Business of Cricket – Indian Premier League

COVID-19 cases are raking up every day and yet the cricketing body, Board of Control for Cricket in India (BCCI) is organising the mega event – Indian Premier League (IPL). The league involves hundreds of star cricketers, their support staff, broadcasting teams, groundsmen, rich team owners, the staff at hotels and other facilities and above all a huge audience, and all of them are at risk if the event happens. And yet, the BCCI is conducting the league though without a live audience and at a completely different venue, still, the cricketers, staff, team owners, groundsmen, broadcasters and name anyone else, is readily compromising health and life, without a word uttered – just for the sake of cricket? Well, not really.

IPL is a business first and cricket laterand not just another business, it is such a mega-profitable business that every participant is happy to be involved in, even during such unpleasant times. General elections, fear of terrorists’ attacks, water crisis, match-fixing scandals and many other controversies and yet the IPL has happened every year, overcoming all obstacles, as if there wasn’t any. Let’s forget cricket for a while and try to understand the business of IPL and what makes it so lucrative.

About the League

The cricket league which started in 2008, after controversies surrounding the ban on Indian Cricket League (ICL) and the participating cricketers, was the mastermind of Lalit Modi who wanted to create cricket league in India similar to Football abroad. The league has a brand value of INR 475 billion according to a report by Duff & Phelps in 2019. According to a survey by KPMG Sports Advisory Group, the league contributed INR 11.5 billion to the Indian GDP and had an overall impact of INR 26.5 billion on the economy (1.2% of GDP) in 2015.

One of the most-watched sporting events around the world, the current IPL season is its thirteenth edition, once every year since 2008 and has also conducted six editions of an international league between domestic teams from various countries – the Champions League (CLT20) during the period 2008 to 2014, eventually scrapped due to poor viewership.

The Legal Structure

IPL is an event organised by the BCCI. BCCI was registered as a Society in 1928 under the Tamil Nadu Societies Registration Act. The State Cricket Associations are its members who appoint the representatives through elections, forming the board currently chaired by Saurav Ganguly. The BCCI, in turn, appoints a governing council for IPL which currently consists of six members who manage the entire event. There are no other direct employees, teams or committees who look after the IPL. It’s all about six people conducting the entire event by outsourcing the various functions to different companies.

Who benefits from the profits of IPL?

BCCI, the society of state cricket associations, is the legal owner of IPL. The surplus profits from the league are owned by the board. These profits, similar to other revenue streams of BCCI, are utilised towards upgrading and maintaining stadiums, organising domestic cricket, paying the cricketers – national as well as domestic teams, various prize money, player welfare etc. Thus, cricket is the beneficial owner of IPL.

Who are the target customers?

While most audience feels they are the customers of the IPL, the real clients of the IPL are the Sponsors. The audience is merely a rating agency – the approval ratings of the audience helps the advertisers decide where to spend their marketing budget. The league is so cash-rich because it is full of sponsorship money. Corporates looking for an opportunity to advertise themselves, through IPL sponsorships, team sponsorships, the broadcasting channels or through various other means participate in the league and are the real customers who run the entire business of the IPL.

What are the revenue streams?

Since sponsors are the customers, the league earns its revenue from selling rights.

  1. Sponsorships – Title Sponsor (Dream11, Vivo, Pepsi, DLF), Associate Sponsors (Polycab, Kamala Pasand, Asian Paints, ITC, Coco-Cola), Official Broadcaster (Star Sports, Sony Max), Official Digital Broadcaster (Hotstar), Official Partners (Altroz, Unacademy, Cred), Umpire Partners (Paytm), Official Strategic Timeout Partners (Ceat), etc. are all means through which corporates advertise themselves in the league, as their names are mentioned, announced, photographed and even talked about in the commentary (e.g. Ceat tyre strategic timeout). Over years various creative methods have evolved in the sponsorship business. The IPL earns approximately INR 700 Crore per year through these sponsorships.
  2. Broadcasting Rights – The right to record and telecast the match Live or its highlights or its official videos anywhere on the internet remains with the broadcaster. The broadcasters like Star Sports and Sony Sports pay in exorbitant sums to BCCI to acquire these rights. Star Sports currently holds the broadcasting rights for 5 years (2018-2022) by paying INR 16,347 Crore to BCCI.
  3. Franchise OwnershipFees – When the IPL started in 2008, the teams were auctioned to various corporates who bought the same for huge amounts by the bidding in the auction. Eight teams were auctioned and at the end of the bidding process, BCCI sold the teams for a total of approximately INR 3,200 Crore. However, the team price was payable over a period of ten years as Annual Fee and when team owners changed, the balance was payable by the new owners.


The Franchises

The franchises who buy IPL teams paying approximately INR 400 Crore over 10 years, also have to bear the costs of players’ fees, the support staff’s fees, the travel and stay, the advertisement of their teams and various other costs involved in the process every year. Running a team isn’t much different from running a business. Thus, the revenue sources for the team owners are important which heavily depend on the performance of the team. Besides, other factors like the home ground, popularity, fanbase, sponsors, etc also affect the revenue.

  1. Central Sponsorship Revenue – One half of the sponsorship revenue generated by the BCCI through various title sponsorship and other sponsors is shared with the team owners in equal ratio. This forms a fixed source of revenue for the teams.
  2. Broadcasting Rights –The broadcasting revenue that the BCCI earns is also sharedwith the teams. However, this share depends on the ranking of the team as the higher-ranked team gets higher viewership during the matches.
  3. Team Sponsors – The sponsorship of jerseysare a major source of revenue. Over years the number of logos on jerseys has increased as the sponsors have become creative. Official partnerships, advertisements by players and in various other various ways, the team owners generate sponsorship revenue of their own. This revenue varies from team to team based on the popularity of the team as advertisers would prefer popular teams for marketing.
  4. Ticket Sales and Ground Advertisement – The revenue generated from the sale of tickets in stadiums goes to the home team owners. Around 80% of the tickets are held by the team owners who get the proceeds of the same. Besides, a share of sponsorship revenue from the boundary lines, banners and other areas of the stadiums, also go to the home team.
  5. Stall Rentals – The food and beverages stalls that serve the spectators are given on contract basis to contracting company who sub-contracts it to others. The revenue generated from stall rentals is retained by the home team.
  6. Merchandise Sales – Teams release official T-shirts, caps, watches and various other products, ultimately bought by the fans, are also a stream of revenue for the IPL franchises.

The Broadcasters

The bidding for broadcasting rights goes to unprecedented amounts, however, in turn, the broadcasters also sign up 35-40 brands for commercials during the Live matches. They earn further revenue from advertisements during the during highlights and other shows telecasted later. With records viewership expected in 2020, Star Sports charges a whopping INR 12.5 Lakh for every 10 seconds advertisement during the Live Matches. So, every second is worth a lakh. The broadcasters also share their broadcasting rights with other broadcasters to telecast matches or highlights in other countries. While the cost of recording, telecasting and others remains same, broadcasters generate a much higher revenue during the IPL. Digital broadcasters like Hotstar also earn huge amounts from sponsorships of their own displayed during the Live telecast and also in-app advertisements of various kinds. It promotes their app and also increases their subscribers.

Event Managers

Since the only employees of IPL are the six members of the Governing council, most of the work is done by outsourcing and Event Managers are at the centre of all these. Event managers manage everything right from the auctions to the ground arrangements with their team of experts and by hiring contractors. Reliance IMG, the joint venture of UK based IMG and Reliance Industries, has been the event manager for almost a decade now. The Event Managers charge approximately INR 30-40 Crore per IPL season.

Cricketers

The auction process of the cricketers is well-known to everyone now. Players get paid according to their market demand and often end up getting paid much higher than they would have earned over the year through other forms of cricket. Many cricketers are now opting to play league cricket alone instead of international or domestic cricket. The best part is that the players get paid irrespective of whether they play a match or not – they just have to make themselves available with the team, free of injury or other commitments. It’s a fixed salary! With some good performances in the league, a player can also gain popularity and bag advertisement contracts, Support Staff

When the league is so cash-rich, and the opportunity to earn more depends heavily on performance and popularity, the support staff becomes much more important and the teams leave no stone unturned. The Mumbai Indians team for years has been known for hiring a support staff team almost equal to their cricketing squad. Other teams have followed the same and many ex-cricketers have opportunities here. The pay, just like any other aspect of IPL, is higher than what they would have earned during other days of the year.

Hotel and Facility Managers

With a league of such a stature involving star cricketers – Indian as well as foreign, rich team owners, Bollywood celebrities and many other eminent personalities, the travel companies, hoteliers and various other high-end facility providers also make a great deal of money by contracting with particular or multiple teams.

And many others

The above are only the direct participants of the IPL, some celebrities get paid for appearances, cheerleaders, media managers, marketing companies and a lot of other types of service providers who earn from the IPL. So, if money flows to you as water flows from the tap, will a businessperson turn off the tap or grab a glass? Well, you already know the answer – the IPL is happening, the show (business) must go on!

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