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10 years and going strong: What makes the IPL's business model so attractive?

As cricket enthusiasts are all set to be glued to their television sets or mobile to watch the beginning of the 10th season of Indian Premier League (IPL), let’s revisit the beginning of the sporting event.

April 05, 2017 / 04:29 PM IST
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IPL


As cricket enthusiasts get set to be glued to their television sets for the beginning of the 10th season of Indian Premier League (IPL), it is worthwhile to ask the question: just how has the league gone from strength to strength despite its share of scandals and a cricket format (T20) that was pooh-poohed by purists as no more than entertainment.

Lalit Modi, the brain behind bringing business, entertainment and sports together, in 1994 toyed with the idea of launching a world class cricketing league. But the process to launch the IPL got expedited after the launch of Indian Cricket League (ICL), which was later trounced by the former.

Since launching in 2008, IPL has been a rage in the country and from corporates to movie stars, everyone wants to be a part of this sports-cum-glamour event.

What makes IPL’s business model so viable?

Before starting IPL in India, Modi studied business models of sporting leagues in US and Europe. This helped him to begin IPL on a firm footing.

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According to global valuation and corporate finance advisor Duff & Phelps, total value of IPL jumped to USD 4.16 billion after season 9 (2016 edition); against USD 3.54 billion in 2015.

New brands heavily bet on IPL to make a mark amidst consumers and Chinese phone maker Oppo is an example of that. The company is bullish on IPL and is backing its growth in the event. It has spent Rs 1079.29 crore for the apparel and gear sponsorship rights for Team India.

Coming in second was Vivo that spent Rs 768 crore in IPL to make a strong entry in India.

Sony Pictures Network has 14 major sponsors and this season Sony expects to earn Rs 1,300 crore revenue against Rs 1,100 crore in 2016.

But while the IPL brand value has soared, it has not been a straight ride for IPL teams over the years.

The main source of income for IPL teams is in the form of central rights -- the share in the IPL revenue that the BCCI pays to the teams. The other way the teams earn money is through sponsorships.

Then, there is sale of tickets, income from trading players with other franchises, merchandise sales and also the prize amount which a team gets after winning a season.

Performance check of the 8 IPL teams playing this year

Kolkata Knight Riders

Topping the list will be Kolkata Knight Riders (KKR) as this is the only team which has not only been consistent on field but also in profit making. Star power of Shah Rukh Khan has been a contributor to bring the team in the profit zone.

According to data analytics firm Tofler, KKR reported profits of Rs 14.15 crore in 2016, up from Rs 9.19 crore in the previous year.

Knight Riders Sports Pvt Ltd, which runs KKR, had clocked in revenues of Rs 168.71 crore in 2014-15, up from Rs 128.81 crore in the previous year.

Mumbai Indians

Mumbai Indians (MI) won two seasons out of 9, one in 2013 and the other in 2015. As price money received by a winning team is one of the biggest revenue sources, MI turned corner when its revenue slipped.

The team earned Rs 220.87 crore in 2013-14, the year it won its first IPL. Next year, its revenues slipped to Rs 167.75 crore, but the firm managed to reduce its loss to Rs 3.87 crore.

Royal Challengers Bangalore

Despite of having star players like Virat Kohli and AB de Villiers, Royal Challengers Bangalore (RCB) reported losses of Rs 30.06 crore in 2014-15, Rs 99.04 crore in 2013-14, and Rs 7.86 crore in 2012-13.

Delhi Daredevils

Delhi Daredevils, the team which is run by GMR Sports, saw profits in financial year 2013-14. However, the team was in red in 2014-15 when its revenue dipped to Rs 112.87 crore from Rs 151.22 crore in the previous year.

Kings XI Punjab

Kings XI Punjab saw its profits shrinking and reported a loss of approximately Rs 9.4 crore in 2016. The company owned by Bollywood actor Preity Zinta along with Ness Wadia and Mohit Burman, reported net profit at Rs 12.7 crore in 2015 to Rs 3.3 crore in 2016.

Sun Risers Hyderabad

Joining the IPL brigade, Sun Risers Hyderabad (SRH) took the place of Deccan Chargers in 2013. But, it was a slow start for the team which reported loss of Rs 58.33 crore in FY2014-15.

Exuding confidence in the team, SRH’s owner SL Narayanan is hopeful that the team will start “making significant free cash flows post FY 2018 when its commitment of annual licence fee of Rs 85 crore to the Indian cricket board BCCI ends.”

Earnings of the remaining two teams, Gujarat Lions and Rising Pune, that are replacements of Chennai Super Kings and Rajasthan Royals are not yet available.

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