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The game behind IPL

Updated: Oct 1, 2020

IPL, the word in itself is an entire truckload of emotions. The Indian Premier League is one of the premier sporting leagues all around the world. Cricket fans and enthusiasts from all over the world are glued to their television screens whenever an IPL game is going on. The craze that people all around the globe have for IPL makes the league one of a kind. A couple of sentences ago, I called it one of the ‘premier’ sporting leagues that happen to exist.

But why did I? What makes IPL as huge as it is?

You’ll get to know this soon enough.

To begin with, the primary reason appears to be the competitiveness of the tournament. Which is a result of top players from around the world participating in it. As we all know, franchise owners pay hefty amounts to make such topmost players a part of their franchise. These hefty amounts point out towards the involvement of large finances. Another reason is its worldwide viewership. This calls for the involvement of big broadcasting houses who have the ability and network to broadcast the matches all over the world, again pointing out to the involvement of large finances. To give you a number, the brand value of the IPL in 2019 was estimated to be over 475 billion rupees. This estimate was given by Duff and Phelps, a famous financial advisory firm. In an interesting comparison between the IPL and the EPL (English Premier League) done in 2019 on the basis of revenues from the title sponsors, the IPL overshadows the EPL with 440 crores and 389 crores respectively as revenues from their title sponsors.

Now, we understand that huge finances enable the IPL to achieve the stature of a premier sporting league. Let’s dig deep into the implications that these huge finances have from both, a macro-economic and a micro-economic perspective.

Looking at the macro aspect first, the contribution of IPL in 2015 on Indian GDP was 1150 crore according to a study by KPMG. Apart from this year, where the tournament is being held in UAE, it attracts tourism in India via foreign cricketing fans who visit from all over the world to watch the IPL. Another area that it impacts is the employment generation in the economy. It creates job opportunities as staff members such as medical staff for every team, stadium employees, security persons, food vendors around stadiums, merchandise vendors and many more.

The study by KPMG also put light at the upliftment and infrastructural development of the tier-2 cities because of the media exposure they receive. Thus, tier-2 cities invest more in enhancing their infrastructure and overall development. Also, as the IPL provides for immensely large revenues for the BCCI, it further results in greater tax contributions by the BCCI thereby raising government revenues as well.

The IPL might be called the BCCI’s billion-dollar baby, but it also costs the world’s richest cricketing body a hole in its pocket. I say this because, before the IPL, the BCCI did not have to pay taxes as it was considered a charitable organization. According to a report by the Times Of India, the BCCI has paid around 3500 crores as tax since the IPL began. Also, talking about the broadcasting rights, Star India paid a whopping 16347.5 crores to the BCCI for a 5-year deal in 2017 and won the broadcasting rights until the year 2022. This means for every IPL match during these 5 years, Star India pays 54.5 crore per match. Now this figure in itself is explanatory of the enormous revenues Star India generates through advertisements and sponsorships. An article by the Economic Times speculates this revenue to cross 2000 crore for the IPL 2020. This year, Star India is selling a 10-second IPL advertising spot for a whopping 12.5 lakh. The price has increased significantly as compared to the previous years because higher viewership is expected in light of the pandemic.

Now, let’s have a look at the micro aspect as well. A large part of the viewers fall in the category of the middle class, and of the legal drinking age as well which is of great significance as many sponsors stay connected with breweries. People usually remain in doubt whether the IPL owners put their own money to buy all these players at such mind-boggling prices, and if they do, how do they make money in the whole scenario?

Let’s try to answer this. The IPL franchises earn revenue through all kinds of sponsors of which an example I gave a couple of sentences before. They also earn through sale of their merchandise, from the stalls set up in stadiums and through the revenue shares that are paid to the franchise owners by the BCCI. These revenues are usually more than the total purse that the team owners are allowed to buy players from. The difference between these revenues and the amount spent at the IPL auction is the profit that the franchise owners earn. I guess this pretty much answers the question that I put up. The revenues the cricketers earn comprise of the amount they were bought for in the auction and the brand endorsements and advertisements they do for their respective franchises.

These were some insights on the economics that goes behind the IPL.

Now I would also like to mention some other amazing implications that the IPL has had on the Indian Cricketing scenario. Through the revenues from IPL, the BCCI has increased cricketing activities at the National Cricket Academy (NCA) by allocating higher funds. Also, there has been an increase in the popularity and the television coverage of both domestic and women’s cricket throughout the nation.

Thus, IPL as a tournament is a grand festival in which every Indian and cricketing fan from all over the globe participate, making it one of a kind. In a country like ours where cricket is a religion, IPL acts as an amazing source of entertainment and immense happiness in our lives.

I hope that now after reading this article, you have a better and deeper understanding about the specifics of how the IPL functions and continues to exist as one of the biggest sporting leagues.

Who are you supporting this year?

Do let us know.

May the best team win!

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