IPL: Understanding the Indian Premier League's financial levers
Those who have stayed invested since the inception of the Indian Premier League — including a majority of the eight original franchise owners — have been raking in the moolah ever since the revenue model changed after the completion of the first decade.
Published : Sep 10, 2020 12:56 IST
When the seeds of the Indian Premier League (IPL) were sown in the latter half of 2007, many felt it was the Board of Control for Cricket in India’s (BCCI’s) knee-jerk reaction to the rival Indian Cricket League (ICL). There were skeptics — even within the BCCI boardroom — who thought the IPL founding chairman (who took great pride in being a self-anointed commissioner and had the full backing of the then BCCI chief) was being shortsighted in launching an ambitious project.
Perhaps they were right. The kind of controversies IPL has been dragged into over the years just proves that it’s far from a perfect product. But when it comes to the quality of cricket and the business side, the BCCI seems to have hit the bull’s eye. No doubt, even the now-sidelined IPL founding chairman would not have envisaged that his calculated risk of amalgamating cricket, entertainment and corporate India under one umbrella would pay such rich dividends.
In fact, the business side has thrived so much over the last decade that the IPL is often referred as Indian Paisa League. And those who have stayed invested since its inception — including a majority of the eight original franchise owners — have been raking in the moolah ever since the revenue model changed after the completion of the first decade. That it coincided with the broadcast rights deal going through the roof turned out to be an icing on the cake for all the team owners.
Ranjit Barthakur, the executive chairman of Rajasthan Royals, believes that the IPL has not only been an exciting investment for the franchises, but has also opened a lot of opportunities. “It is the strongest Indian sports brand which is exciting and has only grown over the last 13 years. Not just cricket, it has also created opportunities for a lot of people associated with it,” Barthakur says.
For much of the first decade, the franchises were bleeding or barely breaking even, considering the high costs and low returns involved. While the annual franchise fee for each of the first decade varied between ₹27 crore and ₹45 crore, the outflow to players escalated from ₹20 crore in the inaugural edition to ₹80 crore in 2017. Add to that the support staff salaries, operational costs and marketing costs, and it was indeed a tough ask for a franchise to be in the green.
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Kings XI Punjab co-owner Ness Wadia believes that it’s the “emotional connect” with the tournament that has made the franchises stick around for so long. “It’s been incredible since day one. It has been amazing to see the young players come from nowhere and become stars. And that way, the IPL has had a major impact on the sporting scene of the country,” Wadia says. “After the IPL, so many other leagues have opened up.”
Once the income from the central revenue pool started going up from 2013 to 2017, the franchises started heaving a sigh of relief. But it was the broadcast deal in 2018 that assured BCCI of ₹16,347 crore for five editions of IPL that turned out to be the game-changer. It meant that each franchise would take home at least ₹200 crore — even during a pandemic-hit year like 2020. Add to that the sponsorship and gate receipts that the franchises generate and the franchises had more than money to expand their horizons.
“IPL is a unique property, which can have local brands as well as national brands riding on it,” says brand strategist Harish Bijoor. “IPL is no longer about the big-brand sponsors. The economic ecosystem essentially has big brand names and also has smaller players. Essentially, the IPL has its money from both the micro- and macro-ecosystems. It is not a one-nation competition, but a micro-set of nations playing one another.”
No wonder then that multiple franchises, including Kings XI Punjab, have invested in other T20 leagues across the globe. “The opportunities have increased manifold. As far as the sports dynamics is concerned, the IPL has become a good profession for players to explore. It has also benefited the allied business and the overall sports industry becoming more professional,” says Wadia, who is also a co-owner of St Lucia Zouks in the Caribbean Premier League along with his partners Mohit Burman and Preity Zinta.
Barthakur stresses on how the IPL has led to a “sporting revolution” in India and has resulted in mushrooming of “many other leagues” across disciplines in the country. While the pandemic has virtually put a full-stop to most of the other leagues in India, the IPL has managed to hold its ground and come out mostly unscathed — financially — from the turmoil.