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Timely cost-cutting for IPL proving wise with Covid-19 storm

Quinton de Kock of the Mumbai Indians bats during the Indian Premier League Final match between the the Mumbai Indians and Chennai Super Kings at Rajiv Gandhi International Cricket Stadium on May 12, 2019 in Hyderabad, India. (Robert Cianflone/Getty Images)

The 2020 Indian Premier League has been one of sport’s success stories on and off the pitch since the first ball was bowled in the eight-team franchise tournament in 2008 but a round of cost-cutting measures and the onset of the coronavirus present the IPL with its biggest challenge yet.

The trajectory for the IPL has been a smooth one financially, so far. In 2019, independent value assessors Duff and Phelps found that the overall value of the IPL had risen from $6.3bn (€5.8bn) in 2018 to $6.8bn in 2019.

Central sponsorship revenue has grown from $14.7m in 2008 to $82.7m in 2019, and franchise revenues have become increasingly healthy with all eight turning a profit for the first time in 2018.

Uncertain 2020

There was some surprise, then, that the Board of Control for Cricket in Indian (BCCI) announced a cost-cutting program on March 4.

This included a decrease in prize money (from $2.72m for the winners to $1.36m), an end to the opening ceremony and a policy change mandating that officials must fly economy-class on short trips.

It also increased the fees the franchises must pay state cricket associations for each home match they play, from $27,197 to $68,119.

The IPL’s chairman, Brijesh Patel, said there was no cause for alarm. “It’s not cost-cutting,” he said. “In 2013-14, to help the franchises, we had agreed to increase the money, but it was not part of the original contract…in 2013, the franchises had requested saying they were not making money in IPL. So, BCCI thought we will also contribute so that player payments do not become an issue. Now, they are earning profits. It’s just loss in profit.”

BCCI president and former Indian batsman Sourav Ganguly. (Photo by Gareth Copley/Getty Images)

One team official told SportBusiness that franchises would have appreciated more input in the decision. “BCCI tend to leave us out of the loop when deciding which way to go. We need to be more involved.

“There have been no real reasons given for the reduction in prize money for this season and the rise in costs has not been welcomed. We do, however, know that there are bigger issues at the moment.”

Covid-19

N. Santosh, of financial advisory service Duff and Phelps, believes that the cost-cutting could have been made in anticipation of the Covid-19 threat. “When the decision was made in early March, the coronavirus was already out there, and concerns were starting to be felt around the country. It is possible that while nobody thought it would impact the IPL, the BCCI anticipated that there would be issues and were thinking ahead.”

It was all supposed to start on March 29 as defending champions Mumbai Indians taking on runners-up Chennai Super Kings and finish on May 24.

The 2020 IPL was due to run from March 29 to May 24, but the BCCI has suspended its start until April 15. With India in the midst of a lockdown – its government banning public gatherings and restricting travel and immigration – the new start date looks increasingly optimistic.

“Everything depends on whether the government extends the lockdown or not,” adds Santosh. “They will have to relax visa restrictions. I don’t see it starting before May but then the window for international cricket starts becomes very difficult. Most foreign players would not be available, and it doesn’t make sense for IPL to play a truncated league without foreign players. I think it will be cancelled.”

A report by Business Today magazine estimated the IPL could lose $521.6m in broadcast revenue and $80.9m in central sponsorship if there is no tournament. Broadcasters Star Sports had targeted $445m in advertising revenue around the 2020 edition and had sold 75 per cent of its inventory by the end of January.

“With a cancellation, there will be a billion-dollar impact in terms of the league’s value and in terms of financials, there will be a significant impact on the individual stakeholders,” says Santosh. “I would expect that the teams will lose around $2m to $3m of their individual income if there is no cricket, though arrangements would have to be made with their sponsors and their insurance companies.

“Income from ticket sales can be insured but there are other losses such as those of merchandise sales that will have an effect. Franchises will be able to survive one season. They are all doing reasonably well.”

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There are other options than full cancellation on the table. These include a shorter season with the eight teams being divided into groups and the winners going through. Games could be played in just two or three cities and there could be more weekend double-headers to fit in more games. Or the league could be put back a little, and foreign players could be given leave to head back to join their national teams after the first round but before the finals. The finals could take place in June.

The BCCI is keen to go ahead but acknowledges it is unlikely to happen. “It is getting more difficult to see a start to the season as time passes,” an official reveals to SportBusiness. “The Olympics have been moved but the IPL is a much smaller tournament and more flexible, at least that was our hope. Whatever happens, the IPL will be back bigger and better than before, this year or next.”

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