The thirteenth edition of the Indian Premium League has commenced and so has the cricket frenzy and the trilling action-drama on the field. The Twenty20 Cricket league allows the best cricket players around the world are gives a chance to represent their talent. The major business plan of the IPL is to invite private companies to buy cricket franchises.
The franchise is sold at a large price so corporate will be attracted to invest in various other major components of IPL. When it comes to the Indian Premium League auctions, teams spend crore of rupees just to get the desired players. With the kind of money involved in the league, it is hard to ignore the financial aspect of the game. In the terms valuation, the league was worth ₹475 billion and $6.7 billion according to Duff and Phelps.
According to BCCI the 2015 IPL season contributed ₹11. Billion to the GDP of the Indian Economy. The viewership of IPL in 2019 was a record of 31% to 219 million and has only increased this year because the Dream 11 IPL is now being played behind the door due the Covid Pandemic. However IPL is as much about business as it is about cricket, Glitz and Showbiz. Here are 6 way the IPL franchises make money.
The official media sponsor of the IPL for the last decade was Sony India, vivo and now Dream 11. IPL is known for its revenue distribution model. The BCCI gets a substantial amount from broadcaster and online streamers. On the basis of IPL team ranking, this amount is distributed among all IPL teams after deducting their fees.
Media rights are another way of earning for IPL franchises. In fact they are IPL brand biggest financial contributors. Then the Star India broke the bank in 2017 to buy IPL broadcasting rights for a massive ₹16,347 crores. Each match of the IPL made ₹54.5 crores, while the latest bid in BCCI media rights auction stands at ₹60.32 billion which amounts to ₹591 million per match.
The IPL media rights sold for Rs 163.5 billion across 300 matches amounting to Rs 545 million per match. The broadcasters can afford such exorbitant prices because of the advertising and viewership revenues. Even though the 2017 deal was between Star India and BCCI it is rumored that board pays IPL franchises as much as ₹35 crores per season.
At the end of the league the team with high ranks gets the larger share of media revenue. Media rights account for 60 to 70 percent of the total earning of the IPL team and through which IPL team members earn money. Besides that, the IPL franchises also make money from broadcasting special shows such as KKR’s Knight Club.
Ticket Sales/Gate Revenue
The revenue generated from the sale of tickets for matches forms another major source of income for the IPL franchises. Each franchises is entitled to a minimum of 7 home matches which gives them a fair opportunity to generate money. The ticket revenue share in the IPL team revenue is around 10%. The home team gets a fixed share of the total tickets sales and all IPL team owners earn money through the sale of tickets.
The franchises then have complete right on the income from gate tickets and passes. Just like any other major sports event, the IPL teams also depend largely on their fans for revenue. It is one of the most watched leagues across the world with full houses on most occasions. This is one of the few mediums of income where fans and franchises are directly involved in the financial transaction.
The revenue received from sales of official merchandises also forms a significant part of income for IPL teams. The merchandises include official jersey replicas, sports souvenirs and sports equipment among others things. Merchandising is a huge opportunity for IPL and the franchisees to monetize their brand and IPL has started replicating the global sporting events.
This trend is expected to change with more IPL franchises now moving towards elevated merchandise promotion. The game merchandise market in India is growing at an annual rate of 100 percent. This market is about 30 million dollars. Every franchisees sells its merchandise, this includes T-shirts, caps, bats, wristwatches and other items.
The IPL franchises can make big gains by just selling stakes at just the right time. For example Delhi capitals formerly known as Delhi Daredevils case for instance. Jindal South West brought 50% stake of the IPL franchise for a hefty price of ₹550 crore from GMR. The group has expressed their desire to increase their hare in the franchise from 50 to 100%.
So within a decade, GMR almost doubled their investment in the franchise. Recently there were intense rumors that the owners of Rajasthan Royals wanted to go by the same route and sell 50% of their stakes in the franchise. Although such big deals don’t happen deals every day, selling staked is surely one of the major routes of making money for IPL franchises.
From players bat to the bails on the stamps everything within the stadium has a price tag. The sponsors are the real source of income in the Indian Premium League. All the teams of IPL have sponsors for everything, there are main sponsor, a jersey sponsor and even a sleeve sponsor which are the main source of income. The team’s tie-up with organizations to promote brands in return of the exorbitant amount of money.
The promotion is done in two forms, through print media, and through advertorials. The player’s jerseys are valuable marketing tool. Which is why an IPL outfit has an average of 10 brand logos, 6 on the jerseys, 2 on the pants and another couple on the cap. Moreover, the franchises also create ad content for promotion of the brands products.
While the brands that cannot make on the jerseys are still promoted through the teams social media handles as well as through package design. For example, CSK has tied up with at least 18 brands, with the Muthoot /9.5Group being the title sponsor.
Prize Money is obviously one of the main sources of income for the franchise. The winning team of the tournament get the largest share of the price money which would be divided to the team owner and the players. In the year of 2019, the winners got 25 crores, the runner up got 12.5 crore, the third place in the playoffs was 10.5 crores, the fourth place in the playoffs got 8.5 crores.
Brand value adds a lot for the team, if you have star players like Virat Kohli and MS Dhoni or even AB de Villiers in your team you have better chance of attracting the brands and investors. Winning IPL or even making it to the Playoffs helps IPL franchises to boost their brand values. This, in turn, helps in easily get brands on board – at prices that the owners demand. Note that MI, CSK, and KKR, all of whom have won IPL more than once, top the Brand value.
So the clout that teams like CSK and MI enjoy during negotiations with brands may not necessarily be experienced by DC and KXIP. However, it is important to know that Brand Value is not only affected by a team’s past performances. Bollywood stars like Shah Rukh Khan and Preity Zinta also add a lot in that aspect along with business leaders like Keshav Bansal and Neeta Ambani.