Business: How well do you know IPL’s Financial Model?

The entertainment quotient of the IPL is unmatched. Cricket fans are glued to the multi-billion dollar entertainment extravaganza for nearly two months every year. This isn’t just a cricket carnival, it is a multi-million-dollar business pot. What fuels this financial powerhouse? What type of business model does it operate on?

IPL Revenues & Expenses

Let’s delve deep into where the IPL receives the money, and where the expenses lie. This involves three important IPL stages: pre-season, during the season, and post-season analysis.

Also Read: What’s the ticket price for India vs Pakistan match?

Team ownership & expenses – a complete summary

Team owners play a vital role, as they are the ones who take care of the players, coaches, and support staff. One complete season of the IPL involves massive budgets, that include travel, accommodation, practice sessions, and miscellaneous costs.

Currently, the IPL operates on a franchise model. This means massive corporates come together to buy teams and take full ownership of different cities. There are 10 teams in the IPL at the moment, and their owners are some of the biggest names in the business world.

The franchises have different revenue streams, other than jersey sponsorships. In all, there are four legal ways in which a franchise can earn revenue through the IPL.

• Central pool share: The BCCI gives away a significant portion of the revenue generated by the IPL through broadcasting rights, sponsorship deals, and others to all the 10 participating franchises, equally. In case, a franchise has performed badly in a season, the money gives adequate financial stability.
• Match-day billings: Every venue earns revenue by selling match tickets which include premium seatings and VIP experiences. The franchises also have gate-sharing agreements with stadiums, which generate income from food and beverage concessions as well.
• Sponsorships: Every team is entitled to leverage individual sponsorship deals. This helps the franchise to collaborate with brands that are searching for national or regional exposure.
• Merchandise: Fans buy team jerseys, caps, and memorabilia which becomes a source of revenue for franchises. The teams also go one step ahead and offer merchandise that includes lifestyle products.

If a franchise earns big, there are equal amounts of expenses lined up, right through the IPL. These expenses include:

• Player acquisition: Hefty amounts are paid to players bought at the auction by the franchises. In addition to this, retaining top players and adding new talent can result in a significant expense.
• Salaries: Be it the players, coaches, support staff, or even the admin staff, the franchise is liable to pay salaries to all of them, without fail.
• Operational costs: There are multiple operational costs such as travel, logistics, accommodation, training facilities, and marketing activities.

Broadcast Rights – BCCI’s golden goose

The BCCI makes a major chunk of its revenues from broadcasting rights. The Board sells the broadcast / television rights and digital platforms rights to the bidders and makes a colossal amount, which is later shared between the BCCI and the ten franchises.

Other than the rights, the BCCI also enters into a partnership agreement with the title sponsors and associate sponsors, for the IPL. These sponsorships provide maximum visibility to the sponsors right through the tournament.

IPL 2024 Sponsors

How do the sponsors make money?

Once the brands get enrolled as sponsors, with the BCCI, they gain significant brand exposure through on-ground activities, branding during matches, and logo placements on team jerseys. Thanks to the IPL’s massive viewership, this allows the sponsors to reach their target audience without any fuss.

Tata is the current title sponsor, having bagged the official rights from the BCCI, for a period of four years (2024-2028). Tata will pay the BCCI a sum of Rs 500 Crore annually. Since 2008, the IPL Title Sponsorship has changed hands five times. Do you remember all five of them?

Sponsor expenses: Fees constitute a major part of sponsors’ expenses, as they are supposed to pay a premium amount to secure the rights at the IPL, or the franchise level. Other than this the marketing campaigns and creating engaging activations also require a lot of money to be invested, to maximize the impact of their deal with the BCCI.

Merchandising – delivering fans what they want

The IPL has a passionate fan base. They can go to any length and breadth of the nation to follow their favourite teams. This love also involved buying team jerseys, caps, bats, and other memorabilia, thus generating massive revenues for the BCCI.

• The IPL and the franchises come together to sell official merchandise through licensed vendors using online and physical stores.
• The BCCI reportedly earns through the sales of fan-made merchandise, thus contributing to useful fan engagement.
• As far as expenses go, the franchises and the IPL have to bear designing, manufacturing, and licensing the official merchandise.
• Expenses related to distribution channels, marketing campaigns, and promotions.

Ticket Sales: Inside-the-stadium experience

Though cricket attendance took a hit during the Covid-19 impact in 2020, ticket sales have returned to normalcy for the past three seasons. The franchises earn revenues by selling the tickets to the fans during the IPL matches. By offering premium benefits, they can generate a higher revenue on the ticket.

When it comes to the investment part, the franchises have to pump in money to cover the costs associated with printing tickets and managing the distribution process. Also, the expenses related to managing the stadium, and giving fans the experience they are looking for.

Beyond the Boundary: The Digital Dollars

The world has gone digital, and so has the IPL way of functioning, and generating revenues. By selling virtual merchandise, exclusive content downloads, by giving access to special features within the app, the Board generates revenue. Digital advertising from various brands adds more revenue to the coffers.

How do the players make money?

The most important component of any IPL is the players who deliver performances year after year. Be it producing match-winning performances, on-field entertainment or even attracting fans, players play a key role.

Source of income: The IPL contracts offered by the franchises, salaries and bonuses are the major source of income for players – national or international. Key marquee players like MS Dhoni, Virat Kohli, Rohit Sharma and a few others also attract lucrative endorsements. Lastly, the prize money distributed by the BCCI at the end of every IPL, comes as a major source of income for the players.

Though the expenses of the players aren’t talked about much, but franchises also keep a tab on the same as well. Key players are provided with personal trainers, coaching staff and physios to help the players stay in shape, right through the season. Also, during the tournament, there are travel and accommodation expenses, taken care by the franchises for all the players, coaching staff and others.

Emerging revenue streams

Who doesn’t want more money? Even the world’s richest board – the BCCI is always on the lookout to add more money to its coffers. Some of the potential revenue streams moving into the future are:

• In-play betting: The regulation of in-play betting given subjected to legalities, can generate massive revenues for the Board.
• Metaverse & NFTs: NFTs are the new cool collectibles in the 21st century, and the BCCI can work in this regard to give fans exclusive experiences.
• International partnerships: Potential collaborations with other major T20 leagues could open new sponsorship opportunities.

The Final Verdict

The business model of the IPL is one where every element contributes to building the brand bigger and better. The financial success of the league is there for the world to see. However, by organizing the T20 league with such commitment, every passing year shows that the BCCI has made a product for the world to see and marvel at for a very long time.

The finances are expected to rise every year because such is the nature of the beast, and one can’t help it anymore. This is only growing by leaps and bounds for many years to come.