kitna kamata hai IPL: IPL: Teams buy in billions, where are the expenses, how do they earn, understand the complete franchise account in 25 points – complete math of ipl team franchise prize spend and revenue model all you need to know
The Board of Control for Cricket in India has announced two new teams for the Indian Premier League. These teams were announced on Monday, 25 October. Lucknow and Ahmedabad are now two new teams of IPL. Kolkata-based industrialist Sanjeev Goenka’s RP-SG Group on Monday bought the Lucknow franchise of the Indian Premier League for Rs 7090 crore while international equity investment firm CVC Capital won the Ahmedabad franchise by bidding for Rs 5,600 crore.
CCI earned Rs 2900 crore by selling all the franchises in the year 2008 at the start of IPL. This is 14 years old. Then the value of one dollar was Rs 40 crore.
In the first auction of IPL, the team of Mumbai Indians was sold the most expensive. For this he paid $ 111.9 million. At the same time, Rajasthan was the cheapest team for the Royals with $ 67 million. We will learn further that each franchise had a different spending model. The teams of Mumbai and Chennai were spending on the best players, while the model of Punjab and Rajasthan was different.
But, let’s keep the franchise trend aside. After the auction of the initial 8 teams, BCCI did not sell two new franchises. Sahara Pune Warriors and Kochi Tuskers. Both these teams are no longer a part of IPL. From this, the board earned Rs 3230 crore. Both the teams pulled out of the IPL due to different reasons.
Sahara had a dispute with the board over the number of matches and payment. Kochi, on the other hand, had no problem with the board. Their problem was with the insider stake and it was not a dispute with the finances. It is false information that they were short of money and were unable to pay.
After 11 years, the board has sold two new franchises. CVC has bought the team from Ahmedabad for Rs 5625 crore. On the other hand, RPSG has given Rs 7090 crore for Lucknow. This makes a total of Rs 12715 crore. Now for the time being, keeping these two teams aside and looking at the first 8 teams, they have remained for 14 years.
In 2008, BCCI sold 8 teams. Along with this the broadcasting rights of IPL were also sold. Although there was some controversy about it – but let’s focus on the bigger picture. 8200 crores given franchise rights for 10 years. Real estate company DLF was made the title sponsor for the first five years for Rs 200 crore.
When the official partners came, the BCCI’s initial earnings were Rs 8,400. Initially the board’s stake was low. For the first three years, the franchisee used to get 80 per cent of the earnings and the board got 20 per cent. After this, for the next three years, the board would get 30 percent and the franchisee would get 70 percent participation. Thereafter, for the next three years, the board’s shareholding increased to 40 per cent and that of franchisees to 60 per cent. Since then it has come down to the 50-50 model.
The same model is still working. The board itself collects 50 per cent of the central revenue and the remaining 50 per cent is distributed equally among the eight franchisees. Initially the board gave more share to the franchise as everyone was new to this business.
Initially, the franchisees were barely able to balance their earnings and expenses in the first 6-7 years. Each franchisee was following its own business model. The franchisees used to pay the franchise fee every year to the BCCI every year. For example, if Mumbai bought the team for $111.9 million, it was supposed to pay $11.9 million every year.
Although IPL was growing very fast. In the year 2017, Star India paid Rs 16347 crore for the broadcast rights for 2018-22. Vivo paid Rs 2200 crore for the title rides. Altogether four official partners came together and agreed to pay around Rs 40 crore.
Therefore, the earnings of IPL which was Rs 8400 crore in the year 2008 became Rs 19500 crore in 2017. Kochi and Sahara were no longer together, which meant that Rs 19,500 crore was to be shared equally between the BCCI and the eight franchises.
This was the situation till Monday. Now with the arrival of teams from Lucknow and Ahmedabad, there is going to be a tremendous increase in earnings, but for the time being we keep that aside. Now let us see how the revenue model works between 2017-18 to 2021-22.
Firstly, IPL is such a business model in which you do not have to pay the entire franchisee all at once. That is, the team owners pay it for 10 years. And that too without any interest. And as soon as you buy a team your earning starts from the first year itself.
Talking about the 50:50 ratio, half of the Rs 9750 crore will be with the board and the remaining half will be divided equally among the eight franchises. That is, every franchisee was earning Rs 1218 crore for five years.
So, overall every franchisee is earning Rs 244 crore every year between 2018 to 2022. With two new franchises coming up, the numbers will change, but for the time being, we make only Rs 244 crore as the base.
There are two ways of earning in IPL. Central and Local. We have already told the Central. In which a team was earning Rs 244 crore in every season. Now let’s talk about local revenue. This is the revenue that the franchisees generate at their level. This is their own business model.
So what is local revenue? Earnings from tickets in this. Jersey is revenue from sponsorship, hospitality etc. Tickets were not sold due to Corona. Let’s see the rest. Mumbai Indians garnered additional sponsorship of 50 crores. Several other teams had trouble.
Gate money which is around 25-30 lakh rupees per match also depends on the field. In this, the size of the field and the spending capacity of the people of the city also matter. Every franchisee has a different idea about this hospitality. So, these numbers keep changing.
So, overall- let’s assume that the local revenue will be around Rs 40 to 70- crores. To calculate this, let’s take it as an average of Rs 50 crores. So much franchisees earn through themselves.
Now add this 50 crores to his central revenue earning of Rs 244 crores. So this amount becomes Rs 295 crore. Adding to this the earnings coming from BCCI, then the top 4 teams are earning more than Rs 300 crore every year.
Now let’s talk about the cost of the teams. Teams have to spend 90 crores on players. Apart from this, an amount of Rs 35-50 crore is spent on operations. It depends on the scale of work of the franchisee. Overall it makes an average of Rs 130 crore in a season.
The franchisee has to pay a fee of Rs 50 lakh for every match organized. That is, Rs 3.5 crore for seven matches – every season. The franchisee has to give 20% of its topline revenue to the BCCI. The board spends this amount on domestic cricket.
A 20% top line means Rs 12-15 crore per year. That is, the average expenditure of each franchisee together is around Rs 145 crore. This means that each franchisee is earning around Rs 145 crore (which does not include tax).
The number I have taken is the least. Franchisees like Mumbai, Chennai and Kolkata earn more money. The reason for this includes sponsorship and other long term activities. Some world-class academics and some spend the whole year in the brand
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