With India lifting the 2007 World Cup T-20 trophy under Mahendra Singh Dhoni’s captaincy, it ushered a new era in cricket in 2008 i.e. Indian Premier League. This novel cricket format of just twenty overs garnered immense popularity due to its speed, jaw-dropping sixes, and fours, the world-class international players playing alongside the Indian players, and the lesser known boys whom they have known as gully cricket players debuting on 22 yards.
IPL in India soon took the form of a festive affair that lasted for seven weeks spanning the months of March-April-May. In India, the affinity of brands towards sports is not new, since sports is a highly lucrative business after all. With a heavy fan base surrounding the IPL (Indian Premier League ) several brands, businesses, startups, and small businesses have leveraged this event to maximise reach and aggressively market their offerings, which resulted in pouring millions of dollars in sponsorships, franchises, purchasing media rights, etc. It is a cricket tournament that has emerged to be a valuable commercial property.
As per a report from Duff and Phelps, IPL’s valuation in 2019 became $6.8 billion from $3.2 billion in 2014.
Factors Contributing to Revenue Stream of Indian Premier League
As per a report from Duff and Phelps, IPL’s valuation in 2019 became $6.8 billion from $3.2 billion in 2014. Below are some of the factors that contribute to the revenue stream of Indian Premier League:
Jersey, Helmets, and barricades near the boundaries
Brand endorsing their logos printed on a players’ helmet, logo, including the boundary barricades receives large scale visibility that contributes approximately 20% – 30% of an IPL team’s revenues. The minimum price for endorsing a logo at the backside of the helmet begins from Rs 1 crore, Rs 4-5 crores for a logo at the back of the jersey, and Rs 7 crores for the front of the jersey. The more prominent and bold the brands want their name to be displayed on the chest or behind the jersey, more the team generates revenue. Brands such as Gionee, Oppo, Vivo, Karbonn, Lava, Micromax, Vodafone, Idea, Amazon, Flipkart, Paytm, Freecharge, KFC, Swiggy, etc. have been some of the IPL’s prominent sponsors over the last few years.
Broadcasting rights forms the lion’s share of 60% – 70% of the revenue earned by the IPL teams. The BCCI ( Board of Cricket Control of India) collects massive revenue from the event sponsors, broadcasters, and online streamers. It retains 50 percent of the revenue and distributes the rest among the teams. The teams receive the amount in the proportion or weighted average of the match rankings. The team that ranks higher at the end of all receives the maximum share of the media revenue. Sony Entertainment and Star Sports have been the official broadcasters for IPL.
The revenue through ticket sales forms 10 percent of the IPL teams. If the team happens to play in their home ground or city then the sales of tickets would form a part of their revenue. The ticket prices are decided by the team owners in which a small portion of the ticket sales goes to the sponsors and the BCCI and the rest amount goes to the team’s wallet. The ticket prices are also dependent on the seating capacity of the stadium, the wallet capacity of the individuals in the city, and the enthusiasm around the match.
The winners of the seven-week extravaganza cricket event receive lucrative prize money in IPL. The champions receive a larger share of the pie while the runners up and other teams get a small share. In IPL 2020, the winners got 10 crores, the runners up received 6.25 crores and teams ranking third and fourth at the playoffs received 4.375 crores each. For the winning team, the prize money is distributed amongst owners and players. The official terms and conditions say that at least 50% of the prize money must be distributed among players, but how much would be offered over and above is decided by the team owner.
Business of Merchandising
Unlike football leagues where fans worship the teams that translates into incomes, the merchandising in IPL is nascent since fans in cricket largely favour the players than the team. The fan’s loyalty base shifts if their favourite players are picked up by some other team in the next season. IPL is yet to earn the revenues from merchandise that includes selling T-shirts, caps, wrist watches, souvenirs, etc. In such tough times of the pandemic, IPL 2020 has been a cushion to various small and medium fitness and lifestyle brands by offering them the contract of sports jerseys, kits, masks , caps etc. .
The food and beverage stalls that serve the spectators during matches are allowed to do business on a contract basis to a third party which again subcontracts it. The franchise collects a fixed amount from a stall per match basis.
Player Exchange during auction
Before every IPL auction, a player transfer window is created where teams can exchange players. Teams can exchange a less expensive player who performs decently in the matches with an exceptional player with some money as compensation.
For the startups here:
India considers cricket as nothing less of a religion. The love for this game is hard to go. For startups to invest in marketing in such high voltage sports events, it will be a shot in the arm to receive large-scale visibility. There is no denying that it will be an expensive affair to invest in such events, but the attention received will be incomparable to the traditional approach.