The most significant thing to emerge from the sale of two new Indian Premier League (IPL) teams on Tuesday (December 8th) was arguably not who won them, but rather who did not. Despite a reverse bidding process that was likely to leave the successful bidder making a loss, and after all the controversy surrounding the league, the Board of Control for Cricket in India (BCCI) still received five bids for the two new teams, all from major companies, and reportedly had as many as 21 interested parties. The IPL remains an enormously valuable and popular commercial property.
Immediate attention will focus on Sanjiv Goenka’s New Rising consortium and mobile phone manufacturer Intex, who won the bids for Pune and Rajkot respectively. However, since the Lodha Committee order was passed in July, events have been defined by parties positioning themselves for the real game to start in 2018, when new franchise agreements and a new broadcasting deal, which could according to some reports be the biggest in the game’s history, will be signed.
The two-year suspension of Chennai Super Kings (CSK) and Rajasthan Royals (RR) placed the BCCI in a difficult situation with broadcasting and sponsorship agreements predicated on an eight team IPL. Two long-term franchise agreements of say, ten years, as exist for the other franchises, would have committed the BCCI to a ten-team IPL from 2018 when CSK and RR return—something that many in the board remain hesitant to adopt. A shorter agreement would have been harder to sell at a high price in a weak market, following the Lodha order, and worth considerably less to the buyer, with market experts claiming it would take at least two seasons for a franchise to break even.
Instead, the BCCI opted for a reverse-bidding process in which the successful bidders would be those who requested the lowest (or negative) amount of the ‘annual management fee’ which the BCCI pay the franchises from the central revenue pool, funded by broadcasting and sponsorship deals. As it was, the eventual winners New Rising and Intex both bid negative sums of Rs 16 crore and Rs 10 crore respectively, opting to pay the BCCI to participate in the IPL rather than receive the money they would otherwise be owed for doing so. It is emblematic of the commercial power of the IPL that the involvement of New Rising and Intex can thus be seen to be little more than a glorified marketing campaign that will help them gain "disproportionate publicity."
It is the BCCI who are the real winners here, though. Despite the brand value of the IPL taking a considerable hit following the Lodha order, and the BCCI only offering two year leases for franchises, the board are set to earn profits of more than Rs 300 crore from the sale according to President Shashank Manohar due to the negative bids of New Rising and Intex, which allow the BCCI to retain their annual management fees and earn some money too. Perhaps more significantly though, the two year stop-gap agreement, previously seen as almost impossible to obtain by industry experts, allows the BCCI to start totally afresh with franchises based on equal contracts in 2018 when the new sets of rights go up for negotiation.
The 2018 refresh has long been pinpointed as the first true barometer of progress for the league, and with the board set the BCCI will be hoping for two controversy-free seasons to give them a solid foundation for what will be the IPL’s year of reckoning.