Reality Check : PSL hurt by low bids in franchise sale

[cricketerB94]

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).

Cricinfo says: The value of the broadcasting deal is $15 million, with the PCB selling the production rights to Sunset + Vine. The PCB itself will bear all costs. Global television rights have been given to Tech Front, a UAE-based media rights acquisition company. The sponsorship deal, including the title sponsorship, is estimated to be more than $6 million.
Don't know the above mentioned broadcasting deal is for one year or how many years.

 

[cricketjoshila]

Cricinfo says: The value of the broadcasting deal is $15 million, with the PCB selling the production rights to Sunset + Vine. The PCB itself will bear all costs. Global television rights have been given to Tech Front, a UAE-based media rights acquisition company. The sponsorship deal, including the title sponsorship, is estimated to be more than $6 million.
Don't know the above mentioned broadcasting deal is for one year or how many years.

Its 15mn and 6mn for 3 year period i believe as this article says all deals are tied for 3 years.

http://www.khaleejtimes.com/sport/cricket/five-pakistan-super-league-franchises-sold-for-93-million

 

[Anfield]

Cricinfo says: The value of the broadcasting deal is $15 million, with the PCB selling the production rights to Sunset + Vine. The PCB itself will bear all costs. Global television rights have been given to Tech Front, a UAE-based media rights acquisition company. The sponsorship deal, including the title sponsorship, is estimated to be more than $6 million.
Don't know the above mentioned broadcasting deal is for one year or how many years.

Global tv rights were sold to a UAE based company called Tech Front. Wonder how much did they pay.

 

[Ironcat]

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.

Private/Early-stage investing is rarely done using CAPM-based discount rates. Theoretically, yes, but in practice, no. (CAPM assumes a fully diversified portfolio, but a concentrated, alpha-driven investor would never sign up for one.) Most VCs are given a minimum IRR from their LPs, who would still take into account the industry beta - among other things - but that does render CAPM on its own only academic.

That being said, this is sports investing.

1. The asset (= the team) is considered a trophy asset, whose ownership comes with bragging rights. Just like owning a mansion in the Hamptons, a piece of Francis Bacon's art, a 30-year-old Ferrari, etc. Very difficult to value using traditional DCF. Almost your entire return is going to come from the terminal value.

2. Most of the buyers are likely looking to use this asset as a cross-selling marketing channel. If ARY owns a team, it owns the marketing around that team - think logos on the kit, player endorsements, exclusive player interviews on ARY, etc.

 

[tahir_dj]

If we calculate
Pcb should get
9.3mil per year from franchises for 10 years

5 mil per year from tv rights for 3 years after 3rd year the tv rights are sure to go up significantly.

2mil per year from title sponsorship

+ 50% from ticket sales.

And i am sure there are still other rights to be sold

Pcb is set to earn at least 10million per year after all the expenditures.

These are rough estimates it could be abit more or abit less.

But st the end of the day I really hope at least 50 % is filtered down to domestic players who wont be able to make it to PSL bandwagon

 

[cricketjoshila]

If we calculate
Pcb should get
9.3mil per year from franchises for 10 years

5 mil per year from tv rights for 3 years after 3rd year the tv rights are sure to go up significantly.

2mil per year from title sponsorship

+ 50% from ticket sales.

And i am sure there are still other rights to be sold

Pcb is set to earn at least 10million per year after all the expenditures.

These are rough estimates it could be abit more or abit less.

But st the end of the day I really hope at least 50 % is filtered down to domestic players who wont be able to make it to PSL bandwagon

Wont the franchisees get 80% of the sponsorship revenues?

 

[tahir_dj]

Wont the franchisees get 80% of the sponsorship revenues?

That sponsorship is most likely what other company will sponsor the franchises to put their logos on the shirt and stuff

I am sure these are different to those

 

[cricketjoshila]

That sponsorship is most likely what other company will sponsor the franchises to put their logos on the shirt and stuff

I am sure these are different to those

No.I remember that PCB will share 80% of the sponsorship revenues with franchisees.IPL does the same.

 

[kamz]

Private/Early-stage investing is rarely done using CAPM-based discount rates. Theoretically, yes, but in practice, no. (CAPM assumes a fully diversified portfolio, but a concentrated, alpha-driven investor would never sign up for one.) Most VCs are given a minimum IRR from their LPs, who would still take into account the industry beta - among other things - but that does render CAPM on its own only academic.

That being said, this is sports investing.

1. The asset (= the team) is considered a trophy asset, whose ownership comes with bragging rights. Just like owning a mansion in the Hamptons, a piece of Francis Bacon's art, a 30-year-old Ferrari, etc. Very difficult to value using traditional DCF. Almost your entire return is going to come from the terminal value.

2. Most of the buyers are likely looking to use this asset as a cross-selling marketing channel. If ARY owns a team, it owns the marketing around that team - think logos on the kit, player endorsements, exclusive player interviews on ARY, etc.

completely agree with you. I wouldnt use a DCF model. If I would be ARY then I would be using DCF and terminal value, given they are trade buyers not me

For me comparable companies, transactions plus a detailed LBO model would work.

But given, the chap I was speaking to, was trying to use a discount rate and thats where the conversation started

However, the key point here is, that you dont own the asset in principle. you are paying a franchise fee for a period of ten years and then the asset is either transferred over or you can sign up a new agreement for another ten years (in essence it is a long term lease).

Had it been that you pay franchise fees for 10 years - then effectively you own the asset, you could have treated the franchise fee as a senior debt or even a unitranche with a bulletised payment at the end of the term.

Was part of the bidding process, so will hopefully share my experience of the process, with the PCB, the players, the launch etc for all of you

PS: do note that I did sign an NDA, so wont be able to share the intricate details, but will give you a fair bit of idea

 

[Big Mac]

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

Not an economics graduate but is it because some Pakistanis have an inflated sense of self-worth?

 

[Ironcat]

completely agree with you. I wouldnt use a DCF model. If I would be ARY then I would be using DCF and terminal value, given they are trade buyers not me

For me comparable companies, transactions plus a detailed LBO model would work.

But given, the chap I was speaking to, was trying to use a discount rate and thats where the conversation started

However, the key point here is, that you dont own the asset in principle. you are paying a franchise fee for a period of ten years and then the asset is either transferred over or you can sign up a new agreement for another ten years (in essence it is a long term lease).

Had it been that you pay franchise fees for 10 years - then effectively you own the asset, you could have treated the franchise fee as a senior debt or even a unitranche with a bulletised payment at the end of the term.

Was part of the bidding process, so will hopefully share my experience of the process, with the PCB, the players, the launch etc for all of you

PS: do note that I did sign an NDA, so wont be able to share the intricate details, but will give you a fair bit of idea

You just need to VPN out of your computer and you can then eat those NDAs for lunch.

Kidding aside, surprised to hear any leverage was used here given the lack of meaningful free cash flows.

Agreed on the franchise license. I was referring to the more general sports investing - such as in North America - where teams are bought and sold and not quite franchised. But the bragging rights remain. Once your net worth gets above $100MM, you can only splurge it on buying another business or one of these trophy assets.

Any negotiation around the nitty gritties, or was PCB in a take-it-or-leave-it mode? For example, how many international players per team, which grounds, length of the tournament, etc.

 

[saeed5646]

I wish that was 7 year contract with franchises. Some of them deserves axing for their unprofessional behaviour

 

[Savak]

Apparently two franchises want to do away with the Franchises now. I haven't seen the Lahore Qalandars chearleader and Islamabad United owners actively participate in the PSL in the last two seasons