IPL’S Revenue Model

The Indian Premier League (IPL) is a T-20 cricket league established in 2007 by the Board of Control for Cricket in India (BCCI). The first edition of the league was held in 2008, and it has taken place every year since then. The game features ten teams representing various states across the country.

The IPL was designed to entice a whole new generation of sports fans into stadiums across the country.

Lalit Modi saw an opportunity to turn cricket into a brewing business because it was a sport that brought all Indians together. He commercialised cricket’s explosive T20 format and gave birth to an entirely new business ecosystem.?

Modi engineered the idea of the IPL after observing the rise of the National Basketball Association (NBA) in the United States and the Premier League in England.

The Ecosystem and Economy of IPL-

The Indian Premier League is more than just a money-driven sport. A team owner’s average expenditure is?around Rs 200 crores, while the prize money is only?Rs 20 crores. It doesn’t make sense, right??

Evidently, owning a franchise is more than just a game— it’s a business with many stakeholders. Administrators, franchises, broadcasting and streaming media, sponsors, and TV ads are just a few examples. Overall, the IPL is an asset to the BCCI, the most important stakeholder.

How does the BCCI earn from this asset?

BCCI makes money primarily by selling IPL media and digital rights to broadcasters and streaming platforms. Star Sports currently holds these rights, which paid Rs.?16,347 crores?for a 5-year contract, and Hotstar. They are the only ones who have the authority to televise and live-stream the game. The BCCI retains?50% of the revenue, with the remainder distributed to the franchise, i.e., the teams.

The League’s title sponsorship is the?second primary source of revenue. It grants the patron the exclusive right to have their name appear prominently before the event’s title. Recently, the Tata Group has taken over as title sponsor from Vivo.

For the next two years, it will pay?INR 335 crores per season.

Other official sponsors of the BCCI include Unacademy, dream11, Rupay, Upstox, and others. They pay the BCCI an official sponsorship fee of?INR 210 crores collectively.

Now, with this money going into the pockets of BCCI and the franchises,?how are the broadcasters earning?

The broadcasters give numerous brands and other sponsors ad space. These businesses want to use IPL viewership to increase visibility for their products or services. They pay a considerable sum of money on merchandise, stadiums, and TV commercials.

These advertisements command a high price and contribute significantly to the profits of the television network, generating?15-18 lakh rupees?per 10-second show. As a result, the broadcasters’ profits equal the total revenue generated from advertisements minus the cost of broadcasting rights.?In 2021 Star Sports?garnered Rs.?3200 crores?in advertising revenue.

Individual team sponsors, ticket sales, and prize money are also sources of revenue for the teams. The local team sponsors pay to have their logos appear on the team’s merchandise and their intellectual property rights. Ticket sales generate an average of?Rs. 4 crores?in revenue per match.

Furthermore, the winning team will receive a prize of?20 crores. Each year, these generate enormous profits for the franchise, with the BCCI receiving?20% of the profits.

IPL’s Financial Position-

According to various consulting firms such as Duff and Phelps, the estimated brand value of IPL in 2019 was?47,500 crores, which fell to?45,800 crores?in 2020 due to the coronavirus pandemic. However, its brand value increased?by 7% in 2021, and it is expected to?increase by 15%?this year.

In 2018, the IPL had the fourth-highest revenue generation (nearly?$6.3 billion)?by a top sports league. With the addition of two new teams in the 15th season, the game is expected to earn an additional?12,000 crores.?This also means that the teams’ sponsorship revenue will increase by?15-20%.

With the sponsorship prices and the franchise’s fan following increasing, the team’s brand value is also increasing. The Mumbai Indians top the list with a brand value of?$80 million,?a 13% growth?relative to the previous year. Other teams leading the list include the Chennai Super Kings and the Kolkata Knight Riders.

Star India owns the current IPL media rights worth?Rs 16000 crore.?Interestingly, this translates to a single ball costing around?24 lakh rupees.?However, if the league is able to secure a projected Rs 30-35,000 crore in broadcast rights for the 2023-27 season, its growth will be boosted even further.

Star Sports generates enormous profits through ads and sponsorships. This year, it has increased the IPL ON-AIR sponsorship?rates by 20%,?and profits are expected to exceed?Rs. 4,000 crore.

According to industry estimates, the IPL accounts for?40% of global cricket revenue and contributes significantly to the Indian economy. The league creates several employment opportunities.

The revenue generated by all stakeholders is included in their taxable income. As a result, the more they earn, the more goes to the government’s treasury, inflating our Gross Domestic Product (GDP). The 2015 season alone contributed?INR 11.5 billion?to the GDP of the Indian economy.

This capitalistic marvel is only a glimmer of the rapidly expanding Indian domestic sports industry. These Indian leagues are expected to become some of the most valuable globally over the next ten years.

Article Summary:?A successful revenue model for sports businesses like the Indian Premier League (IPL) is built on more than just ticket sales. The business must ensure that it has several additional sources of income to support itself. Over the years, the IPL tournament franchise has grown into a valuable business asset. It primarily enables other businesses to widely market and publicises their products and services. As a result, the IPL business model continues to generate a steady stream of money. Learn more about the IPL’s revenue model in this article.?

Aryan Chhajer and Arsheen Monawer?is?a B.A.(Hons.) student at Jamia Millia Islamia, Delhi, and a member of GAEE JMI, an autonomous branch of the Global Association of Economics Education in India. The views expressed are personal and do nor reflect the opinions or views of GAEE or its members.