IPL business model

NB

ARPAN GHOSH

PRASANTH NARISETTY

VAIBHAV DAHIMA

RAMAKANTH GOENKA

SHIVAM SRINIVAS

IPL- Business model “An Innovative sports entertainment”

Brief intro…..

• The season commenced on the 18 April 2008 with the final match held on 1 June 2008 and so far 8 different sessions has been completed.

• It was initiated by Lalit Modi, who served as the league's first Chairman and Commissioner and Board of Control for Cricket in India (BCCI).

• In 2010, IPL became the first sporting event ever to be broadcast live on YouTube.

• Its brand value is estimated to be more than US $ 8 billion in eighth season (Estimated).

• It became the biggest competitor of multiplex in India.

TEAM PERFORMANCES

Notes: W = Winner; R = Runner-up; = Semifinals/Knockouts; DNP = Did not play/participate; TBC = To be confirmed

The 2015 season of the IPL offered a total prize money of ₹40 crore (US$6.0 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 the prize money must be distributed among the players

IPL - BUSINESS MODEL

BUSINESS MODEL OF IPL

BIDDING PROCESS OF BCCI

Announcement of tender inviting bids

Potential franchises submit bids

Bids for more than 1 city

Awarding of franchisesAuction of playersBid amount need to

be specified

Each squad minimum 16 players

with max 4 international

4 Players under 22 from BCCI pool

TEAM CITY OWNERS PRICE (US$)Year 2008

BRAND VALUEYear 2015

CSK Chennai N. Srinivasan (India Cements) 91 million 72 million

DD Delhi GMR Group 84 million 40 million

KXIP Mohali Preity Zinta, Ness Wadia (Bombay Dyeing), Mohit Burman (Dabur)

76 million 32 million

KKR Kolkata Shahrukh Khan (Red Chillies Entertainment), Juhi Chawla.

75.9 million 69 million

MI Mumbai Mukesh Ambani (Reliance Group) 111.9 million 72 million

PW Pune Subrata Roy (Sahara India Pariwar) 370 million NA*

RR Jaipur Shilpa Shetty, Raj Kundra(UK Trade Corp Ltd) 67 million 45 million

RCB Bangalore Vijay Mallya (UB Group) 111.6 million 51 million

SH Hyderabad Sun TV Network 159 million 25 million

TEAM AUCTION

American Appraisal, a Mumbai based valuation firm has valued IPL at $3.2 Billion. It has also predicted that league’s value will skyrocket to over $400 Billion by 2020

Auction of broadcasting right(Sony entertainment for 10 Years at 500 Crore ($1.026 billion)Sponsorship revenue are directed to a central pool - 20% to IPL, 72% to Franchises & 8% serving as the prize money

Title sponsorship and corporate sponsorship[DLF-5 Year at 250 Crore ($ 50 million) and Now Pepsi at 397 Crore ($ 66 million)]Sponsorship revenue are directed to a central pool - 40% to IPL, 54% to Franchises & 6% serving as the prize money

Auction of franchises rights

Sale of tickets (20% allocated to IPL)

Official umpire sponsorship

REVENUE SIDE OF BCCI

REVENUE / EXP SIDE OF FRANCHISEE

1. Share in revenue from broadcasting rights / Media rights :- To be shared among the franchisee after removing IPL’s shares. (80:20 Ratio)

2. Share in the sponsorship money / Sponsorship rights :- 60 % amount collected to be distributed equally amongst the franchisee

3. Share in revenue from sale of tickets / Gate receipts :- Major source of revenue, 20% are allocated for IPL.

4. Other Revenues:1. Revenue from in-stadium advertising2. Revenue from own sponsorship 3. Sale of players to other franchises.

Main expenses Franchisees have to bear1. Franchise fee to IPL2. Player Acquisition cost3. Stadium hire charges4. Team costs (Coach, travel, insurance, office,

other expenses)5. Marketing/ Promotion costs

REVENUE SIDE OF BROADCASTING

1 to 3 4 to 5 6 to 100%

10%20%30%40%50%60%70%80%90%

100%

teams getsBCI gets

years

broa

dcas

ting

Reve

nue

in %

REVENUE SIDE OF PLAYERS

Contract Price – as per basic Agreement

Prize Money – Winning of match

Bonuses at which team finishes

Daily allowance

IPL – ECONOMICS & SWOT ANALYSIS

SWOT ANALYSIS OF IPL

STRENGTHS1. Short span i.e., 2 ½ hours therefore fast-paced and exciting2. Can be played on a weekday evening or weekend afternoon3. Very appealing as a mass sport as a spectator sport as well to TV audiences.4. Revenue is maximized

WEAKNESSES1. It is the verge of damaging the game that generated it. 2. Stakes are very high! 3. Some teams have overpriced their advertising/sponsorship in order to gain some short-term returns

OPPORTUNITIES1. Large potential mass audience is very attractive as a marketing opportunity, especially for advertisers and sponsors.2. The long-term success of all of the franchises lies in the generation of a solid fan-base who will generate large TV revenues. 3. Different markets and revenue sources will emerge for IPL. 4. Huge opportunity for merchandising.

THREATS1. Maintaining the level of competition and interest in IPL or else the revenue will fall.2. It won't be a quick return on investment - so owners need to be in it for the long-term. 3. Franchises are very expensive. Therefore breaking even will also take time.4. The most highly priced teams may not be those that have the early success. Revenues will come from the most highly supported teams.

Q: How does IPL make money?

1. Auction of broadcasting rights2. Title sponsorship and corporate sponsorship3. Sale of tickets (20% of tickets allocated to IPL)4. Auction of franchisees rights5. Official umpire’s sponsorships

Q: How is the IPL income distributed?

6. Share of broadcasting money with franchisees7. Share of sponsorship money with franchisees8. Share of ticket money with franchisees9. Inauguration expenses10. Prize money: $5 million ($3 million for winner; $2 million divided among others)

Economics of the Indian Premier League

Continued….

Q: What are the sources of income for an IPL Franchisee (ROI)?

1. Share in revenue from broadcast rights (equal share for all franchisee after IPL’s share)2. Share in sponsorship money (60% of the amount distributed equally)3. Share in revenue from sale of tickets4. Revenue from in-stadium advertising5. Sale of players to other franchisee6. Revenue from own sponsorship and corporate sponsorship

Q: How is the Franchisee income distributed?

7. Franchisee fees – 10% of total franchisee costs every year to IPL8. Players’ cost (Each franchise have paid around $4-6 million per year)9. Match fees and Inauguration expenses10. Rent of stadium (expense of around Rs.2.5mn per match)11. Marketing and promotional cost (around $3-4mn per team)12. Fee for coaches, physiotherapists and other members.13. Administrative cost

Economics of the Indian Premier League

Key Challenges faced in respect of Accounting and Taxation of IPL