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Will IPL 2018 ensure steep hike in team revenues?

25-September-2017
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Will IPL 2018 ensure steep hike in team revenues?

Ten seasons down the line, Indian Premier League (IPL) has established itself as the most thrilling and popular sporting league in the world, offering brands an opportunity to aggressively market and advertise their products. It is also one of the most preferred platforms to launch new products and strengthen the brand recall of existing ones. IPL as a platform is raking in big moolah. This in turn is good news for team owners who can benefit from the overall value of the sporting league.

If we look closely, IPL has a robust revenue distribution model in place where the BCCI collects revenue from distributors and shares it with the teams. Given the quantum jump in broadcasting revenue this year, IPL teams are set to reap the benefits of this surge. Just to add some perspective, this year, IPL title sponsor Vivo coughed up Rs 2,200 crore for a five-year deal, while Star India paid a staggering Rs 16,347.5 crore to bag the media rights of the game making this league among the most expensive sporting leagues in the world.

 

Impact on IPL team revenues

Talking about the impact of IPL’s overall revenue surge, it is a given that the teams are going to profit immensely. IPL in its tenth year is already worth Rs 34,000 crore and has posted a 26% increase in its overall business from Rs 27,000 crore last year.

It is well known that for all IPL teams, sponsors are the real source of income. Teams have sponsors for everything from main sponsor, jersey sponsor and even a sleeve sponsor. The cumulative ad revenue for IPL from 2018-2022 is pegged at Rs 10,000 crore, which is much higher than IPL’s revenue in 2017, which was Rs 1,300 crore. This growth in ad revenue will be primarily driven by the new ad rates which are expected to go up way further. Some media agency chiefs are even expecting a 10-second TV ad spot rate to climb to Rs 15-17 lakh from Rs 6 lakh in 2017.


If we look at team revenues, Kings XI Punjab earned Rs 26.5 crore from sponsorship revenues in 2016, which according to reports went up to Rs 30 crore in 2017, and is expected to go much higher in next season. While Mumbai Indians earned Rs 70 crore in sponsorship last year, it aimed at a 10-12% increase in sponsorship revenues in 2017 and with IPL now becoming cash rich than ever before, the expectation can be as high as 30% next year.

It is important to state that in 2014-15, KKR posted 30% growth in revenues and 54% when the overall worth of the league was way below its current estimates. 

Revenue growth of 25-30%

GMR-owned Delhi Daredevils is already aiming at a 20% increase in sponsorship revenues. According to industry estimates, in case of teams such as Delhi Daredevils and Kings XI Punjab, thecost of sponsoring the jersey front ranges between Rs 10 crore and Rs 12 crore, while price of advertising at the back is Rs 5-6 crore. While the cost of sponsoring the fronts of jerseys for teams such as KKR and Mumbai Indians ranges between Rs 8 crore and Rs 22 crore; backs of jerseys are priced at around Rs 10-12 crore. This is expected to go higher by at least 20-25% as IPL enters a new phase of growth with Star India having bagged its distribution rights.

Speaking about how IPL teams will benefit from the spike in IPL revenue, Saurabh Uboweja, CEO and Chief Brand Strategist, Brands of Desire says, “Two of the leading sources of income for IPL teams are BCCI's contribution from the sale of media rights and sponsorship rights.. The recent sale of both these rights combined for BCCI means an additional income of not less than Rs 3,600 crore every year. BCCI is likely to share at least 30% of that every year with IPL teams. IPL teams can expect to at least double their revenues from the coming season onwards, which means all teams will be profitable in a single shot.”

On an average, team sponsorship revenues are between Rs 30-40 crore and ticket sales account for around Rs 25-35 crore. Central pool revenues are in the Rs 75-90 crore range for franchises. According to some estimates, franchises are expected to clock 20-25% increase in overall revenue from 2018 onwards. However, all these predictions also depend on the upcoming BCCI-IPL meet which is taking place in a week’s time, and if there are no new conditions announced, the teams will definitely have lot more to expect from IPL 2018.

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