DLF Indian Premier League (IPL) is mix of entertainment and Twenty 20 cricket. The marketing and revenue models of IPL also make an interesting business case study.
Q: How did the idea of IPL Twenty 20 Cricket originate?
A: It all began with the formation of Indian Cricket League (ICL) by media baron, Zee group’s Subhash Chandra to counter BCCI’s strength in Indian cricket. The ICL had senior players from all cricket playing nations (most were nearing retirement) and young budding cricketers from different parts of India.
To take advantage of the growing popularity of Twenty-20 cricket, BCCI and Lalit Modi conceived of an alternative cricket tournament, with the backing of ICC, built on the larger pattern of the English Premier League.
The idea had all the ingredients to be a success – top cricket players of the world, cricket crazy Indians having a perfect viewing experience in summers/ holiday season during prime time TV, presence of Bollywood celebrities, corporate and involvement of state political leaders.
Q: How do IPL cricket teams get to select individual players?
A: The players of each IPL team are chosen through an open auction with individual player being put up for bidding by the franchises and the highest bidder becomes the buyer. Each player has a ‘base annual fee’ which is on a pro-rata basis depending on his availability. In the first season of IPL, there were 78 cricket players to choose from.
Each IPL Franchise has a maximum limit of $5 million to spend on bidding for players, and the contract for each player is for 3 years. In addition, there are icon players – like Sachin Tendulkar, Yuvraj Singh and MS Dhoni – whose fee is 115% of the highest player fee.
Q: What are the composition rules for an IPL squad?
Each franchise squad in IPL should have a minimum of 16 players and at least 4 of these players should be under the age of 22 years. There can be a maximum of 8 foreign players per squad (that cap was raised to 10 in IPL 2009) and a maximum of 4 foreign players can be part of the playing XI for each match.
Q: What is the IPL trading window?
In 2009, the IPL trade window was open for a period of 1 month where 7 players were traded among different franchises. Then we saw another auction where Andrew Flintoff and Kevin Pietersen emerged as the most valuable (read expensive) players.
Q: What is the exact format of IPL T20 Cricket?
A: Each cricket team meets the other team in the IPL league twice, once at home and once away. For instance, if there are total 8 teams in IPL, each will play a total of 14 matches. The top four teams will qualify for the semi-finals stage. The winners from the semi-finals clash in the IPL finals and thus the whole tournament will have 56 matches in all.
Economics of the Indian Premier League
Q: How does IPL make money?
- Auction of broadcasting rights
- Title sponsorship and corporate sponsorship
- Sale of tickets (20% of tickets allocated to IPL)
- Auction of franchisees rights
- Official umpire’s sponsorships
Q: How is the IPL income distributed?
- Share of broadcasting money with franchisees
- Share of sponsorship money with franchisees
- Share of ticket money with franchisees
- Inauguration expenses
- Prize money: $5 million ($3 million for winner; $2 million divided among others)
Q: What are the sources of income for an IPL Franchisee (ROI)?
- Share in revenue from broadcast rights (equal share for all franchisee after IPL’s share)
- Share in sponsorship money (60% of the amount distributed equally)
- Share in revenue from sale of tickets
- Revenue from in-stadium advertising
- Sale of players to other franchisee
- Revenue from own sponsorship and corporate sponsorship
Q: How is the Franchisee income distributed?
- Franchisee fees – 10% of total franchisee costs every year to IPL
- Players’ cost (Each franchise have paid around $4-6 million per year)
- Match fees and Inauguration expenses
- Rent of stadium (expense of around Rs.2.5mn per match)
- Marketing and promotional cost (around $3-4mn per team)
- Fee for coaches, physiotherapists and other members.
- Administrative cost
Future Opportunities for IPL Twenty20 Cricket
Title sponsorship: DLF paid around $50 million to secure the title sponsorship for the first five years and this is is renegotiable after the third year. If IPL Cricket gains momentum, it can be much higher.
Player trading: In the IPL trade window, players can be sold for many times the cost at which they were acquired.
Gate fees: Beyond the third year, gate fees can increase significantly if the IPL takes off in a big way.
Franchise sale: After the third year, a franchisee has the option to sell out. This could lead to a windfall.
Franchise forever: The franchise fee is for the first 10 years, after which franchisees continue to own the teams for perpetuity.
Potential Downsides of IPL
Not enough eyeballs: Sony-WSG and the franchises could suffer losses if IPL fails to wins over spectators and viewers, and draws a critical mass.
Not enough star players: Constant availability of top overseas players may not be possible, due to growing number of international Cricket tournaments.
Other tournaments: Potential viewership threat if the ICC decides to hold an annual international Twenty20 cricket championship.
Ad blues: Recession and change of venue could affect plans of potential advertisers.
Game pull: Business prospects may be affected if the franchisees fail to create a loyal fan following in their turf.
The Indian Premier League (IPL), officially Vivo Indian Premier League for sponsorship reasons, is a professional Twenty20 cricket league in India contested during April and May of every year by teams representing Indian cities. The league was founded by the Board of Control for Cricket in India (BCCI) in 2007, and is regarded as the brainchild of Lalit Modi, the founder and former commissioner of the league. IPL has an exclusive window in ICC Future Tours Programme.
The IPL is the most-attended cricket league in the world and in 2014 ranked sixth by average attendance among all sports leagues. In 2010, the IPL became the first sporting event in the world to be broadcast live on YouTube. The brand value of IPL in 2017 was US$5.3 billion, according to Duff & Phelps. According to BCCI, the 2015 IPL season contributed ₹11.5 billion (US$182 million) to the GDP of the Indian economy.
The current IPL title holders are the Mumbai Indians, who won the 2017 season.
The Indian Cricket League (ICL) was founded in 2007, with funding provided by Zee Entertainment Enterprises. The ICL was not recognised by the Board of Control for Cricket in India (BCCI) or the International Cricket Council (ICC) and the BCCI were not pleased with its committee members joining the ICL executive board. To prevent players from joining the ICL, the BCCI increased the prize money in their own domestic tournaments and also imposed lifetime bans on players joining the ICL, which was considered a rebel league by the board.
"The IPL has been designed to entice an entire new generation of sports fans into the grounds throughout the country. The dynamic Twenty20 format has been designed to attract a young fan base, which also includes women and children."
On 13 September 2007, the BCCI announced the launch of a franchise-based Twenty20 cricket competition called Indian Premier League whose first season was slated to start in April 2008, in a "high-profile ceremony" in New Delhi. BCCI vice-president Lalit Modi, said to be the mastermind behind the idea of IPL, spelled out the details of the tournament including its format, the prize money, franchise revenue system and squad composition rules. It was also revealed that the IPL would be run by a seven-man governing council composed of former India players and BCCI officials, and that the top two teams of the IPL would qualify for that year's Champions League Twenty20. Modi also clarified that they had been working on the idea for two years and that IPL was not started as a "knee-jerk reaction" to the ICL. The league's format was similar to that of the Premier League of England and the NBA in the United States.
In order to decide the owners for the new league, an auction was held on 24 January 2008 with the total base prices of the franchises costing around $400 million. At the end of the auction, the winning bidders were announced, as well as the cities the teams would be based in: Bangalore, Chennai, Delhi, Hyderabad, Jaipur, Kolkata, Mohali, and Mumbai. In the end, the franchises were all sold for a total of $723.59 million. The Indian Cricket League soon folded in 2008.
Expansions and terminations
On 21 March 2010, it was announced that two new franchises – Pune Warriors India and Kochi Tuskers Kerala – would join the league before the fourth season in 2011. Sahara Adventure Sports Group bought the Pune franchise for $370 million while Rendezvous Sports World bought the Kochi franchise for $333.3 million. However, one year later, on 11 November 2011, it was announced that the Kochi Tuskers Kerala side would be terminated following the side breaching the BCCI's terms of conditions.
Then, on 14 September 2012, following the team not being able to find new owners, the BCCI announced that the 2009 champions, the Deccan Chargers, would be terminated. The next month, on 25 October, an auction was held to see who would be the owner of the replacement franchise, with Sun TV Network winning the bid for the Hyderabad franchise. The team would be named Sunrisers Hyderabad.
On 14 June 2015, it was announced that two-time champions, Chennai Super Kings, and the inaugural season champions, Rajasthan Royals, would be suspended for two seasons following their role in a match-fixing and betting scandal. Then, on 8 December 2015, following an auction, it was revealed that Pune and Rajkot would replace Chennai and Rajasthan for two seasons. The two teams were the Rising Pune Supergiant and the Gujarat Lions.
Currently, with eight teams, each team plays each other twice in a home-and-away round-robin format in the league phase. At the conclusion of the league stage, the top four teams will qualify for the playoffs. The top two teams from the league phase will play against each other in the first Qualifying match, with the winner going straight to the IPL final and the loser getting another chance to qualify for the IPL final by playing the second Qualifying match. Meanwhile, the third and fourth place teams from league phase play against each other in an eliminator match and the winner from that match will play the loser from the first Qualifying match. The winner of the second Qualifying match will move onto the final to play the winner of the first Qualifying match in the IPL Final match, where the winner will be crowned the Indian Premier League champions.
Player acquisition, squad composition and salaries
A team can acquire players through any of the three ways: the annual player auction, trading players with other teams during the trading windows, and signing replacements for unavailable players. Players sign up for the auction and also set their base price, and are bought by the franchise that bids the highest for them. Unsold players at the auction are eligible to be signed up as replacement signings. In the trading windows, a player can only be traded with his consent, with the franchise paying the difference if any between the old and new contract. If the new contract is worth more than the older one, the difference is shared between the player and the franchise selling the player. There are generally three trading windows–two before the auction, and one after the auction but before the start of the tournament. Players can not be traded outside the trading windows or during the tournament, whereas replacements can be signed before or during the tournament.
Some of the team composition rules (as of 2018 season) are as follows:
- The squad strength must be between 18 and 25 players, with a maximum of 8 overseas players
- Salary cap of the entire squad must not exceed ₹80 crore
- Under-19 players can not be picked unless they have previously played first-class or List A cricket
- A team can play a maximum of 4 overseas players in their playing eleven
The term of a player contract is one year, with the franchise having the option to extend the contract by one or two years. Since the 2014 season, the player contracts are denominated in the Indian rupee, before which the contracts were in U.S. dollars. Overseas players can be remunerated in the currency of the player's choice at the exchange rate on either the contract due date or the actual date of payment. Prior to the 2014 season, Indian domestic players were not included in the player auction pool and could be signed up by the franchises at a discrete amount while a fixed sum of ₹10 to 30 lakh would get deducted per signing from the franchise's salary purse. This received significant opposition from franchise owners who complained that richer franchises were "luring players with under-the-table deals" following which the IPL decided to include domestic players in the player auction.
According to a 2015 survey by Sporting Intelligence and ESPN The Magazine, the average IPL salary when pro-rated is US$4.33 million per year, the second highest among all sport leagues in the world. Since the players in IPL are only contracted for the duration of the tournament (less than two months), the weekly IPL salaries are extrapolated pro rata to obtain average annual salary, unlike other sport leagues in which players are contracted by a single team for the entire year.
The 2015 season of the IPL offered a total prize money of ₹40 crore (US$6.1 million), with the winning team netting ₹15 crore (US$2.3 million). The first and second runners up received 10 and 7.5 crores, respectively, with the fourth placed team also winning 7.5 crores. The others teams are not awarded any prize money. The IPL rules mandate that half of the prize money must be distributed among the players.
IPL games utilise television timeouts and hence there is no time limit in which teams must complete their innings. However, a penalty may be imposed if the umpires find teams misusing this privilege. Each team is given a two-and-a-half-minute "strategic timeout" during each innings; one must be taken by the bowling team between the ends of the 6th and 9th overs, and one by the batting team between the ends of the 13th and 16th overs.
Tournament seasons and results
Main articles: List of Indian Premier League seasons and results and List of Indian Premier League records and statistics
Out of the thirteen teams that have played in the Indian Premier League since its inception, one team has won the competition three times, two teams have won the competition twice each and three other teams have won it once each. The Mumbai Indians are the most successful team in league's history in terms of the number of titles won. The Chennai Super Kings and Kolkata Knight Riders have won two titles each, and the other three teams who have won the tournament are the Deccan Chargers, Rajasthan Royals and Sunrisers Hyderabad. The current champions are Mumbai Indians who beat Rising Pune Supergiant in the final of the 2017 season to secure their third title and thus became the most successful team in IPL history ever.
Main article: List of Indian Premier League awards
Main article: Orange Cap
The Orange Cap is awarded to the top run-scorer in the IPL during a season. It is an ongoing competition with the leader wearing the cap throughout the tournament until the final game, with the eventual winner keeping the cap for the season.
Main article: Purple Cap
The Purple Cap is awarded to the top wicket-taker in the IPL. It is an ongoing competition with the leader wearing the cap throughout the tournament until the final game, with the eventual winner keeping the cap for the season.
From 2008 to 2012, the title sponsor was DLF, India's largest real estate developer, who had secured the rights with a bid of ₹200 crore for five seasons. After the conclusion of the 2012 season, PepsiCo bought the title sponsorship rights for ₹396.8 crore for the subsequent five seasons. However, the company terminated the deal in October 2015 two years before the expiry of the contract, reportedly due to the two-season suspension of Chennai and Rajasthan franchises from the league. The BCCI then transferred the title sponsorship rights for the remaining two seasons of the contract to Chinese smartphone manufacturer Vivo for an undisclosed amount, estimated to be about ₹200 crore. In June 2017, Vivo retained the rights for the next five seasons (2018–2022) with a winning bid of ₹2199 crore, in a deal more expensive than Barclays' Premier League title sponsorship contract between 2013 and 2016.
|Title sponsor||Period||Sponsorship fee (per year)|
The IPL has seen a spike in its brand valuation to US$5.3 billion after the 10th edition, according to global valuation and corporate finance advisor Duff & Phelps. The brand value of IPL was estimated to be US$4.5 billion in 2015 by American Appraisal, a Division of Duff & Phelps. Duff & Phelps added that the value of brand IPL has jumped to $4.16 billion after the 2016 edition, against $3.54 billion in 2015. The 19% jump is despite the fact that the US dollar to Indian rupee currency has depreciated by nearly 10%.
Team Valuation as on 2017,
The IPL's broadcast rights were originally held by a partnership between Sony Pictures Networks and World Sport Group, under a ten-year contract valued at US$1.026 billion. Sony would be responsible for domestic television, while WSG would handle international distribution. The initial plan was for 20% of these proceeds to go to the IPL, 8% as prize money and 72% would be distributed to the franchisees from 2008 until 2012, after which the IPL would go public and list its shares. However, in March 2010, IPL decided not to go public and list its shares. As of the 2016 season, Sony MAX, Sony SIX, and Sony ESPN served as the domestic broadcasters of the IPL; MAX and SIX aired broadcasts in Hindi, while SIX also aired broadcasts in the Bengali, Tamil, and Telugu languages. Sony ESPN broadcast English-language feeds.
The IPL became a major television property within India; Sony MAX typically became the most-watched television channel in the country during the tournament, and by 2016, annual advertising revenue surpassed ₹1,200 crore. Viewership numbers were expected to increase further during the 2016 season due to the industry adoption of the new BARC ratings system, which also calculates rural viewership rather than only urban markets. In the 2016 season, Sony's broadcasts achieved just over 1 billion impressions (television viewership in thousands), jumping to 1.25 billion the following year. Sony also broadcast a companion talk show, Extraaa Innings T20.
On 4 September 2017, it was announced that the then-current digital rightsholder, Star India (a subsidiary of 21st Century Fox), had acquired the global media rights to the IPL under a five-year contract beginning in 2018. Valued at ₹16,347.5 crore (₹163.475 billion, US$2.55 billion, £1.97 billion), it is a 158% increase over the previous deal, and the most expensive broadcast rights deal in the history of cricket. The IPL sold the rights in packages for domestic television, domestic digital, and international rights; although Sony held the highest bid for domestic television, and Facebook had made a US$600 million bid for domestic digital rights (which U.S. media interpreted as a sign that the social network was interested in pursuing professional sports rights), Star was the only bidder out of the shortlist of 14 to make bids in all three categories.
Star CEO Uday Shankar stated that the IPL was a "very powerful property", and that Star would "remain very committed to make sure that the growth of sports in this country continues to be driven by the power of cricket". He went on to say that "whoever puts in that money, they put in that money because they believe in the fans of the sport. The universe of cricket fans, it tells you, continues to very healthy, continues to grow. What was paid in 2008, that was 2008. India and cricket and IPL—all three have changed dramatically in the last 10 years. It is a reflection of that." The deal led to concerns that Star India now held a monopoly on cricket rights in the country, as it is also the rightsholder of ICC competitions and the Indian national team.
IPL Governing Council
The IPL Governing Council is responsible for all the functions of the tournament. The members are Rajeev Shukla, Ajay Shirke, Sourav Ganguly, Anurag Thakur and Anirudh Chaudhary. In January 2016, the Supreme Court appointed Lodha Committee to recommend separate governing bodies for the Board of Control for Cricket in India (BCCI) and the Indian Premier League (IPL), where Justice RM Lodha suggested a One State-One Member pattern for the board.
- ^The team was founded in 2012 and made its IPL debut in the 2013 season
- ^The team was founded in 2015 and made its IPL debut in the 2016 season
- ^The team was founded in 2010 and made its IPL debut in the 2011 season
- ^The team was founded in 2010 and made its IPL debut in the 2011 season
- ^The team was founded in 2015 and made its IPL debut in the 2016 season
- ^media report estimate