IPL (Indian Premier League) is the most expensive cricket league of all time, but from what are the different sources of the team owners?
Introduction
The Indian Premier League is on the way to bring the biggest cricket carnival. From March 22, we will be witnessing the cricket celebration of the year. This time a total of 333 players have come for the auction and Mitchell Starc became the most expensive player of all time. The Australian players have bagged the major sum of money this time.
We all know that the IPL is the second most expensive league after the USA’s NFL. but the question is how do team owners generate that much revenue?
In this blog, we are going to find answers to these questions and also briefly discuss each and every revenue generation method.
There are various ways by which the BCCI is able to make that much money to make such an event possible.
Broadcasting Rights
IPL 2024 will be broadcast on Sport Network. The BCCI (The Board Control for Cricket in India) sold broadcasting rights for a whooping sum of INR 48,390 Crore for 2023 to 2027 cycle. We have seen the split rights between Television and Digital Streaming Platform for the first time. Mukesh Ambani’s backed JioCinema won the streaming rights for INR 23,758 Crore. Disney Star won the Television rights for INR 23,575 Crore.
There are a total of 4 packages that are being auctioned:
Total revenue BCCI will earn from selling media rights: INR 48,390 Crore
BCCI will get 50% of the total amount which will be used for expenses between players, staff and state associations.
Rest of the 50% will be delivered to franchises and the 4 teams qualified for playoffs
2008: Sony bid for INR 8200 crore for 10 years
2017: Disney Star bid INR 16347 crore for TV and digital rights for 5 years
2022: Disney Star bid 23575 crore for TV rights while 23758 crore for digital rights.
The significance of TV deals in the IPL revenue model
Television has a special place when it comes to cricket because traditionally it is where everyone first sees cricket together with their family. Disney being the broadcaster of IPL will be able to bring the maximum amount of viewership on their platform boosting their revenue OR ROI.
Negotiations, contracts, and the impact on team earnings
Picture Courtesy: Times of India
In December 2022, Mukesh Ambani’s Viacom 18 bagged the deal of IPL’s digital streaming for a whooping sum of INR 23,758 Crore for 5 years. From the past decade we have seen a huge revolution in the digital streaming platforms and every other company wants their hands on it.
IPL being the biggest event from the perspective of viewership brings a lot of business in their pocket. The rise of digital platforms in cricket broadcasting allowed the people to watch the match anywhere and anytime. If we look at the last year numbers, JioCinema has around 97 million users daily. The convenience made it easy for everyone and this is why we have seen around a 300% increase in viewership year-on-year.
Sponsorship Deals
Title sponsorship is very important as it increases Brand recognition among the Target Audience. In the 2022 auction, TATA group took the title sponsorship for INR 660 Crore for IPL 2023-2024. Moreover, TATA also secured the title sponsorship for WPL (Women Premier League) till 2027. BCCI and Franchises owners share the pool amount.
The team partners with many companies to make them money and also the brand wants to make them more and more loud and visible. A total of 10 logos are allowed, 6 on T-shirts and 4 on pants (2 on each side). Teams have different and as many sponsors. for eg. Mumbai Indians had 13 sponsors, Punjab Kings had 17 sponsors and some other teams had even 18 sponsors who paid the team in millions to make their brands more presentable.
Jersey is the foremost thing that fans see the first time. Bigger logo makes the brand loud and this is why companies spend large amounts of money to make their brand more visible. Moreover the fans also buy jerseys which directly contribute to the revenue generation for the franchise. Loyal fans contribute to the maximum selling of jerseys and merchandise.
Merchandising and Licensing
Sale of different merchandise is one of the foremost revenue generation methods for the franchises. For an account merchandise market is a million dollar market which is growing at a rate of 100% every year and franchisees directly earn from it. Merchandise not just includes T-shirts but cups, shoes and many more. Each year the revenue pool of merchandise is constantly increasing making huge sums for teams earning. Having a famous player with a huge following doubles the sales for the franchise and helps them to monetize their brand.
A total of 10 logos are allowed, 6 on T-shirts and 4 on pants (2 on each side). Franchise charge as per the rate card ranging from INR 2 to 25 Crore on front. For back and headgear it cost from INR 5 to 15 Crore. This year this number might increase. In Financial Year 2021, Chennai Super Kings earned revenue of INR 254 Crore, Delhi Capitals earned INR 280 crore, Punjab Kings’ earned INR 234.93 crore as revenue and Mumbai Indians earned revenue of INR 336.25 crore.
Gate Receipts and Ticket Sales
Last year with the advent of WPL the numbers in gate revenue skyrocketed especially in the WPL’s final. This year it is going to be much more. There is a lot of buzz for watching IPL and the pool of loyal fans out there will definitely increase the total revenue. Pre-Covid franchises earned around INR 400 Crore from ticket sales.
Ticket sales account for around 10% of the total revenue generated in IPL. The home team gets a fixed share of tickets sold and all the other team owners also earn from selling tickets. Franchises have complete rights over the revenue from passes and tickets. It is probably the only area where people and franchises directly deal. So, if a team reaches finals and they have a match in their home ground so they have the maximum share over the ticket revenue.
PlayerAuctions and Transfers
The BCCI allot a limited budget for the auction for each franchise. While auctioning the players are bought by the respective franchises for the highest bid. Such auctions are common where the bidders come together and play their biggest bid. A contract is signed for 3 years and the respective player will play in the team for the next 3 consecutive years. The player will be paid the bid amount for the next three years. For eg. if a player is bought for INR 10 crore then the franchise will pay him INR 10 crore for the next 3 years total INR 30 crore.
In different scenarios, we have seen a player transferred to a different franchise and in such cases, a transfer fee is paid which is equally divided between a player and team. Different types of trades are conducted like one-way trade which is all cash deal between two franchises. Then, we have two-way trade where players are swapped and differences are paid. For eg. Hardik Pandya was transferred to Mumbai Indians then Gujarat Titans will pay INR 15 Crore to Mumbai Indians as transfer fee.
Franchise Fees and Profit-sharing
The owners of the franchise do get the share of media, tickets, gates and sponsorships. When two new franchises, Gujarat Titans and Lucknow Super Giants were introduced, it cost around US $1.6 billion.
After Gujarat Titans winning the 2022 IPL, the share value of Titans was increased. Along with this, they also earned INR 20 Crore as a prize money.
The IPL teams have multiple sources of income and all the franchises get equal share of around 45% from the media rights and other sponsors. BCCI also earns around 50% of the media rights and the remaining 5% is equally distributed among the teams that are qualified to playoffs.
Brand Endorsements and Events
Each and every team has their own exclusive sponsors and they earn their revenue from home matches. The more exposed brands are, the more revenue they earn. It also impacts the brand’s credibility. For eg. Players having a huge number of following will create a lifelong impact on the revenue of the particular brand. The team owners do leverage from such events giving huge space to their brand name especially in the front
The brands also endorse themselves via various other methods like advertise themselves on jerseys, caps, headgears and many more. This part of revenue is huge and companies put a huge sum of money to make their brand loud and more visible. Bigger the logo is Bigger the money they put in. This kind of sponsorship counts for around 25% in the total IPL revenue pool.
The home team franchise earns around 80% of the total ticket sale revenue. Moreover, fan engagement builds additional revenue which also goes in the sponsor’s pocket. Moreover, the player’s performance also generates a lot of revenue for the team.
Conclusion
The IPL is not just a cricket event but a festival which regulates a huge portion of the economy here and there. The revenue generated via various sources like Media rights, brands sponsorship, tickets sale, merchandise and many more. The BCCI and franchise distributed the whole revenue between them which builds a brand building and also helps the BCCI to conduct other events and also contribute to the Indian Cricket Scene.
If we look at numbers we will see that the IPL’s valuation has increased by 3 times from the last cycle and it will continue to grow.
So what do you think about the revenue model of the IPL?
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