Reality Check : PSL hurt by low bids in franchise sale

[Adnan Siddiqui]

With the arrival of every news or development, it is necessary to do a bit analysis before reaching the conclusion. In my assessment, PSL hit by low bids by Franchises.

For comparison and assessment, please find the Franchises bidding cost in IPL and BPL.

IPL Franchises bids in 2008:

Franchises sold for 10 years.
1) Mumbai Indians: US$ 111.9 Million
2) RCB: US$ 111.6 Million
3) Deccan Chargers: US$ 107 Million
4) CSK: US$ 91 Million
5) Delhi DD: US$ 84 Million
6) Punjab SK: US$ 76 Million
7) Kolkata KK: US$ 75 Million
8) Rajhastan Royals: US$67 Million

TOTAL: US$ 723.5 Million

BPL Franchises bids in 2012:

Franchises sold for 6 years, can be sell after 3 years.
1) Chittagong Kings: US$ 5.20 Million
2) Sylhet Royals: US$ 5.06 Million
3) Dhaka Gladiator: US$ 5.05 Million
4) Barisal Burner: US$ 3.01 Million
5) Durunto Rajshahi: US$ 3.01 Million
6) Khulna Royal Bengal: US$ 1.10 Million

TOTAL: US$ 22.43 Million

PSL Franchises Bids in 2015:
Franchises sold for 1 year
1) Karachi: US$ 2.6 Million
2) Lahore: US$ 2.4 Million
3) Peshawar: US$ 1.6 Million
4) Islamabad: US$ 1.5 Million
5) Quetta: US$ 1.1 Million

TOTAL: US$ 93 Million (for Ten years)

IPL and BPL figures taken from cricinfo and wikepedia. PSL figures taken as quoted by media. Pardon me if media quoted wrong figure of PSL.

Keep IPL aside, PSL franchises bids are even far below BPL. We know in Bangladesh, cricket still not wide spread as in Pakistan with rich history and legends.

In my humble opinion, PCB/PSL failed to get the bidding price PSL deserve. It may also term as Loss by financial people.

I am unqualified person, so its just analysis of layman.

 

[malanga]

PSL sold fanchisee rights for 93 million US dollars. Not 9.2 million US Dollars.

 

[Inswinger]

Major reason is the fact that the PSL is not being held in Pakistan. Chance of return revenue on the investment is stony reduced due to the fact that Pakistan will not actually be hosting the matches. It's a Pakistani league by name. Numbers would have been up if the matches actually took place in cities like Lahore, Karachi, Peshawar, etc.

It's an apples to oranges comparison.

 

[cricketjoshila]

With the arrival of every news or development, it is necessary to do a bit analysis before reaching the conclusion. In my assessment, PSL hit by low bids by Franchises.

For comparison and assessment, please find the Franchises bidding cost in IPL and BPL.

IPL Franchises bids in 2008:

Franchises sold for 10 years.
1) Mumbai Indians: US$ 111.9 Million
2) RCB: US$ 111.6 Million
3) Deccan Chargers: US$ 107 Million
4) CSK: US$ 91 Million
5) Delhi DD: US$ 84 Million
6) Punjab SK: US$ 76 Million
7) Kolkata KK: US$ 75 Million
8) Rajhastan Royals: US$67 Million

TOTAL: US$ 723.5 Million

BPL Franchises bids in 2012:

Franchises sold for 6 years, can be sell after 3 years.
1) Chittagong Kings: US$ 5.20 Million
2) Sylhet Royals: US$ 5.06 Million
3) Dhaka Gladiator: US$ 5.05 Million
4) Barisal Burner: US$ 3.01 Million
5) Durunto Rajshahi: US$ 3.01 Million
6) Khulna Royal Bengal: US$ 1.10 Million

TOTAL: US$ 22.43 Million

PSL Franchises Bids in 2015:
Franchises sold for 10 years, can be sell after 3 years
1) Karachi: US$ 2.6 Million
2) Lahore: US$ 2.4 Million
3) Peshawar: US$ 1.6 Million
4) Islamabad: US$ 1.5 Million
5) Quetta: US$ 1.1 Million

TOTAL: US$ 9.2 Million

IPL and BPL figures taken from cricinfo and wikepedia. PSL figures taken as quoted by media. Pardon me if media quoted wrong figure of PSL.

Keep IPL aside, PSL franchises bids are even far below BPL. We know in Bangladesh, cricket still not wide spread as in Pakistan with rich history and legends.

In my humble opinion, PCB/PSL failed to get the bidding price PSL deserve. It may also term as Loss by financial people.

I am unqualified person, so its just analysis of layman.

Deccan Chargers was resold again for 5 years after the last owner had issues and the 5 year fees was 13mn per year.Its wrong to compare with IPL.

Whats important to know is how much was paid for broadcast rights.

 

[Syed1]

I am unqualified person, so its just analysis of layman.

The PSL price you mentioned was for one year and not 10 years.

The price for 10 years is 93 million

 

[Syed1]

Also India has such a huge population, for every one guy watching the match on tv there would be 10 watching in India.

No point comparing us with India, we can be compared to BD and as you can see from the numbers above we beat them out of the water.

 

[FreakCricket]

With the arrival of every news or development, it is necessary to do a bit analysis before reaching the conclusion. In my assessment, PSL hit by low bids by Franchises.

For comparison and assessment, please find the Franchises bidding cost in IPL and BPL.

IPL Franchises bids in 2008:

Franchises sold for 10 years.
1) Mumbai Indians: US$ 111.9 Million
2) RCB: US$ 111.6 Million
3) Deccan Chargers: US$ 107 Million
4) CSK: US$ 91 Million
5) Delhi DD: US$ 84 Million
6) Punjab SK: US$ 76 Million
7) Kolkata KK: US$ 75 Million
8) Rajhastan Royals: US$67 Million

TOTAL: US$ 723.5 Million

BPL Franchises bids in 2012:

Franchises sold for 6 years, can be sell after 3 years.
1) Chittagong Kings: US$ 5.20 Million
2) Sylhet Royals: US$ 5.06 Million
3) Dhaka Gladiator: US$ 5.05 Million
4) Barisal Burner: US$ 3.01 Million
5) Durunto Rajshahi: US$ 3.01 Million
6) Khulna Royal Bengal: US$ 1.10 Million

TOTAL: US$ 22.43 Million

PSL Franchises Bids in 2015:
Franchises sold for 10 years, can be sell after 3 years
1) Karachi: US$ 2.6 Million
2) Lahore: US$ 2.4 Million
3) Peshawar: US$ 1.6 Million
4) Islamabad: US$ 1.5 Million
5) Quetta: US$ 1.1 Million

TOTAL: US$ 9.2 Million

IPL and BPL figures taken from cricinfo and wikepedia. PSL figures taken as quoted by media. Pardon me if media quoted wrong figure of PSL.

Keep IPL aside, PSL franchises bids are even far below BPL. We know in Bangladesh, cricket still not wide spread as in Pakistan with rich history and legends.

In my humble opinion, PCB/PSL failed to get the bidding price PSL deserve. It may also term as Loss by financial people.

I am unqualified person, so its just analysis of layman.

you messed up your math big time, add one zero. $26m,24m,16m,15m and 11m

 

[11ShadyBrothers]

LOL. As a finance major. I am crying after reading the OP.

First of all, you need to take inflation into account.

Secondly, its for 10 years. Not just 1 year (the figures you have quoted are for 1 year only). LIKE PLEASE! Mods need to delete this thread our edit the details. Both ways, wouldnt make sense to keep this thread.

 

[Slog]

LOL. As a finance major. I am crying after reading the OP.

First of all, you need to take inflation into account.

Secondly, its for 10 years. Not just 1 year (the figures you have quoted are for 1 year only). LIKE PLEASE! Mods need to delete this thread our edit the details. Both ways, wouldnt make sense to keep this thread.

Even then the figures are lower than BPL though but only just. However I feel they should have been SIGNIFICANTLY more. It doesn't have any top stars and would just fall apart if Pakistan players pull out. PSL on the other hand will have much more high profile international players and at most one or 3 Bangladeshis

 

[cricfan14]

LOL. As a finance major. I am crying after reading the OP.

First of all, you need to take inflation into account.

Secondly, its for 10 years. Not just 1 year (the figures you have quoted are for 1 year only). LIKE PLEASE! Mods need to delete this thread our edit the details. Both ways, wouldnt make sense to keep this thread.

LOLLL some need to see the worst in everything, even at the expense of objective math.

Also it's insane to compare the PSL - with all the odds against it - to the IPL or BPL. Considering what people thought of the PSL, how long it's taken to get off the ground, how little people believed in it, the fact that it's not at "home", it's actually a really impressive showing.

 

[tahir_dj]

i was thinking if

1) Karachi: US$ 2.6 Million
2) Lahore: US$ 2.4 Million
3) Peshawar: US$ 1.6 Million
4) Islamabad: US$ 1.5 Million
5) Quetta: US$ 1.1 Million -

total 9.2 millions x 10 92 millions over 10 years thats just for franchise cost

so what about the media rights how much are they sold for as they have been sold to PTV/TenSports mentioned by Najam sethi.
and stadia rights

how much did HBL paid to be title sponsor?

I am sure It won't be a loss for PCB but nothing is clear regarding other stuff
PCB will also be making money from ground attendance
merchandise rights

 

[cricketjoshila]

LOL. As a finance major. I am crying after reading the OP.

First of all, you need to take inflation into account.

Secondly, its for 10 years. Not just 1 year (the figures you have quoted are for 1 year only). LIKE PLEASE! Mods need to delete this thread our edit the details. Both ways, wouldnt make sense to keep this thread.

Can you tell how inflation is the reason that PSL has lower franchisee bids than IPL.

 

[AlphaFighter]

Do we have to continously demean ourselves by comparing with the IPL, BCCI?

Rome was not built in a day. Give the PSL time

 

[Hawkeye]

Adnan sahab, what are you doing? Again?

It's about $93 million lol.

Also a bit unfair to compare with IPL ones. Several times bigger country and market.

For our size, it's a success.

 

[Pakpak]

For God's sakes, how many times in how many threads do you have to be told its 93 million for ten years? 9.2 million is for a year, times that by 10 its 93. Every news agency is reporting the same.

Seriously man, get a grip.

 

[tahir_dj]

Adnan sahab, what are you doing? Again?

It's about $93 million lol.

Also a bit unfair to compare with IPL ones. Several times bigger country and market.

For our size, it's a success.

yep this is only franchise cost over 10 years

still no details how much did Ten/PTV paidbroadcasting rights
still no details how much HBL paying to be title sponsor
and there are alot of other rights still need to be sold

 

[Slog]

LOL. As a finance major. I am crying after reading the OP.

First of all, you need to take inflation into account.

Secondly, its for 10 years. Not just 1 year (the figures you have quoted are for 1 year only). LIKE PLEASE! Mods need to delete this thread our edit the details. Both ways, wouldnt make sense to keep this thread.

Can you tell how inflation is the reason that PSL has lower franchisee bids than IPL.

Lol shady this is a very genuine question and kinda basic stuff. By that logic PSL should have higher bids .

 

[11ShadyBrothers]

Even then the figures are lower than BPL though but only just. However I feel they should have been SIGNIFICANTLY more. It doesn't have any top stars and would just fall apart if Pakistan players pull out. PSL on the other hand will have much more high profile international players and at most one or 3 Bangladeshis

Not sure if figures are lower than BPL. The ones he quoted were of 10 years and they amount to 22 million as per the OP whereas PSL is 93.

 

[11ShadyBrothers]

Can you tell how inflation is the reason that PSL has lower franchisee bids than IPL.

Lol shady this is a very genuine question and kinda basic stuff. By that logic PSL should have higher bids .

Inflation into account while taking the value over 10 years. Didnt have anything to do with PSL having higher or lower bids.

 

[Adnan Siddiqui]

Pardon me. Its my mistake. Its price per year which I misunderstood as 10 years.

Mods may delete thread or edit its title. [MENTION=93712]MenInG[/MENTION] [MENTION=66397]Green[/MENTION]roar

By the way, first time first time the buying price quoted in 'per year' usually its total price.

 

[11ShadyBrothers]

LOLLL some need to see the worst in everything, even at the expense of objective math.

Also it's insane to compare the PSL - with all the odds against it - to the IPL or BPL. Considering what people thought of the PSL, how long it's taken to get off the ground, how little people believed in it, the fact that it's not at "home", it's actually a really impressive showing.

I dont even consider the likes of BPL or SLPL as PSL's competitors. The real competition is from the Big Bash and the CPL.

 

[Slog]

LOL. As a finance major. I am crying after reading the OP.

First of all, you need to take inflation into account.

Secondly, its for 10 years. Not just 1 year (the figures you have quoted are for 1 year only). LIKE PLEASE! Mods need to delete this thread our edit the details. Both ways, wouldnt make sense to keep this thread.

Not sure if figures are lower than BPL. The ones he quoted were of 10 years and they amount to 22 million as per the OP whereas PSL is 93.

Those are per year too I think. Not sure tho

 

[11ShadyBrothers]

Pardon me. Its my mistake. Its price per year which I misunderstood as 10 years.

Mods may delete thread or edit its title. [MENTION=93712]MenInG[/MENTION] [MENTION=66397]Green[/MENTION]roar

By the way, first time first time the buying price quoted in 'per year' usually its total price.

No worries, always double check.

 

[Slog]

LOL. As a finance major. I am crying after reading the OP.

First of all, you need to take inflation into account.

Secondly, its for 10 years. Not just 1 year (the figures you have quoted are for 1 year only). LIKE PLEASE! Mods need to delete this thread our edit the details. Both ways, wouldnt make sense to keep this thread.

I dont even consider the likes of BPL or SLPL as PSL's competitors. The real competition is from the Big Bash and the CPL.

Neither should we aim to. Not even CPL. Just Big bash

 

[Pakpak]

Pardon me. Its my mistake. Its price per year which I misunderstood as 10 years.

Mods may delete thread or edit its title. [MENTION=93712]MenInG[/MENTION] [MENTION=66397]Green[/MENTION]roar

By the way, first time first time the buying price quoted in 'per year' usually its total price.

No worries bro.

 

[11ShadyBrothers]

Those are per year too I think. Not sure tho

I cant honestly be bothered to trace back the data. [MENTION=138428]Adnan Siddiqui[/MENTION] can you kindly confirm?

 

[Bangladesh_Fan]

Not sure if figures are lower than BPL. The ones he quoted were of 10 years and they amount to 22 million as per the OP whereas PSL is 93.

The BPL franchises were sold for 6 years not 10

 

[Slog]

LOL. As a finance major. I am crying after reading the OP.

First of all, you need to take inflation into account.

Secondly, its for 10 years. Not just 1 year (the figures you have quoted are for 1 year only). LIKE PLEASE! Mods need to delete this thread our edit the details. Both ways, wouldnt make sense to keep this thread.

Lol why the heck can't I post without quoting the above post!!

 

[11ShadyBrothers]

Neither should we aim to. Not even CPL. Just Big bash

Yep, in terms of TV viewership we are already going to tank them.

 

[Pakpak]

The BPL franchises were sold for 6 years not 10

So over ten years they would be around 44 million, which is not even half of PSL.

 

[blackanhyellow]

Not sure if figures are lower than BPL. The ones he quoted were of 10 years and they amount to 22 million as per the OP whereas PSL is 93.

The BPL rights were sold for 6 years not 10 according to OP.

Besides, if the prices in the OP are per year I assume they are per year for BPL too...

Therefore 22 million per year for BPL and only 9.2 million per year for PSL.

Its understandable though, BPL is happening at their home, there would be a lot more buzz around it.

 

[winchester]

If these BPL figures are for 6 years than a 10 year total for BPL would be around 38 million

Again that is if these figures represent a grand total for six years and not per year

 

[Bangladesh_Fan]

So over ten years they would be around 44 million, which is not even half of PSL.

Depends on if it was per year like the PSL figures, then it would get multiplied. And anyway that was in early 2012 when BD cricket was just taking off and its still in taking off phase. Add to that we are a young country with smaller economy. Smaller country too.

 

[11ShadyBrothers]

So over ten years they would be around 44 million, which is not even half of PSL.

If we compare Present value to discount the value of 93 million in present terms (assuming Interest rate at 6%) we get, 51.93 million USD

For BPL its 31.02 million USD.

Not bad for Bangladesh Cricket et all.

 

[Pakpak]

Depends on if it was per year like the PSL figures, then it would get multiplied. And anyway that was in early 2012 when BD cricket was just taking off and its still in taking off phase. Add to that we are a young country with smaller economy. Smaller country too.

I am actually impressed for you guys, still manage to rake in massive amounts of cash!

 

[Pakpak]

If we compare Present value to discount the value of 93 million in present terms (assuming Interest rate at 6%) we get, 51.93 million USD

For BPL its 31.02 million USD.

Not bad for Bangladesh Cricket et all.

Yep, impressive!

 

[Slog]

LOL. As a finance major. I am crying after reading the OP.

First of all, you need to take inflation into account.

Secondly, its for 10 years. Not just 1 year (the figures you have quoted are for 1 year only). LIKE PLEASE! Mods need to delete this thread our edit the details. Both ways, wouldnt make sense to keep this thread.

I am actually impressed for you guys, still manage to rake in massive amounts of cash!

Their economy is on the up.

Many investors including Pakistani investors have withdrawn their money from Pak and invested it in Bangladesh

 

[Adnan Siddiqui]

[MENTION=138463]Slog[/MENTION] some news article quoting it for 10 years while some per year. Generally, such buy is not mentioned in 'per year' as its one time buy. Please let me know the correct news.

 

[11ShadyBrothers]

Yep, impressive!

However, arent figures arent shabby et all. From making zero $ to reaching 51.93 million USD gross is not bad et all.

 

[cricketjoshila]

Neither should we aim to. Not even CPL. Just Big bash

That will be a very tough ask.Dont forget that BBL broadcast rights bring in $20mn per year.If i am not wrong PSL was looking at somwhere near $5mn per year in broadcast rights(A thread was there on PP).

 

[kamz]

If we compare Present value to discount the value of 93 million in present terms (assuming Interest rate at 6%) we get, 51.93 million USD

For BPL its 31.02 million USD.

Not bad for Bangladesh Cricket et all.

Depends what discount rate you are using.

People will hate me for saying this. But from an investment point of view the teams are over valued.

However if the owners are treating this as a marketing expense rather than an investment cap then it's rightly priced or maybe a tad lower.

Broadcasting rights international went for $4m and domestic for $10m. This is the biggest revenue line and these are figures for 3 years. Plus franchises share 85% of these revenues. Based on this one franchise would get roughly 800k. The remaining revenue lines like ticketing are not material in regards to valuation plus 50% of that goes to pcb amd the remaining distributed to the two teams playing the match. (mind you these are net of costs)

Then you add on the $1m payers salaries.plus other marketing expenses. Franchises would make a loss unless they have significantly high merchandise sales. Which is highly unlikely in year 1 and 2.

Having said this, I think a lot depends on how pcb makes this a successful league as that would mean sponsorships for franchises and thus increasing their top line.
Otherwise, sustaining a loss making asset will inadvertently impact the overall league value

Key to watch is Islamabad as they are Vcs running this ad their focus would be on delivering a strong ebitda return in return for a successful exit after 4 to 5 years. Compared to others who are strategic trade buyers

 

[cricketjoshila]

Depends what discount rate you are using.

People will hate me for saying this. But from an investment point of view the teams are over valued.

However if the owners are treating this as a marketing expense rather than an investment cap then it's rightly priced or maybe a tad lower.

Broadcasting rights international went for $4m and domestic for $10m. This is the biggest revenue line and these are figures for 3 years. Plus franchises share 85% of these revenues. Based on this one franchise would get roughly 800k. The remaining revenue lines like ticketing are not material in regards to valuation plus 50% of that goes to pcb amd the remaining distributed to the two teams playing the match. (mind you these are net of costs)

Then you add on the $1m payers salaries.plus other marketing expenses. Franchises would make a loss unless they have significantly high merchandise sales. Which is highly unlikely in year 1 and 2.

Having said this, I think a lot depends on how pcb makes this a successful league as that would mean sponsorships for franchises and thus increasing their top line.
Otherwise, sustaining a loss making asset will inadvertently impact the overall league value

Key to watch is Islamabad as they are Vcs running this ad their focus would be on delivering a strong ebitda return in return for a successful exit after 4 to 5 years. Compared to others who are strategic trade buyers

What is the source of that?

If thats true then its less than 5mn a year and people are comparing it with BBL which get 20mn a year.

 

[11ShadyBrothers]

Depends what discount rate you are using.

People will hate me for saying this. But from an investment point of view the teams are over valued.

However if the owners are treating this as a marketing expense rather than an investment cap then it's rightly priced or maybe a tad lower.

Broadcasting rights international went for $4m and domestic for $10m. This is the biggest revenue line and these are figures for 3 years. Plus franchises share 85% of these revenues. Based on this one franchise would get roughly 800k. The remaining revenue lines like ticketing are not material in regards to valuation plus 50% of that goes to pcb amd the remaining distributed to the two teams playing the match. (mind you these are net of costs)

Then you add on the $1m payers salaries.plus other marketing expenses. Franchises would make a loss unless they have significantly high merchandise sales. Which is highly unlikely in year 1 and 2.

Having said this, I think a lot depends on how pcb makes this a successful league as that would mean sponsorships for franchises and thus increasing their top line.
Otherwise, sustaining a loss making asset will inadvertently impact the overall league value

Key to watch is Islamabad as they are Vcs running this ad their focus would be on delivering a strong ebitda return in return for a successful exit after 4 to 5 years. Compared to others who are strategic trade buyers

Love to have a finance related post here, sire.

The discount rate i used was 6 per cent like i mentioned in the post which is iirc the interest rate running in Pakistan nowadays.

Usually sporting teams are always over-valued because companies treat them as their marketing expenses. Case in point City; now who on earth thinks that City actually makes some profit? Each year they buy new player worth millions of dollars? Heck even the sponsors are arabs.

Franchises would be extremely happy to make break even or make a little profit (best scenario for them).

Dont count on the merchandise sale. In Pakistan, we dont have any such culture. People just cant afford expensive merchandise.

I am not sure about Islamabad's owners - its Lenione Global. Not sure if they are some venture capitals. If they are, they are taking a huge risk.

 

[Hawkeye]

Pardon me. Its my mistake. Its price per year which I misunderstood as 10 years.

Mods may delete thread or edit its title. [MENTION=93712]MenInG[/MENTION] [MENTION=66397]Green[/MENTION]roar

By the way, first time first time the buying price quoted in 'per year' usually its total price.

It's okay. Can happen.

 

[Hawkeye]

That will be a very tough ask.Dont forget that BBL broadcast rights bring in $20mn per year.If i am not wrong PSL was looking at somwhere near $5mn per year in broadcast rights(A thread was there on PP).

Hain? $20mn AUD? That's about $14mn USD. In an established, developed country with home grounds and crowd.

Not sure where the figure of five mn came but I'd wait for some official announcement. The level of competitiveness is going to be equal or better.

 

[liaqat]

PSL will eventually depend on people watching the game's in stadiums and at home.
That's us and i do believe foreign Pakistani's will play a important part.

 

[AlphaFighter]

I just hope that this money will help make the PCB more independent, will pave the way for the return on international cricket in Pakistan, improve the remuneration of both National team players and domestic cricketers most importantly and will help the PCB make necessary investments in improving domestic cricket in pakistan.

 

[cricketjoshila]

Hain? $20mn AUD? That's about $14mn USD. In an established, developed country with home grounds and crowd.

Not sure where the figure of five mn came but I'd wait for some official announcement. The level of competitiveness is going to be equal or better.

I think its 20mn USD.Thats per year.4 times of what PSL is getting apparently.

 

[Anfield]

What is the source of this "apparent" 5 Million USD tv rights?

 

[kamz]

Love to have a finance related post here, sire.

The discount rate i used was 6 per cent like i mentioned in the post which is iirc the interest rate running in Pakistan nowadays.

Usually sporting teams are always over-valued because companies treat them as their marketing expenses. Case in point City; now who on earth thinks that City actually makes some profit? Each year they buy new player worth millions of dollars? Heck even the sponsors are arabs.

Franchises would be extremely happy to make break even or make a little profit (best scenario for them).

Dont count on the merchandise sale. In Pakistan, we dont have any such culture. People just cant afford expensive merchandise.

I am not sure about Islamabad's owners - its Lenione Global. Not sure if they are some venture capitals. If they are, they are taking a huge risk.

Well we can definitely talk finance

Ok here are a few points:

1) For present value, interest rate is a small cog in the overall WACC formula. Now if you are just trying to find the PV of PCB's cashflows in future, then you have to take the overall WACC rate (i.e. that takes into account CAPM and the debt piece along with beta of the industry)

- In that scenario, you may want to think of a higher rate, as within stable markets the rate used is 10% - 15%. So for pakistan it maybe around 15% mark.

2) Well the purchase price / conisderation will be over valued, but the industry multiple isnt over valued (as the market corrects itself over period of time

- Now an industry sector multiple for PSL teams: they would use the likes of EPL, NFL, NBA (ofcourse the comparable companies listed would only disclose multiples, so you look at adjacent business sectors, like advertising media broadcasters etc to have a large population) Then you take into account comparable transaction multiples and apply that to EBITDA.

- Now no PSL franchise would have an EBITDA in positive, so revenue multiples will be used which is 0.7x - 1.0x

3) surprise surprise Man city does make a profit, along with man utd, arsenal , albeit at a higher leverage given their equity use.

4) franchises would indeed be happy to make it break even - but lets take an example like ARY or Haeir. Their primary business is media/gold/real estate for ARY and for Haeir (their primary business is ventilation and electronics)

IF the primary business gets under pressure to deliver high returns, cost saving initiatives will be introduced and the first hit would be the big ticket items (PSL marketing) comes into play and thats where the sustainability of the league and the value of it gets affected.

For EPL, NFL, NBA. The revenue streams are good enough to deliver a profit (merchandise, franchise sponsors, central shared revenue (broadcasting, gate receipts, title sponsorships). Plus their franchise fees are minimal and in some cases nil as you acquire an asset.

Then their viewership, merchandise sales grow year on year. Hence their value goes up as potential investors see cross sell opportunities. If PSL is unable to do that, then we have a problem

If you want the league to be successful, you have to allow franchises to sustain itself on its own, rather than being dependent on owners other primary businesses. Otherwise any impact on that business will effectively impact PSL payments.

5) Leonine are real estate investors and VCs - so for them their ultimate goal is to deliver a positive EBITDA for them to be able to make a return on their exit (sale of asset to a trade buyer after 4 or 5 years)

and yes agree with you they have taken a huge risk. But if the league is successful they might get a money multiple of 7x to 8x, which i believe would be very decent.

 

[Sachin136]

According to Wikipedia the prices for the BPL teams posted in the OP aren’t accurate.

Chittagong Vikings $6.68 million
Comilla Victorians $6.50 million
Sylhet Super Stars $5.97 million
Dhaka Dynamites $5.90 million
Barisal Bulls $5.70 million
Rangpur Riders $4.20 million

This is for 5 years.

To get a rough idea for the first year or two we can just take the price divided by the number of years and ignore inflation.

 

[StreetSmart]

Pardon me. Its my mistake. Its price per year which I misunderstood as 10 years.

Mods may delete thread or edit its title. [MENTION=93712]MenInG[/MENTION] [MENTION=66397]Green[/MENTION]roar

By the way, first time first time the buying price quoted in 'per year' usually its total price.

9.3 changed to 93 Done!!

 

[11ShadyBrothers]

Well we can definitely talk finance

Ok here are a few points:

1) For present value, interest rate is a small cog in the overall WACC formula. Now if you are just trying to find the PV of PCB's cashflows in future, then you have to take the overall WACC rate (i.e. that takes into account CAPM and the debt piece along with beta of the industry)

- In that scenario, you may want to think of a higher rate, as within stable markets the rate used is 10% - 15%. So for pakistan it maybe around 15% mark.

2) Well the purchase price / conisderation will be over valued, but the industry multiple isnt over valued (as the market corrects itself over period of time

- Now an industry sector multiple for PSL teams: they would use the likes of EPL, NFL, NBA (ofcourse the comparable companies listed would only disclose multiples, so you look at adjacent business sectors, like advertising media broadcasters etc to have a large population) Then you take into account comparable transaction multiples and apply that to EBITDA.

- Now no PSL franchise would have an EBITDA in positive, so revenue multiples will be used which is 0.7x - 1.0x

3) surprise surprise Man city does make a profit, along with man utd, arsenal , albeit at a higher leverage given their equity use.

4) franchises would indeed be happy to make it break even - but lets take an example like ARY or Haeir. Their primary business is media/gold/real estate for ARY and for Haeir (their primary business is ventilation and electronics)

IF the primary business gets under pressure to deliver high returns, cost saving initiatives will be introduced and the first hit would be the big ticket items (PSL marketing) comes into play and thats where the sustainability of the league and the value of it gets affected.

For EPL, NFL, NBA. The revenue streams are good enough to deliver a profit (merchandise, franchise sponsors, central shared revenue (broadcasting, gate receipts, title sponsorships). Plus their franchise fees are minimal and in some cases nil as you acquire an asset.

Then their viewership, merchandise sales grow year on year. Hence their value goes up as potential investors see cross sell opportunities. If PSL is unable to do that, then we have a problem

If you want the league to be successful, you have to allow franchises to sustain itself on its own, rather than being dependent on owners other primary businesses. Otherwise any impact on that business will effectively impact PSL payments.

5) Leonine are real estate investors and VCs - so for them their ultimate goal is to deliver a positive EBITDA for them to be able to make a return on their exit (sale of asset to a trade buyer after 4 or 5 years)

and yes agree with you they have taken a huge risk. But if the league is successful they might get a money multiple of 7x to 8x, which i believe would be very decent.

1) You are right - I just used the data that was most readily available and accurate. That is the national interest rate. Calculating PCB's beta would be difficult provided there is no or very less public data. But yes, the WACC would definitely higher than 6 per cent provided PCB must have liabilities.

2) Agreed.

3) I am genuinely shocked. Maybe the shiekh owners are pumping money through the sponsorship to dodge the FFP and make the balance sheets show profit. I am still skeptical over this because FFP enforcing body was not happy with city considering they didnt show profits. I might be wrong. They even fined Barcelona and city iirc.

4) I dont have much worries about the sustainability of the PSL. They have signed up a 10 years contract. I dont think that would be an issue.

5) If i would have been a VC - i would never invest in any sporting league unless i am intending to earn money through other means.

 

[11ShadyBrothers]

9.3 changed to 93 Done!!

Just put a clear edit: that the actual value is 93, OP is mistaken. Otherwise the thread loses it plot.

 

[kamz]

1) You are right - I just used the data that was most readily available and accurate. That is the national interest rate. Calculating PCB's beta would be difficult provided there is no or very less public data. But yes, the WACC would definitely higher than 6 per cent provided PCB must have liabilities.

2) Agreed.

3) I am genuinely shocked. Maybe the shiekh owners are pumping money through the sponsorship to dodge the FFP and make the balance sheets show profit. I am still skeptical over this because FFP enforcing body was not happy with city considering they didnt show profits. I might be wrong. They even fined Barcelona and city iirc.

4) I dont have much worries about the sustainability of the PSL. They have signed up a 10 years contract. I dont think that would be an issue.

5) If i would have been a VC - i would never invest in any sporting league unless i am intending to earn money through other means.

not that difficult to calculate beta, you use comparable industry average (NFL, EPL, NBA etc. There are listed teams in these leagues). Check out damodaran's website. Then you adjust beta accordingly to align it with your geographic region.

3) you cant dodge lol. I think you are being over skeptical of arabs. In UK you have to file company accounts. So you cant show related parties as revenue lol IFRS treatment and all that stuff kicks in (ACA students can point it out and explain this more in detail)

4) no the franchises signed a 3 year deal. If u are a franchise owner, you cannot exit until end of year 3. After that you could sell the team or exit and PSL will resell it.

5) you can make money, you need a strong management team (i.e sales and marketing chaps) VCs cant run a business. Getting a strong sales head would definitely help in getting franchise sponsors and growing merchandise sales.

 

[Pak Warrior]

Lol why the heck can't I post without quoting the above post!!

You probably clicked on the chain quote icon by accident, go back to where 11SB posted this originally and uncheck the quote icon that has a plus next to it

 

[Bilal7]

Don't know why fans are concerned with how much money other people are making. As long as the quality of the cricket is better than those other leagues, I'll be happy.

 

[Anwar_194]

This is how I look at it, Pakistan has been suffering from matches in yhe country so there is a issue for psl not being in the same country. Population in India is over 1 billion and Pakistan is 200 millions, it's like 5 times more than India. Indian first launch of IPL was sold for over $700 millions and Pakistan for about 93 millions, it's just shade below 5 times and to be honest, I think it is still great considering the amount of interest in cricket is just on TV. They will make more money from the TV rights and some from the sponsors but overall it's great investment considering they will make more money in the next 10 years to come.

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[tahir_dj]

Don't know why fans are concerned with how much money other people are making. As long as the quality of the cricket is better than those other leagues, I'll be happy.

Fans are concerned because they want pcb to make money and eventually the money are filtered down to lower level where our domestic players dont have to worry about not being able to make money.

 

[AG93]

Fans are concerned because they want pcb to make money and eventually the money are filtered down to lower level where our domestic players dont have to worry about not being able to make money.

Lolz, huge chunk of this money is going to be filtered into PCB's pockets. They'd just say we didn't make any money.

I see Najam Sethi pocketing $4.3 million out of 9.3 million himself. Do you think the crook is that generous?

 

[MABA]

With the arrival of every news or development, it is necessary to do a bit analysis before reaching the conclusion. In my assessment, PSL hit by low bids by Franchises.

For comparison and assessment, please find the Franchises bidding cost in IPL and BPL.

IPL Franchises bids in 2008:

Franchises sold for 10 years.
1) Mumbai Indians: US$ 111.9 Million
2) RCB: US$ 111.6 Million
3) Deccan Chargers: US$ 107 Million
4) CSK: US$ 91 Million
5) Delhi DD: US$ 84 Million
6) Punjab SK: US$ 76 Million
7) Kolkata KK: US$ 75 Million
8) Rajhastan Royals: US$67 Million

TOTAL: US$ 723.5 Million

BPL Franchises bids in 2012:

Franchises sold for 6 years, can be sell after 3 years.
1) Chittagong Kings: US$ 5.20 Million
2) Sylhet Royals: US$ 5.06 Million
3) Dhaka Gladiator: US$ 5.05 Million
4) Barisal Burner: US$ 3.01 Million
5) Durunto Rajshahi: US$ 3.01 Million
6) Khulna Royal Bengal: US$ 1.10 Million

TOTAL: US$ 22.43 Million

PSL Franchises Bids in 2015:
Franchises sold for 10 years, can be sell after 3 years
1) Karachi: US$ 2.6 Million
2) Lahore: US$ 2.4 Million
3) Peshawar: US$ 1.6 Million
4) Islamabad: US$ 1.5 Million
5) Quetta: US$ 1.1 Million

TOTAL: US$ 93 Million

IPL and BPL figures taken from cricinfo and wikepedia. PSL figures taken as quoted by media. Pardon me if media quoted wrong figure of PSL.

Keep IPL aside, PSL franchises bids are even far below BPL. We know in Bangladesh, cricket still not wide spread as in Pakistan with rich history and legends.

In my humble opinion, PCB/PSL failed to get the bidding price PSL deserve. It may also term as Loss by financial people.

I am unqualified person, so its just analysis of layman.

The BPL prices are completely wrong. Someone edited those by themselves on wikipedia. The real prices are much lower below is what those franchises were originally bought for. So compared to that even the lowest PSL bid was on par with the highest BPL bid. I think thats pretty good. Also you cant compare with India at all their market size is just massive, 7 times that of Pakistan.

 

[zoeyfactor]

Franchises are sold based on valuations derived by a base vs highest bid. I'm sure the financial people has it appraised based on the metrics which they could achieve. One of the guys running is a financial guy so I'm sure they won't make a dumb decision. I think they are good price tags for a 5 year term. After 5 years they can be sold to new buyers hence the valuation will be much more given the league picks up. IPL is the example.

 

[AlphaFighter]

$10 million per year is a huge boost for the PCB, there will be more to come. This is just a start.

Finally we have some hope of Pakistan Cricket solidly standing on its two feet.

 

[Thivagar]

Why are you comparing IPL to PSL ? LOL I do think it is a bit low but considering that all matches will be played in UAE and it is a Pakistani tournament, you can't ask for more. IPL was revolutionary and it had a market nearly 10X the size of Pakistan.

 

[Zak_Fan]

These comparisons with IPL need to stop. It is like some local Haryana boxer complaining about Floyd Mayweather earning more.

 

[Kakar]

Prices are fine imo. Can't compare to IPL. But very high compared to BPL.

 

[Convict]

That will be a very tough ask.Dont forget that BBL broadcast rights bring in $20mn per year.If i am not wrong PSL was looking at somwhere near $5mn per year in broadcast rights(A thread was there on PP).

$20 million is midget tier.
They'll be much larger next time. CA was just desperate to get it on FTA tv.

 

[Bhaijaan]

Major reason is the fact that the PSL is not being held in Pakistan. Chance of return revenue on the investment is stony reduced due to the fact that Pakistan will not actually be hosting the matches. It's a Pakistani league by name. Numbers would have been up if the matches actually took place in cities like Lahore, Karachi, Peshawar, etc.

It's an apples to oranges comparison.

Great to see you [MENTION=5985]Inswinger[/MENTION] bhai. Hope all is well


I think its just fine. We want to see a well organized PSL with good young talent. It does not have to match any other league because we don't want clones anyway. Pakistan's USP is its young talent and its passionate fans.

 

[Executioner]

I am not sure why people are complaining. The prices mentioned above are rather good.

Yes, BPL has comparatively lower bids but to keep in mind the expenditure of the BPL will be low compared to that of PSL which would mean BCB will still make significant profit. PSL will definitely generate more revenue but overall the profit margin won't be too significant.

However that is understandable because the matches are being held IN UAE which would mean PCB will have to pay extra money, their won't be exaggerated crowds as those we have seen in BPL and IPL. Most of the money will come from TV viewership.

My worry is whether teams face the same situation as BPL-1 where the franchises bid a lot for top players but the revenue generated was very poor. This year though, BPL teams have probably paid between 100k-200k for top players, and someone like Gayle to be paid 35k per match which is still an excellent amount and given the sponsorship for each team, they will generate enough revenue to pay back the players and earn profit. Oh, and also advertisement of their brand

 

[MABA]

I am not sure why people are complaining. The prices mentioned above are rather good.

Yes, BPL has comparatively lower bids but to keep in mind the expenditure of the BPL will be low compared to that of PSL which would mean BCB will still make significant profit. PSL will definitely generate more revenue but overall the profit margin won't be too significant.

However that is understandable because the matches are being held IN UAE which would mean PCB will have to pay extra money, their won't be exaggerated crowds as those we have seen in BPL and IPL. Most of the money will come from TV viewership.

My worry is whether teams face the same situation as BPL-1 where the franchises bid a lot for top players but the revenue generated was very poor. This year though, BPL teams have probably paid between 100k-200k for top players, and someone like Gayle to be paid 35k per match which is still an excellent amount and given the sponsorship for each team, they will generate enough revenue to pay back the players and earn profit. Oh, and also advertisement of their brand

There is no bid system in PSL. Its based on categories of players. For example the highest category is something like 200k and you cannot exceed that amount.

 

[Executioner]

There is no bid system in PSL. Its based on categories of players. For example the highest category is something like 200k and you cannot exceed that amount.

yes i am aware of that.

Players will get a good amount payment especially locals

 

[dandapinda]

There is no bid system in PSL. Its based on categories of players. For example the highest category is something like 200k and you cannot exceed that amount.

Pakistan currency or US $ ? I guess IPL reverted to Indian rupee now.

 

[Zak_Fan]

Pakistan currency or US $ ? I guess IPL reverted to Indian rupee now.

Can't be PKR. Even an average poster here earns more than that per month.

 

[MABA]

US dollars, even local players wont play in it for that amount LOL

 

[shortbread]

What does a team's price have to do with good quality cricket?!

IPL keeps boasting of millions this and millions that but has been forever stuck in controversies, fixing etc...etc...

Focus should be on the quality of cricket and that it gives the players the financial stability needed. If this can be done consistently from one season to the next, the teams and PSL as a whole will improve its valuation no doubt. Once everyone is convinced the situation has improved and PSL moves back home, the competition will be a gold mine.

 

[Inswinger]

Great to see you [MENTION=5985]Inswinger[/MENTION] bhai. Hope all is well


I think its just fine. We want to see a well organized PSL with good young talent. It does not have to match any other league because we don't want clones anyway. Pakistan's USP is its young talent and its passionate fans.

Thanks bro. Doing well. Hope all is wells at your end. Agree with your sentiments.

 

[Harpoon]

With the arrival of every news or development, it is necessary to do a bit analysis before reaching the conclusion. In my assessment, PSL hit by low bids by Franchises.
i.

Im not sure what you are trying to prove. But psl is off to a great start.
So please dont try to put it down my saying psl hurt or psl hit. Be happy and positive for a change.

And i know you wouldnt want to as an indian, but in the interest of truth please change the title of your post. It is inaccurate, incorrect and misleading!

 

[Ironcat]

I think PCB missed a trick here by not holding back the sale of one or two teams. If this thing is successful, you are looking at a lot of potential bidders jumping on the bandwagon to bid up the prices.

 

[Azzurri]

Im not sure what you are trying to prove. But psl is off to a great start.
So please dont try to put it down my saying psl hurt or psl hit. Be happy and positive for a change.

And i know you wouldnt want to as an indian, but in the interest of truth please change the title of your post. It is inaccurate, incorrect and misleading!

They are planning to inject a new team every successive year


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[proud_pakistani]

PSL is a much shorter tournament and is happening abroad. Can not compare with BPL and IPL.