The Economics of IPL

IPL is going on in full swing as eight teams are battling it out to win the tournament. A large amount of revenue is being generated by the league, so let us decode the business model of IPL that will help us to understand how this league mints money.

BCCI's Profit Making Strategy-

The primary source of revenue for the BCCI is media rights. Who-so-ever wants to telecast IPL on their platform has to pay a certain amount to BCCI for media rights. This solely accounts for around 60-70% of the total revenue. From 2008-2017, Sony Entertainment bought the media rights for IPL for about 800 crores/year. Star India has acquired current media rights (i.e., from 2018-2022) for 3270 crores/year. Some portion of this amount is shared with the teams, and BCCI itself keeps some. The pace with which the popularity of IPL is increasing day by day; the days are near where the media rights could be sold for 5000 crores/year.

Ways Through Which IPL Teams Make Money-

The teams make money in 5 ways :

• Brand Sponsorships- IPL teams generate a large percentage of their revenue through brand sponsorship. Franchises partner with brands and offer them visibility by endorsing their logos on their kits. The more visibility the sponsors want, the more money they spend. Sponsorship revenues form around 20-30 percent of revenue for the IPL teams.
• Ticket Sales-??IPL franchises also get a share of ticket sales if they are the home team for a particular match. Team owners fix the ticket price. The BCCI and sponsors also get a share of this revenue stream. Around 10 percent of the revenue for IPL teams comes from ticket sales.
• Merchandise Sales-?Teams sell their merchandise in the market. The profit obtained directly goes to the teams.
• Player Trading-?If a team buys a Player A for an amount of 10 crores and they sell it in the next season for 15 crores, the difference of 5 crores is the profit which the team makes from trading of players.
• Prize Money-??If a team wins the title, they get prize money of around 20 crores.?Surprisingly, this accounts for the least revenue IPL generates.

The IPL teams also have to incur expenses in support staff salary, flight and hotel bookings, advertisement. Also, 20% of the revenue is shared with BCCI, thus making BCCI the biggest benefiter from this league.

How Does IPL Benefit Business Men like Mukesh Ambani and Vijay Mallya?

These businessmen are investing their money, time, and energy in IPL for a reason, and the reason is not the prize money.

The main reason is?Marketing. Promoting liquor directly is prohibited in India; therefore, Vijay Mallya cunningly used the team's name(Royal Challengers) to promote its liquor. Similarly, Ambani's are extensively promoting JIO with the help of IPL.

Due to IPL, there has been a rise in Job Opportunities, Tourism, etc. Therefore it is also contributing in country's GDP.

The net worth of IPL had crossed $6 Billion in 2019, and the craze with which IPL is going on, it could go even higher in future.