Why IPL Teams Command Such High Valuations Among Cricket Leagues

In 2008, with the advent of the Indian Premier League, the sport of cricket saw a major shift in its positioning. What once looked like a traditional game, played between nations and governed by laws, witnessed the charm of league sport - a phenomenon associated only with football, basketball, the NFL, and other modern sports.

Even after IPL came into being, people looked at it much more like a razzmatazz than real cricket, but the infant that took shape in 2008 is now on the cusp of adulthood, and not only is it here to stay, but to dominate world cricket.

The recent sale of two IPL franchises - Rajasthan Royals (USD 1.63 billion) and Royal Challengers Bengaluru (USD 1.78 billion) for such astonishing amounts is the reflection of the behemoth the IPL has become or could become in times to come.

But why has the team's valuation skyrocketed in such a short span of time, let's understand in depth:

It's Not Only A Team But A Marketer's Dream

If you keep the emotions associated with a sports team aside, then each IPL team is no less than a media platform. For two months every year, IPL holds the attention of the audience as only a few commodities in the world can.

Matches are telecast in prime time, garner huge social media traction and intensive coverage across media outlets, which provides endless marketing opportunities.

Being an owner of an IPL franchise means that you not only pay for your advertisement but also become a part of the narrative. Instead of paying to be visible, you now own the platform. The team's jersey, dugout branding, and familiarity with a massive fanbase contribute to your sustained presence and make it more natural for people to associate with your brand, unlike a one-time advertising.

More Than A Passion Project

Buying a franchise is much more than passion or love for the game. Yes, if you love the game or have been raised in its environment, it plays a role in opening the door towards it, but the final decision lies in the feasibility of the sport.

The decision to own a team lies on the financial viability of the league and its growth trajectory after 10-15 years. Here, your passion and love for the game take a backseat, and business acumen supersedes the decision.

Basis On Which Teams Are Valued

There is no exact formula for ascertaining the value of a team, as it is different from putting a price on a business or a company. Here, potential owners focus on constant income streams, prospects, and their own understanding of the league or the game itself.

IPL's massive broadcast deal plays a great role in assigning a value. Team owners get a portion from the deal, which ensures a predictable cash flow that every team owner holds dear.

Another form of income for the owner is the central sponsorship, which is also distributed among owners. Though it's not a huge amount, it's something that amounts to a steady income.

What Separates Teams From Brands

Now here comes the most important part - the brand value of a team. Some teams are valued more than others, though they still play the same number of matches and have the same visibility.

It is the brand name that separates them from others, which is earned by winning more matches, having trophies in their ranks, or even by possessing star players.

These qualities create a brand value of the team, which in turn helps them financially to get better deals from the sponsors, boosts merchandise sales, and builds partnerships.

Creates Opportunities Across Broader Businesses

As we know buying a team provides owners with a platform that they control, which in turn can be used to create opportunities across their other businesses such as hospitality, digital media or consumer brands.

At the same time, given the popularity of the league and the scope of growth, the value of these teams appreciates exponentially, resulting in huge profits for the owners.

Over the year, IPL has become something bigger than cricket and has transformed the sport into a business proposition that mixes business, capital, and media in a manner very few others do and for these businesses it's not only about being present at matches for marketing or being with the players but more about owning a part of one of India's biggest consumer platforms.