IPL business model: Here’s how IPL team owners make money

IPL business model: Here’s how IPL team owners make money

By Sanjay Maurya

The Indian Premier League (IPL), arguably the biggest franchise-based T20 cricket tournament in the world, certainly gets bigger and grander with the addition of two new teams. IPL is the world’s largest T20 cricket league, with a perfect blend of cricket, Bollywood, and big money. Corporate India is linked to the IPL, allowing IPL owners to make millions of dollars. Winning the IPL is vital, but the franchise’s success is not only depending on it.

The IPL’s main business strategy is to invite private corporations to purchase cricket franchises. When franchises were sold at a high price, companies imagined value in investing in key components of Indian cricket. This is the source of the funds.

Example

• CVC Capital Partners (British private equity and investment advisory firm) paid around $736 million for the new franchise Gujarat titans.
• RPSG, a conglomerate owned by Sanjiv Goenka, paid around $964 million for the new Lucknow team.

Indian Premier League

Cricket league

• Most runs: Virat Kohli (6283)
• Most wickets: Lasith Malinga (170) Dwayne Bravo (170)
• Format: Twenty20
• Most successful: Mumbai Indians (5 titles)
• Founded: 2008, India
• Countries: India
• Administrator: Board of Control for Cricket in India

Teams

Defunct teams

About IPL Business Model
IPL’s strong business strategy is not just depending on ticket sales. They make big because they have many additional sources of income through which they can support themselves. The IPL tournament franchise has become a major business asset. It allows businesses to market and publicise their products and services widely. They can simply generate money and continue the IPL as a result of this.

How do IPL team owners make money?

Media Rights
The media rights that BCCI sells to broadcasters bring in a lot of money for the organisation. In 2017, Star India spent 16,347 crores to secure IPL broadcasting rights for a five-year period. This equates to about 60 crores for every IPL match. BCCI shares these media rights with all 10 teams.

Sponsorship
Sponsorship is the most important source of income for IPL franchises. If we look at any IPL team’s uniform, we can find a plethora of different brand logos. The logo on the player’s jersey and the advertisement on the boundary ropes, among other things. These brand businesses pay the teams big money to promote their brands.

Merchandising
Teams receive a considerable amount of money from merchandising. It covers the sale of jersey copies, sports memorabilia, caps, kits, and T-shirts of all teams.

Selling Stake
The IPL franchisees also profit handsomely from the sale of team shares. Delhi Capitals is a recent example. The GMR company purchased this IPL franchise for 84 million dollars in 2008. Jindal South West (JSW) purchased a 50% share in the club for 77 million dollars in 2018.

Ticket sales/gate revenue
Ticket sales revenue is one of the most important sources of income for IPL clubs. Ticket sales are anticipated to account for 15% of the total revenue generated by IPL franchises. They depend a lot on this source of income.

Ticket pricing is set by the team’s owners. Sponsors and the BCCI get a little share of the tickets, while the remainder goes into the team’s pocket.

IPL Price money
IPL prize money is another source of income for IPL franchises. Teams are awarded prize money based on their position in the points table. CSK won the VIVO IPL 2021 and received a prize of 20 crores.

Similarly, KKR was awarded 12.5 crores for finishing second. The prize money for the IPL is allocated in this manner.

Stall Rental
The stalls that feed fans during games are given on a contract basis to a third party, who then sub-contracts them. This is usually a fixed term for fixed money that each team collects on per stall per match basis.

Player Trading
Every year, at the IPL auction, a transfer window is provided for a set amount of time. Teams are allowed to exchange players with other franchises during this trade window. This means that talented players are traded for good ones with some money as compensation.

Shikhar Dhawan, for example, was one of the most high-profile players to exchange teams ahead of the IPL Auction 2019. The left-handed hitter joined the Delhi Capitals after leaving the Sunrisers Hyderabad franchise. In exchange, DC sent Vijay Shankar, Shahbaz Nadeem, and Abhishek Sharma to SRH. The exchange benefited DC because Dhawan was a standout performer for them over three seasons, whereas the three players moved away by the Capitals did not play regularly for SRH.

Brand Value
How IPL franchises make money is also influenced by the brand value of their teams. A team with a large number of star players has a high brand value. RCB’s brand image is enhanced by players like Virat Kohli, Glenn Maxwell, AB de Villiers, and others. Mumbai Indians were named the most valuable IPL team in 2020, with a brand value of 761 crores. CSK surpassed MI in terms of brand value a few days ago, becoming the first IPL team to reach a billion-dollar valuation. In comparison to other IPL teams, the team that performs better gains more brand value.

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