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Criconomics: Economics of the Indian Premier League

The festival of Indian cricket is way more than a bat and ball game


The Indian Premier League (IPL) was started in the wake of the economic recession of 2008 and has continued to flourish ever since. As per a report from American finance firm Duff and Phelps, the current value of the IPL ecosystem is around 45,800 crore INR or USD 6.3 billion. Today, IPL is the largest cricket league in the world with ten participating teams and nine sponsors that include giants like TATA, PayTM, CEAT, etc.


Reasons for the profitability of IPL


According to market research published by the International Cricket Council (ICC), there are about a billion fans of cricket ranging from 16-69 years and averaging 34 years. 39% of this consists of women and more than 66% of the total population is interested in all forms of the sport. Furthermore, this population comes from across boundaries and varied demographics, making cricket a wide-reaching sport for commercial interests.


The IPL attracts multi-country talent and hence a multi-country fanfare which gives brands a huge audience to target. Due to this reason, crores of rupees are spent in franchising, sale of players, stadium maintenance, viewership rights, etc. It is also the reason IPL attracts business tycoons like the Ambani family, the Goenka group, the Jindal group, etc. who spend exorbitant amounts to create, maintain, and improve their teams.


Sources of Revenue


To understand what impact IPL has on the Indian economy, we need to understand the revenue stream of IPL in totality. Given that IPL is such an expensive affair, the participants and people are to look for a return on investment, otherwise, it would just be a gimmicky affair of the rich. Further, these revenue streams will help understand the impact on the overall economy.


Essentially, the revenue stream of IPL can be divided into three sub-parts, each equally or more important than the other -


THE PRIZE MONEY-Money won by the team winning IPL finals


CENTRAL REVENUE STREAMS - Revenue generated from all audiences irrespective of, if they are present in the match venue or not


LOCAL REVENUE STREAMS - Revenue generated from the match venue.


Firstly, the prize money. It is the first incentive for all the teams to participate and perform well is the prize money. Bulk cash wins money and additional goods like cars and other goodies. It serves the interest of all, from the team owners and players to the sponsors and franchises.


Next, is the central revenue stream - mainly viewership rights, advertising, merchandising, and sponsorships. All these are expensive and competitive affairs where all the firms compete to telecast, advertise, and merchandise to cash on the popularity of IPL.


Finally, the local revenue stream, entails ticket sales, commercial stalls, and food stalls. These are localized in nature, so the scope isn’t as competitive or expensive as central revenue streams but still contributes an almost equal amount to the revenues. The revenues generated from this are from the audiences physically attending the show and thus vary drastically from place to place.


 


Why has the pandemic not affected the Profitability of IPL?


The COVID-19 pandemic has not much affected the profitability of IPL, the reason being its dependence on viewership itself and not the mode of viewership. So when a pandemic came in that restricted physical viewership, the right to broadcast was sold over a broader horizon diversifying viewership from only televisions to other screens by involving virtual broadcasting players like Disney+hotstar.


All involved parties were satisfied by this solution as the viewership remained almost the same and people outreach of IPL remained constant. It made all central revenue streams make up for their costs, and hence the money pumped into IPL was the same, so was the revenue. However, secondary revenue streams were restricted due to caps on physical viewership and change venue country.


Macroeconomic Impact of IPL


The IPL started in wake of an economic recession and has been a boon ever since. As per a KPMG report, the IPL has inserted about 182 million dollars into the Indian national income and bettered the unemployment levels for both formal and informal sections of the economy. Furthermore, the tax collection from IPL has been beyond a whopping 3,500 crore rupees.


Over and above this, the Indian Premier League has shifted the focus from tier-1 cities of India like Delhi, Bombay, and Calcutta to tier-2 and 3 cities like Dharmshala, Mohali, and Nagpur. It has brought them into the public attention from India and abroad and bettered the plight of the cities while bringing tourist attractions.


Conclusion


The Indian Premier League has gained immense popularity and viewership. On the downside, it has also garnered some shortcomings like match-fixing and betting. However, the entertainment and monetary value cannot be overlooked, since cricket is labeled as a “religion” in India, and IPL is celebrated as its "festival".


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