Since the Indian Premier League (IPL) is expected to begin on 9th April 2021 or thereabouts, and the teams have taken shape, it is appropriate to learn a bit about how IPL has become such a hugely valuable property.
IPL is today among the most valuable annual event properties anywhere in the world. The annual tournament spread over almost 2 months has grown rapidly in value over the years 2016-18, as seen in a series of jumps in value from one season to the next. The IPL was valued by financial experts at US$4.16 billion in 2016, but that number grew to $5.3 billion in 2017, and $6.13 billion in 2018. While this may be much smaller a number than, say, the English Premier League, one must remember that the IPL is played over 2 months only, whereas the EPL is spread over a significant part of each year.
The beauty of the IPL is that it is a formidable collection of efficiently monetised Intellectual Property Rights (Brands, Wordmarks, Trademarks, Copyrights - including TV Broadcasting Rights for different geographies and languages, Website rights etc.) held together by finely defined contractual rights between the BCCI/ IPL on the one hand, and each Franchise, and each Sponsor on the other). Rights to carry live transmission, few minutes' delayed transmission, match highlights, few video clippings and still photographs only are all priced differently. One might even call it the Intellectual Property League, because a major part of the valuation of the IPL and all players in the IPL’s ecosystem is driven by the value of various Intellectual Properties. For example, the IPL Wordmark and the IPL Logo are registered and licensed as Trademarks. BCCI, the franchises and right licensees have to defend their own IPR and also defend themselves against charges of infringement of other parties’ IPR. For example, the IPL had to fight a charge of copyright infringement because it failed to get permission from the Indian Performing Rights Society for using the theme music for the opening ceremony although it had been taken for using the songs played during the matches. Following a legal notice filed against BCCI, it had to cough up license fees.
IPL is a great example of how a combination of Brands, Copyrights, Trademarks, wordmarks and contractual arrangements have helped create one of the world’s premier annual sports events. In this 1st part of a 2-part blog, we look closely at some little-known IPR aspects that are the foundation of the IPL.
Challenges faced and storms weathered over the years
IPL has proved to be a resilient IPR property. It has weathered big storms:
It easily parried the challenge posed by the pioneers, ICL set up by the Zee Group, inter alia, by binding all players to a 3-year contract period.
Twice, the venue had to be shifted to a different country.
It survived scandals related to Lalit Modi, the irresistible force behind the concept during its first two editions.
It has survived franchise/ team terminations (remember Kochi Tuskers? Deccan Chargers? Pune Warriors India?) and suspensions (Chennai Super Kings and Rajasthan Royals).
It survived a serious challenge to its credibility in the form of the spot-fixing scandal that caused much reputational damage to the event and to BCCI. It ended the careers of Ajay Jadeja and Mohd. Azharuddin, while also banning a co-owner of the Rajasthan Royals franchise,
It has also weathered last year’s pandemic impact and is gearing up and bracing for trouble in the form of bio-bubble maintenance, etc in the 2021 edition too.
It survived a late withdrawal of the title sponsor (Vivo) due to the India-China military standoff in Galwan in 2020. Vivo was replaced by Dream11 for 2020. Earlier, Pepsi had withdrawn its sponsorship in 2016 and 17 because two teams were suspended in the match-fixing scandal. Vivo filled the gap at the time, at an even higher price.
The very resilience of the IPL has increased the long term valuation of an IPL franchise year after year. So has the perceived willingness that the BCCI has shown to energetically defend its IPRs and go behind infringers.
What follows is a very brief write-up on
which kind of entity earns and spends from which sources; and
which entities are making money, and is anyone losing money
This will help us understand the web of intellectual properties that have been created, which make the IPL so unique as a commercially successful event. We begin with understanding what the BCCI earns and spends on.
IPL: What does the BCCI/ IPL get out of the IPL?
The BCCI (the IPL is a part of the BCCI that is independently governed by a Governing Council) earns from the following sources:
Media, Broadcasting and Digital Platform Rights: Media rights reportedly form about 60-70% of all revenue earned by IPL franchises. In fact, they are the IPL’s biggest financial contributors.
These rights (and BCCI's share) have seen significant increase since the inception of IPL in 2008. In 2008, the broadcasting rights to telecast live matches on Television in India were bagged by Sony Pictures for Rs. 8,200 Crores for 10 years from 2008 to 2017. Prize money for winning teams and players was 8% of this amount, and Franchises got 72%, a portion being distributed equally and a portion distributed based on their final points positions and Net Run Rates in the league table. BCCI kept 20% in 2008. Its share steadily went up and the franchises’ share declined (as agreed upon) every year after that till they touched 50% - and there it remained thereafter. When bids were called for 2018 to 2022, the annual bids quadrupled doubled - Star India (Star Sports) bid Rs.16,300 crores for 5 years’ broadcasting rights for Televisions and Digital platforms in India (Hotstar), easily surpassing Sony Picture’s bid of Rs.11,050 Crores. It is now the most expensive single broadcast rights deal in the history of cricket anywhere in the world. BCCI gets 40% of the Sponsorship revenues, and 60% is distributed amongst the teams (franchisees)
Franchise Fees from each team as the Franchisor, initially under a 10-year agreement – 10% of the amount bid is the annual franchise fee. Later renewals of the franshise were for 5 years at a time.
Title and Associate Sponsorship revenues
Title sponsorships deals are usually signed for 5 years or more at a time. DLF were the first Title Sponsors from 2008 to 2012, they totally paid Rs. 200 crores (Rs.40 crores per year). Pepsi bid Rs.397 crores for 2013-2017 but withdrew from the sponsorship after 2015 when Chennai Super Kings and Rajasthan Royals were suspended for 2 years. Vivo took their place at Rs.200 crores for 2 years – 2016 and 2017. Vivo continued as Title sponsor for 2018 to 2022 for Rs.2,199 crores (Rs.439.8 crores per year) making it the most expensive title sponsorship in the world at the time. In 2020, when there was unrest between India and China due to Galwan Valley standoff, the contract between BCCI and Vivo was suspended for the 2020 Indian Premier League and Dream11 was given title sponsorship for the particular season at Rs. 222 Crore. Vivo was reinstated as title sponsor for 2021 IPL for the remainder of its contract period.
Along with the title sponsors, there are many associate sponsors that have been part of IPL since its inception. The current lot of associate sponsors includes Unacademy, Tata Safari, Dream11 (who were title sponsors for 2020), CRED, Paytm and CEAT Tyres.
Other sponsorship revenues include sponsorship for brands advertised on the umpires’ uniforms, Official Beverage, and so on
60% of the amounts collected from sponsors are distributed equally among franchises. The balance belongs to BCCI.
Gate (in-stadium) revenues – tickets, food and beverages (20% of)
Mobile app rights for the next 8 years were sold by BCCI in 2010 for an undisclosed sum.
Rights were also sold for a companion talk show, Extraaa Innings T20, featuring celebrity guests
In the year 2010, BCCI sold online broadcast rights to Youtube (Google) and to Britain's ITV.
The right to run and manage the IPL’s official website (iplt20.com) was also auctioned to the highest bidder.
Cinema screen rights were first auctioned in 2009, with the highest bidder being Entertainment & Sports Direct (ESD) at Rs.330 crores for 10 years till 2019, for audiences in cinema halls, stadia, waterborne vessels, buses, trains, armed service establishments, hospitals, bars, hotels, restaurants, airports, railway stations, shopping malls, offices, construction sites, oil rigs, clubs, auditoriums, spas, salons and other similar public venues.
The BCCI spends on the sums payable to ex-players who are selected as members of the IPL’s Governing Council. Some revenue streams are shared in pre-decided proportions with specific stakeholders, mainly franchises. All remaining revenues are almost entirely IPL’s profits, with only administrative expenses against those.
In the next part of this blog, we will look at what each of the other entities (Sponsors, Franchises) earn and spend on.
Adv Nayan Talwar and Ms Vaani Shrivastav contributed significantly to the authoring of this blog
Disclaimer: All information has been culled from public domain secondary sources. It is intended for educative purposes. We would be glad to correct any errors - they are not deliberate.
Rajesh is a qualified CA & CWA. He has served as a Director of PricewaterhouseCoopers, a Director of a large urban co-operative bank and Dean of a B-School over the years. He has taught Finance for over 20 years & trained participants from several Companies and B-Schools. He is an educator and a learner (he believes both are inextricably intertwined), and a knowledge product developer. Law Gyani, which he has founded to help Law Students with their exam preparations, and to understand nuances of the law.
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