BUSINESS MODEL OF IPL, HOW INDIAN PREMIER LEAGUE FRANCHISES MAKE MONEY
Indian Premier League season 9 is practically around the bend and today we will have the Auction in front of the 2016 season. 2 new groups Pune and Rajkot will be supplanting suspended Chennai Super Kings and Rajasthan Royals in the following two seasons and everything set for another staller T20 season in India. So going into the new season we chose to examine IPL's income/dissemination model which sort of made it the most lucrative cricket class on the planet. So releases simply back 9 years when IPL was framed and perceive how the underlying model functioned
On 24 January 2008 BCCI welcomed biddes fom IPL Franchises and they sold 8 establishments for a consolidated aggregate of $723.59 million for next 10 years. Since 2008 few establishments has gone belly up/suspended and a couple of new ones were presented. Each establishment is required to pay 10% of the aggregate value each year and that is the greatest income hotspot for BCCI/IPL overseeing body. The following is the table indicating how the groups were sold in 2008 and what new groups needed to pay to end up a portion of IPL.
the following is the underlying offering process for both Franchises and the players utilizing as a part of 2008. While in the event that you look underneath you will discover indepth insights about IPL income era and appropriations channels.
At first 8 establishments were sold in the principal version of the IPL. In next couple of years Deccan Charges were ended due their failure to pay yearly expense to BCCI. Two new establishments Pune Warriors India and Kochi Tuskers Kerala were added to Indian head association and them two would go belly up and IPL would include another two establishments with New Rising Pune and Gujarat Lions supplanting Chennai Super Kings and Rajasthan Royals
IPL and its frachises make money
So IPL governing body (BCCI) get yearly fee from each of the franchise (10% of total franchise price every year) and that money is 100% kept by BCCI and used for orgnizing expenses etc. But there are other major sources from where IPL generate money like Media rights, sponsorship which is shared among franchises and IPL with 60%/$40 share.
The below diagram shows the entire revenue and distribution model adopted by IPL. We explain the process in detail further down the page.
IPL Revenue Stream & Distribution Channels:
#1. TV/Media Rights: Money generated from tv/media rights sale is divided into two shares. A) IPL share, B) Franchise Share.
A) IPL Share: ipl will get only 20% of the media rights money in the first 2 years of IPL but set to reach 40% by 5th year onwards.
B) Franchise Share: In the first 2 years 80% of total media rights money will be divided equally among all teams but it will be reduce to 60% by 5th year onwards.
So the biggest source of revenue generation in IPL is “TV media rights sale”. Back in 2008 when Sony signed a record breaking 10 year deal with BCCI for IPL rights they agreed to pay $1.02 billion over the 10 year contract. Sony will be paying 10% of the total agreed amount ($100 million) every year till 2018.
So out of $100 million, $60 million is distributed equally among IPL teams every year while $40 million is kept by IPL governing body.
#2. Sponsorship Rights: IPL signed official title sponsorship deal with DLF for the first five seasons than PEPSI became the title sponsors paying around 250 Crores for 5 years in a deal signed before IPL 6 season. IPL also have number secondary sponsorship deals with host of local and multinational companies as official partners. So on average around Rs. 500 crores is generated through sponsorship rights which becomes the IPL central pool and is later divided into 50/50 share between IPL and franchisee teams.
Sponsorship distribution: in the first few seasons 60% was allocated for franchisee teams while IPL/BCCI got %40 percent but after the 6th season the percentage is around 50/50%. 6% from IPL’s share is allocated for prize money fund while 50% share allocated for teams is divided equally among all IPL teams every year.
Franchisee own sponsorship and tickets sales revenue and expenses:
All franchises are free to signed their own individual sponsorship deals including kit deals/shirt sponsors or even title sponsors. While all teams control their home matches hospitality and gate/ticket revenue by 80%, rest %20 is allocated for IPL governing body.
Having said that All IPL teams are finding it hard to post profit every year as they are either in loss or barely break even year after year. But the initial thought process of buying an IPL is not posting profit in short-term, most of the companies/owners bought IPL franchises as long-term investment and and open advertisement tool for their parent companies. below are some of the expensive for teams are listed.
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