Friday, October 30, 2009

IPR in the IPL

In the Indian Premier League (IPL), the player gets to choose between two types of contracts. In one, the Board for Control of Cricket in India (BCCI) guarantees a fixed amount to the player; if the auction proceeds are higher, BCCI keeps the excess. In the other, the player keeps the auction price.

In the player auctions, Dhoni and Andrew Symonds ($1.5 Mn and $1.35 Mn respectively) emerged with the highest bids. Shane Warne got a bid of US$450,000 sign-on fee for the first season. It seemed high considering that he was in the evening of his test and ODI career. However, he was not the highest paid, even in his team -- Yusuf Pathan got $475,000. In the event, Warne and Pathan both justified the price paid by the franchisees, with Warne leading his team to a victory in the 1st IPL, with very few other big names.

BCCI is the IPL Franchisor; each team is a franchisee of the BCCI. BCCI licenses the players to play for the franchisees, based on winners at auctions. However, it is acknowledged that the player is himself a brand, and can be used by the BCCI in relation to the IPL matches. As a consequence, the players retain with themselves the right to decide about brand endorsements of their name and image. The players are bound to a team by a  3-year contract, but teams can trade players after 1 year.

BCCI has four IPR-related revenue streams (because it has applied for registering IPL wordmark and the logo as trademarks):
(a)  revenue from sale of franchise rights,
(b) bids from franchisees for ownership of a  team,
(c) title rights and (the most lucrative)
(d) media rights.

Franchisees get 72% of the media rights revenues while 8% goes in form of prize money, and 20% is retained by IPL, in year 1. The franchisees' share declines to 60% over 5 years.
The eight franchisees will receive 80 per cent of the media rights in the first year, 70 per cent in the second, 65 per cent in the third, 60 per cent in the fourth and 50 per cent for the remaining six years.

Total media rights are expected to earn BCCI $1.026Bn or Rs.8,700 crores in 10 years for telecast rights sold to Sony/ World Sports Group consortium. They in turn sold telecast rights on a geographical basis to 7 different networks in year one, which has swollen to 13 different networks by IPL 3, at mostly undisclosed prices.

In the first auction in Jan 2008, the base price for 8 franchises was set at $400 Mn but fetched almost $724 Mn. Teams also pay 10% of the bid amount every year to IPL every year for expenses. Each franchise is, in addition, expected to spend $3-4 Mn on advertising and promotions, and pay for stadium contracts for 7 matches every year at Rs.25 Lakhs per match on an average.

The title sponsorship was bagged by DLF Universal paying Rs.200 crores for 5 years (Rs.40 crores per year) in another open bid process. Pepsi is the tournament's Official Beverage paying, USD12.5 Mn for 5 years (everything official about it, for a change). Kingfisher Airlines got the IPL Umpire Partners with right to advertise on umpires' clothes, and 3rd umpire decision sponsorship for 5 years at Rs.106 crores.

PS: This post has been updated on Nov 6, 2009 and also on 26 March, 2010.

No comments:

Post a Comment