PSL: Good cricket but bad business

The Pakistan Cricket Board (PCB) is said to be raking in somewhere around Rs1.7 billion annually in revenue through its flagship event, the Pakistan Super League. But according to some sources, the league is set to sink if its current business model is not changed.

“Franchises are incurring losses and they can’t keep that up for long. They will shut shop [if things didn’t change for the better],” an inside source confided to Profit. “The franchise owners initially enjoyed the status and attention they received, but now they’re starting to feel the heat from all the money they’ve been burning.”

According to another source, the cheapest of the first five franchise, Quetta Gladiators, has already incurred losses to the tune of Rs320 million even as the league moves through its third season. Not surprisingly, the Gladiators have not been forthcoming with the details and did not respond to any of the questions posed to them. Naturally, the losses incurred by other franchises must be even higher, given the more substantial annual fees they have had to pay out.

Multan Sultans debut:

On the other hand, the PCB seems to be expanding rather than changing their game plan, having sold a sixth franchise – the Multan Sultans – debuting in this year’s edition. Acquired by the Schon group at a whopping price tag of $5.2 million (per year for eight years), the Multan franchise is valued at three times more than the average price of the other five franchises.

However, market pundits are saying that each of the first five PSL franchises must have a higher valuation than the new entrant. Karachi and Lahore should be deriving better market value as they represent the two largest cities of the country. Meanwhile, the Peshawar Zalmi is the defending champion and Islamabad United won the title in the inaugural edition. The Quetta Gladiators has also been runner-up in both editions.

According to well-placed sources, the Karachi Kings, the most expensive team in PSL at $2.6 million annually, was looking to haul in sponsorship worth Rs900 million before the season 3 kicked off. Meanwhile, the Quetta Gladiators was looking to touch somewhere around the Rs400 million mark.

However, a source said that the hopes of receiving such big sponsorships won’t be happening any time soon.      

Of the branding done on venue in a PSL match, 70% is reserved for the PCB, explains our source. The two franchises’ playing on the day apparently have to split the remaining 30% of branding space.

In comparison, the Indian Premier League (IPL) runs on a system where the teams playing share the entire space between them, while the Board of Cricket Control in India (BCCI) and the IPL have no stake in it.

“From a marketing perspective, what the IPL has been doing is quite understandable since mostly the fans of the two franchises are interested in the match. So, the brand association of the two franchises with their fans cannot truly be capitalized in the PSL’s case,” the source added.   

Majority of franchises in default:

There have also been reports, carried by daily Dawn, that a majority of the franchises were in default with the PCB, which may take over defaulting franchises and auction them all over again.

However, the Peshawar Zalmi, the Quetta Gladiators and the Islamabad United – the three most successful franchises in PSL – so far have all come on record to announce that their accounts with the board were in the clear. The PCB has kept mum on the issue.

“It really cheesed off sponsors. Who would sponsor a team that has been defaulting and might lose their rights on the franchise?” the source said.

One marketing head, who has information about the ongoing sponsorship deals of some of the franchises, said that prospective and current sponsors do not seem as keen to jump the gun this time around.

“Why would sponsors be interested when you haven’t prepared a good package for them? There is little understanding about the things sponsors want. According to my assessment, only the Karachi Kings has tried to attract sponsors. It has flexed its media muscle to impress sponsors, but I think even they are trying to sell their sponsorship rights expensively,” he said.     

The Karachi Kings owner Salman Iqbal has also confessed that there are fewer sponsors this time around.

“There are two sponsors this time while there were around nine last time. But these two sponsors outweighs that nine,” Iqbal said during a Karachi Kings’ partnership with yayvo.com by TCS.

Bahria Town is the main Titanium sponsor of Karachi Kings while Arkadians and Nurpur are their platinum sponsors. Nurpur of Fauji Foods joined just as the tournament was around the corner. Imtiaz Super Market is also said to be sponsoring Karachi Kings and are their super market partner.   

However, an official of the PCB seemed skeptical of Salman Iqbal’s explanation, and said it was difficult to comprehend how two sponsors can outweigh nine.

Bizarre explanation:

The skepticism is understandable, but from the point of view of someone like Salman Iqbal, if his franchise is to keep its brand value intact, it needs to demonstrate that it is getting enough sponsorship. However, given the visibility, since they cannot lie about the number of sponsors, the team owners thus had to come up with such bizarre explanations.

According to a Karachi Kings document, it has put Titanium sponsorship up for sale for Rs200 million, while its Platinum sponsorship is said to be selling for Rs150 million.

However, a source close to the development said that the Bahria Town became Titanium sponsors for Rs40 million – five times less than what the Karachi Kings quoted in its document for potential sponsors, while Arkadians and Nurpur too have paid up only Rs20 million apiece against the demand of Rs150 million each for platinum sponsorships.

“The Karachi Kings have received sponsorship of around Rs80 million. However, they will not be incurring losses this time since they would also be receiving from central pool of ticket sales and broadcasting fee,” the source said.     

Quetta nets a big fish:

However, Nadeem Omar, owner of the Quetta Gladiators, has struck a deal with the giant Engro Corporation, one of the largest conglomerates in Pakistan.

“We have caught the big fish,” said an excited Nadeem Omar, a business tycoon who owns Omar Associates, a privately-owned company which deals in minerals such as talc, and gypsum.

“I can tell you that Engro is the best sponsor for any of the franchises in the PSL so far,” Omar said during an official ceremony in February.

Meanwhile, president of Engro Corporation, Ghias Khan, says that Engro hopes to engage with the youth through their new association with the Quetta Gladiators.

“It has given us a chance to work with role models for younger generation. Sports is really involved in people’s lives. It is sports that teaches us about failure – how to bounce back and pursue success after failure,” Khan said.

Khan, a huge fan of the Quetta Gladiators mentor, and the West Indian maestro Viv Richards, said that he was looking forward to seeing such legends wearing the Quetta Gladiators jersey with the Engro logo.

However, a source privy to the matter told Profit that the overall sponsorship amount the Quetta Gladiators received was ‘much much’ less than Rs400 million, which the franchise initially planned to gain this season.

“However, the owners seem very satisfied with what they could garner,” said the source. Another Quetta Gladiators insider said, that the franchise had incurred a loss of Rs320 million in the previous two seasons.

“Nadeem Omar takes a large entourage of relatives, friends and support staff to the UAE for the PSL. This in itself is a reason for running losses,” said the source.

What the ‘Pundit in Power’ has to say:        

The PCB chairman Najam Sethi, who doubles up as the PSL supremo too, has admitted that the cricket league model is complex. That’s why several leagues, including Sri Lanka and Bangladesh have been failures. South Africa’s attempt at launching a league also didn’t take off.       

Sethi says he has told franchises to bolster their marketing team and haul sponsorships early. In the same breath, however, he was also critical of franchises being greedy, and aggressively pursuing sponsorships.

“When there was a small pool of sponsors and every franchise tried to get sponsors for themselves, they subsequently had to lower their sponsorship rates since the sponsors were offered lower rates by other franchises,” Sethi said in an interview to Geo.        

“Most of them, not all, didn’t pay attention to raising revenue. This is my view. We did workshops for them and briefed them and showed them that money can be made from such avenues. But other than finding sponsors for shirts and a few other things, they did nothing,” Sethi complained.

According to the Chairman, merchandising can also be a big source of business for franchises. Moreover, the franchises could have cashed in on fanfare.

“We should remember that they have just started and the market still has juice. If there was no juice in the market, we wouldn’t have been able to sell our sixth team for $5.2 million,” said Sethi.

He further said that PCB receives $128 million from ICC annually under the new understanding and PSL will be generating at least half of that soon.          

Fixing threat looms large?

With the sale of Multan Sultans at double the price of the Karachi Kings, there has been a reevaluation of the new market worth of previous five franchises. One knows that he is repeating himself, the Multan Sultans price range is approximately three times more than the average of previous five franchises.

However, after interviewing several sources who are in close association with the PSL in different capacities and also listening to Sethi, one thing is clear: the franchises are incurring losses. The question is, how long will they be willing to endure it?

There’s no denying that the idea of organizing the PSL was on the table since the success of IPL in 2007. For the PSL in every avenue, the IPL has indeed been the role model.

Although much more popular, the IPL has been hit hard by corruption scandals, something the PSL may have to worry about.

Two of the Indian league’s franchises – the Chennai Super Kings and the Rajasthan Royals – were banned for two years following illegal betting, and an investigation into match-fixing. Gurunath Meiyappan, a former team official of the Super Kings, and Raj Kundra, a former Royals co-owner, were banned for life from any involvement in cricket matches.

Shanthakumaran Sreesanth, who took Misbah-ul-Haq’s catch in the inaugural World T20 Championship final for victory, was arrested along with two other cricketers and several bookies in 2013. He served a year in jail before being bailed out. In 2012, five low profile cricketers were nabbed for involvement in corrupt practices.

Last year, the PSL also faced similar infamy when several national cricketers were indicted and subsequently were charged for fixing, including Sharjeel Khan, Khalid Latif and Nasir Jamshed.

The present circumstances of PSL where the franchises were incurring losses, is similar to that of IPL. It could make some stakeholders deal in underhand practices in an effort to become profitable from a loss-making franchise. But it is hoped that the PSL will largely remain immaculate and the franchises start generating profits from legitimate sources.    

Hints of cricket returning to Pakistan:

International cricket is slowly returning to Pakistan – thanks to PSL final in Lahore in 2017. The ICC World XI played three matches in September 2017, and a month later, Sri Lanka landed in Pakistan to play the last T20 match of the three-match series in Lahore. Before that, Zimbabwe had come to Pakistan in 2015 since the terrorist attack on Sri Lankan cricket team in Lahore back in 2009.   

This year, two playoff will take place in Lahore while the final is scheduled to be played in Karachi’s National Stadium, currently undergoing a serious makeover.  

According to Manager PSL, Naila Bhatti, organizing the PSL tournament abroad has been their biggest challenge and an expensive one too. Moreover, spectators are expected to turn out in huge numbers to see even early matches of the tournament, if it were organized in Pakistan, which is unfortunately not the case in UAE.

Quetta Gladiators’ officials have on many occasions said that they lost the final in Lahore to Peshawar Zalmi in the second edition because their foreign players didn’t come to play. However, this time around most of the foreign players have consented to come to Pakistan if their team qualifies for knockouts to be held in Pakistan. Moreover, Najam Sethi has also said that in 2019, half of the PSL matches will be held in Pakistan.

The PSL is only ever going to reach its full potential, both from sporting and commercial perspectives, when all of its matches are hosted in Pakistan.   

       

Meanwhile, after this ongoing third season, the title sponsorship is scheduled to expire. According to the PCB, the title sponsorship will be up for grabs but with a much higher price after the third season. After the ongoing third season, the title sponsorship is scheduled to expire. According to the PCB, the title sponsorship will be up for grabs but at a much higher price after the third season. The PCB had initially sold its title sponsorship to HBL, for a relatively insignificant Rs250 million each for the first three editions.  

Is T10 a threat to PSL?

A source, requesting anonymity, said that the T10 League held in Dubai couldn’t dent the PSL. “Only one Peshawar Zalmi sponsor abandoned it to join the T10. Nothing else happened. There was no need for creating such a hue and cry for the league.”

Moreover, PCB is also pondering over to hold its own T10 League in Pakistan.

“There are few options regarding next T10 League in UAE. One is that we hold our own T10 League. Number two is that we send our players and earn some money as before. And the third is that we don’t send our players and say goodbye to our friends in UAE,” Sethi said.