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How does IPL make money?

After India’s win in the 1st ever T20 world cup in 2007, Lalit Modi’s brainchild came into existence which we call the Indian Premier League (IPL). One of the most watched sporting events in the world, it is reported to have a valuation of $6.7 billion as of 2020. The league involves hundreds of star cricketers, their support staff, broadcasting teams, grounds men, rich team owners, the staff at hotels and other facilities and above all, a huge audience. With so many people on board, it’s annulment amidst the ongoing pandemic was almost unquestionable. However, it did take place both in 2020 and in 2021. When these many lives are put at stake at once, can we really agree on the fact that it’s just for the sake of cricket?

Well, not really! IPL is a business first and cricket later. It’s not just any other business – it is such a mega-profitable business that every participant is happy to be involved in it. Thus, let’s forget cricket for a while and understand the lucrative business of IPL.

Sponsorships and advertisements in ways more than we can really count form one of the biggest revenue chunks of this business. Everything from the name of the league itself to the smallest of things like an umpire’s hat is tagged here – such is the level of sponsorship. We can summarize the whole fiasco through this table-

Sponsorship/Advertisements Revenue Generation (in US$)
1.    Title and Associate Sponsors 100 million
2.    Team sponsors (for kits, equipment, jerseys, etc.) 4-10 million per team
3.    On-ground sponsors 27 million

If we observe carefully, even the strategic timeout of 2.5 minutes is attached to CEAT.

Another big portion of the revenues is generated by the broadcasting rights given to Star and Sony. Every live match, or the highlights shown, or the official videos put anywhere on the internet is charged so hugely that almost $510 million is collected on an annual basis.

The ticket revenue collection is an additional provenance of funds where all the teams together earn around $18-22 million, as every team gets to play 7 matches on their home grounds.

The lump sum made by all these sources are divided among BCCI and all the 8 franchises in the following manner:

Source: Businessbar

Coming to the income earned by another very heavily involved party, broadcasters earn enormously too by signing up 35-40 brands for commercials during the live matches. Every second of advertisement is worth lakhs there. The same goes for the online telecaster – Hotstar. This ad revenue is estimated to be around INR 8500 crores this year. Apart from that, the viewership helps them add on to their stack of receipts which is discussed further in the article.

Players are said to earn more through IPL than through all the matches played round the year. They get paid according to their market demand by auctions and the best part of this is that they just have to make themselves available to the team; whether they play a single match or not is not really a concern here. They even get to earn various types of prize money for showing good performance.

Thus, the way in which its revenue wagon-wheel works is pretty clear and it sums up the fact that it is not just cricket and entertainment, but a profit earning line. 

Now that we’ve talked about the business model and financial dynamics of IPL: one of the biggest sporting entertainment extravaganza, can we point out the eventual customers and paymasters of this circus? There is no doubt that sponsors can be claimed as the ultimate client because of the pool of funds provided by them; but most out of the 460+ million viewers don’t even have an idea about their contribution to the proceeds of this business. Let’s have a look at the same.

The first thing that comes to our minds when we talk about the fan base is the revenue generated from ticket sales of each match. Every match held before 2020 saw nothing, but a nearly full stadium, thus generating around $18-22 million, putting all teams together. 

However, on account of Covid-19 and lockdowns, DTH and digital subscriptions have helped different groups of people make large piles of cash. 330 billion minutes spent every year by TV viewers helps STAR gain a lot of traction. But why only talk about TV subscriptions in the era of digitisation? Hotstar experiences an increase in their subscriber base every year by millions during the IPL season, giving a tough competition to other OTT platforms like Netflix. With the staggering fall in data tariffs from the time Jio entered the market, and increasing reach of Hotstar in different regions of India, STAR still factors in a hike of 20-25% in subscription revenue of Hotstar. 

Digitisation has also given rise to a number of start-ups among which fantasy sports platforms have grown about 700% in the last decade. Dream11, MPL, My11Circle, MyTeam11, etc also have one of their best times during these 2 months of cricketing festivity. The idea of putting one’s own acumen into forming a team and betting on it has made people crazy, which is the sole reason why IPL fantasy leagues are worth $1 billion alone

With all the means of customer vandalism mentioned above, let’s try and understand one complex way of doing the same thing. We all are aware of the scandals that go on in the background of this show business, some refer to it as match fixing and bribing! It raises a question as to how ordinary people like us can be involved in it.

Source: Pinterest

The above given picture shows the likelihood of a team to win during a match – this decides the favourite team of the bettors at a particular moment. When a team is doing so well that its win probability is almost 100%, most of the audience have their money locked for that team. Sometimes, in such cases, the market maker of this betting world has connections with the superiors and that’s how the players get lured for losing in exchange of billions betted by the fans. After all, we can now make an inference of such frequent last minute twists in IPL.

Such a mega event like the Indian Premier League is obvious to have an impact on the Indian Economy. There are a number of indicators of its contribution to our economy which can be listed in the following manner:

  • A significant increase in GDP of India is inevitable. KPMG’s survey report reveals that IPL’s huge scale branding, crazy fan support, and tremendous fan following worldwide contributes to almost INR 11.5 billion to India’s GDP.
  • It is certain that a series of 60 matches being played at 8 different venues helps the travel and tourism industry to flourish greatly. As per one of the most reputed travel companies, Cox & Kings, the IPL leads to a whopping 30% increase in travel revenue during that season.
  • A tournament as big as IPL, where massive employment is generated from companies, their stakeholders, sports personalities, emerging athletes, etc. creates economic value by bringing a huge number of jobs on board. 
  • Lastly, the Government is directly benefited in the form of payment of taxes. Around INR 3,500 crore taxes have been paid by the BCCI to the government since the beginning of IPL.

Commercialisation of cricket was apparent when IPL earned total revenues of INR 4000 crores even during the high tide of the pandemic in 2020. Though the revenues were skewed negatively compared to previous years,   it reflects the fact that there isn’t anything big enough to stop the IPL. On this account, it probably won’t be wrong to call this league the Green Revolution of Cricket!

Curated By: Kashish Agarwal and Prapti Kedia