How do IPL teams make money? – Demystifying the IPL Business Model
How do IPL teams make money? – Demystifying the IPL Business Model
Ownership Eligibility: The Board of Control for Cricket in India (BCCI) invites eligible companies to purchase IPL teams. The companies must meet certain criteria, including a minimum valuation (earning power) of around 3,000 crores.
Invitation to Tender (ITT): Interested companies need to apply for the ITT, which is a non-refundable fee of 10 lakhs Rs plus GST. The BCCI sets the terms and conditions for the ITT, and interested parties must email their request to the designated email address provided by the BCCI.
Shortlisting and Bidding Process: After receiving the ITT, the BCCI shortlists the eligible companies to participate in the bidding process. The bidding process involves a base price, which is usually between 1700 to 1900 crores. Bidders compete through a bidding process, and the highest bidder secures the ownership rights of the team.
Player Selection: Once a team is acquired, the owners need to build their team by selecting players. Players register themselves into three categories: capped players (those who have played for the Indian national team), foreign players, and uncapped players. State associations recommend players to be included in the player pool. The team owners participate in bidding for players based on their base prices. The teams must adhere to certain restrictions, such as the minimum and maximum number of players and foreign player limits.
Revenue Streams: IPL teams earn money through various revenue streams, including broadcasting rights, title sponsorship, ticket sales, merchandise sales, brand endorsements, and prize money. Broadcasting rights involve selling exclusive rights to telecast IPL matches to a particular channel or platform. Title sponsorship refers to companies paying a significant amount to associate their brand with the IPL tournament. Ticket sales generate revenue from selling tickets for matches held at different venues. Merchandise sales involve selling team-related merchandise to fans. Teams also earn money through brand endorsements and advertisements featuring their players.
Revenue Sharing: The revenue generated by the IPL is shared between BCCI and the teams. The exact percentage split may vary, but typically 50% of the broadcasting rights revenue goes to BCCI, and the remaining 50% is divided among the teams. The winning team receives a prize money of 20 crores, and the runner-up receives 12.5 crores.
It's worth mentioning that the revenue distribution model has evolved over the years. Initially, the BCCI used to keep a larger share of the revenue generated, but as the league grew in popularity, the teams demanded a larger share. Currently, 60% of the revenue goes to the BCCI, while the remaining 40% is divided among the teams.
In addition to the revenue sources mentioned earlier, IPL teams also benefit from the prize money distributed by the league. The winning team receives a significant cash prize, and the other top-performing teams also receive monetary rewards. This prize money provides an additional boost to the team's finances.
Another aspect that contributes to the financial sustainability of IPL teams is the revenue-sharing model implemented by the league. As mentioned earlier, 40% of the total revenue generated by the IPL is distributed among the teams. This revenue-sharing mechanism ensures that even the teams that may not perform as well on the field still receive a portion of the overall revenue, helping them sustain their operations.
It's important to note that while IPL teams can generate substantial revenue, they also incur significant expenses. These expenses include player salaries, coaching staff, travel, accommodation, training facilities, marketing and promotion, administration, and other operational costs. Managing these expenses effectively is crucial for the financial health of the team.
In recent years, IPL teams have also explored additional revenue streams to further strengthen their financial sustainability. For example, teams have ventured into merchandising and licensing deals, allowing them to generate income from the sale of team merchandise, such as jerseys, caps, and other memorabilia. These merchandising efforts capitalize on the popularity and fan following of the teams, providing an additional source of revenue.
Moreover, IPL teams have been proactive in leveraging digital platforms and social media to engage with fans and attract sponsors. They invest in creating engaging content, interacting with fans on social media platforms, and partnering with brands for promotional campaigns. These activities not only help teams connect with their fan base but also attract sponsors who are looking to reach a wide audience.
Sponsorships play a crucial role in the financial sustainability of IPL teams. Companies across various industries, including consumer goods, telecommunications, automotive, and financial services, vie for sponsorship deals with IPL teams to enhance their brand visibility and connect with millions of viewers. These sponsorship deals provide a significant source of revenue for the teams and help offset their expenses.
It's important to note that while the revenue streams mentioned so far contribute to the financial sustainability of IPL teams, the actual financial performance of each team may vary based on factors such as their on-field success, popularity, and management strategies. Teams that consistently perform well and have a large and loyal fan base are likely to attract more revenue-generating opportunities and secure lucrative sponsorships.
The second thing is that the success of the team attracts more fans, which leads to higher ticket sales, merchandise sales, and increased viewership. More fans mean more engagement, and that translates into higher revenue for the team.
Additionally, IPL teams also generate income through various sponsorships and endorsements. They collaborate with brands for jersey sponsorships, stadium branding, and advertising during matches. These sponsorships contribute a significant amount to the team's revenue.
Furthermore, team owners often have their own businesses and brands, which they promote through the IPL. They leverage the popularity and reach of the league to increase brand visibility and generate additional income.
