India’s cricket festival IPL is back with a bang. This time there are 10 teams instead of 8 IPL teams. Yes, the two new teams, Lucknow Super Giants and Gujarat Titans have been introduced in the IPL after RPSG Group & CVC capital collectively bid 12000 crores for their respective franchise. To know this, you need to understand the IPL business model.
Have you ever wondered how IPL teams earn money when the prize money of winning the IPL trophy is roughly around 20 crores whereas a team is bought for a minimum of 1700-1900 crores as per BCCI’s policy? How do the IPL teams keep track of their revenues? Do they use tools like invoice generator and specification revenue tools to keep track of their expenses and profits? Readout further to find the answer and know the IPL business model.
IPL Business Model –
The revenue earned by IPL teams & BCCI can be categorized into three-
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Central Revenue (70%)
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Ad & Promotional Revenue (20%)
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Local Revenue (10%)
Now, let’s understand each revenue concept thoroughly-
1) Central Revenue
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Broadcast Rights
If you are a curious person and tried to find out the reason why IPL was telecasted on Sony from 2008-2016 whereas right now it is been broadcasted on Star network(2017-2022). The uncomplicated answer is that when IPL began Sony bought the media rights for whopping 8200 crores and the agreement was then bought by Star for more than16000 crores for 5 years.
This amount is distributed between BCCI and IPL franchises in a certain ratio which currently stands at 50-50%. In other words, 16000 crores will be distributed as 8000 to BCCI and the rest 8000 will be divided among the IPL team in equal share over the 5 years.
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Title Sponsorship
DLF IPL, Pepsi IPL, Vivo IPL, Dream11 IPL and TATA IPL are the names associated with IPL over time. These brands pay a hefty amount merely for their names to be prefixed with IPL. Currently, TATA is the title sponsor for IPL. Similar to media rights, even this money is distributed among BCCI and IPL franchises.
2) Ad & Promotional Revenue
IPL is the highest viewership event in India. Imagine a billion population turning on to different platforms OTT & TV for a cricket match. If you have noticed then there are ads at the end of every over that last for merely 10 seconds and different brands want to grab the attention of such viewership and thus are ready to pay heft amount.
Star network approximately charges 12.5 lakhs for a 10-second ad. Although, the amount is not so big but imagine the number of ads shown in a match, and this viewership is retained for long 40-50days.
3) Local Revenue
Why is there a concept of home matches and away matches for a team? Not solely because of the home ground advantage but also for the amount through match tickets sale belongs to the home team. Suppose Mumbai Indians & Delhi Capitals are playing in Mumbai, then Mumbai Indians owners have the right to decide the price of tickets as the revenue generated through ticket sales will form their revenue. Almost 80% share belongs to the home team.
Further add food & beverages sale, team jersey, cap, various merchandise of a team. All these form a minor chunk of revenue for the team.
Moreover, the brand endorsement or tie-up with a particular brand to a team also adds to revenue for the owners. Mumbai Indians have SLICE printed on their jersey which means Mumbai Indians are in a way providing recognition to SLICE for which the company pays an amount to the team owners. According to recent reports, Mumbai Indians and Chennai Super Kings have more than 100 crores+ brand valuations through different endorsements.
Last but not the least, the prize money of IPL also belongs to the team owners. Although, the amount is not substantial in comparison to other revenue streams still it is revenue for the team. To illustrate this, Chennai Super Kings won the 2021 IPL trophy which had a prize amount of around 20 crores. This amount belonged to team owners and not team players.
We hope we have covered all your queries and explained to you the IPL business model in the simplest possible way.
Also, read about the new sensation in IPL Ayush Badoni.