Sponsors

Lets take the example of the IPL jersey of RCB above. RCB is paid by Hero Cycles, Lloyd, Tata, Britannia and Lyf. The companies get publicity and the teams are paid handsomely, a win-win situation.

Stadiums(Ticket Prices)

IPL has always been welcomed warmly by the Indian fans. Almost 60% of the matches in IPL have a full house. The home team gets to keep a share of the ticket sales. That is the reason each team has 7 home games.

Media Rights

Sony India has been the official media sponsor of IPL for a decade. Sony takes a contract from BCCI for a certain sum, of which, a certain sum of money is given to each team based on the TRP Ratings by BCCI. Sony TV in return, earns money in the form of advertisements. For a 10 second slot of an advertisement, companies shell out money in lakhs.

Main Sponsor

Every year, we see the title sponsor of IPL changing. For the year 2016, the title sponsor has been Vivo.

Vivo pays 100 Crore per season as per the contract. However, majority of this share goes to BCCI.

Brand Value

One cannot deny the fact that actors like Shah Rukh Khan and Preity Zinta add glamour to the league. Also, players like Virat Kohli, MS Dhoni and Yuvraj Singh are associated with many brands. Their association with a team increases it's 'brand value' and attracts many sponsors. Eg. SRK endorses 20+ brands, hence most of these brands act as sponsors for his team too.

Prize Money

IPL offers a prize money to the winners and runners up. This would be around 15 Crore.

For attracting sponsors and creating a brand value for itself, a team needs consistent success, for that it needs to win games, for that it needs good players who are bought for exorbitant amounts. However, since the inception KKR has been the team to earn most profits, thanks to King Khan.

IPL involves a lot sources which generate a lot of money to each franchise. The major source of income comes from the Title sponsors such as DLF and VIVO along with Freecharge, Maruthi Suzuki, Yes Bank and Vodafone which are the official patners. Around 60 percentage of the income that BCCI generates is given to the franchises. Accompanied by these, every IPL team has its own set of dedicated sponsors. These sponsors play a huge role for the teams. Each teams jersey is filled with sponsors. These sponsors strike a big deal and make a lot of publicity for themselves.

Another massive stake of income comes from the broadcasting rights. Sony Entertainment has made the media broadcast rights deal with the BCCI for Rs. 8,200 crores up to 2017. A major chunk of that money is distributed amongst the franchises by the BCCI.

This is the guaranteed income that all the franchises make annually.

The franchises make a lot of money from the tickets that are brought during their "home" games. The Drinks, souvenirs, food, T-shirts and all the other major activities seen in the stadium goes to the owners of the host team. Teams make big money if they win the IPL as the championship prize money is pretty immense. The winners of IPL-9 (2016 edition) will get prize money worth Rs. 20 crores and the runners-up will get Rs. 11 crores.

We do see some players being unsold during the auctions, its because of the owners are trying to invest smartly on players based on the teams requirements. The salaries of the players are fixed at a certain amount. Also, the salaries for the team support staff including the coaches are decided. Also, there are expenditures on flight tickets and hotels for the players & their families and support staff. The teams have to pay a certain amount to the cricket associations in order to host their home games.

Also, every franchise spends a certain amount on marketing before every season begins. Marketing may include hosting promotional events like jersey launch, fashion shows etc. Every team spends on popular marketing tools like Television commercials and music videos.

A lot of money is won by the players even during the tournament. There are big prizes on offer for the player of the match, Maximum sixes and the Best fielder after each game. After the tournament ends, the orange cap holder (most runs in the tournament) and the purple cap holder(most wickets in the tournament) are given handsome rewards by the IPL. The players are also given handsome incentives if their team wins the championship.

Running a franchise in the Indian Premier League is no easy job, considering the amount of money required to sustain themselves in the cash-rich league. Winning a title is important, but that isn't all the franchises are focussed on.

How the IPL franchisees earn money?

Revenue Streams

Brand Sponsorships: The IPL franchises generate a chunk of revenue through sponsorships. Top brands tie-up with the franchises in a quest to provide a much needed visibility to their brand with the public by endorsing the names and logos of their brand on team kits and jerseys. The amount varies significantly as the size or the visibility increases and decreases. Right from the title sponsors to the ethnic wear partners, teams sign a wide array of deals to keep the cash flowing.

Revenue through the BCCI Central Pool: The IPL, as a brand generates its own share of revenues through the official sponsorships (such as Pepsi), partnerships (such as Vodafone, McDowell's No.01, Yes Bank, CEAT) and also by selling the broadcast (currently to Sony Max) and streaming rights (currently to Hotstar). A share of the total revenue is added to the BCCI central pool which is distributed among the franchisees based on several factors including their position in the league table.

Merchandise Sales: According to the report by The Times of India dated November 11, 2014, the sports gear business market growth in the country is 100% annually and the value is projected to be approximately $30million. The franchises sell merchandise that include stuff like Tee-shirts, Caps, Wrist watches and generate a revenue tapping the fan base.

Prize Money: According to a report published in The Bangalore Mirror, the IPL Prize money has raised 300% from 9.8 Crores INR in 2008 to 40 Crores in 2015. The Champions get a major portion of that with the runners up and other teams which make it to the playoffs getting a lesser share.,

Ticket Sales: Ticket Sales

form an integral and important part of the income of each of the IPL franchisees, given the immense popularity of the tournament and the large crowds that flock the stadiums in every single game. It is reported that each IPL franchise gets to sell 80% of the tickets for its home games with the rest being reserved for special people.

In ground Ads: The in-ground advertising banners that are captured on the screen and off it, by the spectators in the stadiums add a part to the income of the franchisees.

Player Trading: Before the IPL Auction each season, a transfer window is opened for a certain period of time during which teams can exchange the players between them. It has been observed that good players are often exchanged with average players with a sum of money as a compensation.Champions League T20: Champions League T20 was introduced by the BCCI where the top T20 teams around the globe gather to compete for glory. The latest edition of CLT20 tournament had a prize money of $6 million at stake. In other terms, the tournament awarded the winner with $2.5 million (15 Crores INR), the runner with $1.3 million, the losing semifinalists with USD 500,000 each and the rest of the participating teams with USD 200,000 each.

Expenses

Franchise Fee: The IPL franchisees are bought by the owners for a certain amount and 10% of the sum must be paid to the IPL by the respective owners before the start of every season. To put things in an easier perspective:Mumbai Indians franchise was bought by Reliance for a 111.9 crores, they have to pay 11.1 crores each season in the form of franchise fee while Rajasthan Royals pay the least (6.7 crores) among all franchises.Payment to the local cricket club:While the IPL franchisees generate revenue through the ticket sales at their respective venues, they must pay the local cricket association for using the ground facilities.

Player fee: With an eye on their performance and another eye on their brand value, IPL franchisees hand pick players who go under the hammer. The IPL franchise pay the players for the amount that they were bought. In certain cases, where a player is retained by a franchise, a salary is negotiated and agreed upon before the retention.

Marketing and Running Cost: Right from the day to day operations of the franchise during the tournament to the marketing costs has to be taken care off by the team management.

How BCCI generates revenue

• - TV broadcasting rights: This is a huge source of revenue for the IPL franchises. Broadcasters have acquired the global broadcasting rights of the IPL for ten years at a cost of well over US$ 1 billion (the broadcaster then re-sold parts of the broadcasting rights geographically). A major chunk these proceeds is equally distributed to the franchises, with the rest going towards IPL and prize money.
• - Sponsorship rights: The proceeds from sponsorships of the IPL go towards a central pool and a sizeable percentage of that is distributed equally among the franchises, with the rest going towards IPL and prize money.
• - Local sponsorships of the team
• -Ticket sales: It is estimated that 80% of total stadium tickets are with franchises with the rest being held by IPL organisers. Proceeds from the sale of gate passes are a major source of revenue for franchise owners.
• - Prize money: As mentioned above, a high single digit percentage of the broadcasting rights and IPL sponsorship go towards the prize money for the IPL, thereby adding to the top line of the franchise of the IPL winner.
• - Merchandise sales: The franchises sell merchandise like T-shirts and caps through their web-site and other channels. This revenue stream can be a big money spinner depending on the fan base of the team.
• - Player Trading: We have seen a lot of players being traded between different franchises in the last two years during the open period of the trading window. Franchises make a neat profit from the 'sale' of these players as they charge a premium on the price at which they 'bought' them.
• - Champions League Twenty20: The top four teams in the IPL qualify for the Champions League every year and are entitled to a share in the amount paid for the broadcasting rights.

p>The franchise of the team doles out millions of dollars to buy star players and we see there is always a competition for owning the franchises of the IPL teams. So when Most of the franchises of the IPL teams are businessman, it is obvious that they will not let so much of the amount flow just for the fun and definitely they will be trying to earn from this investment. So today we tried to dig out the answer of this question and here is my attempt to give a brief about how the IPL franchises are earning money:

Marketing Benefits:

Franchise can sell the team or a player to other companies for ad and promotion and the players do the ad without taking any money from the franchise or the company. The money which is paid by companies for ad to the player goes to franchise

Few interesting thing signed in the bond is:

No player can ignore the direction of their franchise for ad and promotion.

Players of the IPL team are not allowed for do any ad or promotion without permission of their franchise during the IPL match.Percentage of Amount Distribution: 100% to Team Franchise.

Central Revenue:

1. TV broadcasting rights:

The match for the IPL is permitted for Live coverage and hence the Broadcasters has acquired the global broadcasting rights of the IPL for ten years at a cost of well over US$ 1 billion. This broadcaster then re-sold parts of the broadcasting rights geographically. And the major chunk here is these proceeds is equally distributed to the franchises

The earning of television ad during the live cricket match is also distributes in franchise of both teams (which are playing on the ground) and IPL. The TV channel covers the live of the match and shows ads between the overs. The TV channel pays shares of TV ad to the IPL and IPL distributes this amount to both franchises of IPL team and himself. This is the main reason why franchises want that their team should be play the more matches.

2. Sponsorship rights:

The amount earned by BCCI or an IPL organizing committee from the sponsorships of the IPL go towards a central pool and after that a sizeable percentage of that is distributed equally among the franchises. A part of this money is added towards prize money a well.Percentage of Amount Distribution:

80% to Team Franchise and 20% to IPL committee (first 5 years)

60% to Team Franchise and 40% to IPL committee (after first 5 years- up to 10 years)

local revenue:

The other small revenues can be considered under this categories which can include:

• Ticket sales: The revenue earn from the selling of ticket gets divided between the two playing teams and the IPL organizer.
• Percentage of Amount Distribution: 80% of total stadium tickets are with franchises, 20% with IPL organisers.
• The amount earned from the sale of gate passes are a major source of revenue for franchise owners.
• Local sponsorships of the team, which the franchisee tries to earn from the different brand available in the market and hence the popularity of the team comes in picture here as definitely the most popular team among the population can get more sponsorship.
• Prize money of the match also goes to the Franchisee . the price money consist of a single digit percentage of the broadcasting rights and IPL sponsorship.
• The franchises sell merchandise like T-shirts and caps through their web-site and other channels and this revenue stream can be a big money spinner depending on the fan following of the team.
• Player Trading was recently observed in the IPL where lots of players will be traded between different franchises. Franchises make a neat profit from the 'sale' of these players as they charge a premium on the price at which they 'bought' them.
• Now coming to the point how a win can add a more benefit other than broadcast revenue and price money. The Champions League Twenty20! Here the top four teams in the IPL qualify for the Champions League every year and are entitled to a share in the amount paid for the broadcasting rights.
• Now if we check the expense other than the Player's cost and team fees, there are few which the IPL owners has to pay.

Stadium rent.

Travel & hotel expenses of the players and support staff

Marketing costs.