CHENNAI: "The Board of Control for Cricket in India and Vivo Mobile India Pvt Ltd have decided to suspend their partnership for Indian Premier League in 2020."
One-liners are meaningful at times, because they leave room for imagination. The BCCI's statement announcing that Vivo won't be the title sponsor of the IPL for 2020 was one of those. Nothing before and after that sentence. Yet, there was so much to read into it!
Broadly, there were two roads ahead of the BCCI. Cancelling Vivo's contract and giving it to someone else for the next three years was one. Letting Vivo pull out only for this year, looking for another company and having Vivo back for the next two years was another.
By not ending this association, despite Vivo pulling out of a contract it had signed in 2018, the BCCI has left the door open for the Chinese smartphone maker to come back in 2021 and 2022. The board could have sued Vivo for a breach of its own word. That they have not done it suggests they realise it will be difficult to get another sponsor willing to shell out Rs 440 crore per year under the present economic climate even in the next two years.
The board seems to think that whoever steps in as the new title sponsor will not commit to that amount, even if they are given a three-year deal (Vivo's contract runs till 2022) instead of one. And if the BCCI ends the partnership with Vivo and signs a new three-year deal for a lesser amount, they may not be in a position to negotiate for a bigger amount for the period after 2022.
So by trying to rope in a sponsor for one year for a potentially lesser amount (it's not known yet how much the 2020 deal would be worth but market experts expect it to be less than Rs 440 crore), the BCCI is in all likelihood looking to secure the future. They are prepared to incur a loss for one year in order to do that.
Most possibly, the BCCI bosses have calculated that the sum they will get over three years with a new sponsor will be less than what they will get from one year of a new sponsor plus two years of Vivo (Rs 880 crore). They see sense in settling for a figure less than Rs 440 crore just for 2020 because when they start looking for a sponsor for 2023 and there on, they will be in a position to bargain. They can say that the existing deal is worth Rs 440 crore a year and they want more than that.
Nobody from the BCCI was available for a comment, but this is what a prominent market expert had said on Tuesday. "If there is a markdown from the existing amount, there will be an impact on the value of IPL... If they sign a new three-year contract for a lesser amount, the valuation may suffer. Going forward, the BCCI's bargaining power may change," valuation and financial advisory services professional Santosh N had said. He is managing partner of D and P India Advisory Services LLP and external advisor to Duff and Phelps, which studied brand IPL for six years and estimated it to be worth Rs 47,500 crore in 2019.