Let's Explore the Learning Episode 1
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Welcome to my weekly newsletter, where I share different lessons I learned from daily life and explain Economics, Business, Geopolitics, technology, and other news headlines with examples from our daily lives in a straightforward language.
In the previous few days, all cricket fans watched some nail-biting matches and discussed different permutations so that their favourite team could make it into the playoffs now. After some thrilling games,s finally have the top four teams for the playoffs. Most of us know the Indian Premier League as an iconic summertime sports sensation. Still, it’s a capitalistic miracle for the Indian Economy is a very genius Business model behind this Indian Premier League. Today I am talking about that business model, and you will get the answer why the price money of just 20 Crore rupees teams spends hundreds of crores.
Today the brand value of IPL stands at an insane mark of 4.7 billion dollars. The broadcasting rights of the IPL($8.5 million per match) world level are far ahead of the NBA( $2.1 million per match). To understand the success of IPL, we have to go back to 2007 when ICC introduced new shorter formate of cricket called T20 cricket, which takes only 3 hours per match, unlike ODI, which takes 8 hours or the five days long test cricket, and Yuvraj Singh mesmerized the world by hitting six sixes in an over and a young Indian Cricket team with its long hair captain Dhoni just won the world cup.
And in the next year, BCCI and Lalit Modi found some new market indicators which made the market highly opportune for the Domestic T 20 league in India: first, since India won the T20 World cup in 2007, the Indian crowd was crazy for the new T20 formate, second, this shorter formate last only 3 hours fans can easily watch the game. And last but not least, during the summer, the Indian audience, especially the kids, desperately wanted something for their entertainment as they were on summer vacations. Therefore BCCI wanted a product for the Indian audience like NBA or the English premier league because these leagues were some big hits, and we got teams like Manchester united from these leagues. These factors ignited the formation of the Indian Premier League, which became the most prominent sports sensation in Sports history.
Stakeholders of the IPL:
Administrator: In the case of IPL, BCCI is the administrator.
Organizer: It helps BCCI to organize IPL. Now IMG global is the organizer of IPL.
Franchise: These are nothing but our favourite IPL teams that buys the players in the auctions.
Players: These players play the games and are owned by franchises.
Streaming Platform and Broadcasters: These are among the most influential assets as they telecast live actions of the games to the fans. It includes Hotstar, sony and star sports.
Sponsors: These are the companies that advertise their products to the viewers.
Merchandise: Initially, fans were just viewers, but different team merchandise is sold as the craze increases. These merchandise owners are generally either owned by teams, or the teams have some stakes in the profits earned from merchandise owners.
Fantasy Apps: These fantasy apps like Dream 11 are the recent stakeholders that build the game's business around the fans.
The Economics of IPL:
Let’s start with the first stakeholder; since BCCI is the league administrator, it sells digital rights and media rights to streaming platforms and media houses. This broadcaster sells ad spaces to the brands which wish to get visibility for their products or services. From 2008 to 2017, Sony bought its broadcasting rights in 911 Crore/ Year. And sold ad spaces to the different brands like Pepsi, Ceat tyres and Dream 11. Initially, when the league was not popular, broadcasters had taken massive bets and selling these ad slots was difficult. However, as the league's popularity increased, the prices of ad slots skyrocketed, and Broadcasters made Mammoth profit. And the Popularity of IPL grew at such an insane rate that in 2018 Star network owned broadcasting rights from BCCI by paying 3270 Crores each year for the next five years.
BCCI owns 50% money earned by selling media rights rest 50% money is distributed among the franchises, in which 45% of the money is spread equally, and 5% of the money is distributed based on performance. It was the economic relationship between franchise, streaming platforms, BCCI and the advertisers.
Now I talk about individual team partners. The company like slice, which places their logo in the centre of the jersey, are called individual team sponsors. These companies also own the intellectual properties of the team, like players’ images and logos of the team in their advertisements. Apart from these individual sponsors, many brands also pay money to the teams for placing their advertisements on the caps, sleeves etc.
The teams have to pay 20% of the revenue from the individual team partners to the BCCI, which is further used to organize matches and pay associations and all. This Individual Sponsorship is crucial for the team because, based on the fan following and performance of the team, sponsors decide the amount to pay the team teams. Therefore, CSK has around $79.5 million brand value, while teams like Rajsthan Royals have a brand value of just $34 million.
This is how the IPL ecosystem works which in 2015 alone contributed 11,500 Crores to the Indian Economy. This IPL is just a glimpse of the fast developing Indian domestic sports Industry, and in next ten years, these leagues are expected to become some of the most valuable leagues in the world.
These leagues also promote tourism and the Economy indirectly. And it provides several economic opportunities from a gatekeeper to players; to understand more, you may read the following article.
Also, I will thank the Youtube Channel Think School, they made a fantastic video on the same topic. I gathered all the data from there. I am attaching the link to that video. If you want, you may check it.
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Good article 👍
Nice article