In 2008 BCCI, Board of Control for Cricket in India, introduced a professional Twenty20 Cricket League called Indian Premier League (IPL). The league takes place usually between March and May every year where eight teams represent eight Indian states.
Initially, in 2007, Zee Entertainment Enterprises funded ICL, Indian Cricket league, but it was not recognised by BCCI. To avoid players from joining Indian Cricket league an increased prize money was introduced as a strategy to attract more players towards IPL.
On 13th September 2007, the launch of Twenty20 cricket competition called Indian Premier League was announced. In April 2008 the details were announced by Lalit Modi, BCCI vice president, in a ceremony which was held in New Delhi. Now Indian Premier League has turned out to be the world’s undoubtedly biggest cricket League where professional players from all over the world are selected into eight teams who compete in the league.
But the question which arises in most of the viewers’ mind is “Where is the money coming from to hold such extravagant events?”
Well most of you must have seen logos of sports giants like Adidas, Nike, Puma and more on the stadium boundaries and player’s jersey. Players are actually paid to wear their logo based jersey and displaying the company’s names on huge banners also gives them profit! Not just the logos but the tickets you buy to watch the game in the stadium also plays a major role in providing money to the franchise!
Let’s Look Into Depth About How These IPL Franchise Make Money:
1. Ticket Sales
If we head back to 2008 when covid-19 didn’t attack us and we were not forced to stay at home because of lockdown, the stadiums were fully occupied by the fans to cheer their idols on the cricket stadium and make it possible for them to play with more energy and passion!
You are required to enter the stadium with a ticket which allots you a seat number and the chosen section where you have to sit. Well, the allotted seat is not just for your recreation but for their earning too!
Each team plays 7 games at the home ground where the price of the ticket is determined by the team owners. A small amount goes to BCCI and sponsors while the rest goes to the teams wallet. Since each franchise is entitled to play 7 home ground matches they have the rights on the income starting from the gate tickets to the stadium passes. This is one of the mediums that the fans and franchisees are connected directly in terms of financial transactions. Usually the income because of the ticket sales increases exponentially at a high voltage when teams with highest fan following teams are performing and the stadium is booked at its extreme limit.
Sales of official merchandisers forms a significant part of the revenue for the IPL franchisees. The official merchandise includes the official Jersey replicas, sports equipment and sport souvenirs. If talking globally, the merchandising industry is at $20 billion plus but if we are talking specifically about IPL, the industry is at a beginning stage.
Merchandising can turn out to be even a bigger opportunity for IPL and several franchises to monetize their brand. IPL started recreating the Global Sporting events and the trend is expected to alter after more IPL franchises will look forward to elevate their merchandise promotion.
Since all the franchises sell their merchandise like t-shirts, caps, wristwatches, flags, bats among other items, the market is at about $30 million. In terms of growth the game merchandise market is getting bigger at an annual rate of 100%.
3. Title Sponsors
What is the title sponsor?
Well you see brand names like DLF IPL, Vivo IPL, Dream11 IPL-these are actually the title sponsors who are responsible for title name of the league and registered under the name of the sponsor.
The title sponsor of IPL from 2008 to 2012 was DLF who secured the sponsorship at a bid of rupees 200 crore for over five seasons of IPL. Later, for the subsequent five seasons, the sponsorship for brought by PepsiCo for ₹397 crore but the deal was terminated 2 years before the lapse of the contract.
The main reason for the termination of the deal was the two-season suspension of the Chennai and Rajasthan franchisees. The title sponsorship was later transferred for the remaining two seasons to Vivo, the Chinese smartphone manufacturer, for ₹200 crore. The rights were retained by the company for the next five seasons from 2018 to 2022 at a bid of ₹2199 crore which was much more expensive compared to the Barclays’ Premier league title sponsorship contract which was held between 2013 to 2016.
In 2020 several disputes were raised between India and China regarding the Chinese applications stealing the details of Indian users and hence they were pulled out from the title sponsorship for the 2020 edition. However other reasons for the pull out world market losses of Vivo due to the covid-19 situation which resulted in a lockdown for over 10 months.
Dream11 was the official title sponsor of IPL 2020 with the winning weight of ₹ 222 crore. The sponsorship was acquired by dream11 for the ongoing season in 2020. Some amount is retained by the BCCI while the rest is distributed among the teams. However recent news state that VIVO is back to sponsor IPL for the 2021 Edition!
4. Media Rights
One of the best and most important sources for IPL economy are the media rights. BCCI is responsible for selling the media rights or the broadcasting rights to channels and for some teams their revenue is 60- 70% of total revenue! BCCI excludes their share from the revenue and distributes the rest between the teams.
Sony Entertainment from IPL season 2008 to 2017 purchased the media rights which were a 820 crore INR for the season against a 8200 crore INR between the respective years. From 2018 to 2022 the media rights were acquired by Star India which were 3269 crore INR for the season against 16,347 crore INR for the 2018 to 2022 period.
If compared to the sudden increase in other expenses and the hype in the price of media, to previous seasons, the teams were profitable because prior expenses were high but revenue was low. The gigantic hype in media rights gave strength to their financial system.
5. Selling Stakes
Selling stakes at the right time brings big gains and money to the stakeholders. The IPL franchises do the same. Take an example of Delhi Daredevils, now Delhi capitals, where Jindal South West, JSW, bought a massive 50% Stake of the IPL franchise from an infrastructural company, GMR, at a hefty price of ₹550 crore. GMR Group has also expressed their wish to increase their share from 50% to 100% in the franchise.
GMR has now doubled their Investments in Delhi Daredevils and according to few rumors, Rajasthan Royals’ owners are also going by the same strategy of selling 50% of their stake in the franchise. Although such deals don’t take place very commonly but IPL has seen such methodologies bringing a heavy revenue to the franchises. Hence selling the stakes are one of the major ways for the money making process in IPL.
6. Prize Money
Winning the title of the IPL or even making it to the playoffs, IPL franchisees are able to boost their brand values which helps them to get on board that is at the prices that the owners demand. Hence price money is one of the sources of income for the franchises and the earnings are notable.
Not just past performances define the brand value but the notable players owned by the franchises play a potential role in boosting the brand value. In every season, IPL divides the prize money among the franchises where the maximum amount goes to the IPL title receiver or the winner and the rest is divided equally among the teams, apart from the prize money. The trophy and medals are also distributed among the players, be it the winner or the runner. Although price money is not the interesting source of revenue but consistent performances endure the marketing value of the team raising the demands for the sponsorship of the teams.
7. Player Trading
No team wants to lose a good player but oppositions are always ready to buy the cheap bought player at a good price based on his performance. Trading, sometimes called mid-season trading of a player, takes place between the teams which give them the permission of receiving great revenues because they can find a player at a good price who can perform for their team because he can be the reason for their defeat in the match.
Most of you must be thinking that IPL earns tons of money but the expenses of all players, coach fee, supporting staff, travelling, hotel administration and operational costs cannot be avoided and a small disruption in this area regarding the cost can affect the whole team. Major expenses also go in the advertisements which are organised by the team for audience’s attraction to get sponsorship from them. Teams like Mumbai Indians, KKR, Royal Challengers Bangalore have advertisements with their songs which most of us have heard during the IPL season and the money spending process in these advertisements might cause disruption if not taken systematically.