Moneyball: Analysing the finances of the ISL and its franchises

In 2019, the owner of Bengaluru FC, Parth Jindal, said that his club is losing upwards of INR 25 cr every season since they moved from I-League to the ISL. However, a look into the finances of the club establish them as the only ISL franchise to make pre-tax profits in each edition of the ISL. The losses are offset by the parent company JSW and this point towards a financially unsustainable league despite the rise in ISL's profile in India.

The following study was conducted by PhD scholar Sarthak Mondal and his supervisors Dr. Dan Plumley and Dr. Rob Wilson of Sheffield Hallam University, who dug deep into the finances of ISL and its member franchises to find the malaise within the league. The data for this study is between 2014/15 and 2019/20 and was collated from publicly available sources on the internet.

Professional football in India did not have the smoothest of journeys as the NFL and its successor, I-League suffered from failed marketing strategies and disputes arising from failure of player payments. To raise the profile of the game in India, the AIFF signed a 15-year agreement with IMG Reliance worth INR 700 crore, granting them rights to organise a franchise-based tournament by charging franchise fees from teams to participating in the ISL.

This points towards a US model of operation, but the caveat lies in the fact that ISL charges its member franchises a fee every season to participate and as of 2019/20, they have amassed INR 777.44 crore from franchise fees. Broadcasting money is distributed equally in the ISL, but a total of INR 538.59 crore has been paid out to franchises so far, which is a deficit of INR 238.85 crore to the clubs.

Speaking about this strategy adopted by the FSDL, the authors of the paper suggested that the policy is counter-intuitive as the objective of a league should be generating revenue for its member clubs or franchises. It is also important to note that despite every team earning a chunk of central revenue from the broadcasting rights deal of ISL with Star Network, each franchise has to pay a fee of approximately INR 12 cr as a buy-in to the league.

The franchise fee likely puts unsustainable pressure on most clubs and as evidenced in recent years, Delhi Dynamos FC have renamed themselves to Odisha FC and shifted their base from Delhi to Odisha, while FC Pune City have decided to shut down operations citing unprofitability despite making a pre-tax profit of INR 1.37 cr in 2018–2019.

On financial and sporting performance of ISL clubs

Using the Performance Analysis Model, the authors calculated holistic financial and sporting performances of the ISL clubs and found that the comparative performances of Delhi Dynamos FC (now Odisha FC), ATK FC (now defunct and replaced by ATK Mohun Bagan FC), Kerala Blasters, Mumbai City FC, FC Pune City (now defunct) and Chennaiyin FC have deteriorated over time.

Average revenue figures indicate rapid growth for the period under review. However, there are issues with cost control throughout the ISL, highlighted by the fact that average expense in all six seasons were greater than average turnover amongst the franchises in the study. In the first three editions of the ISL, none of the eight participating franchises made a pre-tax profit. Furthermore, total debt has also inflated by 212 percent (increasing from INR 26.45 cr to INR 82.43 cr), pointing towards issues with managing debt.

The Indian Super League was developed to capitalise on the growth prospects of football in India, but the results show financial problems at the franchise level that have, in some ways, restricted growth. The franchises have seen rising revenues in recent years, but they have also both struggled with cost control problems, which is not dissimilar to other professional leagues in the world such as the English Premier League or La Liga.

The relationship between financial and sporting performance over six seasons were assessed by the authors as well and they have found that the best performing clubs are Bengaluru FC and Chennaiyin FC.

These clubs have been able to maintain a good financial performance alongside good sporting performance in relation to their competitors. However, the paper finds no evidence that better financial health leads to better sporting performance. This is likely because the data scrutinised by the paper only analyses 6 seasons of data and therefore cannot make definitive conclusions.

The financial situation within the ISL does pose a significant challenge for the clubs if they are not self-sustainable with many ISL franchises reliant on their owners for financial support. Furthermore, it must be noted that apart from Jamshedpur FC (one of the two existing clubs to make a profit), none of the clubs own their stadium. A stadium is one of the few tangible assets that football teams own and the ability to own your stadium and be able to maximise revenue streams from it is an important component of the business models of football clubs.

"It would be advisable for franchises to own their stadium as they will be able to maximise revenues from it in the long run by hosting other non-sporting events in the off-season or non-match days such as birthday parties, business conferences, and music concerts. This model is adopted by various clubs in the world such as Chelsea FC, Real Madrid and Manchester United among others," Sarthak added.

The ISL also faces further challenges at governance level due to its peculiar structure and arrangements between the league, franchises, and broadcasters. From a governance perspective, these need addressing so that the game can move forward. This in turn may then make it a more attractive proposition for external commercial partners.

The market potential for Indian football remains considerable in one of the largest and most populated countries on the planet. Having a strong, elite level football league that is attractive in international markets could be the catalyst for significant growth for Indian football as a whole. As well-wishers of Indian football, we hope thesessues are resolved as the new rights starting from 2024-2025 are yet to be negotiated.

The entire research paper, titled 'The other ISL: analysing the finances of the Indian Super League (football) and its franchisees', written by Sarthak Mondal, Dan Plumley and Rob Wilson (all from Sheffield Hallam University), can be accessed here.