Broadcasters face the music now

Published>Thu, Apr 22 10 10:48 AM

The source of funds for broadcast rights, financial transactions in last three years and the details of promoters and directors of IPL broadcasting partners - Multi Screen Media (also known as Sony Entertainment TV) and World Sports Group (WSG) - on Wednesday came under the scanner of the income tax and enforcement directorate.

IT officials and the enforcement directorate visited Mumbai offices of MSM and WSG on Wednesday as part of their investigations on IPL. The IPL broadcast partners came under the scanner after reports of 'facilitation fees' of around $80 million paid by them to IPL for the renegotiated deal surfaced. MSM holds the broadcast rights for IPL till 2017 while WSG Mauritius has the global rights for audio and visuals of IPL till 2017. BCCI had awarded a renegotiated contract to WSG-MSM in March last year for a reported sum of Rs 8,200 crore for 2009-2017 after Lalit Modi had terminated the MSM's contract over delayed payments. The matter was settled in favour of WSG-MSM combine after a brief court battle in March, 2009.

The focus of investigations, according to sources in the enforcement directorate is on WSG Mauritius office, the IT returns filed by WSG India, MSM and the details of earnings from IPL in 2008, 2009 and the current year. Also, the government agencies are trying to unearth any financial benefits or direct, indirect earnings that Modi may have received from the two broadcasting partners last year. This is significant because broadcast rights contribute over 55% earnings of franchise teams and around 40% to IPL. Senior officials said the source of funding for the telecast rights of IPL and routing of money to IPL via Mauritius will also be probed. According to industry sources, WSG Mauritius is actually paying the broadcast fees of IPL by routing it through the overseas affiliates established in Mauritius and other international tax heavens. Curiously, MSM India's majority shareholders are also based in Mauritius. The two Mauritius based Sony Picture group company-SPE Mauritius Holdings and SPE Mauritius Investments hold close to 62% in MSM India while one-third shares are held by an investment vehicle Atlas Equifin based in Mumbai. The Mauritian angle of both WSG and MSM India is what that has evoked the interest of probing government agencies, highly placed sources said. "It is but natural that most franchise owners in IPL are coming out in support of Modi. The main source of income for them is broadcast revenue," a senior official in RoC said.

According to insiders, SET Max, which paid Rs 220 crore in 2008 for IPL-1, will now be paying a little under Rs 500 crore per IPL as broadcast fees to WSG which in turn will pay the IPL. MSM is likely to pay its broadcast rights fees in four installments, two of which have already been paid. "SET Max has already raked in around 750 crore in advertising revenue for IPL-3. After its dues and operational costs, it may make a neat profit in excess of Rs 100 crore," an industry insider said requesting anonymity.

However, since 2009 broadcasting experts have put a question-mark on the size of the WSG-MSM deal. After a brief court battle, MSM managed to re-negotiate the contract by allegedly paying felicitation fees of $80 million.

Source: Web Search