with the franchises. The franchises will receive 80% of the television revenue over the first two years, 70% in the third and fourth years, 60% between years five and ten, and 50% from the 11th year onwards. In addition, they will also receive 60% of the sponsorship revenue during the first ten years, after which they will receive 50%. Of the total amount to be distributed, 20% will be divided based on the final league positions of the franchises while the other 80% will be shared squally. The IPLs distribution model, which is based on their current forecasts for the first contracts for centralized television and sponsorship agreements, should be adjusted should the forecasts change. The competition comprises 59 matches and spans 44 days with each franchise playing the other on a home and away basis. The top four teams qualify for the semi-finals, the winners of which will contest the final. The two finalists will in turn qualify for the Champions Twenty20 tournament, which has been provisionally scheduled for October 2008. We will write a custom essay sample on Ipl Strenght and Weakness specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Ipl Strenght and Weakness specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Ipl Strenght and Weakness specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Each franchises squad will have a minimum of 16 players and no more than four international players, drawn from the pool of contracted players, may play in a particular match. Four Under-21 players and four players from the franchises catchment area must also be part of the squad, though these can be the same players. Our first round-up of the IPLs finances shows the league generated $209 million in revenue in its second season, for an aggregate operating profit (earnings before interest, taxes and depreciation) of $89 million. The average franchise is worth $67 million, a 31% increase in just one year. The Rajasthan Royals, winners of the leagues first championship, has risen in value by 71%. This despite the uncertainty and logistical headaches caused by moving this years entire 59-game slate, including the final, to South Africa with only three weeks notice. (After terror incidents, the Indian government was anxious about providing security as parliamentary elections coincided with the month-long season. The IPL was conceived in 2007 near some hallowed ground for sports: in Londons Wimbledon suburb. There, Lalit Modi, representing the Board of Control for Cricket in India (BCCI), the governing body of Indian cricket, and Andrew Wildblood, an executive at sports management powerhouse IMG, discussed the disconnect between crickets worldwide popularity and the lack of commercial success of any domestic league. Their solution: a franchise ownership structure modeled after top U. S. sports leagues. Since then , the league has grown at breakneck speed. In January 2008, eight IPL teams were auctioned for a combined $724 million (to be paid in 10 annual installments to the nonprofit BCCI, an umbrella for the IPL). Just three months later, the Redskins First Ladies of Football were flown in to shake their pom-poms at the sold-out opener. Proceeds from the auction, as well as portions of national media and sponsorship deals, are reinvested, mostly in Indias aging (as far back as the 19th century) cricket stadiums, including some of the 10 rented by IPL teams for $100,000 per match. How successful was that first season? The 2008 semifinals and final drew 62 million viewers in India, with a per-match average of 11% of the nations total cable audience. In the months that followed, Modi, now IPL commissioner, opted out of TV deals with Sony and World Sports Group, risking nearly $1 billion of guaranteed payments over the next nine years. The gamble paid off, to the tune of a 98% annual increase from those broadcast partners, both of which deemed the IPL too valuable a property to lose. One reason the league is so TV-friendly is its format: Matches are held under Twenty20 rules that speed up each contest to about three hours (a traditional cricket match can last days, with tea breaks). The format is sweeping cricket worldwide. Revenue from TV, mobile and digital rights deals totaled $100 million for the latest season, of which teams split an 80% share equally. They also divvied up 60% of the $40 million in league sponsorships, including a cool $10 million from the leagues title sponsor, DLF, Indias largest real estate firm, and $5. million from motorbike maker Hero Honda. Despite playing 5,000 miles away, Indian companies actually increased spending on team sponsorships, which grew by 60% to a collective $60 million. Ground staff scurried to change signage before every match so that none of the floating teams advertisers were underrepresented. Ticket sales did not go as smoothly. The move led to a 75% drop in gate receipts, as prices were slashed to fill up stadiums to make the product more appealing on TV. That must have worked: This year, the finals telecast reached 24% more viewers in India than in 2008. Even Modi is surprised by how quickly the league has grown. At the beginning there were not many bidders who were conscious of the fact that the league would succeed, and they had to bid on total blind faith. There was no history, everybody was writing against it, there was no support for it, he says. Then the first season averaged 58,000 fans per match (80% more than a typical Major League Baseball game), and new investors clamored to climb aboard. In February, an ownership group that includes Lachlan Murdoch, the son of media baron Rupert Murdoch, sold a minority stake in the Rajasthan Royals to investors fronted by actress Shilpa Shetty in a deal that reflected the rapid value appreciation. Just last year, the Royals were auctioned for a league-low $67 million over 10 years. While speculation about the IPLs long-term viability drove prices down at the franchise auction, the leagues early success has now translated to unrealistic valuations in the other direction. Not helping is a misguided study frequently cited by cricket officials that calls the IPL a $2 billion business. Perhaps one day, but certainly not yetour cumulative valuation amounts to barely one-fourth of that. Our survey of franchise values is determined by multiples of revenue from continuing operations, except in cases where teams are on the verge of gaining additional money and exposure. Example: The Delhi Daredevils will play for a share of a $6 million purse in the inaugural Twenty20 Champions League this fall, on top of receiving $500,000 just for participating in the tournament. Since up to half of team revenue is accrued by dint of gate receipts, local sponsorships and merchandisingrevenue streams of which teams share little with the leaguemarket size plays a major role in making some franchises more valuable than others. Take the Mumbai Indians, who play before a robust corporate base in Indias largest city. The Indians are the IPLs most valuable team, worth $80 million for the owner, oil and gas giant Reliance Industries and company chairman and largest shareholder Mukesh Ambani, Indias wealthiest man. Sensing Mumbai as the IPLs signature brand, akin to the English footballs Manchester United or baseballs New York Yankees, companies from outside of India, like Adidas ( ADDDY. PK news people ) and MasterCard ( MA news people ), have been quick to sponsor the team. Over two seasons, Mumbais $43 million in revenue tops the IPL. Some of the IPLs cachet comes from its owners: Khan uses the resources of his film company, Red Chillies Entertainment, to promote Kolkata and expand the teams reach into new markets. His strategy is paying off. Polls consistently rank the Knight Riders as Indias most popular team, and theyre already more valuable than two teams that were sold at higher auction prices only a year and a half ago. Such hands-on management is a far cry from the Stanford Super Series, the defunct Twenty20 competition between the English national team and all-stars from around the West Indies that was bankrolled by alleged Ponzi schemer R. Allen Stanford and thought to be competition for the IPL. Instead, after only one year, the SSS joined an alphabet soup of failed cricket ventures, including the IISC, WSC and APC. Cricket has been played internationally for 165 years and was once a contest at the Olympics. With 104 nations as members of crickets governing body, its one of the most popular sports in the world. But before the IPL, professional leagues had never truly been run as a business. Most leagues around the world are operated by nonprofit entities and teams owned by athletic clubs with thousands of members; often, making money is a low priority. Says Donald Lockerbie, chief executive of the USA Cricket Association, [English cricket] is as traditional a sport as there is. Its essentially a club membership drive. National teams have always been crickets top draw. But private franchise ownership coupled with the commercial possibilities of the new, abbreviated version of the game in Indias cricket crazed marketplace has upended the sports established order. Its also made Modi into crickets most influential (if polarizing) figure, for whom profit always trumps tradition. A brash and charismat ic promoter, hes the subcontinents answer to Don King. In April he hired around-the-clock security after reportedly receiving death threats from the mob, the gambling operations of which stood to take a hit from the season moving to South Africa. Unfazed, Modi is already laying the groundwork for the IPLs next chapter. We plan to have another shorter [season] that will move around the world, with a main league that will stay in India, he says. Another plan to boost league coffers is to add more teams. IMGs Wildblood projects expansion as early as 2011 with the IPL adding one or two more squads. Unlike in the early days, bidders will have a sense of the leagues long-term prospects. I think a lot of people discounted the fact that there was any value, Modi says. Not anymore.