The IPL Business Model “Reading poetry and watching cricket were the sum of my world, and the two are not so far apart as many aesthetes might believe. ” -Donald Bradman
Team Bidding LOL!! “Royal Challengers’ mantra ‘winning will be a habit with us’.” – Vijay Mallya
The bidding process
Player Auctions For IPL season 4 : 10 teams can spend $7 million each; an increase of $2 million. Effectively $ 70 million can be spend which translates to Rs 1000 cr. Teams given an option to retain 4 Indian players and 3 foreign recruits.
Government revenue IPL season 1 : 91 cr IPL season 2 : major loss of revenue as IPL was held in South Africa. IPL season 3 : 200 cr Direct Tax: Rs 100 cr Tax deducted at source (TDS) from the remuneration paid to players, umpires, coaches and commentators. Service Tax : Rs 100 cr Advertising, marketing and consultancy services
BROADCASTERS IPL FRANCHISEES
Player Revenues & Valuation
Player Valuation Cricket player valued for his on-the-field and perhaps, off-the-field performance. Estimating the value of a player having different attributes using,hedonic price equation Pi = g ( zi1, …,zij, …, zin) where Pi is the final bid price paid to a cricketer i for the IPL tournament and zijis the value of the attribute j of the cricket player i
Franchisee Revenues Media rights – To be shared equally amongst franchises after removing IPL’s share. Sponsorship rights (IPL sponsors) – 60% of the amount collected to be distributed equally amongst the franchises. Local Sponsorships – Team sponsorship revenues Gate receipts – Are anticipated to be a major source of revenues. 20% of tickets are to be allocated to IPL.
Expenses Team franchising costs – A franchisee has to pay 10% of total franchisee costs every year to IPL Player costs –US$4-6mn per year. This includes cost of managers and coaches. Each franchise has 18-22 players who are tradable after a year. The players have a three year contract with the franchise. Marketing costs –US$3-4mnby franchisee for promoting its team. Stadium expenses – Franchises have to contract stadiums for 7 matches at BCCI agreed rates. On an average, the expense is Rs2.5mn per match. Other expenses- Administration and event management.
Profit and Loss of a franchise over 10 years The Business of Sport
Revenue from Media rights
The Broadcasting angle The BCCI created history when it sold television rights of this yet untested format to Sony– World Sports consortium for US$1.02 bn US$ 1.02bn (-)US$ 108mn ( Promotion expenses ) (=) US$ 918mn ( Actual cost ) US$ 316mn US$ 608mn (Broadcasting rights (Broadcasting rights first 5 yrs ) next 5 yrs )
The Broadcasting angle
Ad Revenues Advertising revenues for Broadcaster have seen a steady increase since inception of IPL
IPL Revenue from other sources of Media UFO Moviez have Theatre rights You Tube will show live telecast with five minute delay. You Tube sponsored for Rs 1.5cr & Rs 4 cr ITV has taken UK television rights The general entertainment channel of Viacom 18 group (MTV, IBN7, CNBC) colors will air a show “IPL Rockstar”. A deal of about $130 million (About Rs 600 crore.)
All these sponsorship revenues fall under the Central Pool
Sponsorships IPL’s umpire partner -Kingfisher Airlines has been named with rights to advertise of umpire’s clothes and also sponsoring third umpire decisions for five years. The deal is worth Rs. 106 cr (appx. US$ 26.5 mn). All these revenues fall under the Central Pool 100 % 40 % 54% 6% (IPL ) (Franchises) (Prize Money)
IPL VS EPL
Media revenues for all teams would be almost EQUAL
Gate revenues dependent on stadium capacity and purchasing power of city.
They vary between Rs500-Rs50000 premium seating. 20% of tickets will go to IPL
In India, it is yet to develop. This would be a litmus test for IPL’s success.
They vary depending on the success of the league.
Internationally, most of these teams own stadiums.
The club culture already existed in the West.
Impact of IPL on other Media If Stalin had learned to play cricket, the world might now be a better place. -Richard Downey
IPL is scheduled to be telecast in the most sought after prime time slot of 8-11 pm. This Slot is the most popular among housewives for soaps aired on (GECs) like Star Plus, Zee and Set. IPL will cause a dent in the ratings and revenues of other GECs. Regional channels which hitherto did not face competition from national level reality shows are likely to take a big hit. TV General Entertainment Channel
TRPs 2008-09 2010-11 The average half-hour ratings of top general entertainment shows are around 10-12% more than IPL III during the first nine days of the T-20 tournament Advertisers have realised that Hindi GECs on a weekly basis generate GRPs of 1,300-1400 while IPL is around 10% of this.
Box office There is a decline in the number of releases owing to IPL IPL fever has a negative rub off on the revenues of movies at the box office. Some of the movies releasing in the IPL season are , U me aur ghost , love sex aurdhoka etc. Multiplexes like Cinemax and PVR screen all the matches. Talks are also on to telecast the semi-finals and finals in 3D.
IPL BETTING *We had to dedicate a slide to this team
Gambling in Cricket How to Bet?There are bets for every match. Betting usually begins few hours before the match. What are Odds? Odds indicate the $’s that you will win in return for each $ you bet if your prediction comes true. Odds in the game may vary while the betting is open, depending on many factors. What are Payouts? Payout is the final amount of $ which you’ll earn if you win the bet.
“Cricket must be the only business where you can make more money in one day than you can in three.” -Pat Gibson Total IPL betting – 6000 crores* The Law says “NO” Online Betting possible on sites like betfair.com Bookies say its MI this time. “Today’s commercially successful venture, may not be so, in five years time, and the game, has to be protected, for future generations. ” - M S Gill "Picking an IPL winner is darn hard. Rajasthan produced the turn up of turn ups in the inaugural season. Deccan, who finished bottom that year with only two wins, were transformed into champs 12 months later.“ - Ed Hawkins , Betfair.com
What's the Future?
Future Prospects Opting for Private Equity In EPL football, the putative model for the IPL, the American owners of Manchester United and Liverpool have both used their clubs' assets as financial leverage in other sections of their corporate empires, and reaped the wrath of the fans. The same is the case with the owners of franchises in the IPL. The shameless power of money will shape cricket’s destiny.
The ICC "will be empowered not by self-centred countries but by businessmen with high expectations" who are "free from impossible responsibilities and the petty politicking" that mars international cricket. The Indian Premier League will soon be played in the United States of America. The change from patronage to ownership will prove a giant step.
What do we finally have to say?
Show me the Money: Money and Opulence rule at the IPL.
India Shining: IPL is a total win-win for India.
The Best The World Has To Offer
Metros going Global: IPL teams are homogeneous yet heterogeneous.
Changed But Rooted: Cricket has evolved - from tests to ODIs to 20-20s & now to league. Yet, there is heritage, tradition & familiarity.
Fast and Furious: IPL is instant gratification.
Page 3 Is The Way To Be: IPL has just the right mix of Bollywood and Cricket.
Desperately seeking Entertainment: IPL is a great new hangout.
Media Maketh the Man: . IPL has provided the media with all the big bucks and glamour which makes for great coverage.
Ready for a change: IPL offered a whole new experience & India was ready to give it a try.
But eventually it is a game of cricket. -SachinRameshTendulkar