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Economic benefits of PSL

The Pakistan Super League (PSL) has made the Pakistan Cricket Board(PCB) richer, the broadcasters are smiling, and the fans are not complaining either. As for the franchisees, some are still wondering when they are going to break even, but the others are happy with the eyeballs and the brand-building. The key attraction is the presence of big name and the format itself. Nobody wants to miss the PSL action and related mega bucks. The fourth season has just started, matches are being played in UAE, where stands are almost packed for almost every match so far; the prices of tickets are rising, the crowds in front of television sets are also increasing along with a lot of advertisements. PSL is a ten years long project where one should not expect profits in the first year. In the first year of PSL, three out of five made profits. As per an estimate, PCB earns around Rs 2.5 billion annually in revenue through its flagship event, PSL.

The Pakistan Super League is in its 4th season this year. It feels like it began just a few years ago and it is already four years old. It has grown so fast. The business model goes something like this, the teams, named after cities, are owned by the corporate houses and high net wealth individuals. Owners are allotted teams through a bidding process and once the teams are allotted, cricketers from Pakistan and other countries were put to auction. A cap on the maximum amount is fixed to make bidding more fruitful. That meant teams would buy cricketers within the maximum amount equally fixed for all the teams. However, they could let go of any player the next year or can retain the players by buying them again.

According to economic experts, PSL will help in boosting the country’s weak economy by generating money and bringing sports tourism in Pakistan. As per details, billions of rupees will be circulated during the event and government will earn millions. Businesses of hotels, restaurants, sports, textile industry, airlines, advertisements, restaurants, and dozens of others will profit with the arrival of players and thousands of cricket fans. This economic boost will also help to revive the cottage industry. Food attracts the tourists and fans, textile production increases by making shirts, caps and other accessories, and the poor can run their circle by selling these items. Tickets also generate millions of rupees for the government.

The PCB and the PSL itself are making money via the auction of broadcasting rights, title sponsorship, and corporate sponsorship, ticket sales, auction of franchise rights and official umpire sponsorship. How would the franchises paying big bucks, earn back their investment, is the most sort out question. As a matter of fact, their sources of income included a share in revenue from the broadcasting rights, a share in the sponsorship money, a share from ticket sales, revenue from in-stadium advertising, the sale of players to other franchises and revenue from own sponsorship and corporate sponsorship.

Around 60 percent of the PSL’s revenue is from sponsorships and around 70 percent of this is reserved for PCB whereas the remaining 30 percent is distributed to the franchises. Presently, the PSL broadcasting deal works out to millions of dollars. As per the agreements between PCB and the team owners, most of the revenue will go to the franchises. Every PSL team has its own set of sponsors. Dedicated sponsorships play a huge role in generating revenue for team owners. It is also believed that the teams need the sponsors more desperately than previously thought. Without the sponsorship deals, most franchises would be on ventilator soon. The bottom teams sometimes struggle to get sponsorships even at discounted rates. The teams that don’t do well just fall away because there simply aren’t enough sponsors. Their ability to earn sponsorships depends not just on league performance, but also the talent they have and the locations they play in. Moreover, every PSL franchise sells merchandise that includes T-shirts, caps, wrist bands etc.

 

Team sponsorships are not too different from startup companies attracting VCs. Most of the teams in PSL are guilty of overspending – on talent, marketing, fan-building etc. They seem to have done this while ignoring their bottomline numbers (i.e. profits). Startups do that too sometimes, going all out to acquire customers and build a loyal, returning base. On the auction of players, most cricket fans follow individual players, not the franchises per se in Pakistan. If a player moves to a different team, the fans shift loyalties yet there are exceptions as well. Some have a strong vocal and loyal fan base. Ticket sales are another source of revenue for the teams, accounting for roughly 10 percent of team revenues. A couple of matches were played in Pakistan last year, which saw 100 percent occupancy in the stadium. It is expected that more matches will be played in Pakistan this year.

One of the best things about PSL is the excitement of a local talent bursting onto the world stage. The PSL has brought many unknown players to fame. Every edition of the tournament has produced stunning performances from established stars as well as newcomers. When a local cricketer does well for a franchise, the entire city rallies behind the team. This usually led to higher ticket sales.

The Pakistan Super League provides regular people an opportunity to hang out with celebrities and cricket stars and also promises a magical experience while watching an engrossing game of T20 cricket.The association of showbiz stars like Fawad Khan has helped the PSL draw newer audiences to cricket. The glamour of stars or even the association of celebrities has led to undeniably higher visibility and brand value. PCB’s primary motive is that franchises make a minimal loss if they have to. PCB can always snatch more revenue by selling more teams, last year it sold the 6th team and it is expected that it will sell the 7th team in the future. PCB sold a sixth franchise (Multan Sultans) in 2018 to Schon Group for US$ 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. It is being said that a majority of the franchises are in default with the PCB, which may take over defaulting franchises and auction them all over again. PCB has just auctioned Multan Sultans and Multan Consortium led by Ali Tareen has won the franchise rights for the sixth team of PSL. The reserved price set by PCB was US$5.21 million per annum for a period of seven years. This reserve price has been exceeded by the bid winners as per PCB sources and they have not disclosed the actual sale price of Multan Sultans.

The success of the PSL will encourage and will lay the foundation for various other sporting leagues across the country. These include national-level non-cricket leagues in hockey, football, among others. While such leagues will gain popularity, a few of them will be fizzled out because of instability in sponsorship revenues, poorly set up business models or inadequate public appeal. However, it is expected that PSL will continue to thrive, leading the way for other sporting leagues in Pakistan.

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