BUSINESS MODEL OF IPL: HOW DOES THE BCCI AND IPL TEAMS MAKE MONEY?

Introduction:

Every year, from March to May, India rings in a brand-new cricket season that is nothing short of a source of entertainment for cricket fans and non-cricket fans alike! Since, this year’s (2022’s) IPL is just about to end in a few days, what could be a better time to pen a piece on how IPL teams make money? Read on and I’m sure you’ll take away a few, very insightful and perhaps unknown facts about the IPL!

Background:

The Indian Premier League (IPL) is a professional men’s Twenty20 (T20) cricket league, that is played by ten teams constituted by players hailing from seven Indian cities. The IPL was kickstarted in the year of 2008 by the then BCCI vice president, Mr. Lalit Modi.  

The forgotten story:

Very few Indian cricket fans who enjoy watching IPL matches are aware of the fact that a year before the inception of the IPL, there was another cricket tournament in play, which went by the name of the Indian Cricket League or the ICL. The USP of ICL, you ask? Well, it was started by a privatized holding, namely Zee Entertainment Enterprises – the same organization that runs Zee News and Zee TV. The concept of ICL was very similar to today’s IPL: Teams will partake in a player’s auction wherein players will be brought in and the subsequently formed teams will thereafter play against one another. However, destiny had other plans in store for ICL when it wasn’t recognized by the BCCI or the International Cricket Council (ICC). In fact, the BCCI was so dissatisfied with players playing for the ICL that they started imposing bans on the domestic cricketers to discourage them from partaking in the ICL!

Picture credit: https://www.youtube.com/watch?v=4DhK260KYzQ

The inception of the Indian Premier League:

On 13 September 2007, the BCCI made an announcement regarding the inception of the IPL from the year after, i.e., 2008. Mr. Lalit Modi, under whose aegis the IPL was about to be started, had famously said that while formulating his brainchild, the IPL, he had taken absolutely zero inspiration from the makers of the ICL and ICL’s pattern. It should be mentioned in this context that tournaments of similar structure are quite popular in other sports like the English Premier League or the EPL – which encompass the game of football and the NBA league which encompasses the sport of Basketball. 

  

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Needless to say, due to the ban that was imposed on cricketers which discouraged them to participate in the ICL, the latter slowly lost all its shape and eventually ceased to exist. While the first-ever match of the IPL was played in April 2008, the ultimate season of the ICL was hosted during the year 2009.

Why is it necessary to know about ICL?

Keeping in mind that this piece pertains to discussing about how IPL teams make money, knowing about ICL is equally important because of the primary stakeholder in both cases. Since the IPL is governed by the BCCI – the sole governing body of cricket in the entirety of India, players, and teams are able to make quite a bit of money – compared to the governing body of the ICL, which would be Zee Entertainment Enterprises, wherein players were banned from partaking!

The revenue model of IPL: How does the BCCI rake in the money?

Picture credit: https://www.youtube.com/watch?v=4DhK260KYzQ

The main revenue generators for the BCCI are as follows:

A.     Sponsors:

There are two types of sponsors. The first kind is known as title sponsors. For example, some years back, IPL was better known as Vivo IPL. This year, it is best known as Tata IPL. The organization, whose name is written before the words, “Indian Premier League” is the title sponsor. For the years 2022 and 2023, Tata has signed a contract of title sponsorship as far as the IPL is concerned.

The revenue that is generated from the title sponsors paying the BCCI, is split 50-50, with 50% being retained by the BCCI and the remaining 50% being given to the playing teams of the IPL.

Picture credit: https://www.youtube.com/watch?v=4DhK260KYzQ

The second kind of sponsor is the official sponsor. Remember the strategic time-out that IPL teams have whilst they battle it out on the fields? Can you possibly recall a popular brand that is associated with this strategic time-out? There are, of course, no brownie points for guessing that the brand in question is CEAT of CEAT tires. The company has reportedly fished out Rs. 30 crores for holding onto the official sponsor seat. Official sponsors, in other words, are those companies who sponsor several different aspects of the game that is being played.

A.     Rights to Broadcasters:

The IPL is nothing short of a full-fledged entertainer for Indian cricket fans and needless to say, the matches that are played are broadcasted on several television channels. Which channel you ask? For 10 straight years, from 2008 to 2017, Sony had the sole right to broadcast the matches on their channel, in lieu of a hefty 8200 crore that they paid to the BCCI. Thereafter, from 2018 to 2022, Star Sports acquired the sole broadcasting rights of the IPL for a sum of Rs. 16400 crore that they paid to the BCCI. Here too, BCCI splits the revenue, keeping 50% with itself and giving the remaining 50% of the IPL teams for their costs.

 

Picture credit: https://www.youtube.com/watch?v=4DhK260KYzQ

It is no doubt that broadcasters who spend such a substantial amount of money for IPL matches to be broadcasted on their channels, do recover whatever they spend if not more. How? From advertisements of other sponsors that play in between the overs of an IPL match. If reports are to be believed, broadcasters charge almost INR 14.5 lacs for each 10-second clip of advertisement that gets advertised.

The revenue model of IPL: How do IPL teams make money?

IPL teams are owned by private organizations or individuals. After an IPL team is acquired or bought, quite a bit of money is spent on several aspects of the team. On average, an IPL team requires INR 200 crore per season, which encompasses several aspects like their training, players’ salaries, transportation costs, etc. Where from does the money come?

Team sponsors: Team sponsors are the ones who make the major part of the money available. Each cricketer has about 10 brand logos on the outfit that they wear while playing, each of these brands, thus being known as “team sponsors”.

Ticket sales: When a cricket fan reserves a ticket to an IPL match, 80% of the revenue that is generated from the sale of tickets, goes to the IPL teams. In other words, each home team gets 80% of the ticket sales revenue, every time that they play a match on their home ground. For example, if an IPL match is being played at Eden Gardens, Kolkata, 80% of the revenue that comes in from the sale of tickets will be going to the home team, that is Kolkata Knight Riders or KKR. The remaining 20% is deposited in the name of the Home State Cricket Association of each state. Each IPL team gets at least 7-8 home ground matches, per season. An average of INR 4-5 crores is raked in from each home ground match, as far as ticket sales are concerned.

IPL Merchandise: I’m sure, all of the IPL fans amongst you, have stepped out at least once or twice to purchase merchandise that displays your favorite IPL teams’ logos. Have you ever wondered where your money goes? It goes to the IPL teams!

The winner and the runner-ups: The winner of each IPL season is entitled to a handsome sum of INR 20 crores, whereas the runner-up of the season is also entitled to a sum of INR 13 crores. Barring these two teams who battle it out against one another in the finals, the losing team of Qualifier 2 is entitled to INR 7 crores while the losing team of the eliminator is entitled to INR 6.5 crores. It should be noted in this context that this prize money is also split 50-50, with 50% being given to the IPL team players themselves and the remaining 50% being given to the IPL team owners.

Conclusion: What is the motivation behind IPL team owners wanting to win the tournament each season?

If you’re thinking that the prize money sum of INR 20 crores is the sole motivating factor behind IPL team owners striving to push their respective teams towards a win, well, you’re only partially correct. Think about the cascading effect that an IPL team can cause in the business world if it wins a season. Here’s a flowchart that can help you figure out what happens thereafter:

IPL season winner: Let’s take RCB.

 

The winning team will definitely get prize money of INR 20 crores.

 

Owing to the brand value that the winning team creates, along with the brand value of the team’s captain: Virat Kohli, the team lands several advertising and promo shoots, especially during the next IPL season, from where they earn even more money.

 

Spectators like you and I, push our limits to procure tickets to matches that are played by one-time or two-time defending champions, which increases the revenue that is generated from the sale of their tickets.

 

When there’s positive feedback from the audience, there’s a subsequent chance of increased viewership. This can result in an increased number of sponsors, for that IPL team. These sponsors will be more likely and willing to extend lucrative financial offers to the owners – which brings in more revenue for the team.

Thus, it may be safely concluded by stating that in a match format similar to that of IPLs, the brand value of a team or a player is definitely more important than the prize money.  

The next time you go to a stadium for an IPL match or invite a couple of friends over to watch an IPL match together at home, do keep in mind this article and probably ask yourself this question:

Who is the real winner?

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Written by: Sneha Das; Batch 2021-2023