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IPL Teams Economics & Revenue

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India is a cricket crazy country and, IPL is heart & soul to every Cricket fan out there. IPL is the most talked-about League in the world. Sometimes more popular than many world leagues. Indian Premier League (IPL) is a professional Twenty20 cricket league in India contested during March or April and May of every year by eight teams representing eight different cities in India. The league was founded by the Board of Control for Cricket in India (BCCI) in 2008. And this is what we all know. Have you ever thought about the IPL economy? What is IPL revenue? Is there any negative impact of IPL on the Indian economy? 

Likewise, there are several questions that we aren’t aware of. So, in this blog, we will mainly dig deep into the revenue sources of IPL and its economy. 

Launch of IPL 

The commercially driven Indian Premier League has changed the dynamics of Indian domestic cricket massively. Yes, we know IPL involves big money but do we know how IPL teams Economics actually works and how much they earn or not?

Lalit Modi that time Vice President of BCCI (Board of Control for Cricket in India) was inspired by the model of EPL (European Premiere League) and wanted to start a league like EPL in India with cricket and introduced IPL (Indian Premier League) in 2008. In a country full of cricket enthusiasts, IPL didn’t take much time to get popular and in its very first edition, it got hit worldwide among cricket fans.

The revenue and Profit of IPL teams are things that always make all the spectators curious about how much they earn? There have been many shoutouts and questions on the IPL economy and IPL revenue lately. 

Revenue Sources for IPL Teams | IPL Economy

There are several sources through which IPL generates its revenue. Some of the best and most important sources have been described below:

Media Rights 

Media rights are the main and important source of revenue for any IPL team. For some teams, it is about 60% of their total revenue. BCCI sells Media rights or broadcasting rights to Channels. BCCI distributes revenue earned from media rights between teams after excluding their share from it. Sony Entertainment and Star India are two broadcasters who gained media rights of IPL in different seasons.

From IPL season 2008 – 2017, Sony Entertainment purchased media rights against 8,200 crore INR which is 820 crore INR for the season. 

Season 2018 – 2022 Star India acquired IPL media rights against 16,347 crore INR which is 3,269 crore INR for the season.

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Gigantic hype in media rights revenue resulted in every team profitable as prior expenses are high but revenue is low in comparison to the expense and sudden hype in the price of media rights provided great strength to their financial system.

We hope that this would have cleared the IPL revenue statistics in a more profound way. 

Brand Sponsorship  

Brand sponsorship to teams is also an important part of revenue for the teams like Gulf to CSK EROS to RCB. These sponsors invest their money in the team to get promotion through logo and name placement on the jersey. like CSK got sponsorship from Muthoot Group, current principal shirt sponsor, having signed a three-year deal in 2018. Telecom service provider Aircel was the previous shirt sponsor after they signed a three-year deal in 2008 which was then renewed in 2011 for ₹ 850 million, then the most expensive sponsorship deal in IPL. The team also has sponsorship deals with India Cements, Gulf Oil, Equitas Small Finance Bank, HIL, Nippon Paint, Parle Agro, Frooti, and Atria Convergence.

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The brand offered money to teams for promotion and the highest sponsor got the main attraction area on the jersey to get more viewers attraction.

Also, read about the Lalit Modi IPL Scam.

Title Sponsor

The title sponsor is the one whose name comes before the IPL like DLF IPL, VIVO IPL. These are the sponsors who sponsor the title of the league and get registered under their name. From 2008 to 2012, the title sponsor was DLF, India's largest real estate developer, who had secured the rights with a bid of ₹200 crores (US$28 million) for five seasons. After the conclusion of the 2012 season, PepsiCo bought the title sponsorship rights for ₹397 crores (US$56 million) for the subsequent five seasons.

However, the company terminated the deal in October 2015 two years before the expiry of the contract, reportedly due to the two-season suspension of Chennai and Rajasthan franchises from the league. The BCCI then transferred the title sponsorship rights for the remaining two seasons of the contract to Chinese smartphone manufacturer Vivo for ₹200 crores (US$28 million).

In June 2017, Vivo retained the rights for the next five seasons (2018–2022) with a winning bid of ₹2,199 crores (US$310 million), in a deal more expensive than Barclays' Premier League title sponsorship contract between 2013 and 2016. On 4th August 2020 Chinese company VIVO pulled out as the title sponsor of the Indian Premier League (IPL) for the 2020 edition, following a row of controversy for Anti-China Sentiments among the Indian public. It was also reported that the pullout was a result of VIVO's market losses due to the COVID-19 Situation and it intended to return as the title sponsors for the following 3 years. Like media rights, BCCI distributes revenue from title sponsorship among teams excluding their share in it.

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Ticket Sale & Merchandise Sale 

Revenue collected from the sales of tickets is shared between team and association which ground is associated with. Merchandise sales belong to the team.

Player Trading 

Sometimes mid-season trading of player done between the teams which also gives the team great revenue as they can sale cheap bought player at a good price if he performs well in the game but this happens rarely, no team wants to lose any good player who can perform for them or against them or can be a cause of their defeat.

Prize Money

Winners and runners- up were awarded the prize money alongside their trophies and medals which was distributed among players excluding team share from it. In the 2019 season winner amount reward to Mumbai Indians are 20 crore INR and runner up the amount of 12.5 crore INR rewarded to Chennai super King. But prize money is never an interesting source of revenue for the teams but consistent performance in the winner or runner up position can endure the marketing value of the team and raise the demand for sponsorship for the team.

After all these revenue sources everyone might be thinking that the IPL team earns tons of money but there are many expenses, they have to bear to conduct team season successfully.

Players fee, Coaches fee supporting staff, travel, Hotel, Administration & Operational cost are some expenses that cannot be avoided by any team at any cost because any sort of disruption in these areas for cost-cutting could harm the whole team.

Advertisements organized by the team to attract the audience to get sponsorship for them is also a get expense for any team like Halla Bol song of Rajasthan Royals, Duniya Hila Denge Hum from Mumbai Indians are best examples to it. 20% share of BCCI in team overall revenue is a major expense team has to bear as it directly affects their net profit. 

If we take an example of KKR (Kolkata Knight Riders) whose brand value is high from the inaugural season due to Shah Rukh Khan association with it led the team register profit in its inaugural season. In financial season 2017 KKR total revenue registered was 154 crore INR and 20 crore INR is their net profit. but the sale of net title sponsorship and broadcasting rights resulted in every team in a profitable situation.

If IPL team profit is compared with the EPL club is way very low right now in the fiscal year 2017-2018 net profit of CHELSEA is about 554 crore INR, on the other hand, KKR profit is about 20 crore INR. There is a long way for the IPL and its teams to get a nice amount of profit. Due to these fewer profits making and loss-making nature makes many team owners sell their team and Decan chargers Hyderabad was a great example of it.

In the whole expenditure revenue profit and loss period, BCCI is the only organization that is registering profits at very high rates as many say IPL is the main reason to change the Dynamics of BCCI across the world.

 

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Shubham