Economics of IPL

The Revenue Side
Share of central pool: $7 million per year
Prize money: $5 million on offer
($3 million for winner; $2 million divided among others)
Local pool revenues: $0.75-2.5 million
Total average revenue potential per franchise: $8-12.5 million
The Cost Side
Franchise fee: $6.7-11.2 million
Cost of players: $1.1-1.7 million
Other costs: $2-5 million
Total average annual cost per franchise: $10-18 million
Notes: ‘Other costs’ includes executive and coaching salaries, stadium leasing costs, match-day costs like staffing and security, administration costs, team travel and accommodation and training expenses Estimates are purely indicative and based on a simple mathematical model. IPL follows a graded structure and actual cash flows will differ from these figures.
The Upsides
Title sponsorship: It went for $50 million for the first five years, and is renegotiable after the third year. If the IPL gains momentum, it can be much higher.
Player trading: After the first year, teams can trade players. Players can be sold for many times the cost at which they were acquired.
Gate fees: Beyond the third year, gate fees can increase significantly if the IPL takes off in a big way. The English Premership earns $5 billion in gate fees every year.
Franchise sale: After the third year, a franchisee has the option to sell out. This could lead to a windfall.
Franchise forever: The franchise fee is for the first 10 years, after which franchisees continue to own the teams for perpetuity.
The Downsides
Not enough eyeballs: Sony-WSG and the franchises could suffer losses in the first two to three years till IPL wins over spectators and viewers, and draws a critical mass.
Not enough star players: Constant availability of top-notch overseas players may be an issue due to growing number of international fixtures.
Other tournaments: If the ICC decides on an annual international Twenty20 championship, it might get better viewership than the IPL.
Iffy advertisers: Many advertisers are still in the wait-and-watch mode.
Game pull: Business prospects may be affected if the franchisees fail to create a loyal fan following in their turf.