IPL! IPL! IPL! Everyone Indian is just crazy about it! There is a whole lot of buzz of the millions and billions of dollars that are shelled in the name of IPL. I was just curious to know the flow of money which is of course defined in the business model of IPL. Read on!
There are four parties involved : the media, the IPL, the franchisees and the players.
1. Media
Cost : US$108
A consortium consisting of India’s Sony Entertainment Television network and Singapore -based World Sport Group secured the global broadcasting rights of the IPL. The record deal has a duration of ten years at a cost of US$1.026 billion. As part of the deal, the consortium will pay the BCCI US$918 million for the television broadcast rights and US$108 million for the promotion of the tournament.
Revenue : Sony-WSG then re-sold parts of the broadcasting rights geographically to other companies all round the globe.
Sources of money (which gets divided in the following ratio IPL : Franchisee : Prize money):
1. Broadcast rights – $108 million – 20 : 72 : 8
2. Central revenue –title sponsorship of the tournament, licensed merchandise and so on – 40 : 54 : 6
2. IPL :
Sources of Revenue :
1. From 1st source of money – US$200 million approx.
2. Central Revenue – some amount from 2nd source of money
3. The amount bid by the franchisee owners
4. 20% of Franchisee rights – 20% of the revenue of the franchisee in short. Franchisee in the sense franchisee owner!
Cost :
To pay the players there regular fees
3. Franchisee :
Cost :
1. Cost of bidding the franchisee = $10 million approx/year
2. Cost of bidding the players = $8 million/year
Revenue :
1. From money source 1 = $10 million/year
2. From money source 2 = some amount.
3. From all the rights that they have for their match = $10 million/year
Variety of means like selling advertising space in the stadia for home matches, licensing products for their team like T-shirts, getting sponsorship for the team uniform, advertising on tickets and so on, apart from the gate money.
Players:
Revenue :
Apart from the annual fee contracted with the franchisee, they get a daily allowance of $100 through the IPL season, which lasts about a month-and-a-half. The total amount spent on player fees for an IPL team cannot be less than $3.3 million each year and is actually expected to be significantly higher. In other words, players will earn about Rs 80 lakh or more per season on average, though the amount would vary from one member of the team to another.
Players could also get bonuses from the team owners and perhaps even the prize money that the team wins by virtue of where it finishes in the tournament. But it is for each franchisee to decide whether these payments are made to the players or not.
Even in the case of the annual fee negotiated between a player and the franchisee, not all of the negotiated amount may actually go into the player’s pocket.
This is because the IPL is reaching two different kinds of agreements with players when it gets them on board. Under one arrangement — called the “firm agreement”, the IPL commits a certain fee to the player. If a franchisee bids more for that player in the auction between franchisees for different players, the IPL gets to keep the excess. Under the other – the “basic agreement” – the player gets whatever is bid for him. Not surprisingly, most players so far have opted for the “basic agreement”
Hope this helps!!
References :
- ^ Indranil Basu. “Does the IPL model make sense?“, The Times of India, 2008–01-27. Retrieved on 2008–03-21.
- http://en.wikipedia.org/wiki/Indian_Premier_League#Player_signings
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