Business Model of The Indian Premier League (IPL)

Business Model of the Indian Premier League (IPL): The distinctive business concept of the Indian Premier League combines marketing, entertainment, and sport in one cohesive package. The league is a franchise-based competition between ten clubs from different cities in India. Franchises operate on a revenue-sharing mechanism and are exclusive. The league generates revenue in a variety of ways, including broadcasting rights, sponsorship agreements, retail sales, player auctions, and player endorsements.

The successful business plan of the Indian Premier League goes beyond ticket sales. They sustain themselves by earning a substantial amount of money from several other kinds of income on the premises. The IPL tournament franchise is currently one of the company’s most valuable assets. It makes it possible for companies to market and advertise their products worldwide. They can therefore easily make money and keep the IPL going. 

Business Model of Indian Premier League (IPL)

Broadcasting Rights of IPL

The Indian Premier League (IPL) secured a five-season television rights arrangement that will enhance its value by 48,390.5 crores (6.2 billion USD) between 2023 and 2027. According to figures from ESPN Cricinfo, the 2023–27 season’s rights have been sold for twice as much as the 2018–22 season’s. Disney Star, which was able to secure the TV rights for ₹23,575 crores, was displaced by the Mukesh Ambani-backed Viacom-18, which won the digital broadcasting rights for ₹23,758 crores. 

For ₹1,075 crore, Viacom and Times Internet split and shared the rights to broadcast IPL matches worldwide. Viacom additionally paid 2,991 crore rupees for the non-exclusive right to broadcast 18 important matches every season from a different group. The Indian Premier League (IPL) has overtaken 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, behind the American National Football League (NFL), according to a statement made by BCCI Secretary Jay Shah.

The Money-Making Ecosystem of IPL

When the IPL first began in 2008, eight city-based franchises were purchased for a total of $723.59 million by some of India’s wealthiest industrialists and Bollywood celebrities. The Indian Premier League’s economic value and popularity have surged in the past five years. In 2021, CVC Capital, a British equity firm, paid roughly $740 million to acquire the Gujarat Titans. Due to the massive sum of money that is invested in the ecosystem every season, the IPL runs like follows:

Central pool

Roughly 70–80% of a team’s total revenue comes from central sponsorship agreements and broadcasting rights. Half of the entire earnings from the central pool are retained by the BCCI, with the remaining 45 percent being split equally among the franchises. The remaining funds are awarded as prize money to the four teams who advance to the playoffs, with the winning team receiving the largest sum. Franchisees are required by the rules, which were last updated in 2018, to pay the BCCI an annual fee equal to 20% of their entire earnings (not including ticket sales).

The total revenues of the central pool from the most recent deal and central sponsorships are expected to exceed $7.6 billion in the next five-year cycle. 

Each franchise may earn $76.9 million (₹600 crores) annually if a modest portion of the deal is divided among them. This is more than twice as much as each team is expected to have earned in the 2022 season—275 crore rupees.

Business Model of The Indian Premier League (IPL): Sponsorships

Tata was selected to become the title sponsor for the 2022 and 2023 seasons by paying the BCCI Rs. 335 crore. As part of a departure plan, Chinese smartphone manufacturer Vivo chose to terminate the agreement years before it was set to expire by paying the BCCI ₹1124 crore. Over 300 crores were also provided to the IPL through associate sponsorship agreements with official partners, strategic time-out partners, and on-ground partners. 

Within the broad category of sponsorships are team sponsorships, which comprise the exclusive sponsors of the franchises rather than the competition. Among them are radio partners, digital partners, and shirt sponsors. However, this only makes up a minor portion of the franchise’s earnings.

Sales of tickets and Merchandise

The “domicile” franchise owner receives an estimated 80% of the proceeds from ticket sales from the seven to eight home matches each season; the remaining 20% is divided between the BCCI and sponsors. Fifteen to twenty percent of a team’s revenue comes from ticket sales. Additionally, teams get revenue from food and drink specials offered on match days in their home arenas. Official team apparel, such as jerseys, hats, and other accessories, also contributes a tiny portion of the franchise’s earnings.

Business Model of The Indian Premier League (IPL): Franchise auctions

As the tournament grows and more teams enter the league, franchise auctions are starting to provide the BCCI with additional money. In 2021, the Gujarat Titans were acquired by the CVC capital group for roughly $740 million, while the RP-Sanjiv Goenka group paid nearly $940 million (7,090 crores) for the Lucknow Super Giants franchise. The scale of the new television rights contract has led some to believe that the BCCI will have 12 teams by 2027.

Media Rights

After Reliance purchased a portion of the IPL broadcasting rights (for 2023–2027) for a total of Rs 23,758 crore, Viacom is providing free IPL 2023 streaming on its over-the-top platform, JioCinema. Disney Star, on the other hand, paid Rs 23,575 crore to secure the TV rights for the Indian subcontinent.

Player Trading

Every year, the IPL auction offers a brief window for transfers. clubs may trade players with other clubs during this trade window. This suggests that good players are traded for skilled ones to get money.

For example, before the 2019 IPL Auction, one of the most well-known players to transfer teams was Shikhar Dhawan. The left-handed batter departed the Sunrisers Hyderabad Franchise to join the Delhi Capitals. DC gave Abhishek Sharma, Shahbaz Nadeem, and Vijay Shankar to SRH in exchange. For three seasons, Dhawan was a top performer for DC. DC reaped significant benefits from the swap.

Benefits for the Broadcaster

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Advertising is the broadcasters’ primary source of income. For more than 16,300 crore rupees, Star India—now Disney Star—bought the broadcast rights to five seasons spanning 2018–2022. Advertisers paid the broadcaster as much as 14 lakh rupees for a ten-second spot during a match. The IPL 2021 digital (streaming) and broadcast commercial sales brought in around 3,500 crores in total revenue, according to Moneycontrol. The Hindu BusinessLine reports that the new media rights agreement may lead to an increase in the cost of advertising for a 30-second television slot, with an estimated value of one crore rupees.

Viewership generates ratings, which leads to more advertisements. According to Star India in 2021, the IPL was expected to reach 400 million viewers for the fourth consecutive season. In 2020, with an average of 31.57 million impressions each match, the tournament set a new viewership record. The Broadcast Audience Research Council (BARC) estimated, however, that over the first three weeks of the season, IPL 2022 viewership fell by 30%. 

Sponsorships

Subscriptions are another source of income for IPL digital streaming rights holders, even though OTT platforms in India have some of the lowest average revenue per user (ARPU) rates in the world. For example, Disney+ Hotstar gained around 60% of its Indian subscriber base thanks to the Indian Premier League. After the second quarter of 2022, “a little over half” of the net new Disney+ members came from Disney+ Hotstar, according to Christine McCarthy, CFO of The Walt Disney Company. This was made possible by the IPL 2022. The company also attributed an increase in the average viewership of the matches and higher rates to increased advertising revenue from its “Worldwide Channels” business.

Experts in the area, however, argue that following the execution of the new $6.2 billion agreement, the rights holders would require at least three to four years to turn a profit and break even.

Viewership

The head of communications of Dabur India, Rajiv Dubey, reports that this season has seen an amazing 30% increase in IPL television viewership. Furthermore, JioCinema has teamed with well-known modern businesses like Rapido, Amazon, and Spotify for the competition. Given the increased internet usage and smartphone accessibility in the nation, the prominent presence of advertising sponsors emphasizes the growing importance that businesses are placing on digital streaming platforms.

With 17.1 million viewers (TV and digital) per game in 2021, the NFL recorded a 9% rise in viewership from the previous year. 

There were a lot more people watching games involving the best teams. For example, the Dallas Cowboys vs. Las Vegas Thieves game had 40.8 million viewers, setting a record for the 2021 campaign.

In regards to the EPL, 26.8 million people in the United Kingdom watched the broadcast in 2020–21, which is around 40% of the country’s population. In the United States, high-octane games like Liverpool and Manchester United were viewed by about 4.5 million people.

Comparison of IPL to global sports leagues

Introduced by the BCCI Secretary, the National Football League (NFL) in the United States is considered the only major international sports league with greater sway than the Indian Premier League. It was founded in 1920. The NFL and EPL both make money in a manner akin to that of the IPL due to their business and monetization strategies. The NFL made over $12 billion in revenue in 2020. They just inked a new media rights agreement with CBS, Amazon, ESPN, FOX, and NBC that was valued at over $110 billion for the years 2023 to 2033.

The NFL features 32 teams that play a total of 285 games throughout a five-month season, comprising 272 games in the regular season and playoffs. It also receives a sizeable portion of its money from media rights, much like the IPL. The national revenue from the NFL’s negotiated contracts for TV rights, merchandise, and licensing is split evenly between the 31 independently owned clubs and the Green Bay Packers, a community-owned non-profit status franchise. In addition, teams also receive local revenue from team sponsorships and ticket sales in their home stadiums.

The comparison of IPL business with EPL 

Meanwhile, twenty groups are competing in the EPL, which began in 1992 and has nine extended seasons with weekly matchdays. The Football Association Premier League (FAPL), which is managed by a business with a chairman and board of directors to oversee daily operations, has 20 clubs as shareholders. Teams also negotiate sponsorship and merchandise arrangements, and the corporation and teams split the national money generated 50/50.

Depending on the stadium’s amenities, matchday activities like ticket sales and recreational pursuits like museum visits and bar and restaurant sales, among others, contribute between 10 and 20 percent to the EPL. Sponsorships, merchandise sales, and other business agreements, like player endorsements, are examples of commercial channels. Additionally, the broadcast channels make up between 40 and 45 percent.

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

The pandemic’s start exposed the sports sector to new, unpleasant realities. All major sports tournaments, both club and international, had to be temporarily suspended to prevent the new coronavirus from spreading. Since there was no movement in the field, revenue from ticket sales, merchandising deals, and broadcasting avenues had all stopped. The revenue from ticket and product sales on matchdays, which fell 67% throughout the period, was the most negatively impacted source. Revenue from central rights and sponsorship fell by 25.6 and 14.5 percent, respectively.

Comparably, during the same period, the combined revenue of Premier League teams Arsenal, Liverpool, and Manchester United decreased by 18.5%, with matchday revenue declining by 95%. The Dallas Cowboys, Los Angeles Rams, and New York Giants all experienced 16% drops in revenue during this period, reflecting the NFL’s same misfortune.

Also read, IPL 2024: List of Sponsors of All Teams