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Experts are divided over the likely response from bidding companies to the Board of Control for Cricket in India’s (BCCI) move to give two-year contracts to cricket league team owners.
The BCCI has announced its plans to invite bids for two new teams to replace Chennai Super Kings and Rajasthan Royals for two years.
Returns on investmentAdvertising and brand experts have pointed out that it takes at least five to six years for an Indian Premier League (IPL) franchise to start getting returns on investment. Licence fees and player costs make up the two big overheads on the team owners’ expense sheet.
Shailendra Singh, Joint Managing Director, Percept Ltd, said, “This is a reactive move by the BCCI and not a solid solution to restore the credibility of Indian Premier League. They need to look at long-term solutions rather than transactional ones.”
Some media experts say that it is not clear what the BCCI will do with these franchises after two years and whether it will look at making IPL a 10-team league in 2018.
Indranil Das Blah, Partner at CAA-Kwan, said that if the franchises is brought on board only for two years, it will depend on the licence fees they have to cough up for the contracted period.
“It takes four to five years for IPL franchises to break even. It may make sense for companies that are looking at a big launch and looking at an aggressive branding strategy to go for a two-year contract,” he said.
Likely biddersExperts say e-commerce firms or handset makers, who have entered the country recently, could find this as an attractive opportunity. But they added that it would not be a viable business opportunity unless licence fees are low.
Another senior executive with a media planning agency who did not wish to be identified, said, “The terms and conditions of the bidding process have not been revealed. But if one looks at the revenue structure, franchises earn about ₹ 50-55 crore through the central revenues, about ₹ 18-20 crore as broadcast and advertising revenues, besides other revenues streams such as ticketing. If the operational cost for the franchise is low then it may make sense for companies to come on board for two years.”
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