MUMBAI: The Indian Premier League may see a value erosion of up to $1 billion over its 2019 brand valuation if world cricket’s biggest annual event is called off this year, a study undertaken to analyze the impact of COVID-19 on the IPL ecosystem notes.
According to global advisory firm Duff & Phelps, brand IPL (season 12) was valued at $6.8 billion in 2019 and the same will see an erosion of $200-350 million if the BCCI goes in for a truncated tourney with empty galleries and $700-1,000 million if the season is cancelled outright.
The advisory agency as arrived at the numbers based on a two-scenario assessment of a truncated tourney with half the numbers of matches being played to empty galleries or no revenue from the gate sales and a complete washout of the 2020 season.
“Overall, the IPL ecosystem will see value erosion of USD 200-350 million or 3-5% if the BCCI goes for a truncated season. But the same would be much higher at 10-15% or $700-1,000 million if the IPL season 13 is called off,” says the report, adding “the analysis does not capture a financial recession like event that may further impact the IPL value.”
Duff & Phelps considered two possible scenarios as the basis for its evaluation:
1) Scenario 1: Truncated IPL with the number of matches reduced to half
2) Scenario 2: The entire IPL 13 season getting cancelled
Santosh N, managing partner D and P Advisory LLP and external advisor, noted: “Our impact analysis has been carried out on the IPL ecosystem value calculated by Duff & Phelps last year which was $6.8 billion in 2019. The analysis doesn’t reflect the current value of the IPL ecosystem which would have been estimated after considering the factors available post completion of IPL 2020.
“Scenario 1: According to BCCI officials, in case the IPL season commences on April 15th, it will be truncated as more than 15 days would have been lost by that time. In our analysis we have assumed that in a truncated season, each team will play against the other only once, instead of the home & away format, thus reducing the number of league matches by half. We have also factored in two situations – one where the spectators are allowed inside the stadium and another where the matches are played behind closed doors, effectively impacting the in-stadia revenues including gate receipts and food and beverages. The impact of revenue loss on account of lack of gate receipts is negligible on the IPL value. It might in fact benefit the broadcasters if the shutdown persists and more people are forced to spend time at home thus increasing the television audience for IPL, though none of the stakeholders including the broadcasters prefer this option. Further, we have factored in the loss of revenue from broadcasting and sponsorship, as broadcast partners and sponsors will renegotiate the contracts based on the number of matches being played. We have also considered the impact of a truncated tournament on the sale of official merchandising and associated revenues. Overall, under Scenario I, the IPL ecosystem value estimated by us last year is expected to reduce by $200 million to $350 million range (3.0% to 5.0%).
“Scenario 2: Under this scenario we have assumed the possibility of the entire IPL 13 getting cancelled, a high possibility if the current situation persists. This scenario will have a massive impact on the IPL Ecosystem value as it will also consider larger economic and financial consequences.
“In this scenario, we have considered two sub scenarios. First there is no impact on the next year’s edition and the second, a complete one year set back from revenue perspective for all the stakeholders. In sub scenario 1, we have considered nil cash inflow from the broadcaster or title & associate sponsors for the 2020 season as the same is assumed cancelled. Likewise, franchisees will not receive their share of revenue from central pool nor will they be required to share profits with BCCI as part of their franchise fees. However, we have considered the expenses incurred by BCCI, IPL franchisees and other stakeholders with respect to advertising, promotional events and other general administrative costs including salaries to their non-cricket playing staff, etc. In sub scenario 2, apart from the cashflow impact considered for the 2020 season, we have also considered economic impact due to the one year set back, where we have anticipated that the sponsorship revenues might not grow at desired levels next year due to the current disruption.
“Under Scenario 2, we estimate the IPL ecosystem value to reduce by $700 Million to $1,000 Million range (approx. 10.0% to 15.0%). Our analysis under this scenario does not capture a financial recession like event which would further impact the IPL Ecosystem value.”
