Behind all the glitz, glamour and star players of the IPL is a truth that cannot be denied. If the large corporations and film stars had not come together then surely the IPL would not have been able to become financially one of the highest valued sporting events in the world. Which is all very good, but what the curious mind would wish to know is whether the team owners are making any profits at all through their association with the IPL. Ever since the IPL started in 2008, very few IPL teams have generated any profits and that too only the cheaper franchises like Kings XI Punjab and Kolkata Knight Riders during one of the editions who have to pay a considerably less yearly retainer fee than the other franchises. However, overall the franchises have not been able to even break even and most of them are making losses year after year.
Now before we discuss the profitability of an IPL franchisee let us first consider the income streams. Unlike the other top leagues in the world like the NFL and the European football leagues where the top teams in terms of performance are awarded the highest cuts from the broadcasting revenue the IPL pays each and every team the same amount of money irrespective of where they end in the points table. So, funnily the top teams like CSK, MI or RCB will earn the same amount of money as the bottom places teams like DD or the PWI. The total broadcasting and advertising money pot totalled Rs. 180 crores this year down from Rs.190 crores in 2012 and out of that 60% is shared equally between all the franchises. So that is not a lot of money when you consider the yearly retainer that the franchises have to pay in addition to player’s salaries and stadium fees.
So, as anyone can easily make out the IPL is not a profitable venture at all when you consider the costs of maintaining a team but why do some of the biggest corporate pour in copious amounts of money into something that makes losses every year? One of the rationales that have been well received is that corporations do it for the exposure that their companies get. For instance, GMR who own the Delhi franchise is a big construction firm based in Hyderabad but it had little exposure in the rest of the country but since it bagged the Delhi franchise they have become a household name in many parts on India. On top of that, their revenues have increased as well in that time frame.
Now coming to the smaller franchises like RR, Kings XI and even KKR there is a suspicion that these franchises might be fuelled by off shore entities in tax havens like the Cayman Islands or Monaco. In 2010, at the height of the controversy surrounding the ownership structure of the Kochi franchise the income tax department of the Government of India carried out raids in the offices of some of some of the franchises. Some of the revelations were startling because the officials found a money trail that led to tax havens and the inference that anyone would draw from such a revelation is a given. The franchises might be fuelled by ill gotten wealth of individuals who might be or might not be in any way connected to the franchises.
The IPL remains a money spinner for the BCCI but how far it has helped the franchises in making any money is still something that has to be seen. It is still a young tournament but by what has been going on over the past few years one can safely say that the tournament is mature beyond years and it is highly likely that the whole financial structure of the league might not be as squeaky clean as you might be led to believe.
Image Source: IANS