CHENNAI: In the world of commodities, precious metals like gold and silver are enjoying a record-breaking rally because of a combination of factors. But nobody knows how long it will last. There have been sellers who have profit booked but buyers have been happy to jump on the bandwagon. Likewise, Indian Premier League (IPL) teams — owners to be more precise — are in the news. Some owners want to cash in but potential buyers are already forming an orderly queue to own a piece of one of India's biggest cultural exports of the 21st century.
Per Bloomberg, Rajasthan Royals are currently valued at over a billion dollars and a sale could be in the works. If Royals, one of the founding eight and the cheapest franchise when they were bought for just over $65mn in 2008, are sold for over a billion, it directly explains why some of the first investors are looking to exit. They think that while the product has shown that it's recession proof — heck it was a recession baby — and is capable of making money even during global headwinds (Covid being one of them) — the valuation maybe inflated.
One of the big tests facing the 10 IPL franchises is the next TV rights deal. It will come into being post the 2027 season but there's a feeling that the growth witnessed in the last auction cycle may be missing. Post the Star merger with Jio, it remains to be seen if an OTT giant like Netflix will be convinced to make the auction a competition. Sony may be tempted but only if the price is right and there's a feeling that they will not. It's also why the International Cricket Council (ICC) have warned some of their members to expect a significant hair cut in terms of media rights for the next cycle (as reported by this daily first). They expect a 30 per cent reduction. While there may be more interest in the IPL, the league could face a challenge in this avenue.
"I don't think you are going to get a huge jump this time," said N Santosh, managing partner at D & P Advisory, an independent valuation company. "There will be some growth but I don't see revenues being doubled like we saw the last time the rights went through the (bidding) process."
Apart from the above-mentioned reasons, another factor why no broadcaster will match that jump is because of the ban on real money gaming websites. They were a proper money-spinner but because of the loss of advertising revenue, the broadcaster has had to pivot and its effects may be felt in March itself. After years of RMG-based ads dominating the advertising ecosystem during the IPL, what will teams and the league do for ROI?
Why the interest
But then why are there multiple potential owners? Per this daily's reckoning, there are multiple interested parties wanting to buy or at least owning a piece of at least three franchises and as many as four franchises — RCB, RR, LSG and KKR ()ther teams' co-owners or outright owners will be viewing this space with interest). A fifth — CSK — do have the option of going the IPO way to raise money (their shares trade in the unlisted market with LIC one of the big investors).
The IPL is well placed to go from 14 to 18 league games every season. While the original plan was for the IPL to hit that number a few years ago, they have option of pressing that button whenever. Because the IPL is a closed league with no threat of relegation, there's guaranteed income and revenue generation on a yearly basis. While there's a merit linked incentive ensuring that teams who win the league make more money than the team in 10th, there's an equal split of the central pool. So, there's no threat of a Mumbai Indians or RCB or Chennai Super Kings — the most popular teams by a lot of metrics — of taking home more money than some of the other teams. US hedge funds and US businessmen, especially, like a closed system. It's why a lot of them have started to take interest in owning T20 teams in leagues across the world.
Potential new league
Then, there's the tantalising prospect of the return of Champions League T20. All of these are money-making opportunities. While Santosh agreed with this assessment — "they are possible scenarios, especially the tournament guaranteeing 18 league matches every year" — he's also mindful that owning or part-owning a team is, first and foremost, 'a trophy asset, signalling status'. New studies have also suggested that owning sports teams is what billionaires do these days. Per a survey by JP Morgan, more and more billionaire families prefer owning sports teams over art or cars. "Ownership," they said, "is both a strategic and emotional endeavour — a way to align family unity, institutional capital and generational legacy around shared passion."
Here's an example. David Blitzer, chairman of Blackstone's tactical opportunities division, is the first to own equity in each of the US' big five.
Blitzer is now eyeing one of the IPL sides up for sale.
Per match value in 2018-22 cycle `54.2 cr
Per match value in the existing rights cycle `107.5 cr
Per match value in the next cycle ?