Wanna take a look @ the IPL Economics ?
A fortnight is too short a time to judge the success of a concept, especially when it is something as revolutionary as the Indian Premier League (IPL). Yet, those behind the IPL, including the Board of Control for Cricket in India (BCCI), may have enough reason to smile as the third season of the tournament is set to have a successful grand finale. However, there is little doubt that the recent controversies surrounding IPL chairman Mr Lalit Modi has affected the brand value and credibility of this business entity to some Extend.
In this article I will not be discussing about any kind of controversies, but I am going to bring the entire monetary policy of IPL. Before i start anything let me take back to the Indian History . The British East India company ruled India over 100 years .The policy so called â€œ Divide and rule â€œ made things easy for the British .Today after 63 years of our independence , the god father of Indian cricket (BCCI) has applied the same divide &rule policy. They divided the India into cities and appointed Mr Lalit Modi as the viceroy.
The cities were put on to an auction table and well know Indian conglomerates bagged those deals . The new owners of Indian cricket were neither the old princess nor the bureaucrats, who forced into sports. They are serious business men who running efficient business all over the world. The table below contains the auction price of each cities and the owner.
IPL had $2.3b dollar revenue before a ball was bowled! .1.6 billion from television- rights ,whichÂ had been sold for 10 years. The remaining 0.7 billion was from the money in which all the franchises putting in.
Ticket sale :
Our population, for a long time we though as a biggest problem. Today eventually it became our great asset. The more people watch ,more the profit for IPL and each franchises . If the crowds that have thronged the stadiums at every single venue ,then the IPL may have caught the imagination of the masses. The entire concept of IPL is based on the assumption that the public will take a fancy to supporting league teams, as opposed to national teams, and come out in large numbers to watch their favourite stars play, whatever their nationality.
The title sponsorship fee of Rs 40 crore per annum for the next five years to be paid by DLF will be shared with the franchises. IPL will retain 40 per cent of this with the balance 60 per cent to be shared between the franchisees equally. While these revenues accrue from the central pool to the franchisees, they will generate team sponsorship at individual levels. For instance, Nokia is the team sponsor for Kolkata Knight Riders while Aircel sponsors Chennai Super Kings and Fly Emirates Sponsor Kings X1 Punjab. This revenue will remain wholly with the franchisees. Some teams such as Mumbai Indians have multiple sponsors in MasterCard and Idea all of which are endorsed on team jerseys.
Now lets take a look at how money has been flowing in and out for last few years in the IPL .
The critical question is: Will the franchises break even in the first year itself? The answer could differ across franchises, as the sponsorship models that they have assumed are different. While some of them have gone for straightforward team sponsorship, others have taken sponsors on board as partners. For example Teams like RCB will not make any money from sponsorship as their main sponsors are Kingfisher because the Owners equity belongs to the same person, as both entities are under UB group.
Note : figure in Crores (Rs) and based on year 1 data .
This is quite amazing that KKR and RR break even in the first year itself . Itâ€™s a great achievement after spending millions of dollars. I believe the bottom line of this extravagant money bonanza is â€œ Winning doesnâ€™t matter â€œ and I have stats from KKR to support my hypothesis .
NOTE: This is an article by my friend Nithin Jose (Nit), who is studying Business Management @ Singapore. Please share your opinions on this as comments below. You can contact Nithin @ Facebook