22 May

Few understand cricket’s global economy more than the Indian Premier League’s (IPL) former CEO Sundar Raman. He was one of the architects of the T20 format and has been following closely the chaos ensuing from the coronavirus pandemic and the resulting scheduling issues in India and the rest of the world,

Raman spoke to The Times of India about a white paper he is working on to address the current crisis in cricket and potential solutions for the long and short term.

If there was a choice this year between staging the IPL or the T20 World Cup in Australia then Raman is clear. IPL generates 40% of cricket’s global revenue whereas The T20 World Cup could easily be rescheduled to a later date,

The IPL guarantees $US 100m in players’ salaries annually. Raman has worked on two scenarios that are likely to play out in the months to come:

Scenario 1: Sports returning to TV/Digital platforms by July 2020 and fans to stadia by January 2021

  • 48% loss in global revenues.
  • Assuming all matches/tournaments in FTP between March and June are cancelled entirely.
  • Broadcasting resumes in July with England hosting West Indies and Pakistan and ICC T20 World Cup and Asia Cup go ahead.
  • Revenue loss will be 48%, of which two thirds due to the IPL.
  • Of the 48% loss the impact due to broadcasting will be 64% while 18% will be loss of ticketing revenue.

Scenario 2: Sports returning to TV/Digital platforms by December 2020 and fans to stadia by April 2021

  • 88% loss in global revenues would be a conservative estimate in the event of an extended lockdown.
  • Assumes all matches in the window March 20 to November 20 are cancelled/postponed incl. IPL, Asia Cup and T20 World Cup.
  • Of the revenue lost (88%) IPL would account for 36.1%, T20 World Cup would account for 22.3%. England to be hit hardest as the entire summer schedule would be lost.
  • Of the 88% broadcasting revenue loss would account for 72% and 9.5% would be due to ticket revenue lost.

The focus of Raman’s white paper is to highlight the delicate economy of sports with a focus on global cricket across the three most important revenue streams of Broadcast/media, sponsorship and stadia ticket sales against a background of the coronavirus pandemic.

Whilst the global cricket economy is estimated at US$1.9bn with a strong reliance on India (2/3rds of revenue relies on playing in India or India participating elsewhere) India only realises 45% of its overall potential while enabling other nations to monetise.

“The potential opportunity of India’s revenue contribution (unrealised by India) is alone worth US$1.2bn over a 4-year cycle (2019-2022)” Raman says.

A third of cricket revenues in 2019 were from the IPL. With a fair market pricing structure, approximately 24% (US$ 100m) of the broad cast rights fee earned by IPL is spent on players wages each year.

In 2019, despite being a Cricket World Cup year, IPL revenues were estimated to be 30% higher than that of the World Cup (not including ticket revenue of CWC as these are retained by the host). IPL 2020 revenue was projected to be 70% higher compared to ICC WT20 revenues in 2020.

Raman says “Cancellation of both of these events will have a serious impact on cricket economics for this year. However, in the case of an ICC event, as the contracts run through until 2023, a deferment to 2022 may be possible without loss of revenues. Not hosting IPL or bi-lateral series of any country will lead to a loss of revenue, which is far from desirable. In an ideal world, the ICC event scheduled in 2021 in India could be shifted to Australia as it is in the same October window and India could host the event in 2022 by creating a suitable window. This will give adequate time for economic recovery and not overcrowd the calendar”

“Also, if WT20 is to happen behind closed doors, host Australia’s gate revenues will be zero. For the IPL even if it is held behind closed doors, the impact is smaller as it is cushioned over 8 stake holder teams and the economics of the IPL can still support a closed-door season.”

“IPL remains the single biggest event for the global cricket economy. With a contribution of 1/3rd of global cricket revenues annually, the importance of IPL cricket’s global economy cannot be over stressed. If IPL was to be considered a separate cricket body and revenues from IPL were to be removed from the Indian Cricket Board’s revenue, IPL would emerge as the biggest revenue generator for global cricket – higher even than ICC & Asian Cricket Council (ACC) revenues combined,” he says.

Therefore, given the large contribution and annual nature of IPL, cancelling the event would be a severe loss of revenue to the cricket economy, something that no sport can afford in the current economic environment. Whilst the jury is still out on ICC WT20 this year, deferment of it merits serious consideration.

The White Paper further states: Whilst India realises US$ 863m, the attributable value of revenues from Indian participation is estimated as US$ 1.2bn. This delta of US$ 300m+ per year can be viewed as India’s opportunity loss or in a more positive outlook as India’s contribution to cricket outside India. Over a 4-year period this value is a staggering US$ 1.2bn. Lucrative broadcast and sponsorship deals of ICC & ACC events are also primarily driven by the huge Indian fan base and viewership from India. Media reports put TV viewership for the ICC CWC 2019 Final between England and New Zealand played in England at 15.4m in England and 183m in India.

Also, out of a total 706m unique broadcast audience for ICC ODI world cup 2019, 509m were from India. This dependency on India is also evident from the relatively low value realised by global broadcasters through sublicensing from all other markets despite the events being hosted in some of these markets.

“The importance of India to the world cricket economy cannot be over stressed. Outside of Australia and England, who have large domestic market deals, both valued at US$ 1bn over a 4-year cycle, other cricket boards rely on Indian tours as part of bilateral fixtures to attract interest from Indian broadcasters,” says Raman.

From countries where domestic market deals are not large, tours such as India, England or Pakistan become important as they open up substantial overseas broadcast rights, which are substantially larger than domestic rights.

Many cricket boards have provisions in their broadcast deals on the number of games to be played against India in the deal period. Not fulfilling this can adversely impact the broadcast rights valuation realisation. Given that most of these boards are sitting without broadcast rights and play within a US$ 35m to US$ 45m revenue bracket, they haven’t been considered in the paper that looks at a global meltdown, hence the primary players.

John Stephenson




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