Saturday, November 14, 2015

How IPL is planning to pick two teams for two years?

And, as we speak, IPL is back in the news!
View through glasses IPL current state vs IPL to be state
Transparency is what IPL will be focussing on
Enough of all the recent news bits like Bihar elections, Beef ban, award-wapasi, it's time for some CEC (Cricket, Entertainment and Controversy). You simply can't keep IPL out of mainstream news, can you? Amidst all the brouhaha, IPL was quietly cleaning up the mess that was self-created. It was quiet since cleaning up is not part of the agenda of mainstream news. Heads turned in the BCCI fold due to the new governance structure put in place. Roger Binny stepped down because his presence can jeopardize (or improve, whichever way you look at it) the career of his son Stuart Binny. Anil Kumble stepped down as he is still part of Mumbai Indians franchisee. Saurav Ganguly took his place. 

But what about the two banned teams - CSK and RR? And their players?

BCCI are adamant to have an eight team IPL for the next two years since their original IPL concept proposal was budgeted based on at least 8 teams. Lesser number of teams will mean less revenue in BCCI coffers and ever lesser amount as revenue for IPL teams. As a solution, they decided to replace 2 banned teams with two new teams, a eureka moment (sic) indeed.

So, how will the two new teams be finalized? Reverse auction process. The base price for both teams is set at Rs. 40 Crore. The entities bidding for teams will have to bid lower than 40 crore and the two least bidders will be selected. As per Rajeev Shukla, IPL chairman, "It will be a walk in bid on December 8. The base price for reverse bid from central revenue pool is Rs 40 crore and the party which bids for lowest share from central revenue pool will be the winner of new team". Surprised? No, BCCI is not in a generous mood. The bidding is not the amount the winners will pay BCCI, instead it's the amount BCCI will pay the two winning bidders from the central revenue pool. Interested parties will have to bid as low as possible - mathematically even a negative amount. A negative amount would mean the winning bidder will pay the BCCI the bidding amount for two years.

How long will these teams remain? Two years. That is as per the current scenario. Post two years, IPL will complete 10 years. If you remember, the original contract with all IPL franchisees was for 10 years post which all players will again be in the auction pool. IPL, in a way, will restart again. CSK and RR will come back in the fold after the two year ban.

Why will anyone bid for a team for only two years? It seems illogical in terms of business. To break-even, an IPL team needs a minimum of 4-5 years (RR was an exception). In IPL, you invest heavily in the beginning and reap the rewards in the long term. BCCI is aware of it and hence the concept of reverse auction has been introduced. Also, bidders will know that the platform provided by IPL is on a global stage. Winning the bid to have a team in IPL will translate into a huge marketing platform that will fast-track the brand for years to come, if handled properly. The players of the team automatically qualifies as brand promoters. Huge investment, potential loss in short term but a huge opportunity in the long term. The only constraint is the need for funds to invest for two years. Another reason could be the flexibility the IPL rules provide (sarcasm, indeed). IPL-11 may have more than 8 teams, if the return on investment is significant with minor tweaks in the format.

What about players of CSK and RR? Ten players, 5 from each side, will be drafted into these two new teams. The rest of the players will be auctioned. One concern the owners of two teams will have is that they have a lesser population to choose from. What if the new team wants Ajinkya Rahane or Chris Gayle? What if they want to buy a player from Delhi / Mumbai? IPL has an option to buy and sell players between teams outside of auction. This option, I believe, should be applicable to new teams. The only catch is the team who currently owns the player should be interested to sell.

Will Kochi and Pune be involved? No. And no reason has been provided for this decision. This is the masala the mainstream news may focus on.

Well, that's about it. December 8th is the date for the bidding process. Unless there's a twist in the tale. Don't hold thy breath!


  1. This time it looks like a new team will be there. Its gonna b super fun.


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