IPL 2019: How Exactly do IPL Franchises Make Money?

The twelfth season of the Indian Premier League is currently underway and the country is once again smeared in cricket frenzy. In terms of valuation, the league was worth $6.3 billion last year according to Duff & Phelps. After over a decade of being in showbiz, IPL is bigger and better than ever. This year, the viewership has also increased by a record 31% to 219 million as compared to 2018. However, IPL is as much about business as it is about cricket, glitz, and showbiz. We often wonder how the IPL franchises manage to spend crores of money on players in auctions when ultimately, the prize money is only around ₹ 20 crores (the cash that CSK pocketed after their 2018 triumph).

However, winning leagues is only one of the ways in which the teams make moolahs.

Here are the top 6 ways in which the IPL franchises make money:

Selling Stake

The IPL franchises can make big gains by selling stakes at just the right time. Take the Delhi Capitals’ (formerly known as Delhi Daredevils) case for instance. Jindal South West (JSW Group) brought a 50% stake in the IPL franchise for a hefty price of ₹ 550 crores ($77 million) from GMR.

That was a huge deal for GMR, who had originally bought the team for a little more than the figure JSW paid – $ 84 million. Recently, the group also expressed their desire to increase their share in the franchise from 50 to 100%.

Whoa…. JSW Group (owners of FC Bengaluru), who were long linked with buying out RCB, have instead bought a 50 percent stake in Delhi Daredevils (subject to BCCI approval). #IPL

— Chetan Narula (@chetannarula) March 9, 2018

So within a decade, GMR almost doubled their investment in the IPL franchise. Recently, there were intense rumors that the owners of Rajasthan Royals wanted to go by the same route and sell 50% of their stakes in the franchise. Although such big deals don’t happen every day, selling stakes is surely one of the major routes of making money for IPL franchises.

Merchandising

The revenues from sales of official merchandises also form a significant part of income for IPL teams. The merchandises include official jersey replicas, sports souvenir, and sports equipment among others. However, the industry is still in its nascent stage and has a huge potential. “Merchandising, which has not picked up as anticipated, is a huge opportunity for IPL and the franchisees to monetize the brand, and we hope to see IPL replicating the global sporting events’ success in monetizing their brands through merchandising,” Santosh N, Duff & Phelps India Managing Director, told to PTI in an interview. Nonetheless, this trend is expected to change with more IPL franchises now moving towards elevated merchandise promotion.

Prize Money

Prize Money is obviously one of the main sources of income for the franchises, although the earnings are significant. Last year’s champions, Chennai Super Kings, pocketed ₹ 20 crores in prize money. That is meager considering one of the league’s richest players, Virat Kohli makes ₹ 17 crores.

But then a logical question follows – why do IPL franchises stress on winning the title so much when the earnings are not as encouraging?

Simple – Brand Value. Winning IPL or even making it to the Playoffs helps IPL franchises to boost their brand values. This, in turn, helps in easily get brands on board – at prices that the owners demand.

Here is the IPL franchise valuation summary for the year 2018 by finance advisory firm Duff and Phelps. Note that MI, CSK, and KKR, all of whom have won IPL more than once, top the Brand value list.

So the clout that teams like CSK and MI enjoy during negotiations with brands may not necessarily be experienced by DC and KXIP. However, it is important to know that Brand  Value is not only affected by a team’s past performances. Other factors like marquee players that a franchise owns (RCB rank joint third due to the presence of Virat Kohli among others), or their potential is also important in boosting brand value.

Media Rights

Media Rights are another way of earning for IPL franchises. In fact, they are IPL brand’s biggest financial contributors. Star India broke the bank in 2017 to buy IPL’s broadcasting rights for a massive ₹ 16, 347 crores. That makes for almost ₹ 54.5 crores per match. The broadcasters can afford such exorbitant prices because of the advertising and viewership revenues.

Even though the 2017 deal was between Star India and BCCI, it is rumored that the board pays IPL franchises as much as ₹ 35 crores per season. This is obvious, considering the teams form the core of the league.

Besides that, the IPL franchises also make money from broadcasting special shows such as KKR’s Knight club.

Gate Revenue

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 franchises then have complete right on the income from gate tickets and passes. This is one of the few mediums of income where fans and franchises are directly involved in the financial transaction. This income may go high in high voltage matches when there is a full house.

Also, Read | Top Ten Cricket Stadium in India: Who Do You Think is the Best?

Sponsors

Perhaps the most important source of income for IPL franchises is Sponsorship. Teams tie-up with organizations to promote brands in return of the exorbitant amount of money. The promotion is done in two forms, through print media, and through advertorials.

Also Read | IPL Sponsors: Brands Who Joined IPL in 2019

Player jerseys are valuable marketing tools. No wonder the jerseys of any Indian Premier League player are filled with colorful brand logos. An IPL outfit has an average of 10 brand logos, 6 on the jersey, 2 on the pants and another couple on the cap. Moreover, the IPL franchises also create ad content for promotion of the brand’s products. Then, those who cannot make it to the jerseys are still promoted through the team’s social media handles as well as through package design.

For example, CSK has tied up with at least 18 brands, with the Muthoot Group being the title sponsor.

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