Understanding the IPL Team Ownership and Revenue Model.
The Indian Premier League (IPL) has become a global spectacle, attracting vast sums of money and intense competition. Here’s a comprehensive overview of how an individual or organization can buy an IPL team, the associated eligibility criteria, the player selection process, and the intricate revenue model of these franchises.
Buying an IPL Team
Eligibility Criteria for Ownership:
To purchase an IPL team, prospective buyers must demonstrate significant financial strength, with a minimum company valuation of ₹3000 crores, which indicates their earning potential. The process involves two primary avenues:
1. Purchasing Shares from Existing Owners: Like Life Insurance Corporation (LIC), which acquired a 6% stake in Chennai Super Kings, potential buyers can negotiate directly with current owners to buy shares.
2. Bidding for New Teams: When the Board of Control for Cricket in India (BCCI) decides to launch a new team, eligible companies can apply. Interested parties must pay a ₹10 lakh non-refundable fee for the Invitation to Tender (ITT), which allows them to participate in the bidding process. The BCCI sets a base price for teams, typically between ₹1700 to ₹1900 crores.
Once shortlisted, the bidding takes place, often leading to staggering final amounts—as seen when Lucknow and Ahmedabad teams were sold for ₹7000 crores and over ₹5000 crores, respectively.
Player Selection Process,
Once the team ownership is established, the focus shifts to building a competitive squad. Players enter the bidding process through registration, categorized as:
1. Capped Players: Those who have played for the national team.
2. Uncapped Players: Emerging talents recommended by state associations.
3. Foreign Players: From various international cricketing nations.
A pool of around 1100 to 1500 players is created, with approximately 500 shortlisted for the auction. Each player sets a base price based on their experience and abilities, ranging from ₹20 lakhs to ₹2 crores. The auction is highly regulated, with bidding increments varying based on the price range.
Financial Aspects and Revenue Generation:
Owning an IPL team comes with significant costs, such as player salaries, operational expenses, travel arrangements, and a mandatory 20% revenue share paid to BCCI. However, IPL teams have multiple revenue streams to offset these costs:
1. Broadcasting Rights: Major television networks bid heavily for broadcasting rights. For instance, Star India acquired the rights for ₹16,347 crores for a five-year period, with half of this revenue distributed among the teams.
2. Title Sponsorships: Companies pay substantial sums to associate their names with the IPL, enhancing visibility across audiences. Historical title sponsors include DLF, Pepsi, Vivo, and TATA, with amounts ranging from ₹200 crores to ₹2,199 crores.
3. Match Ticket Sales: Ticket revenues contribute significantly to team income, with home teams typically retaining 80% of ticket sales, amounting to an average of ₹5 crores per match.
4. Advertising and Merchandise: Teams earn by advertising brands on players' jerseys, merchandise sales, and in-stadium advertising, with players often doubling as brand ambassadors.
5. Prize Money: While it may seem minimal (₹20 crores for the winning team), prize money is just a fraction of the potential earnings a successful team can generate through other avenues after achieving higher placement in the league.
Conclusion:
The IPL model combines a unique ownership structure, player acquisition strategies, and diverse revenue streams that facilitate financial sustainability. Despite the considerable capital required, franchise owners are motivated not just by the potential for financial gain but also by the prestige and visibility that accompany IPL success. Over time, as seen in the evolution of the league, the monetary dynamics have shifted, transforming how teams operate and generate wealth, ultimately leading to the IPL's growth as a premier cricketing league globally.
