Behind all the controversy surrounding the much sought after Indian Premier League, we found that dirty politics and greed are not the only flavours in the murky air. There has been slandering, backstabbing and intense suspense and drama. One has no idea what to believe and what not to in this scenario where everyone bites the bullet.
The IPL’s financial structure remains a huge mystery to most people who heard and read about the rocketing sums that a Dhoni or a Symonds was bought for.
What we found out indicated that the IPL has a very strong financial model and business structure that keeps it going. In this article we will talk about the base financial modelling of the IPL but before that lets catch up with the happenings.
Just 3 days after the supreme court gave its suggestion to remove all India Cements employees from the BCCI and all bodies concerning, the old maestro Sunil Gavaskar was appointed as the interim BCCI president. This has set about the dice all over again! The rumours and old dust that was down about Sunil Gavaskar is being dug up again. So is it a game played by Srinivasan and his men or is it just the negatives of holding such a high position in one of the richest boards in cricket? We finally decided we would go to the root of the riot.
What makes IPL stand out and thrive even through all these happenings? Is it just the money or is there something else behind the biggest cricket league in the world. We got in the touch with the man himself who brainstormed the IPL. Yes you guessed it right Lalit Modi it is!
Taking you 6 years back in time
10…9…8…7…6…5…4… OH! YES! ABHI!
It is the summer of 2008. Preity Zinta is excitedly waving her team flag while Shah Rukh Khan is seen cheering for his team, an Indian bowler lauds the effort of a West Indian fielder of the same team. The batsmen are raining fours and sixes and the packed stadium seems charged with electricity, to say the least. Yes, a heady mix of cricket, complete with a dramatic, televised players’ auction, some of the most popular Bollywood personalities as team owners, national and international players in the same team, the gyrations of skimpily clad cheer girls, high profile sponsors, the clamour for tickets and passes, hysterically ecstatic crowds—this is how the Indian Premier League’s (IPL) Twenty20 matches made their giddy debut, completely changing the dynamics of the game of cricket. It was not just about the techniques and scores—now it was all about smashing shots, glamour, fashion, gossip and controversies.
And, amid all this hysteria, one could see a rather diminutive man, a perennial busy body, pulsating with nervous enthusiasm, trying to make sure the tournament went off exactly as he had dreamed of. That was Lalit Modi, the architect of this league—the man responsible for getting droves of people—women and children included—to a halt, simply to watch cricket; to experience the sheer madness of the game that many until then didn’t even understand much of.
This is what the man has to say about the IPL
It was while building the ESPN franchise that I realised the immense potential for live sport in the country. Thus, to put it simply, the idea for the Indian Premier League germinated way back in 1994, when I partnered with ESPN to launch the channel in India. It was then that we started ideating on how India could have a world class cricketing league to call its own—something like the professional league in the United States, the likes of the NBA and the NFL, or even the English Premier League. The second idea that I was toying with in my head was how sports and business could be merged for the greater good of the game.
After that, I spent a lot of time studying the business models of sporting leagues in the US and Europe to understand their strengths and weaknesses. It was just about this time that a shorter, more entertaining version of cricket was gaining worldwide appeal —Twenty20 cricket. It was fast emerging as the ‘perfect blend of sports and entertainment’, it also featured loud music, dancers, cheerleaders, and wired-up players providing commentary on the game even as it was being played.
With our due diligence on the business model done and all the safeguards in place, we presented to the BCCI the vision and plan for the Indian Premier League. Once my plan was approved, we then meticulously went about procuring the 100 best players in world cricket and meeting Indian corporates who we identified as potential investors.
Next, I turned my attention to bagging the all important broadcaster who would actually help fund the IPL through media rights. I distinctly remember that my initial discussions with several TV broadcasters in India and abroad had not been very promising. Unperturbed, I went ahead with the global media rights invitation to tender, and after a fair and transparent bid process, was pleasantly surprised at the amount of the winning bid.
So is it surprising that the IPL survives through all the drama?
No, not surprising at all. Thanks in no small measure to the check and balances put in place while developing the business model after having studied the positives and negatives of various sporting leagues from around the world.
Thus, the IPL has always been on a firm footing, right from the time it kicked off. The foundation was on solid basis from Season 1 itself. The IPL is thus a global brand that will never die. It has been built with a solid foundation and despite controversies, it will continue to spread and hold on its own.
So what is the Karbon Kamaal Catch of the Model that keeps this league running?
The IPL is the result of studying and taking the best out of several of the top league models in the world. So if you thought it was only the entertainment, fan following, pure adrenaline or sheer talent that kept this league alive, you are wrong the IPL owes its survival to the strong base model that is was built on!
We have a few key insights on the model of the IPL
The brand value is estimated at 5 billion US Dollars by the start of the 5th season and is expected to increase in the coming seasons
Combines glamour and sport that makes it a unbeatable entertainment combination
Was the only sport to broadcast live on YouTube
Literally was made to create a platform for young talent which was self funded with high expectations and stake. Became the breeding ground for International talent in a matter of 2 years.
By broadcasting the bidding and other non cricketing events in the IPL, it was made sure it captured a varied audience
The financial income is from broadcasting rights, title sponsors and corporate sponsors, auction of franchise rights and sale of tickets. This came to be pretty profitable in a nation where cricket is a religion
Media rights were shared with franchises after the initial cut toward the IPL
A firm player revenue system that rewarded players at different levels. This got the best in the game to come buzzing to India.
A source shows that while the funding is 8.7 billion US Dollars, just 4.8 billion US Dollars was needed for the grand event. So a saving of almost 4 billion US Dollars is there on the cards almost every season
With the theme of Youngistan meri jaan they targeted the youth of the nation
So what made the IPL a stand out it was the brilliant financial model. So, what is financial modelling?
Financial Modelling is one the most fundamental and widely sought after skills in the finance industry. It is the art of building a model to depict financial statements and investment analysis using MS Excel. This helps arrive at optimal business solutions by analyzing various parameters. At the end of the course, you will be able to do the task of building a model depicting financial statements/ business model, which helps in decision making.
What can you learn?
Learn how to construct an integrated financial model from scratch. You will soon be building models that are robust, and provide you with dynamic projections that can be used to thoroughly analyze a company from multiple standpoints: operations, investment, financing and valuation.
Financial Models constructed in Financial Modelling help in decision making and business modelling for firms and check the viability of projects. You learn techniques to value and analyze Firms, IPOs and FPOs in Financial Modelling. Investments in nascent stages can be valued with accuracy with hands on Financial Modelling for eg. Private Equity/ Venture Capital Investing.
Commercial Banks use Financial Modelling for disbursing loans for the projects; Project Management uses it for performance tracking of on-going projects. Financial Modelling concepts can be applied to any industry. Individuals who hold an MBA and also possess knowledge of Financial Modelling have an edge over others.
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