IPL’s Amazing Business Model and How is profit shared among BCCI and the Franchisees?

Cricket! India’s most beloved sport. Every street here has pundits, fans, fanatics, and its own Tendulkars here. The Indian Premier League, a.k.a IPL, is a two-month-long frenzy carnival in such a cricket-crazy India. Just ask us Indians what we do on IPL nights. People make a beeline for their home to relax on their couch and enjoy the matches streaming on the Television sets. 

Be it Kohli, chasing another target with ease or Thala Dhoni showing glimpses of his vintage finisher self. Be it Warner messing with the best of the bowlers or Bumrah knocking your team out cold. IPL artistically incorporates both entertainment and the game into a masterpiece. But have you ever wondered, “How much do Franchisees earn?” or “How does BCCI conduct this extravagant tournament?”. Let’s find out as the script unrolls.

Franchisees like Mumbai Indians and Chennai Super Kings are the spotlight of the IPL. These franchisees earn the lion-share of their income from the sponsors. Notable companies like Samsung, Myntra, and Ultratech Cement often pay a substantial token amount to become principal sponsors. Other companies like Jio and Boat often become associate sponsors. 

In return, franchisees advertise these sponsors on match kits. The BCCI earns funds from sponsors by selling title rights. DLF, Pepsi, Dream 11, and Vivo were the former title sponsors. After Vivo bailed out of the title rights contract, TATA Industries took over the mantle as the new title sponsor.

The other major source of income for franchisees and BCCI is broadcasting rights. Star Sports are the current broadcasting and digital streaming partner, after paying approximately a sum of ₹16,500 crores for five years in 2017. 

The money earned is divided between franchisees after BCCI retains an unspecified amount. The other effective way to make money is through advertisements during the broadcast. The advertisers have to pay a small share to both BCCI and franchisees, other than paying the advertising amount to the broadcaster. Other than that, Star players like Rohit Sharma and Virat Kohli are asked to act in mini ads either solo or with the team. The players aren’t paid a penny as their salary contracts ask them to do this stuff as a part of their job. The endorsement fee is directly paid to the franchise. 

Besides sponsors, Franchisees also earn revenue through gate fees for specific home stadiums. BCCI acts as a negotiator between State Cricket Boards and Franchisees. State Cricket Boards offer the stadiums on sizeable rent for the stipulated time period. Franchisees alone have to bear the burden of the rents. BCCI claims a small part of the rent as the central board. The stadium maintenance and ground staff are all to be liable by franchisees. In return, the gate fees are entirely deposited in franchisees’ accounts. Looks simple? It isn’t. BCCI takes a part of the gate fee here as a commission or brokerage. Besides this, Franchisees also earn income from various food joints in the stadium.

The only part of income that franchisees enjoy alone is the profits from selling merchandise. The merchandise includes customized player jerseys, caps, posters. etc. The sale amounts to nearly ₹25-30 crores for a season for Mumbai Indians, ironically equivalent to prize money for winning the tournament. Well, this is all the money franchisees could grab.

BCCI, on the other hand, has a bigger and stronger source still in its hands. The city bids and franchisee rights are sold by BCCI entirely. BCCI shortlists cities eligible to compete and list them. The major groups or companies bid for the ownership of new franchisees and pay large sums to gain them. 

Pretty complex and vivid structure? Credits to Lalit Modi for creating a robust and well-planned business structure. Unlike other T20 leagues worldwide, IPL has not only secured its existence but also has been a self-sustainable and financially independent league. Its projected annual turnover of £350 million exceeds that of the English FA Cup and is nearly equal to that of Arsenal FC of the English Premier League. Reports claim IPL has grown more than 20-fold from its initial value in 2008.

Planned investment in a suitable environment, which runs on the basic principle “Demand and Supply,” is key to a successful business venture. IPL has proven to be one of the most successful ones at that. The inception of IPL has helped Indian Cricket grow both technically and financially. India has become a dominant force in Cricket, and new talent is emerging from every street. Indeed, an idea like IPL has changed the likes of India.

Leave a Reply

%d bloggers like this: