Indian Premier League 2021 is going on in full swing as eight teams are battling it out to be the winner of the tournament. Due to COVID-19 restrictions, crowds aren't allowed in stadiums this year, which means IPL isn't selling tickets for the T20 matches.
Many fans may wonder as to how are the franchises making money if the tickets are not being sold? The truth is that the business model of the IPL does not wholly depend on ticket sales per match. That is how the IPL teams can buy players for millions and yet be profitable.
What is the business model of IPL?
The IPL has a robust business model that is able to sustain itself despite facing difficulties, like the COVID-19 pandemic. IPL is a cricket tournament that has been developed as a valuable commercial property. It offers firms the opportunity to market and extensively advertise their businesses.
How BCCI and IPL makes money?
At the core of IPL's business model is the idea of inviting private firms to own franchises. When the franchise rights were sold at lofty prices, other firms saw value in investing in the tournament, and that is where the money came from. Some of the biggest conglomerates in India fight it out to get the title sponsorship of the tournament.
The investors believe that IPL is a sure-fire bet as the entertainment industry will never go into recession and will continue to grow. IPL, being a mixture of Bollywood and cricket, is a source of entertainment for millions.
Besides, the BCCI collects hefty revenue by selling the media rights of IPL. In this revenue distribution model, the BCCI gains revenue from broadcasters and online streamers. It then shares this with the teams after deducting its share. The team which ranks higher at the end of all matches gets the highest amount. Around 60-70 per cent of all revenue earned by IPL teams is generated through media rights, according to Business Insider.
How IPL teams make money?
IPL teams generate a large percentage of their revenue through brand sponsorship. Franchises partner with brands and offer them visibility by endorsing their logos on their kits. The more visibility the sponsors want, the more money they spend. Sponsorship revenues form around 20-30 per cent of revenue for the IPL teams.
Besides, IPL franchises also get a share of ticket sales if they are the home team for a particular match. Team owners fix the ticket price. The BCCI and sponsors also get a share of this revenue stream. Around 10 per cent of the revenue for IPL teams comes from ticket sales.
How IPL Franchises make money?
The IPL teams can also generate additional revenue by actually winning the tournament. The IPL offers a hefty prize amount which is distributed between the owners and the players of the winning team. According to rules, 50 per cent of the prize amount must go to the players.
The IPL teams also generate revenue through merchandise sales. T-shirts, caps, kits and wrist watches of all teams are sold in abundance.
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