IPL: A business-cricketing joint venture

The Indian Premier League (IPL) is underway and the thrills and chills of nail-biting matches, keeps us at the edge of our seats. The IPL is valued at a $6.8 Billion as of 2020, which is an incredible feat for a tournament which has just entered its 13th season recently. So, have you ever wondered, what makes IPL a money-making machine for its franchises and the BCCI?

There are two important factors to this, one off course being the monetary part, the second being the social factor which includes people’s support and crowd engagement. A league is as popular as the craze and enthusiasm of its fans. And IPL has set very high standards in terms of numbers, averaging at an incredible 32k attendance per match. With the digital platform becoming mainstream for viewership, the first match of the IPL 2020 recorded a massive 200 Million viewers.
Now for the monetary part, IPL apart from being a cricket league is a business with a very successful business model. How can we be so sure about that, you ask? What if I say, that the prize money for IPL 2020 that was halved because of the pandemic situation to Rs.10Cr, is still 3 times that of the prize money offered for winning the Big Bash League (the second most viewed cricket tournament in the world).

IPL teams earn back their money spent through multiple channels, such as sponsors, merchandising, gate revenue (the revenue generated through ticket sales). Let us go through it one by one, shall we?

Sponsorship

The first thing a team needs is sponsors, as they bare the administrative costs, such as travel, logistics and promotions. Team jerseys work out as a fruitful way to promote these sponsor brands with the front side, back side, left and right shoulder arm are individually up for grab. This allows a team to have 4 or even more than that unique sponsors that get to promote their brands for an exorbitant amount of money. Some popular sponsors include Muthoot Finance for CSK, JSW for Delhi Capitals.

Merchandising

Revenue generated through the sales of official merchandise is another source of income for the IPL teams. The merchandises include jersey replicas, sports souvenir, and flags among others. Though it is a very popular business model in countries like USA, UK and Australia. It hasn’t proved to be as rewarding in India. “Merchandising, which has not picked up as anticipated, is a huge opportunity for IPL and the franchisees to monetize the brand, and we hope to see IPL replicating the global sporting events’ success in monetizing their brands through merchandising,” Santosh N, Duff & Phelps India Managing Director, told to PTI in an interview. Pricing of the products is said to be the major factor behind such minimal response.

Gate Revenue

Money earned through the sales of tickets for matches. Each franchise plays a minimum of 7 home matches, thus making them liable to be part of the financial transaction partly with the state cricket boards.

Media Rights

One of the biggest sources of revenue for the IPL is also a major contributor to the banks of individual franchises. It is said that as a result of the record-breaking deal of Rs. 16,347 Crores between Star India and BCCI for a 5yr term, each IPL franchise is payed Rs. 35 Crores per season by the BCCI Board.

Stakes

Last, but not the least are the stakeholders. They are responsible for running the business and the smooth functioning of the IPL teams. IPL has seen many high-profile stakeholders involved in the franchises, like World’s 5th and India’s richest man Mukesh Ambani, owner of the Mumbai Indians franchise, Superstar Shahrukh Khan (SRK), joint owner of the Kolkata Knight Riders franchise. The valuation of each team affects the stake pricing and when a firm decides to sell their part of the stake, it makes a big difference in terms for finances. Recent entrant to this was the JSW (Jindal South Steel) group who purchased a 50% stake in the IPL franchise Delhi Daredevils (Now Delhi Capitals) for $77 Million from GMR. For comparison, the original cost of the entire team was $84 Million in 2008.

IPL has and will always be one of the major sources of cricket entertainment for its fans and a locus for fruitful business and franchising for the owners.