IPL cancellation may lead to ecosystem value reducing by $700 mn to $1 bn: Duff & Phelps – TelevisionPost

MUMBAI: If the cash-rich Indian Premier League (IPL) does not happen at all this year then the IPL ecosystem value could reduce by $700 million-$1 billion according to Duff & Phelps. If it is a truncated season starting from 15 April 2020 then the value reduction is estimated at $200 million-350 million.

The company considered two scenarios. In the second which is the event gets cancelled a high possibility if the current situation persists then there will be a massive impact on the IPL Ecosystem value as it will also consider larger economic and financial consequences.

Duff And Phelps external advisor and D and P Advisory Managing Partner Santosh N said that in this scenario two sub scenarios have been considered. First there is no impact on the next years edition and the second, a complete one year set back from a revenue perspective for all the stakeholders. In sub scenario 1, we have considered nil cash inflow from the broadcaster or title and 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 cash flow 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 (approximately 10% to 15%). Our analysis under this scenario does not capture a financial recession like event which would further impact the IPL Ecosystem value.

The first scenario sees the IPL season commencing on 15th April 2020 and being truncated as more than 15 days would have been lost by that time. The analysis assumes that teams play each other only once instead of the home and away format. So the number of league matches halves. 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% to 5%).

He further noted that The Government of India and various state governments have mandatorily banned public gatherings in view of public health and safety concerns. The government he pointed out has also suspended visas from most countries which might impact the availability of foreign players who are a vital cog in the IPL. Given this background, the options before BCCI are somewhat limited.

He said that impact analysis has been carried out on the IPL ecosystem value calculated by Duff And Phelps last year which was $6.8 billion in 2019. The analysis doesnt reflect the current value of the IPL ecosystem which would have been estimated after considering the factors available post completion of IPL 2020.

Talking about how the global sporting scene has been affected, he explains, We might just be in the first quarter of 2020, but the year has already seen the unprecedented shutdown of global sports leagues due to COVID19. The last such shut down happened during World War II when all major sporting events across the globe including the Olympics in 1940 & 1944 were cancelled. Major sports leagues across the world including EPL, La Liga, Seria A, NBA, Champions League, bilateral cricket tournaments are suspended at least until the first week of April as governments scramble to contain the spread of the virus which has been declared a global pandemic by the World Health Organisation.

UEFA EURO 2020 and COPA America 2020, the two major football events scheduled to take place this year in June have also been pushed to 2021. Even the Olympics 2020 being held in Japan face the threat of cancellation or postponement if the pandemic does not subside in the next couple of months. More recently, the Indian Super League finals between ATK & Chennaiyin FC had to be played behind closed doors.

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IPL cancellation may lead to ecosystem value reducing by $700 mn to $1 bn: Duff & Phelps - TelevisionPost

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