The Indian Premier League (IPL) is one of the biggest T20 cricket leagues in the world, and its innovative business model has made it one of the most lucrative businesses in the sports industry. Here are the different revenue sources that contribute to the IPL's success:
BROADCASTING/MEDIA RIGHTS:
According to reports, the current price for each Indian Premier League (IPL) match is Rs 107.5 crore, and the deal is for 410 matches over a 5-year period. The bidding process is done through e-auction, where owners are given a secret code to bid. The initial bidding started with increments of Rs 50 lakh, and once Package A winner challenged the highest bidder of Package B, the incremental bid value increased to Rs 1 crore. The winners of the two packages have not been confirmed by any BCCI officials. Package D, which includes overseas TV and digital rights, has a base value of Rs 3 crore and is expected to have a strong contender in Zee, led by former BCCI CEO Rahul Johri.
In 2017, Star India secured the IPL media rights for the 2017-2022 cycle with a bid of Rs 16,347.50 crore, making the cost of an IPL match around Rs 55 crore. Back in 2008, the IPL media rights were acquired by Sony Pictures Network for a decade-long term, with a bidding amount of Rs 8200 crore. The global digital rights of IPL were awarded to Novi Digital in 2015 for 302.2 crore for a period of three years.
This year, the IPL was expanded from eight teams to ten teams, with Gujarat Titans and Lucknow Super Giants included from the 2022 season. Gujarat Titans won the tournament in its first season last month.
BRAND VALUE OF TEAMS:
The brand value of the IPL teams is crucial in attracting advertisements during breaks. The teams with higher brand values are willing to pay more for matches between two highly valued teams. This contributes to the revenue and popularity of individual teams. Mumbai Indians and Kolkata Knight Riders have the highest valuations.
UMPIRE AND STRATEGIC TIMEOUT PARTNERS:
The companies that sponsor umpire and strategic timeout events face no competition due to their single sponsorship nature. Paytm and CEAT pay for advertisement rights for being the official umpire and strategic timeout partners, respectively.
ORANGE AND PURPLE CAP PARTNER:
Saudi Oil Company Aramco signed a multi-year deal worth 65 Crore per annum to be the official sponsor for the Orange Cap & Purple Cap.
INDIVIDUAL TEAM PARTNERS:
Companies partner with certain IPL teams and place their logos on their uniforms. These partnerships are an important source of revenue for the teams and can also contribute to the overall popularity of the team.
Overall, the IPL business model is a complex and multifaceted system that involves multiple revenue sources. The league's success is due to its ability to attract a large audience both in India and abroad, which in turn attracts high-profile sponsors and media partners. With the league expanding and the sustained viewership numbers, the BCCI and the franchises are poised to continue to benefit from the various revenue sources available to them.
The Central Revenue Stream
IPL's central revenue stream has been the backbone of its success. Sponsorships, franchises, and broadcasting arrangements have provided revenue, with the title sponsorship being one of the most significant contributors. For instance, in 2012, Pepsi bought the IPL title for 400 Crores INR, and other sponsors such as Vodafone, Yes Bank, Star Plus, and McDowell's also became sponsors. Sony Max, Sony Six, and Times Internet purchased the broadcasting rights, but the exact amount paid remains unclear. However, it is estimated that the amount paid by these sponsors was massive. Despite this, some key sponsors, such as DLF, the title sponsors for earlier games, and Hero MotoCorp, have withdrawn.
In the central revenue stream, the IPL body keeps 40% of the revenue generated, while the franchises receive 54%, and 5% is given as prize money. This model ensures that the IPL body receives a significant portion of the revenue while the franchises have enough incentive to keep performing well.
The Decentralized Revenue Stream
In the decentralized revenue stream, franchise owners sell ad space on team uniforms and other ad material, TV displays to other firms. For instance, in 2012, Aircel, one of the leading mobile phone service providers, paid 85 Crores INR to Chennai Super Kings for a three-year deal. The Delhi Dare Devils are proudly sponsored by the Muthoot Group, whereas the Mumbai Indians had the esteemed sponsorship of Hero Honda for a period of three years.
Viability of the Revenue Model
The revenue model is robust enough, but in the end, franchises must make a profit since they have invested a lot of money. The revenue model is based on the franchise owners' ability to make profits, and it is becoming increasingly challenging to achieve this. For example, Sunrisers Hyderabad, which made its debut in IPL in 2013, has forecast a loss of 30 Crore INR. The franchise is owned by Sun TV Network, and it paid 425 Crore INR for five seasons, i.e., 85 Crore INR/season to the BCCI. In addition, players' wages added 40 Crores INR/season, making the total cost 125 Crore INR/season. Achieving profits with such a challenging schedule of about 40 days is, therefore, particularly challenging.
Other franchises, such as RCB, DC, PBKS, and MI, have also faced losses right from the first IPL matches. The problem is that the small window of about 40 days makes it difficult to spread costs over a longer period of time. However, some owners, such as GMR, Sun TV, Ambani, India Cements Ltd., and others, are big business houses with a large turnover and can absorb the expense of about 125 Crores. The fact remains, however, that franchises are not making profits.
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