"Hello, friends!"
"Whichever team wins in this IPL season," it'll get ₹200 million as the prize. ₹200 million.
That's a tonne of money for a common man. But for an IPL team? What does it mean? Think about it. "Even the cheapest IPL team, the
Rajasthan Royal, per the last season,"
its brand value is almost ₹2.5 billion.
"And for teams like the Chennai Super Kings," their brand value is ₹27 billion. So what would a winning prize of ₹200 million
mean to these teams? "Obviously,
the IPL matches that you see on your TV,"
are just the tip of the iceberg. The
real money is exchanged behind the scenes.
"So friends, in today's Blog,"
come let's understand the Business Model of IPL. """Indian Premier
League." It has developed a unique
brand of cricket "that combines
entertainment with fast-paced action,"
"and attracts players from around the world.""" """The Indian Premier Leauge
or the IPL," has only been around
for 12 years. "But it's fast
becoming one of the most popular and valuable cricket leagues on the
planet.""" """India
has given a model for other countries to follow.""" """When the IPL is successful,
all these other places will set up their leagues.""" "I'm not sure if you remember this
friends," "about 1 year before
IPL began," ICL was established. "Not IPL, the ICL." The Indian Cricket League. It was special because it was started by a
private company. By the Zee
Entertainment Enterprises. "The
company that runs TV channels like Zee TV, Zee News, etc." This company set up this league. The concept of ICL was similar to the one of
IPL. "There were supposed to be
teams from different cities," "players
would be auctioned," "the
teams would buy the players," and
then they would play against each other.
"But neither did our cricketing board BCCI recognised the
ICL," nor did the international
cricketing board ICC. Both organisations
were displeased to see the larger number
of cricketers playing in the ICL. "To
prevent the players from playing in the ICL," the BCCI increased their salaries for playing
in their domestic tournaments. "And
said that the players who would play in the ICL," would face a lifetime ban from the BCCI
tournaments. BCCI did not want to have a
cricket league that it could not control.
"Later in September 2007,"
BCCI announced a similar league. The
Indian Premier League or the IPL. The
Vice-President of BCCI was Lalit Modi then.
The tournament was being organised under his supervision. He said that they did not draw inspiration
from the ICL. And that they were
developing this idea for a long time. "Earlier,
this idea was quite popular in football and basketball." "The English Premier League or EPL, a
tournament for football." And the
NBA in the USA for basketball. The first
season of IPL was played in April 2008. "The
previous restrictions on players preventing them from playing in the ICL," slowly killed off the ICL. The last season of ICL was played in 2009. It is important to know this because "if you want to understand the business
model of the IPL," you need to
understand how BCCI is at the centre of
this business model. BCCI is the
governing body of IPL. "Had a
tournament like the ICL gained popularity," the governing body of it would have been the
Zee Entertainment Enterprises. It's not
that BCCI is not a private company. The
BCCI is also considered a private entity.
It's an interesting fact. "Many
people consider BCCI as a government agency," but the government has no direct control over
the BCCI. But since the International
Cricket Council (ICC) recognises "BCCI
as the sole representative for the Indian team," "and for cricket in India," it gives BCCI the authority to head cricket
in India. "If someday the ICC stops
recognising BCCI," the BCCI would
not be considered the cricket authority in India any longer. And because BCCI is not directly controlled
by the Indian government.
There have been several controversies in the past between the BCCI and the Indian government. "But anyway, to return to our
topic," the responsibility of
conducting and organising IPL lies with the
BCCI. "In addition to BCCI, there
are three other main components" in
the Business Model of IPL. First: the
Broadcaster. The TV Channel on which you
watch IPL. Second: the teams of IPL. Owned by private companies and private
individuals. And the third: Sponsors. The private companies sponsoring IPL and the
IPL teams. And run ads on the TV
channels. BCCI is the fourth component
in this model and is the governing body
of IPL. They have 2 main sources of
revenue. First is the sponsorship amount
received by the BCCI. There are two
types of sponsors. "One, the title
sponsor." You'd recall it used to
be called DLF IPL at one point. Then it
was known as Pepsi IPL. Vivo IPL. And now we know it as Tata IPL. "The brand name that's used here with
the name IPL," is the title
sponsor. "Because whenever you'd
talk about IPL," you will recall
the name of the company as well. So
these brands pay a lot of money to become the title sponsor.
"Initially, in the first five seasons of IPL," DLF was the title sponsor with the sponsorship fees of ₹400 million
each year. It was paid to the BCCI. Then Pepsi paid ₹790 million per year. Vivo had spent a lot of money on this. ₹1 billion in 2016-17 and almost ₹4.4 billion in 2018-19. "The title sponsor in 2020 was
Dream11," but Vivo was back in
2021. "In 2020, Vivo withdrew as
the title sponsor" because of the
tensions between India and China and it
is a Chinese company. That's why Dream11
was the sponsor in 2020. But then Vivo
was back with ₹4.40 billion. You can see
how the Chinese company was willing to pay a large amount to be the sponsor. "For the title sponsor of this year,
Tata, it is estimated that" they'll
be spending ₹3.30 billion. Not as high
as Vivo. "With this, you can
understand why " Chinese sponsors
are coveted so much whenever IPL is organised. "Of the money received by BCCI from
the title sponsorship," 50% of it
is retained by them. And the remaining
50% is given to the teams. "Since
Tata has signed a contract for two years,"
Tata will remain the sponsor next year as well. "After that, Vivo may return or it may
be any company." "Keeping
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"By clicking on that link, you can get" Bitcoin worth ₹100 for free to sign up for Coinswitch. Do check it out and let's get back to the topic of this Blog. "In
addition to them, as the official sponsors of IPL." Brands that sponsor various aspects of IPL. "For example, CEAT tyres " has sponsored the strategy break. They had paid ₹300 million to sponsor the strategic timeout. "Apart from this, you might have noticed
commentators say" """The
'Cred Power Play' is going on.""" It is sponsored by Cred. Then they have the Dream11 Game Changer of
the Match. There are several companies
which sponsor multiple aspects. "In
total, it is estimated that" BCCI
receives around ₹2.10 billion from these official sponsors. "Sponsorships are a source of revenue
for BCCI," "apart from this,
the second important source of revenue for BCCI is" selling rights to the Broadcasters. IPL will have to be broadcasted on some TV
channel or the other so on which channel
should it be broadcast? Every TV Channel
would want to broadcast it so that they
can get a high rate of viewership. So
BCCI sells the Broadcasting Rights in
exchange for money to the TV channels. "For
the first 10 years of IPL," Sony
owned the media rights. From 2008 to
2017. They had spent ₹82 billion on it
in total. So almost ₹8.2 billion for
each season. "But then in
2018," Star Sports bought its rights at ₹164 billion for 5 years.
The approximate cost of it per year would be around ₹33
billion. "Even here, half the
amount received" is retained by
BCCI and the remaining is given to the
franchises of the participating teams. "If
you look at it from the perspective of the broadcaster," If Star Sports is willing to spend ₹160
billion. "it would be benefiting
out of it too," "because
obviously, they wouldn't spend this large amount for no reason." "Friends, the thing is that" not only do they earn back this amount they end up making profits from this deal. Because if you want to run an ad for 10
seconds on Star Sports during IPL 2022 you
will have to spend almost ₹1.5 million for the 10-second long ad. ₹1.45 million to be exact. It is the price charged by Star Sports if you want to run the ad during the match. The ads that are run between overs. Star Sports spends a considerable amount "and most likely, it earns a higher
amount" by running the ads of the
other sponsors on their TV channels. "Now, let's look at it from the
perspective of an IPL team." An IPL
team is owned by private companies or by
private individuals such as celebrities
and rich businesspersons.
They buy the IPL
teams "and after that, they have to
spend on a lot of things." When the
players are bought the IPL teams have to
pay the salaries of the players "for
their transportation, training," all
these expenses are borne by the IPL team.
It is estimated that "on
average, an IPL team spends" around
₹2 billion. It is a significant amount And the owners of the IPL teams "wouldn't want to bear these expenses
obviously," so where do they get
this money from? I've already told you
about one of the sources. BCCI shares
50% of its revenue with the IPL teams. But
it is not enough. "Even for the
teams, the main source of revenue is from the sponsors." There are team sponsors. The brand sponsorships can be seen on the
jerseys of the team members. "On
average, there are 10 brand logos on a regular IPL outfit." "6 on the jerseys, 2 on the pants," and 2 on their caps. The brands pay the IPL teams to put their logos on the outfit. "Apart from this, when you go to watch
the matches in the stadium," "the
revenue from the ticket you buy," 80%
of it goes to the IPL teams. "Specifically
speaking, for the stadium that's hosting the match" gives 80% of the revenue to the home team. "Such as if there's a match in the
Wankhede Stadium," 80% of the
revenue from the sale of tickets would
go to the Mumbai Indian teams. The
remaining 20% goes to the Home State Cricket Association.
Each team plays at least seven home matches. So the teams have an opportunity to earn from
this source as well. Although the
revenue from the sale of tickets doesn't make much money. It is estimated that the stadium ticket sales from one match make
about ₹40 million in a match. "And
since the price of food and beverages are hiked up there," it is another source of revenue. But ₹40 million on ₹50 million isn't very
significant "when you compare it to
the expenses of each team, around ₹2 billion." "Additionally, merchandising is also a
source of revenue for the IPL teams."
When you buy jerseys of your favourite teams. IPL merchandise can be of several types apart
from jerseys. "Such as keyrings,
mobile covers, chargers, caps," "joggers,
coasters, wrist bands," and many
other things.
That you can purchase at stores. The revenue from selling these merchandise goes directly to the IPL teams. "And finally, at the end, there's the
prize money." ₹200 million goes to
the winner of the IPL season. "And
the runner-up team, the one losing the final match," get about ₹130 million. "The loser of the Qualifier 2 match
would get ₹70 million," "and
the team losing the Eliminator match, get ₹65 million." Half of the prize money goes to the owners of
the team. And the remaining goes to the
players. It's divided equally among
them. "If you look at this from the
perspective of the players," "For
playing in the IPL, they obviously get a high salary," each player has their brand value. Famous players make more money during the
auctioning. "But in addition to
this, since half the prize money is equally distributed among the
players," this is an additional
motivation for the players to win the tournament. "If you look at the Business Model of
the IPL from the perspective of the teams,"
"as I've told you at the beginning of the Blog,"
The prize money is only ₹200 million. Whereas the average expense of an IPL team is
₹2 billion. And the brand values of the
IPL teams have started exceeding ₹20 billion as well. "So from the perspective of the owners
of the IPL teams," what motivates
them to own the winning team? Think
about it. Why would the owners of the
IPL teams want their teams to win the
tournament? ₹200 million isn't
significant in this context. It is not
because of this ₹200 million that they would want the team to win. "Instead, the real reason here is
the" brand value of their team. "If they win the IPL," it will be a sort of
publicity for their team. More people
would know and support their team. And
more people would watch the team's matches.
"And when they'd
get positive feedback from the people,"
"with more viewership,"
sponsors would also flock to the IPL team. And the brands will be willing to pay more to sponsor their logo on the jersey of that
IPL team. The brand value of the IPL
team is much more important from the
perspective of the Business Model rather
than the prize money. "Additionally,
the brand value of the IPL team," increases
when they get a famous player in their team.
"Like MS Dhoni playing for Chennai Super Kings," Virat Kohli for Royal Challengers Bangalore. Teams try to nab the good players. "Oftentimes, famous Bollywood stars and
famous businesspersons" increase
the brand value of the team. Take the
case of Shahrukh Khan and Kolkata Knight Riders. Teams also give out the stakes in the team. So that they can be bought by other private
companies. "For example, LIC holds
a 6.04% stake in Chennai Super Kings."
Rajasthan Royals had sold a 15% stake
to RedBird Capital Partners. So
this is how the Business Model of IPL works.
"If you enjoyed this Blog,"
I would definitely recommend
that you watch the other Blogs I
have on Business Models. I made one on
the Business Model of the T20 World Cup.
On the Business Model at work when the World Cup is organised. The flow of funds in it. I have made Blogs on the Business Models of several
companies as well. "Such as Amazon,
Tesla," You can click here to get
the playlist of the Business Models to watch them. Let's meet in the next Blog. Thank
you very much.