Game on, Profits Up: The Business Model of Indian Premier League (IPL)

The IPL’s unique business model is an amalgamation of cricket, entertainment, and marketing strategies all rolled into one. Ten teams from various Indian cities compete in the league, which operates on a franchise system. The franchises are exclusive and work on a revenue-sharing model. Broadcasting rights, sponsorship deals, merchandise sales, player auctions, and player endorsements are just a few of the many ways the league makes money.

IPL’s solid business strategy isn’t simply relying upon ticket sales. They make a huge chunk of money on the grounds through numerous additional sources of revenue by which they can uphold themselves. The IPL tournament franchise is now a significant asset for the business. It enables businesses to widely advertise and market their goods and services. As a result, they can simply generate revenue and maintain the IPL. 

Broadcasting Rights of IPL

By negotiating a broadcasting rights agreement for the five-season cycle, from 2023 to 2027, the Indian Premier League (IPL) increased its wealth by 48,390.5 crores (6.2 billion USD). ESPN Cricinfo’s data show that the rights for the 2023–27 seasons have been sold for twice as much as they were for the 2018–22 seasons. Mukesh Ambani-backed Viacom-18 grasped the digital broadcasting rights for ₹23,758 crores, leading to the replacement of Disney Star, which managed to preserve the TV rights for ₹23,575 crores. 

The privileges to air IPL matches internationally were divided and shared among Viacom and Times Internet, for an amount of ₹1,075 crore. In addition, Viacom paid an additional 2,991 crore rupees for a separate group of non-exclusive rights to air 18 crucial matches per season. In making the announcement, BCCI Secretary Jay Shah stated that the Indian Premier League (IPL) had surpassed the English Premier League (EPL), Major League Baseball (MLB), and the National Basketball Association (NBA) to become the second-most valuable sports league in the world, following the American National Football League (NFL).

The Money-Making Ecosystem of IPL

At the point when the IPL started in 2008, some of India Industrialists and Bollywood’s greatest names spent a sum of $723.59 million to purchase eight city-based franchises. After a half-decade, the IPL’s popularity and economic value have skyrocketed. The Gujarat Titans were acquired by British equity firm CVC Capital in 2021 for approximately $740 million. The IPL operates in the following way because of the enormous amount of money poured into the ecosystem each season:

Central pool

The Broadcasting rights and central sponsorship deals account for roughly 70 to 80 per cent of teams’ overall revenue. The BCCI preserves 50 per cent of the total central pool amount and the remaining 45 per cent of the central pool’s revenue is divided equally among the franchises. The four teams that make it to the playoffs achieve the remainder as prize money, with the winner bagging the highest amount. The rules, which were last changed in 2018, require franchisees to pay the BCCI 20% of their total revenue (excluding ticket sales) annually as fees.

In the upcoming five-year cycle, it is anticipated that the central pool’s combined revenues from the most recent deal and central sponsorships will reach $7.6 billion. With a small part of the offer being split between the franchises, it could get every one of them a yearly income of $76.9 million (₹600 crores). This is more than double the estimated 275 crore rupees that each team had made in the 2022 season.

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Sponsorships

For the 2022 and 2023 seasons, Tata was chosen to pay the BCCI Rs. 335 crore to become the title sponsor. Chinese cell phone creator Vivo has opted to end the deal years before expiry, paying ₹1124 crore to the BCCI as a feature of a leave plan. In addition, associate sponsorship deals with official partners, strategic time-out partners, and on-ground partners contributed upwards of 300 crores to the IPL. 

Team sponsorships, which include the exclusive sponsors of the franchises and not the tournament are also a part of the large domain of sponsorships. Sponsors of shirts, radio partners, and digital partners are among them. This, nonetheless, accounts for a small percentage of the franchise’s income.

Sales of tickets and Merchandise

With 7-8 home matches each season, the ‘domicile’ franchise proprietor brings back home an expected 80 per cent of the revenue from ticket deals with the leftover 20% split between the BCCI and sponsors. The revenue generated from ticket deals constitutes 10-15 per cent of a team’s revenue. Furthermore, teams likewise procure money from match-day food and drink deals in home arenas. A small amount of the franchise’s revenue is also generated by official team merchandise like jerseys, hats, and other accessories.

Franchise auctions

Franchise auctions are becoming an additional source of revenue for the BCCI as the tournament is expanding and new teams are joining the league. The Lucknow Super Giants franchise was purchased by the RP-Sanjiv Goenka group for approximately $940 million (7,090 crores) in 2021, and the Gujarat Titans were purchased by the CVC capital group for approximately $740 million. Some people think that the BCCI will have 12 teams by 2027 because of the size of the new media rights deal.

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Media Rights

Viacom is offering free streaming of IPL 2023 on its OTT platform- JioCinema, after Reliance took the share of IPL broadcasting rights (for 2023-2027) for a total of Rs 23,758 crore. Whereas Disney Star bagged the TV rights for the Indian subcontinent, paying Rs 23,575 crore.

Player Trading

The IPL auction every year provides a transfer window for a limited time frame. During this trade window, teams can trade players with other franchises. This indicates that talented players are exchanged for good ones in exchange for money.

For instance, Shikhar Dhawan was one of the most well-known players to switch teams prior to the IPL Auction 2019. The left-handed hitter joined the Delhi Capitals in the wake of leaving the Sunrisers Hyderabad Franchise. In return, DC sent Vijay Shankar, Shahbaz Nadeem, and Abhishek Sharma to SRH. Dhawan was a standout performer for DC over three seasons. As a result of the exchange, DC benefited to a great extent.

Benefits for the Broadcaster

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The main source of revenue for the broadcasters is advertisement. The broadcast rights of five seasons from 2018 to 2022 were purchased by Star India, which is now Disney Star, for more than 16,300 crore rupees. During a match, advertisers paid the broadcaster up to 14 lakh rupees for a ten-second ad slot. According to Moneycontrol, the IPL 2021 television and digital (streaming) ad sales generated nearly 3,500 crores in total revenue. According to the Hindu BusinessLine, the new media rights agreement could result in a surge in ad rates for a 30-second television slot that is estimated to reach one crore rupees.

Ratings result from viewership, which in turn results in more ads. In 2021, Star India stated that the IPL was on track to surpass 400 million viewers for the fourth year in a row during that season. With 31.57 million average impressions per match in 2020, the tournament had established a new record for viewership. However, it was estimated by the Broadcast Audience Research Council (BARC) that viewership for IPL 2022 decreased by 30% over the first three weeks of the season. 

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Sponsorships

Despite the fact that OTT platforms in India have one of the lowest average revenue per user (ARPU) in the world, subscriptions also drive revenue for IPL digital streaming rights holders. For instance, the Indian Premier League helped Disney+ Hotstar acquire nearly 60% of its subscriber base in India. The Walt Disney Company’s CFO, Christine McCarthy, stated that thanks to IPL 2022, “a little over half” of the net new subscribers for Disney+ came from Disney+ Hotstar toward the end of the second quarter of that year. The organization additionally credited higher advertising revenue from its ‘Worldwide Channels’ business to an expansion in the normal viewership of the matches and higher rates.

However, experts in the field maintain that the rights holders would need at least 3 to 4 years to make profits and reach break-even after the implementation of the new $6.2 billion agreement.

Viewership

According to Rajiv Dubey, the head of media at Dabur India, the viewership of IPL on television has witnessed an impressive surge of around 30% during this season. In addition to this, popular new-age companies like Rapido, Amazon, and Spotify have partnered with JioCinema for the tournament. The significant presence of advertising sponsors highlights the growing importance that brands are placing on digital streaming platforms, given the enhanced internet penetration and smartphone accessibility in the country.

In 2021, the NFL saw an increase in year-over-year viewership of 9%, with an average of 17.1 million viewers per game (TV and digital). Games including the top sides had a lot more watchers that included the Dallas Cowpokes versus Las Vegas Thieves game that had around 40.8 million watchers, establishing a standard for the 2021 season.

Concerning the EPL, a sum of 26.8 million in the U.K. watched the coverage in 2020-21, which accounted for around 40% of the nation’s populace. About 4.5 million people watched high-octane games like Liverpool and Manchester United games in the United States.

Comparison of IPL to global sports leagues

The National Football League (NFL) in the US, adduced by the BCCI Secretary was regarded as the major and the only international sports league, which is more influential than the IPL, started in 1920. The IPL’s business and monetization strategy is very similar to that of the NFL and EPL, so they both earn money in a similar way. The NFL procured a total revenue of around $12 billion in the 2020 season, and a new media rights deal was recently signed by them that was worth more than $110 billion for 2023 to 2033 with CBS, Amazon, ESPN, FOX, and NBC.

In a five-month season, the NFL has 32 teams playing a total of 285 games, including 272 games during the regular season and playoffs. Like the IPL, it additionally procures a significant lump of its revenue from media rights. The 31 individually-owned teams and one community-owned non-profit status team known as the Green Bay Packers equally share the national revenue generated by the NFL’s negotiated contracts for media rights, merchandise, and licensing. Furthermore, teams likewise acquire local revenue from ticket deals in home stadiums and team sponsorships.

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The comparison of IPL business with EPL 

In the meantime, the EPL, which started in 1992, has 20 groups contending in a nine-drawn-out season with week-after-week matchdays. The 20 clubs are shareholders in the Football Association Premier League (FAPL), which is run by a corporation with a chairman and board of directors to oversee day-to-day operations. The national revenue created is split between the corporation and teams on a 50:50 premise, while teams likewise sign sponsorship and merchandise deals.

Matchday activities like ticket sales and leisure activities like museum visits, and bar and restaurant sales, among others, contribute between 10 and 20 percent, depending on the facilities in the stadium, for the EPL. Commercial avenues include sponsorships, merchandise sales, and other commercial deals like player endorsements. Moreover, the broadcast avenues contribute between 40 to 45 percent.

The impact of Covid-19 on IPL and global sports leagues 

The beginning of the pandemic uncovered the sports industry to new undesired realities. To stop the new coronavirus from spreading, all major sports tournaments, both club and international, had to be temporarily halted. Revenue from merchandise deals, ticketing, and broadcasting avenues had all stopped as there was no action in the field.The worst-affected avenue was matchday earnings from ticket and merchandise sales, which decreased 67% during the period. Sponsorship and central rights revenue decreased by 14.5 and 25.6 percent, respectively.

Similarly, Premier League clubs Arsenal, Liverpool, and Manchester United saw combined revenue declines by 18.5% over the same time frame, with matchday revenue declines by 95%. The NFL also suffered from the same fate, with the Dallas Cowboys, Los Angeles Rams, and New York Giants seeing 16% declines in revenue during this time.

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