Sponsors too backing out of Indian Premier League (IPL)

The departure of Kunal Dasgupta from Sony Entertainment Television has raised doubts about the Indian Premier League’s (IPL) financial viability as sources insist that Sony, which bought the rights to produce and telecast matches, owes IPL huge amounts of money.

World Sports Group (WSG) bought the IPL rights for 10 years for a sum close to $1 billion and in turn gave them to Sony for a three-year period. It was decided back then that Sony would explore the Indian subcontinent while WSG would cater to the international market.

However, it is learnt that Sony allegedly owes IPL $30m (approximately Rs 150 crore) in dues this year, which is a 50% advance according to the contract. While last year’s bank guarantee, as per the contract with the IPL, was furnished, there are unconfirmed rumours that this year’s bank guarantee of Rs 600 crore – for a combined period of two years – hasn’t been provided.

Lack of payments, say BCCI officials, need not necessarily be termed as a default but are merely delays. However, given the losses accrued, IPL officials themselves admit that Sony isn’t willing to go any further.

Rohit Gupta, president, SET, denies these rumours. “The show will go on as last year,” he insists. Lalit Modi, IPL commissioner, also denied the rumours: “There’s nothing to it; Sony stays.”

When these figures were presented to Dasgupta, the former Sony CEO simply denied everything. Figures also suggest that while Sony paid Rs 250 crore for the first year, the market estimates that sales of free air time (which is used for airing commercials) reportedly fetched only Rs 220 crore. This year, they expect the losses to run into triple figures, said an official in the know. Last year, SetMax officials had gone on record as saying they were expecting 10-second advertisement slots to be sold for an approximate Rs 3 lakh per spot and increase as the tournament further progressed. This year, it is learnt that with the economy having slowed down perceptibly, buyers aren’t interested even in the above mentioned figures.

A list of sponsors – central and individual – who are learnt to have backed out of their contracts in IPL. Citigroup (Rs 16 crore per year) and PepsiCo (Rs 10 crore per year) have backed out of their central sponsorship with IPL. HDIL, the associate sponsors for Team Kolkata and Jaypee Group, the team sponsors for Team Hyderabad, are also believed to have called it quits (though the figures in their case are not available). Bajaj Allianz, the team sponsors for Rajasthan Royals, has seemingly also backed out. In case of Vijay Mallya’s Team Bangalore, the four sponsors backing the side are all in-house.

Additional sponsorships happen to be the central source of revenue for every franchisee and the operational cost for running the franchise revolves anywhere between Rs 80 and Rs 150 crore, according to team estimates. What franchisees earn from central sponsorships – Sony and DLF – is pegged at around Rs 40 crore. Therefore, if additional sponsorships go missing, franchisees are bound to face further losses.

When last contacted, IPL sources did admit that there was major trouble brewing as far as their association with Sony was concerned and that ESPN, Doordarshan were in the fray if at all the search for fresh telecasters was to begin.

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