Macro Moves

If IPL is cancelled, what would be the Financial Impact?

Created on 08 Apr 2020

Wraps up in 5 Min

Read by 4.4k people

Updated on 08 Oct 2020

Summer is not just about holidays, ice-creams and vacations. But it is also about the most awaited event of the year, the Indian Premier League. Most of us stick to the television screens wearing our favorite jerseys and screaming out for our team.  But the most valued sport and most followed sport, IPL has lost its hype amidst the fear of COVID-19. To make things worse, it has been postponed until April 15 breaking the hearts of millions of fans. 

How did it all begin?

It all started in 2008. IPL was launched with a view of combining India’s most favorite sport and entertainment. India and cricket are the same. It’s extremely difficult to spot an Indian who hasn’t been a part of the cricket fever. It is one thing we unite by shedding our differences. You can understand how crazy the Indians are if you were to witness the eve of the world cup. 

But IPL elevated the sport to a whole new level.  The IPL is conducted during the holidays and the time duration of the actual sport is approximately 4 hours making it a perfect entertainment game to chill out with family and friends. Further, it is being broadcasted live in various regional languages across the world and propagates the idea of “my city, my team”.  

The event also made peace with technology and used a lot of hi-tech devices like the spider cam making every moment be seen clearly. We cannot forget the marketing that made IPL a grand success. The advertisement after and before the event, the jingles, and other promotion stunts transformed it into India’s greatest sports franchise. In fact, during IPL, Hotstar sees a record-breaking download.  Apart from all this, the involvement of Bollywood stars, native players, new talents and international players all at one place brought audience flooding to the stadiums making it a recipe for success. 

Now, IPL is more than just a game. It has become an event around which several businesses revolve. It is filled with emotions and craziness to a level you cannot fathom. But, who do you think loses the most if the event stands canceled or postponed? 

What do the stakeholders fore-go?

The event has been postponed without any promise of being conducted at a future date. Even if T20 is conducted in a future date, BCCI will be under the obligation to reduce the number of matches played to keep up with the schedule. They are also required to finish the event before July. Because July is the period when the monsoon starts and conducting IPL during monsoon only invites a list of other troubles. Hence, they might incur a downfall of 2-3% or a 200 million loss according to Duff and Phelps, a financial consultancy firm.  As per estimates, the cancellation of an event could bring a guaranteed loss of about Rs. 3896 crore to all its stakeholders put together. BCCI alone will have to deal with 2000 crore losses if that happens. 

If the 13th edition of the IPL had happened as per schedule, then Star India along with other sponsors would pay around 4000 crores to BCCI. This is then divided among the franchises and BCCI in a 50/50 ratio. With the future of the event at stake, all this will be put to a standstill.  However, as per the contract, at least 50% of the payment must be made 30 days before the event. Hence, Star sports held its part of the deal and paid about 1600 crores to BCCI. Further, the advertiser and sponsors such as Vivo, Ceat Tyres paid about 500 Crores. 

But the BCCI is taking every step to offset the losses. It is also undertaking various cost-cutting measures. It has sent an official message to all the concerned stakeholders of its decision to reduce the prize money which is awarded to the winner from 20 crores to 10 crores. The runner up cash prize has also been reduced to 6.25 crores.  But all this could be barely sufficient to meet up the losses. 

Whenever a match is being held in a particular place, the cricket association of that place will get a sum of 50 crores.  And IPL is not a one day show. It takes an entire year to prepare for the event. This is taken care of by event management companies like IMG. In turn, they are paid about 25 crores for the entire year. All their income will be hit hard.  The franchise owners, sponsors and various stakeholders are looking forward to a possible renegotiation. They are also filling claims and lining up in front of the insurance companies to write off the losses as much as possible. But as said earlier, all this could be a small blow against a huge pile of sand.

Apart from that, every player will be paid a certain agreed amount by the franchising company. It is a source of guaranteed income for many players. Established players like Virat Kohli, M.S. Dhoni gets approximately 10 lakh per match. In the event of cancellation, they will not be paid as well.

 Further,  IPL can be crucial for the most loved Captain Cool. M.S. Dhoni wasn't active in international cricket for quite a period. CSK could offer him a blasting come back. Shane Watson, Pravin Tambe is among the list of players whose career might be hit if IPL is canceled. 

All this is just in the big picture. But there are a lot of daily wagers and small employees involved. No one could guess how the unfortunate change of events will treat them. Particularly, for players who are setting foot into IPL for the first time, it can be bad news. Take the story of Yashavi Jaiswal. He was among the highest bidder players with about 2.4 crores. The young lad has to run from job to job, from selling pani puri to hours of practice. His hard work paid off when he was selected by RR. But the canceled ipl can be another rock stone in his years of a dream.  A lot of players like him may be suffering from it. 

The value of IPL was estimated at 6.83 billion dollars last year. But the coronavirus has caused an unexpected yet serious toll on it. With CSK and Rajasthan Royals back in line, Indians were waiting for the coin to be tossed into the air, with the captains taking either side. Along with the question as to who will win the cup, there is another question that is ruling social media. Will IPL be conducted? All I could hear is the prayer of every fan.  But all seems uncertain right now, with little to no possibility to fulfill every fan’s wish. 

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Ayushi Upadhyay

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A Keen Learner. Tiny, brainy, and studious, this quiet one stays in her zone until she pops. And once she does, boy, are her comebacks snappy! There is no financial question that she can't answer through her magical blog-writing. 

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