IPL is a safe bet for the franchisees

The IPL team owners are assured of a steady stream of income for the next 10 years which offsets all the money they have thrown in buying the franchisees.The income accrues from the television broadcasting deal IPL has with SONY and also from the title sponsorship fees paid by the DLF.

The real risk has been taken by the TV company that has committed a little over a billion dollars for TV rights over the next decade. Over the same 10 years, the team owners will get their lion’s share of TV sponsorship fees (80 per cent for the first five years, 60 per cent for the next five) and the title sponsorship fee (60 per cent) which is to be paid by DLF. Each team owner therefore stands to get a guaranteed share of between $80 million and $100 million over 10 years — which makes the teams themselves virtually free for some of the less ambitious bidders (even the highest team bid, by Mukesh Ambani, was for $111.9 million). The team owners also get access to all on-ground and local revenues as well as the obvious branding opportunities, all of which taken together should be comfortably enough to pay the players’ fees (a total of between $3 million and $5 million per team). After 10 years, team ownership is there in perpetuity without any further charges. So what might have seemed like a flaky play by movie stars and cash-rich businessmen is in fact a pretty safe bet.

A recent press release from Hero Honda says that they have now signed in as a Co-sponsor, which in effect means more money for the IPL team owners.

Almost risks free business eh!