Much ado has been made of this coming IPL season, and for good reason. When compared to international leagues, the IPL has a somewhat unique structure and therefore, business model. The IPL is one of the few leagues to boast such high valuations for its teams, command such high bids for broadcasting rights, and generate more buzz than a dozen swarms of killer bees. What makes it even more intriguing is the revenue structure that the IPL has.

What separates the IPL from every other league in the world is the complete absence of physical assets, namely stadiums. The IPL depends for the most part on sponsorships both from a central revenue pool, with major sponsors such DLF, Pepsi, Hero Honda, and Kingfisher, as well as a local revenue pool which each individual team is responsible for, and keeps the revenues from. The single biggest contributor to revenue is the broadcasting rights contract the IPL has with Sony and WSGM. In one of the more underplayed but extremely significant episodes during the pre-IPL controversies, IPL terminated its contract with Sony and WSGM, and actually ended up signing a new agreement with both parties at terms that would give it virtually double the revenue that the previous agreement would, approximately U.S. $1.8 billion over 9 years. Gate receipts and in-stadia signage and endorsements aren?t a huge component of revenue in the IPL. Simply put, the League, which is owned by the BCCI, earns revenue through the Franchise fees paid by each owner over the next 9 years, revenue from the central revenue pool (40%), central licensing income (12.5%), and of course, income from broadcast rights (20%). The Franchisees receive the remaining broadcast revenue (10% each), central revenue pool income (7.5% each), licensing income (87.5% per franchise), and revenues from the local revenue pool as well as gate receipts and other match-day revenue streams.

The English Premier League (EPL), the world?s most popular sports league, has a very different structure, and very different revenue streams. Each of the twenty teams is a shareholder and therefore part-owner of the League. Two of the biggest revenue streams in the EPL besides broadcast rights are stadium-related revenues, and sales of merchandise. Each of the teams also has a major physical asset that contributes to its valuation and net-worth: its stadium. By owning the stadium, each team not only is able to sell all associated branding and stadium rights, but it also has a tangible physical asset that can be leveraged.

Owning a facility in a country like India, however, can be a double-edged sword, as this season of the IPL has demonstrated. Keeping in mind the security situation, as well as other possible extraneous factors, flexibility has been vital in making the IPL a success until now. While this may not be viable from a long term perspective, facilities ownership needs to be gradual and in line with the evolution of the league. Similarly, merchandising and gate receipts as major contributors to revenue will again be a gradual process as team loyalties develop.The League has underwritten all additional expenses for this season, but this isn?t a sustainable model. In the medium term, the IPL needs to figure out the security situation, develop all the components that go into creating a successful global league, and needs to transform itself into a proper league with a farming system, talent development, and year-round brand building activities that make it more than just an event.

It?s hard to envision the IPL not being a success in the short and middle term, but as a long term sustainable entity, it needs to evolve and separate itself from any future competition. It needs to be solid, predictable, and stable for it to be a long term success. The IPL is the Indian Premier League, and it needs to be in India, for the Indians, a true reflection of a one-sport nation clamoring for its success. That is the only way it can retain ?home-court? advantage, and compete with the best on a long term basis.

The author is a sports and corporate attorney at J.Sagar Associates. These are his personal views