IPL: A commercial and cricket masterstroke

While giving shape to IPL, 3 aspects were kept in mind. The league was to sit within BCCI, cricket and cricketers had to benefit, and it had to generate cash.

More than hundred years after Ranji invented the leg glance, BCCI created IPL – India's most significant (perhaps the only) contribution to world cricket. IPL is a winner, a commercial and cricket masterstroke.

IPL trophy

While giving shape to IPL, three key aspects were kept in mind. The league was to sit within BCCI, not outsourced, to ensure that ‘control’, the important C of BCCI, was maintained. Cricket and cricketers had to benefit and, lastly, it had to generate cash. Lots of it.

The IPL construct addressed these three guiding principles in masterly fashion. To retain control, BCCI treated the new league as any other local tournament. With this, IPL became a domestic tournament managed by a sub-committee, no different from Vizzy Trophy for inter-university cricket.

This shut the door on outside involvement in running the league. The clear message to private investors: this is our territory, our asset, we don’t need advice. Owners were excluded from governance and their contractual right was only to operate their teams in perpetuity, for a fat commercial consideration. It meant the annual franchise fee – in excess of ₹700 crore for LSG – wasn't good enough to merit a seat on the governing council. As a result, IPL remains an in-house property of BCCI. Totally ringfenced, totally secure.

The financial arrangement of IPL between teams and BCCI is very creative. BCCI, owner of the league, became the batter who deflects all risks to the investors while giving itself guaranteed revenue and profits. It received franchise fee from teams and retained a large share of the media and sponsorship revenue. For perspective, look at just one number. BCCI keeps approximately ₹25,000 crore (50% of the roughly ₹50,000 crore) from media rights sale/sponsorship for a five-year cycle. That is ₹5,000 crore a year.

IPL teams too are on a good financial wicket. Technically, business risks exist but the eco system ensures they have a smooth ride. Their yearly costs (on team operation/player/marketing) are roughly off set by ticket sales and sponsorship deals. And they are profitable because of the large amount received as the share of central revenue from IPL’s media/sponsorship rights deal.

Besides this annual profit, there is more. Teams understand that IPL is not a balance sheet business but a valuation game of the brand. This asset keeps rising in value because the supply is tightly controlled. IPL has only 10 teams, anyone wanting to enter this elite club has to pay a massive premium to get past the entry barrier. Net result? IPL is on a steep upwards trajectory, and team owners are smiling.

BCCI aced its objective of strengthening domestic cricket through IPL. The seven Indians in the playing 11 rule granted domestic players job reservation – teams hired up to 18 domestic players. They got a fantastic deal – assured jobs, top salary, a terrific platform to showcase talent, and excellent perks.

Indian players are paid the entire contractual amount even if they don’t make the eleven in any game. For the centrally contracted players, the arrangement is sweeter. If they miss IPL through injury (like Bumrah), their contracts are covered and they get full salary. With the impact player rule, more domestic players get an opportunity to play and teams also hire experienced players (Mohit Sharma, Pradeep Sangwan) as net bowlers.

The BCCI has been extremely smart in sustaining and strengthening the IPL brand. To keep its exclusive character, Indian players are barred from participating in overseas leagues. IPL set benchmarks others find difficult to match. Each team spends $12 million on player salaries; foreign leagues can’t afford even a quarter of that. Sam Curran’s IPL earnings can pay for an entire team in England’s Hundred.

The board keeps a tight leash on IPL teams to ensure the brand is not diluted. They can’t play each other in exhibition matches, friendlies or tournaments. IPL teams can go overseas but strict conditions apply – they are only allowed to play in associate cricket nations, and that too during a specified window. The guidelines are so tight the only way to export their brand is by buying teams in overseas leagues.

The BCCI is often at the receiving end, criticised for focusing on the commercial conquest of cricket while neglecting the game. Purists dislike IPL’s surround sound, the noise and hype, and find the drill of cheerleaders cringeworthy. But the message from the ground is Indian cricket is in good health because of IPL. It is a big step forward that deserves a 22-gun salute.