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Business Model of T20 World Cup | Explained by Dhruv Rathee - YouTube
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Hello, friends!
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Did you know that despite India not being in the World Cup,
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the Indian Cricket team will get prize money of $120,000 from the ICC.
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Have you actually wondered,
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whenever this T20 World Cup takes place,
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who earns the most money?
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Does the winning team get the most profit?
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Or the organisers of the tournament?
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Or the country hosting the tournament?
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Or the International Cricket Council aka ICC?
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In today's video, let us understand
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the business model of this T20 World Cup.
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"It has been confirmed by the ICC now
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that the venue for the ICC Men's T20 World Cup 2021
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has been shifted out of India
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to the UAE and Oman."
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"Because of Corona,
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the tournament has been shifted to the UAE."
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Let's start with the most basic and the simplest thing
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that everyone knows about.
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The Prize Money.
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The team that will win this T20 World Cup
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will get a cash prize of $1.6 million.
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The losing finalist team
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will get a cash prize of $800,000.
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And the two semi-finalists,
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will get the prize money of $400,000.
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In addition to this,
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every team in the Super 12 stage,
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that wins any match,
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will get a prize of $40,000 for winning each match.
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This is the reason why despite India being out of the World Cup,
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since India won 3 matches,
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$40,000 per match,
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the Indian team will get a cash prize of $120,000.
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In total, the prize money amounts to $5.6 million
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that will be given in this tournament.
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And who will bear the cost of this prize money?
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ICC.
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The International Cricket Council.
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The international governing body of cricket.
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Apart from this, there will be several other expenses to be borne by the ICC.
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The salary of the umpire.
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The salary of the commentator.
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ICC has to pay for all of this.
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Because this entire tournament
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is organised by the ICC.
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ICC has formed an elite panel of Umpires
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and has classified the commentators into 3 categories.
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For example,
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the annual salary of an umpire can be
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in the range of $35,000 to $45,000.
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That is approximately ₹2.4 million to ₹3.1 million.
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In addition to it, for every match, the umpires get a fee.
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For a T20 match, the average salary of an umpire is about $1,000.
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But from where does ICC get funds for these expenses?
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What are the sources of revenue of the ICC
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when the World Cup is organised?
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The primary source of income for them is broadcasting rights.
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That is sold to TV channels and streaming services.
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Basically, the permission to stream this match on their channels.
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Through which you can watch the match.
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In exchange, the TV channels and streaming services,
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pay the ICC.
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For example, nowadays you watch the matches on Star Sports
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because ICC has struck a deal with Star Sports
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that all the major tournaments of the ICC
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will be exclusively broadcast on the Star Sports channel.
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This deal will be in effect until 2023.
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As consideration, Star Sports paid ICC $1.98 Billion.
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Almost ₹140 Billion.
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Additionally, ICC gets money from their sponsors.
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Nissan, Oppo, MRF Tyres,
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Booking.com, Byju's and Emirates
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are the global partners of the T20 World Cup 2021.
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These are the top sponsoring companies.
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It is an ad for the company
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for this sponsorship, they pay the ICC.
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There are various types of sponsors
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and they are divided into categories as well.
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Like the Global partners, Category partners,
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and social media partners.
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The exact amount that ICC gets from these sponsorship,
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is not publicly available.
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But at the end of the video, I'd tell you a fair guess
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of the income from sponsorship.
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But everything I've told you till now,
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was from the perspective of the ICC.
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Now, let's understand the things
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from the perspective of the host country.
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The country where the tournament is organised,
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what does the country get?
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What does the government of the country get?
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The answer to this isn't straightforward.
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There are many indirect benefits
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that are difficult to be calculated.
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Directly,
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obviously, the money from tourism.
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The country that hosts this World Cup,
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is visited by foreigners that want to watch the match in the stadium.
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And when there is an influx of tourists in the country,
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then obviously, tourism brings in money as well.
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In short term, a lot of employment is generated.
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Because of the huge influx of tourists in the country.
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Businesses around the stadium
such as the restaurants, bars, hotels,
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see a lot of growth.
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The hotels get booked out.
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And you get to see 'full house' in all the restaurants.
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Obviously, the economy of the country,
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the GDP of the country,
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undergoes a potentially positive impact.
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In addition to it, if the country can prove to the rest of the world
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that it has successfully hosted the World Cup,
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it proves the stability of the country.
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The soft power of the country increases.
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Because of this, more people would want to invest in the country.
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Leading to a growth in foreign investments.
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And during the preparation for the World Cup,
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the infrastructure needs to be upgraded,
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Good roads need to be built.
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Cleanliness has to be maintained.
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Like the 2010 Commonwealth Games held in Delhi,
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saw a major change in the infrastructure of the entire city.
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But, in order to do this,
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to upgrade the infrastructure,
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to prepare for the tournament,
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the country has to bear huge expenses.
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Do you know what is the biggest expense for the country, apart from this?
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When a World Cup is hosted.
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Tax Exemptions.
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During the T20 World Cup,
often the country hosting it,
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gives tax exemptions to the ICC.
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And it isn't for cricket only.
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It's the same during the FIFA World Cup as well.
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The hosting country for the FIFA World Cup,
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declares itself to be a Tax-Free Zone for FIFA.
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And millions of dollars are spent on tax exemptions.
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In fact, for the football World Cup, it is a given condition
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that the country with the winning bid to be the host,
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will have to grant tax exemption to FIFA.
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For example, the 2006 FIFA World Cup was held in Germany,
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it is estimated that around €250 million of tax exemptions were given then.
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By the German government to FIFA.
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But the benefit from the perspective of the government is that
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overall, the revenue from tourism
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is more than this.
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Like in the 2006 FIFA World Cup,
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the German government reported that
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the tourism revenue due to the World Cup,
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was around $400 million.
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This was a clear-cut profit for the government.
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And let's return to the topic.
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Friends, every country isn't so fortunate.
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Like in the 2014 FIFA World Cup in Brazil,
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there was a lot of unnecessary construction
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there were many protests and allegations of corruption.
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And it is said that Brazil
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had to bear an overall loss for hosting this World Cup.
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The expenses borne by the Brazilian government
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was of $15 billion.
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But the revenue was estimated at only $13.2 billion.
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Additionally, there were many protests
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in which the government was criticised
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questioning the government's rationale to waste money on stadiums,
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while education and healthcare desperately needed money in Brazil.
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A similar situation was seen in South Africa.
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When the FIFA World Cup was held in South Africa.
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Although, the government of both countries claim
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that when the World Cup took place in their country,
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it was a success.
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The T20 World Cup taking place now,
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has an interesting story too.
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If you look at it from the perspective of the hosting country.
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It was originally planned that this World Cup will be held in Australia.
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But then the Covid-19 pandemic broke out.
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Because of it, the World Cup was initially postponed.
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It is taking place in 2021
instead of 2020 as planned.
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Then India offered to host this World Cup in India in 2021.
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But then there were some problems.
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Newspapers ran with reports that
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BCCI may have to pay taxes as much as ₹9.06 billion.
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If the Central Government refused to give complete tax exemptions
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to host the ICC World Cup.
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Even if the government gave partial tax exemption
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the BCCI would still have to pay ₹2.27 billion as taxes.
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For hosting this T20 World Cup.
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Interestingly friends,
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the Indian government has always been quite slow at such things.
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For offering tax exemptions.
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Even for the 2011 50-Over World Cup held in India,
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the Manmohan Singh government had not approved tax exemptions till the last moment.
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But at the very last minute,
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it was granted when the then Prime Minister Manmohan Singh intervened.
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After that, in 2016,
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when India hosted the T20 World Cup,
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the Narendra Modi government
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gave 10% tax exemptions only.
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Then, $23.75 million was withheld by ICC
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from the money that BCCI was supposed to get.
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And this issue between the two,
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between ICC and BCCI,
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that hasn't been resolved yet.
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As I told you about FIFA,
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it is the same with the ICC.
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ICC tries to secure the tax exemptions upfront
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in whichever country the World Cup is supposed to be hosted
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Only after that, the hosting rights are given to the country.
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But BCCI failed in securing tax exemption from the Indian government.
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Following this, it was decided
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to host this T20 World Cup in
the United Arab Emirates and Oman.
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It is assumed.
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Officially though, BCCI has given only one reason,
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Covid security and safety concerns.
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Because of this, this World Cup didn't take place in India.
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Instead, it was held in the UAE and Oman.
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But several experts believe
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that the main purpose was securing tax exemptions.
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Now, look at things from BCCI's perspective.
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BCCI is the Indian cricketing body.
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And distinct from ICC.
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BCCI has its own source of income.
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First, they get a broadcasting revenue share from ICC.
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ICC does so for every cricketing board.
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It appropriates a part of its revenue to the other cricketing boards.
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But BCCI's main source of revenue is
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sponsorships.
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The main kit sponsor of BCCI,
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is MPL Sports.
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Their deal was made till 2023.
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BCCI gives them the right
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to sell merchandise.
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The base price of MPL for this is ₹6.5 million per match.
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And ₹30 million per year.
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That is paid to BCCI.
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The merchandise partner and the jersey sponsor aren't the same.
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The jersey sponsor is the one
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whose name is printed across the jerseys of the Indian Cricket Team.
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In this case, it is BYJU'S.
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There's an interesting history of the jersey sponsors of the Indian cricket team.
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The company that was the Indian cricket team's jersey sponsor for the longest time
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was Sahara.
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They started in 2003 and remained the jersey sponsor till 2013.
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Here comes the interesting fact.
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In the 2003 cricket World Cup,
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there was no jersey sponsor for the Indian cricket team then.
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This is because there is a rule by ICC,
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that the companies from which ICC gets sponsorships,
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the other cricket boards,
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cannot get sponsorships from any competitor company.
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The main sponsor of ICC at the time was South African Airlines.
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And the company Sahara was also involved in the airline business.
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This led to a conflict of interest.
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And so there was no sponsor on the jerseys of the Indian team.
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Sahara remained the sponsor till 2013.
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After that, Star India became the sponsor for 3 years.
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Then Oppo for 2 years.
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And now BYJU'S.
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Overall, according to the reports it is being estimated
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that from this T20 World Cup alone,
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the BCCI will earn around $12 million.
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Till now you've looked at this business model
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from the perspectives of the ICC, the hosting country and the BCCI.
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Who remains?
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The Broadcaster.
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The TV channels that broadcast the matches.
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For us, the TV channel is Star Sports.
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As I told you at the beginning of the video,
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Star Sports has paid millions of dollars to ICC
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to get the broadcasting rights.
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What is Star Sports' source of income?
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The answer to this too, friends, are the sponsors.
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For this present T20 World Cup,
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the main sponsors of Star Sports are
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BYJU'S, Dream11, Vimal and Coca-Cola.
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An interesting thing here,
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2,700 seconds of commercial airtime is allotted
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for one T20 World Cup cricket match.
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Meaning that for the one World Cup match that you watch,
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you watch 2,700 seconds of advertisements.
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But in IPL, this time is increased to 3,000 seconds.
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If you've noticed, there are more ads on TV channels in IPL,
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as compared to the T20 World Cup.
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What is the exact rate of sponsorships?
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It is reported that for this World Cup,
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it is around ₹1 million to ₹1.1 million
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for every 10 seconds of ad.
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If a company wants to play a 10-second ad.
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If a company had to co-present this tournament,
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it is estimated at ₹550 million to ₹600 million.
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And for associate sponsorships,
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it is estimated at ₹300 million to ₹400 million.
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It is estimated that in this case, the broadcaster
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can expect to earn ₹12 billion to ₹12.5 billion in ad revenue
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from this specific T20 World Cup.
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Since the TV channel is Star Sports,
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the rights for online broadcasting has been given
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to Disney+ Hotstar streaming app.
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Here, you can clearly see
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why IPL is more profitable.
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The simple reason is that for each match,
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more inventory is given to the ads.
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It means that IPL rakes in more sponsorship revenue.
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And the next time you're wondering why there is so much focus on IPL,
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the direct answer to this lies here.
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I hope you found this different type of video.
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If you want to watch more such videos on Business models,
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tell me by commenting below.
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Which other company's or event's business model would you like to watch?
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The link to download TaxBuddy is in the description below.
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Let's meet in the next video.
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Thank you very much!
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