KEY STORY
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The Indian Premier League is set to expand to 10 teams from 2022. Entries have been invited to own and operate two new teams and BCCI officials expect a bumper response. Are they playing up the numbers or are there enough players queuing up to join IPL? What impact would an IPL expansion have on the existing franchises? The 2011 edition had 10 teams, and was decided over 74 matches.
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Duff and Phelps do a IPL brand valuation every year. Santosh N, Managing Partner, D and P Advisory, addresses some of the questions around the expansion of the lucrative T20 league.
Excerpts
Do you believe it is the right time for an IPL expansion?
I am sure IPL is ready for expansion. The success it has seen has been quite amazing. They may be a couple of years late. There will be challenges like creation of an extended playing window. Cricket is not football where club games become more important than the national team. But at some point in the future that mindset may also start to change.
How high can the valuation of the new teams go?
The average of the two teams could come to around $300 mn (Rs. 2,200 crore). It’s possible that one of the teams could touch $350 mn (Rs. 2,550 crore). Rajasthan Royals was one of the lowest performing franchises and they still got valued at $250 mn (Rs. 1,825 crore) recently.
Based on your brand valuation experience, what would be the notional value of existing franchises?
It would be anywhere in the range of $250–350 mn. This is the broad range one can look at.
There’s a wide difference between what one can classify as 1st and 2nd Tier franchises. What explains that?
All teams except Sunrisers Hyderabad have been there from the beginning. Yet there is this disparity. That’s because of factors like on-field performance, the players they have, etc. For example, RCB’s performance over the years has been ordinary but they have been able to sustain their value on Brand Kohli. The stability of the management and controversies the team is involved in also contribute. Rajasthan and Punjab have had their share of controversies. They have also lacked management stability, which has impacted their valuation. Mumbai Indians get the best sponsorships because of their brand image.
What are the steps needed to safeguard the brand of the league during expansion?
There should be a lookout for the addition of new teams not diluting the league. By that I mean whether you can ensure prime time for all the matches by extending the playing window. Even if they extend the matches to 74, and not 94, the broadcaster would still be interested in having maximum prime time matches. Otherwise, it affects their advertising revenue. The central pool revenue should also go up proportionately with new teams coming in. Or else, the existing teams’ revenue share will be affected. On the sponsorship front, it would be okay because there is still room in the market to accommodate two new players.
IPL would need to get the player retention rules right so that the new teams don’t start with a disadvantage in forming squads…
There are going to have the mega auction, and the retentions will be limited. Even if 32 players (4 retentions per team) are out of the auction, there is still plenty of talent available. The other point being with every retained player, the existing franchise’s purse goes down. For the new teams coming in with a clean slate, it could also be a blessing in disguise. This will be unlike what happened with Gujarat Lions and Rising Pune Supergiant, who came in for a two-year holding period (2016-17) where they were in a slightly disadvantageous position because in the absence of mega auction, the existing teams had retained all their players and they only had the CSK and RR players to choose from.
