How IPL Teams earns income & maintain profits despite huge costs

Introduction:

IPL is the one thing which everyone is missing during this lockdown since it used to entertain us during every summer and we are addicted to it since it is the most interesting format of cricket where we can see rivalry between our favorite players.

We all know that IPL teams will incur huge costs in acquiring players (For example, KKR acquired Australian fast bowler Pat Cummins for a whooping price of Rs 15.50 Crores which is around Rs 4 Lakhs for every ball he is bowling assuming KKR will play 17 matches with team consisting of him and offering 4 overs every match played), administration costs like their travel and lodging expenses for every match and their team promotion other costs related to it.

Prize money for IPL 2019 for winning team was Rs 25 Crores and for runner up was Rs 12.5 Crores. At the outset after considering expenditure being incurred by every team as mentioned above, it is clear that prize money is just a minor source of income and there are so many other major sources of income. Detailed discussion will start below.

Sources of Income for IPL Teams:

• A major Source of income for IPL teams is Media rights for broadcasting IPL. When IPL was started in 2008, Sony has acquired broadcasting rights for ten years for a price of Rs 8200 Crores (i.e., 820 Crores per annum) but same rights for the five year period 2018-22 were acquired for a whooping price of Rs 16,347 Crores (i.e., 3,269 Crores per annum which is 4 times the earlier price) by Star India

Dramatic increase of price is due to ever increasing demand for watching cricket (mainly IPL) and higher advertisement income during IPL (for one 10 seconds slot during IPL Matches, Star India charges around Rs 6 Lakhs)

• Second major source of income is Title Sponsorship of IPL. Details of Sponsorship fee is tabulated below:

With an ever increasing title sponsorship fee, income of IPL teams is also increasing (especially from the year 2018 where it has witnessed more than 4 times increase).

Forty percent of Title Sponsorship Income and Media Rights shall go to BCCI and remaining sixty percent shall be distributed among the teams.

• Every IPL team has principal sponsors (Like Muthoot Group for CSK and DLF for MI) and Co-Sponsors whose logos and names were printed on their jerseys and caps etc. which is a source of income for individual team based on their individual popularities.

In a cricket ground, we will witness so many of the company’s logos and names not only on player’s jerseys as mentioned but also on cricket bats, dresses of umpires and helmets and even boundary lines and screens behind them. All those forms part of the income of the concerned IPL Team.

• Stadium ticket sales of the match forms part of considerable source of income. In an IPL match, Home Ground Team’s income shall include above portion of income and certain percentage of amount to be paid to the cricket association of that ground.

On a rough calculation of an average of 30,000 seats being filled up per match at a price of Rs 500, for seven matches to be played in its home ground, every team will earn Rs 10.50 Crores approx. p.a.

• Sale of Merchandise like Jerseys, Caps, Glouse, Band, Accessories, Autographed Posters etc. of IPL team (including online which will be done by an entity authorized by concerned team) will form part of concerned team’s income
• Trading of players between IPL teams (though not much recurring) is also a source of income
• Last but not the least, as discussed above, Prize Money for winning IPL trophy and for runner ups and qualifiers is also a source of income. Better performance in IPL will not only result in winning prize money but also increases brand value which will increase sponsorships for team
• As everyone knows, top 4 teams of IPL will be qualified for Champions League which will in turn provide share in Broadcasting Income etc. for qualified teams.

Conclusion:

From the year 2018, all IPL teams have started reporting profits due to manifold increase in broadcasting income and title sponsorship income. BCCI is also earning a considerable amount because of IPL.

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