#5. How do IPL Teams Make Money?📊🏏

Welcome to the exciting world of IPL Teams! This week, I'll breakdown how IPL teams/franchises make money.

Just like any other business, these IPL teams have both Expenses and Revenues. And I'll break them down, so you understand the workings of these franchises. 🏟️💸

Let's start with money that goes out of the bag.

Expenses 💰:

1. Franchise fee - Each team needs to pay the BCCI a substantial amount each year as the franchise fee. 💸

All franchisees must pay 20 per cent of the total revenue (including rights revenue, sponsorships and miscellaneous) to the BCCI each year as a fee.

They also pay the auction prices in instalments over 10 years, over and above the franchisee fee.

2. Salaries & Player Fee - This one's obvious! In addition to players, The coaches, support staff, and administrative team members are also paid salaries. 💵🏏

For older teams, player remuneration happens to be one of the largest cost centres — eating up almost 40 per cent of the franchise’s revenues.

3. Operating Expenses - Various operating expenses include insurance, advertising & marketing, legal fees, and ground rentals. 🏢📈

Let's now look at where the Moolah💸 comes from.

Income 💸:

1. BCCI's Contribution - The BCCI plays a primary role in the revenue generation, sharing 50% of central revenue from the IPL and media rights revenue across all teams. 🤝💰

The BCCI sells media and digital rights for the IPL to broadcasters.

IPL ad-spaces command huge prices — around Rs 15-18 lakh for every 10 seconds, with a minimum buy of ₹2 to ₹3CR.

2. Team Sponsorship - The money comes from all the logos you see on each player's jersey. It's an essential revenue stream for the franchises. 👕💰

Some brands pay up not only to make their appear logo appear on a jersey, but also to use the intellectual properties of the franchise.

Some of these deals allow brands to use player images and team logos in advertisements and products

3. Other Revenue Channels - A small portion of the overall revenue is generated from ticket & gate fees, merchandise sales, and advertising at the venue. 🎟️🛍️🏟️

4. Play-off Fee - Each team that enters the play-offs earns a special fee according to their terms and conditions with the BCCI. 🏆💵

Let's look at some of the numbers of BCCI:

IPL brand value jumped from $1.8 billion in 2022 to $3.2 billion in 2023—that's an 80% increase in a year, primarily due to the media rights deal with Viacom18 and Disney Star, which also propelled IPL’s business enterprise value to $15.4 billion.🇮🇳

Let me explain this better with an example of how the Chennai Super Kings (CSK) made money in 2022: (Here's their Annual Report of 2022 for you to dig through for the finer details.)

In FY '22, CSK made ₹349 cr in total revenue,

• Rs 242.27 cr coming from the Central Media Rights Revenue

• Rs 65 cr generated from sponsorships

• Rs 33.74 cr from tournament-related income

• They also made about Rs 8 cr from bank interests! (As of 31st March '22 they had Rs 135 cr cash on hand in their current account.)

In terms of their expenses: CSK had a total of ₹299 cr spent

• The player fee & the staff remuneration add up to Rs 148 cr.

• The franchisee fee was Rs 61.56 cr

• Tournament expenditures like hotels, food & flights, etc, for the team added up to Rs 43.71 cr & the administration expenses added up to Rs 20.67 cr

Some other interesting facts on their expenses are:

• They paid the TNCA - Tamil Nadu Cricket Association Rs 1.37 cr as rent for the Chepauk Stadium for the entire duration of the 2022 IPL Season

• Just the insurance costed them about Rs 1.96 cr

• They spent Rs 3.67 cr on advertising.

• And of-course salaries & benefits for the full time employees added up to Rs 3.18 cr, Just FYI - The salary of the CEO - Kasi Vishwanathan was Rs 1.05 cr

• They also spent Rs 2.03 cr on CSR activities.

All this leaves CSK at an EBITDA positive of Rs 49.41 cr and a profit of about Rs 32.1 cr after tax. 💵💼

On average CSK has a net profit ratio of about ~15% & Return of Capital Deployed about ~20%