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Economics of IPL

Cricket is something that is pious in India. Indians never fail to boast of the Indian cricket team and wear it as the most decorated belt. After a standby of more than five months, Board of Cricket Control in India's (BCCI) most awaited spectacle, the Indian Premier League (IPL), has been charming cricket crowds over the world from the latter half of September. In a world scarred by COVID-19, the 2020 version of IPL is being played in the UAE, without the gigantic groups that typically delude the stadiums. Be that as it may, fans need not stress as they will have the option to watch their favourite teams in the UAE from the peace and comfort of their homes.

We all know with IPL, comes frenzied Indians along with a crazy IPL sentiment amongst all the cricket fans. As all the IPL teams are owned by business owners, it is imperative that they work on certain economics apart from providing leisure and fun-filled moments to the Indians. 

The concept of IPL was brought in by Lalit Modi who after watching the English Premier League (EPL) was inspired to do something on these lines in India. 10 years down the lane, IPL contributes upwards of 60% revenue to the BCCI in just a span of fewer than 2 months (53 days). The excess surplus which BCCI garners from IPL is further used for improving the game’s infrastructure and other heads. Hence, IPL has proved itself by hitting two arrows (economically and mentally) with just one concept.

We all must have wondered that the IPL prize money for the ultimate winner is just ₹200 million (which has been further downsized by another ₹100 million in 2020) but Virat Kohli was bought for ₹170 million followed by Pat Cummins who was bought for ₹155 million. The main question, how can someone spend hundreds of millions on a single player but the prize money is just ₹20 million? This article will primarily deal with the economics of IPL and talk about how an IPL team earns revenue. 

The primary source of money generation for an IPL team is its media rights. Star India paid a whopping ₹163 billion for a five-year contract with relation to media rights. Every year, Star India pays ₹32 billion to the BCCI. The broadcaster further sells the rights to different media companies geographically. The amount which the broadcaster gives to the BCCI is further distributed between the teams in a weighted average manner. The teams with higher ranking and higher viewership get a bigger chunk and vice versa. For some teams, media rights revenues account for more than 60% of their revenue. Therefore, media rights form a sizeable chunk of revenue earned by every team. 

The second most important source is sponsorship rights. The BCCI has signed a five-month sponsorship deal with gaming firm Dream11, valued at ₹2.2 billion which is half of what Vivo paid in 2019, but due to Indo-Chinese tensions, it had to back out. Other than that, Cred, Unacademy and Tata Motors were roped in for official partners which paid BCCI to the tune of ₹1.2 billion. There are a plethora of sponsors like Jio, the logo of which is seen on almost all the teams’ jerseys followed by BKT which is present on six teams’ jerseys. The mechanism for this is, all the proceeds from the sponsors get collected in a central pool, which after deducting a certain cut for the BCCI, is equally distributed amongst all the teams. A part of this money is also contributed to the prize money as well. 

Now comes brand sponsorships, which also form an integral part of a team’s revenue. Groups tie-up with associations to advance brands that pay them exorbitant amounts of money. The advancement is done in two structures, through print media, and through advertorials. We can see a plethora of colourful logos on every team’s jersey with a few of them on the track pants and even on caps. For instance: principal sponsors of one of the teams are Muthoot Group, India Cements, and Gulf Oil. These groups can ask any player of the team to advertise for them and the players have to adhere to it without any naysaying. 

Revenue generated from the sale of tickets for matches forms another major source of income for the IPL franchises. Each franchise is entitled to a minimum of 7 home matches. The ticket prices are fixed by team owners. A small portion of tickets are offered to sponsors and the BCCI, the rest goes into the team’s wallet. An IPL franchise gets to sell around 80% of the tickets for its home games while the rest is kept reserved for sponsors and BCCI. This is one of the few mediums of income where fans and franchises are directly involved in the financial transaction. This income may go through the roofs in high voltage matches when the stadium is jam-packed. Ticket revenue reportedly forms around 10% of revenue for IPL franchises.

The penultimate source among other sources is revenue generated from merchandising. There is a lot of potential which is yet to be unleashed from merchandising. All the IPL teams have their own brand value, through more penetration and adoption of the teams’ merchandising, the brand quotient can drastically increase. Lastly, the most obvious source is the prize money which has been pegged at ₹100 million this year followed by ₹60 million for the runners-up and ₹40 million for the third and fourth-placed teams. 

In the world where people have transformed from citizens to netizens, IPL 2020 saw an increase in the participation of startups instead of conventional businesses. Despite Dream11 being the lead sponsor, BCCI lost around ₹13 billion this year. During 2019 IPL, BCCI amassed revenue of ₹50 billion compared to revenue of around ₹37 billion this year. This can be related to a lot of sponsors backing out due to slow business activity resulting in the new sponsors coming at a lower price. Another factor can be no jam-packed stadiums this time. Initially what stemmed off as an idea, has now held the nerves of all the Indians and the craze doesn’t stop here, it increases with every coming IPL. 

aditya.khandelwal

Aditya Khandelwal

A happy person with the desire to enchant everyone with a smile. Pursuing Bachelors of Commerce from Hindu College. In his free time, you can find him reviewing new gadgets or cars.

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