Indian Premier League: Current business model and its sustainability

Abstract

The first IPL season has been touted as a major success. IPL is also considered by many to be the first concrete step towards institutionalization of sports entertainment industry in India with participation from major corporate houses and media personalities. The IPL franchises are considered to be the next big value creators by the financial investors. Due to these factors we felt that the study of IPL business model would bring out factors that lead to success from the strategy point of view and also the sustainability of the current hype. We followed a model of stakeholder analysis to understand the IPL business model. The aim was to dissect the major revenue inflows and outflows, as well as their inter linkages for the major stakeholders involved. Which are Sony-WSG group (broadcaster), BCCI and franchise owners. The following study shows the distribution of major revenues like sponsorship rights, broadcasting rights among BCCI and franchise owners and also makes a comparison with EPL where we found that such share for franchises was much higher. The revenue distribution is crucial for any sports league and we highlight how IPL used broadcasting rights money to de risk the business model and lure big corporate houses to make bids. The study also highlights that the IPL success would translate into maximum benefit for the BCCI. However for the franchise owners, some of them have done well in the initial year but the biggest value driver is maximizing local revenues through merchandizing and gate receipts. We also studied various economic theories involved in managing professional sports league and drew a comparison of how those principles have been incorporated in IPL. Unlike a monopolistic firm, a sports league thrives on competition and IPL structure achieves that by allocating iconic players to specific teams and also keeping a cap of player bid amounts in the initial years. Such a competitive balance promotes joint profit maximization by all the teams. Though the IPL has been a success in the first edition, it still faces significant issues. The whole business model is based on the Indian public s appetite for cricket and the belief that they will adjust to club loyalties which is a new concept for India. Thus we foresee that most of the future IPL club strategies would be aimed at taking into consideration local consumer profile while deciding the ticket prices or selecting players. We see a lot of scope for innovative marketing strategies to build a strong local brand and loyal fan base so as to maximize local revenues.