The Million Dollar Question : Will Indian football Ever be Profitable ?

By Jonathan De Sousa
12 years Ago

As player salaries rise, crowds dwindle,Ai??media show lack of interest and infrastructure worsens, the million dollar question on every Indian football fan’s mindAi??is whether Indian football will ever be profitable in the long run. Increased player salaries and operating cost of a team over the past ten years has seen multiple owners scratch their heads over the amount of cash being burnt in Indian football, forcing big corporates like the Anand Mahindra owned Mahindra United Football Club to shut shop in 2009 despite winning the NFL in 2005 and the Mahindra Group being an over US$ 15 billion company. Clubs like JCT Mills and Viva Kerala have too followed the Mahindra way in the last two years leaving Indian football in disarray.

The Revenue Model the World Over

Ai??In some of the major Leagues across the world, this is how some of the top European Clubs earn their revenue.

Revenue- or rather lack of it- for an Indian club

The major revenue earner for top European Clubs like Manchester United, Real Madrid and Barcelona are their sponsorships. Due to their large visibility and enormous fan base, clubs like Barcelona are able to sign multi-million dollar shirt deals like the one they have with Qatar Foundation valued at $ 43.5 million a season.

In contrast, none of the Indian clubs playing in this seasonai??i??s I-League have a shirt sponsor except for East Bengal and Mohun Bagan. United Sikkim, by virtue of selling its title sponsorship to URO will have to feature their name on the match jerseys. Most of the clubs in India owned by corporates advertise their parent company or its subsidiaries on their team shirts. None of the Indian clubs own their own stadium, making itAi??difficult for them to get a sponsor for their stadium or rent it out for revenue generation. A major share of the gate collection also goes in paying the stadium rent. For example in Goa, the Sports Authority of Goa, which owns the Nehru Stadium in Goa takes 20% of the gate collection as stadium rent. In Balewadi too, Pune FC pay a whopping amount in excess of Rs. One lakh per match to stage their home games under lights – an absolute money burner in the absence of large gate collection. Last season, the highest gate collection for a game in Goa didnai??i??t cross a lakh of rupees while the average collection for Dempoai??i??s home games was less than 50,000 rupees.

Broadcast Rights

FC Barcelona earned a staggering $ 479 Million according to Forbes, while Indian clubs earned zero revenue from broadcast rights thanks to the AIFF-IMG Reliance deal. The deal that the AIFF has with its marketing partners-IMG Reliance leaves very little scope for Indian clubs to get any revenue from the broadcast rights due to the nature of the deal. In 2010, IMG-Reliance, bought the entire marketing rights of the AIFF in a Rs. 750 crore deal for 15 years. By virtue of this, all the profits made by the AIFF go to IMG.

To set the record straight, this is what happened last season.

Thanks to its cash strapped coffers, AIFF depends totally on IMG-Reliance for funds to organize the yearly competitions like the I-League, the Federation Cup, Santosh Trophy and the age group tournaments.

IMG Reliance pays around 33-35 crores each season to the AIFF out of which the governing body for football in India uses 16-17 crore to conduct the I-League. Coca-Cola also repays the AIFF in actual expenditure for the conduct of the U-16 Coca-Cola Mir Iqbal Hussein Trophy. The rest of the 16 odd crores given by IMG is used by AIFF to conduct their other tournaments like the Federation Cup, the Santosh Trophy and is also used on the national team.

Last season, IMG-Reliance sold the television rights of the I-League to News Time Bangla and News Time Assam for an estimated 17 crore rupees and to Ten Action for an undisclosed amount. But all this revenue went to IMG Reliance thanks to the deal with AIFF. So, in effect IMG got back their investment on the I-League through the broadcast revenue while the clubs were left with nothing out of the 17 crores.

Player salaries have reached an astronomical Sum

The world over player salaries have reached an astounding figure. However in India if you compare the Return on Investment (ROI) with the operating costs of a team and its player salaries, the figure reaches unheard proportions. Football is a Rs. 140 crore a year industry in India. The average yearly budget for each team touches about 6-7 crores for smaller clubs and sometimes even 17-18 crores for the likes of East Bengal and Mohun Bagan. Out of its entire operating budget, clubs use nearly 75-80% on player salaries when the ideal amount would be around 65%. Mind-boggling amounts of money is paid to Indian players when football in India has a very less ROI. Compared with cricket, their football counterparts earn almost comparable salaries.

After Indiaai??i??s World Cup win in 2011, the Board of Control for Cricket in India (BCCI) laid down revised salary structures for its cricketers. Under the revised structure of graded payments, cricketers like Sachin Tendulkar, MS Dhoni, Zaheer Khan etc, earned retention fees or Rs. One crore a year. In addition they earned Rs. 7 lakhs per test match, Rs. 4 lakhs per one day international and Rs. 2 lakhs per T20 match. So, consider Sachin Tendulkar played all of Indiaai??i??s 11 Test matches, 26 ODIai??i??s and 6 T20 International, he would have earned Rs. 2.04 crores on match fees throughout the season, excluding the bonus, endorsements and IPL money. An Odafa Okolie will cost Mohun Bagan a staggering 3.5 crores this season. Players like Subrata Paul, Ranti Martins, Tolgay Ozbay, carlos Hernndez and Gourmangi Singh will earn as much as middle level Indian cricketers like Ashwin and Harbhajan Singh this season which is ridiculous when you compare the ROI on cricket and football.

Considering graded payments for footballers, one would get a chart as below.

Now when you consider that according to Forbes, the BCCI is in the top three of the worldai??i??s richest bodies with a revenue of Rs. 15 billion, you understand the irrational and crazy sums that footballers in India get paid. In fact according to AFC, Indian footballers get as much money as some of the A-League stars in the absence of salary caps. The high operating costs of the players and the low ROI has forced many of the Indian club owners to seriously consider their investment in Indian football.

Comparison between player salaries in MLS, A-League and I-League

Transfer Fees

When Pune FC sold Lester Fernandes to Prayag United this season for a sum of Rs. 20 lakhs it was probably the first time an Indian club earned a substantial amount of money through player transfer. The practice of transfers in India is irrelevant as most of the clubs prefer signing players on one year deals thanks to the huge sums of money the players command. State Associations like the IFA too, as exhibited in the Tolgay Ozbay saga, follow an archaic system of issuing tokens to players thus making it difficult for clubs to sign players on longer contracts.

Also there have been instances when the clubs have released contracted players but have unprofessionally recovered the transfer amount from the player instead of the club. In the absence of a proper contract system, it is very difficult to set a transfer system in place in India making it practically impossible for clubs to earn money on player transfers. In Europe, a major revenue earner for smaller clubs is through transfer of talented players who are nurtured at smaller clubs and then transferred for a huge amounts of money to bigger clubs. However this practice is not prevalent in India. The AIFF too has failed to redress the issue.

Merchandising

With most of the money being spent on player salaries, very little money is spent on off field activities like community development, fan development and Corporate Social Responsibility. In the absence of this, the popularity of clubs has failed to reach a level where substantial revenue can be earned through gate collection and merchandise. Hardly any club sell their merchandise in India and the clubs that do sell make very little money from it. Faced with tough competition from the more popular European clubs, Indian clubs find it very difficult to sell their merchandise virtually shutting down the possibility of earning revenue from the offai??i??field activities.

Currently Indian football is at the crossroads of sustainability. It is becoming increasingly difficult as one can see to invest in Indian football. A complete overhaul of the system is required, starting with the AIFF. The governing body in India needAi?? to get its act together quickly and stem the rot. A good start could be by making the I-league a separate legal entity and make the participating clubs the stakeholders of the League thereby creating a revenue model where clubs can dream on getting back something in return from their massive investment. The I-League needs to have a separate marketing arm where theAi??it can be popularized and revenue generated from it by making it commercially viable to the clubs as well as the Federation and its marketing partners. For three years now the League has been struggling with a title sponsor and under the present circumstance, even if the I-League had to get a title sponsor, the majority of the money would go to IMG-Reliance thanks to the deal with AIFF. There is an urgent need to make clubs a party to the revenue distribution and it needs to happen fast before cases like Mahindra United, JCT Mills and Viva Kerala are repeated.

The world over clubs are reeling under debt. Even top European clubs like FC Barcelona and Manchester United have enormous loans left to be repaid. However the value of the property hasnai??i??t decreased. The same cannot be said about the I-League. The Indian League as a property is slowly but surely degrading. Since being rechristened from the NFL to the I-League to make it more commercially viable, the League has gone from bad to worse failing to attract a sponsor for the past three years. The Federation Cup too has failed to get a sponsor for three years running. There are three days for the Federation Cup to kick off and still no news whether it would be broadcast on television. There are less than four weeks to go for the start of the I-League but still no sign of a broadcaster. A massive overhaul is needed to change Indian football and the faster it happens the better it will be.

Categories: COVER STORY, Editor's Pick, Indian Football
Tags: football finance I-League Indian Football

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