Ten years ago, Lalit Modi collected friends and groupies to share his vision of a privately owned professional cricket league – it was to be a television-friendly product to target a new audience. Modi was looking to persuade people he knew to literally buy into his vision by investing money. Initially, instead of support, his pitch was met with a depressing lack of interest and skepticism, but ultimately he was to badger, bully and bribe them to green-light the tournament. The IPL was launched in 2008 with eight teams collectively committing $723 million.
In a recent article to celebrate 140 years of Test cricket, Mark Nicholas picked the arrival of IPL as a defining moment in cricket's journey. The IPL invited private enterprise into cricket and successfully created a commercial property that aligned with changing social trends and lifestyles. In a fast-paced world with low attention spans, the IPL fitted into space available for result-oriented sport that was short, snappy, snazzy and spicy.
The IPL achieved many firsts: a 20-over brisk shootout which resonated with young fans and persuaded corporates to invest in cricket. It had an important ally in the entertainment industry and top cricket international cricketers who were ready to take part in a ‘domestic’ tournament, despite no ICC involvement.
By ticking key boxes, the IPL's unique package found instant favour with fans, broadcasters and commercial partners. From a fan's perspective, what could be better than watching top talent in a contest that guaranteed excitement? Broadcasters were happy they could capture 3 hours and 30 minutes of valuable content on multiple HD cameras and deliver live action to the drawing rooms of consumers at prime time.
IPL's runaway success across the ten years since it began makes it the most preferred tournament for players. It remains one of the fastest growing sports leagues in the world, the gold standard against which to measure the xerox copies coming out of Australia, Bangladesh, West Indies and soon-to-be-launched ventures in England and South Africa.
The IPL works on two counts:
- It remains true to cricket, the only tweak being shrinking its duration to deliver a result.
- It taps into India's recession-proof cricket economy and its huge fan base. Drawing strength from this, the IPL throws up amazing numbers, whether the $10 million each team spends on putting a squad together (compared to $780,000 in CPL, $1. 6 million in BBL and $1m in PSL) or the staggering price tag of Ben Stokes alone.
But there is more than just its numbers. The true impact of IPL lies in the fact that it gave traditional cricket a good shake and triggered intrinsic change. The IPL converted cricket into a three-format sport with T20 the driving force that fuels its economy and subsidises Tests. Its success has changed cricket’s technical grammar, forced batsmen to be aggressive, and bowlers to discover new tricks for survival. And as cricket evolves and run rates go up, Test cricket stands energised.
The IPL’s first decade has not been without hiccups and tumbles, it has had its share of controversy and crises. So what does its report card look like ?
Distinction
1. A calendar-altering League
The IPL is cricket's pre-eminent league due to its economic muscle and financial clout. It has an unofficial but almost permanent window through April-May in the international calendar. In this six-week period, players happily abandon national commitments and head to India. All countries, even England, the last to buy in, have made peace with this reality.
First Class
1. Global Standards
The IPL was positioned as competition not against the Duleep or Deodhar Trophies, but against the best the world had to offer. Everything had to look top-grade. Right from the bottom: Machine-compatible accreditation cards with special lanyards, customised crockery/cutlery and napkins, elaborate attention to branding and stadium 'look and feel' – the focus was on delivering a special experience to fans and encouraging them to pay repeat visits.
In addition, venues had to provide facilities for hospitality and entertainment (upgraded sound system, giant replay screens, electronic scoreboards) and investment was required to put ticket turnstiles, storage space, kitchens, hospitality boxes, and parking, in place.
As stadiums were not up to scratch, not built to factor in these requirements, IMG was commissioned to make every Indian stadium IPL-worthy and introduce global best practices to seamlessly manage the affairs of players, sponsors, commercial partners, entertainment, security and hospitality. They did this with polish and efficiency, occasionally stumped by peculiar challenges such as finding change rooms for cheerleaders.
Considerable work was done by venues to upgrade infrastructure to meet expectations that fans in other countries took for granted, but which the Indian fan had rarely seen. Clean toilets and safe drinking water topped the list and while there is greater awareness to be spectator-friendly, the 'fans first policy' still remains more a slogan than a reality.
2. IPL as a Domestic BCCI Tournament
The IPL is a BCCI tournament with a difference because it injects a booster dose of money, competition and media attention into domestic cricket. It is also represents cricket's Mandal moment by ensuring job reservation under a rule that mandates seven Indian players must feature in every playing XI. This guarantees employment for more than 100 Indian players.
Could Do Better
1. Governance
The challenge before the IPL is governance, and not cricket, or its commercial health. The management has run the event in a routine manner so far, but the league needs long-term vision and leadership.
From the beginning, the IPL made a tactical mistake by aggressively advertising its commercial character. Many thought this error of judgement demonstrated a lack of good taste. The IPL carelessly flung its figures – of commercial deals and player salaries to name a few – around, a move that made the League sound like someone boasting about their newly-acquired wealth.
The IPL’s habit of quoting all figures in US dollars was less top-dog and more wannabe. The fact that cash, and not cricket, became the IPL’s currency, hurt the league in more ways than one.
As if this overemphasis on cash wasn't bad enough, the IPL forged a strong bond with controversy and crisis, and displayed a spectacular talent for scoring self goals.
Among them the most famous:
A) IPL's own self-crowned czar/boss/don Lalit Modi was accused (and found guilty) of colossal financial wrongdoing. He was subsequently suspended, sacked and exiled.
B) By allowing officials to own teams, the IPL set in motion a chain of events that caused a tsunami of sorts, leading to the dismantling of the BCCI. It was the IPL that brought 'conflict of interest' (COI) to the centre stage in the national discourse. To put it in simple cricketing terms, a person’s love for multiple roles could lead to him being a player who also became an umpire and the official who appoints the umpire.
Letting officials own IPL teams meant that the team owner, the BCCI official and the IPL governing council member could all be the same person: the one making a case, the one admitting a case and the one who passed eventual judgement on it.
C) The move to shift the IPL to South Africa in 2009 infuriated the government. In turn, the government ordered a serious crackdown involving court cases, tax enquiries investigations and raids. Files relating to the 2009 affair are still floating around various arms of the government, waiting to be brought into play whenever convenient.
D) The darkest chapter was when the IPL was hit by the corruption and match-fixing controversy. Players and team officials were jailed, the League’s and the BCCI’s governance practices were exposed to scrutiny and four years later, the BCCI is still dealing with the fallout.
E) High mortality rate of franchise teams caused uncertainty and upheaval. Teams came and went, others were suspended and terminated.
Hyderabad, Kochi, Pune have all been on the wrong side of the IPL, as have champions Chennai Super Kings and the Rajasthan Royals, resulting in litigation and arbitration –none which survived scrutiny in court.
The IPL, quick on the trigger, has often ended up shooting itself in the foot. In ten years the IPL is yet to open its account when it comes to getting any favourable verdict from the court.
The IPL journey has seen occasional patches of clear skies, but lots of turbulence and rough weather. Think of the IPL as a flight where the seatbelt sign is never switched off.
2. Equal Opportunity for All Budgets
The league was structured on the principle of providing equal opportunities to the teams. Safeguards were put in place to keep teams from using their resources to bypass their rivals. The IPL wanted to create an ecosystem where skills decided the winner instead of money.
Like most other things associated with the IPL, this noble intent was also systematically shot down. Take for instance, US $10 million the salary cap – the maximum amount available for teams to build their squads. This ceiling exists only on paper as there are many legal loopholes and provisions (retentions, trading, support staff salaries, releasing money to foreign boards), which allow expenditure in excess of this limit.
Under the current formula, the RCB can pay any amount, say Rs 20 crore to Virat Kohli, but only Rs 12.5 crore is taken from the Rs 66 crore salary purse.
The point is simple: the salary cap should cover all player/support staff costs without exception. Or else, just junk the concept.
A Few Questions
Has IPL delivered on its promise to make domestic cricket robust ?
From a cricket standpoint, exposure to top world players and the experience of competitive cricket is immensely beneficial. The modern young player today is self- confident and is better prepared for a higher grade of cricket, his education fast tracked by sharing a dressing room filled with legends.
Is there a downside to this?
Perhaps just one, a concern first articulated by Rahul Dravid, who felt it could devalue normal cricket in the eyes of the young player. If it is possible to make serious money and become a star on the strength of limited skills required in the 20 over format, he argued, why would anyone work hard to play Ranji or even Test cricket?
Are the rupees raining down on Indian cricketers?
While cricket benefits are clearly visible, the economic achhe din are still a long way off, as the promised financial boom has not reached the majority.
Of the 135 Indian cricketers engaged by IPL teams this season, 50 players are already secure, given their central contracts and earnings outside cricket. On the other hand, 48 players fall in the minimum Rs 10 lakh IPL salary bracket, and another 14 sit in the Rs 10-30 lakh bracket. So, effectively, only 25 or so Indian cricketers receive what can be termed life-changing rewards.
The stark reality of IPL Indian players contracts are not unlike global economics today.
Because rich players are getting richer while the vast majority – 1000-odd Ranji/first class players representing 28 teams in senior tournaments – have missed out on the IPL riches.
What the IPL has definitely done is to create job opportunities for a larger number of India support staff. After an initial phase, when foreign professionals were hired as a package deal with foreign coaches, Bangar/Balaji/Amre/Arun Kumar/Mohd Kaif/Hrishikesh Kanitkar/Mithun Manhas were appointed, as teams realised that Indians are best suited to provide intelligence about Indian players, who make up two-thirds of the squad.
IPL – The Balance Sheet
Over nine years ago, while making his sales pitch, Lalit Modi sold the potential investors an attractive dream. His presentation promised an impressive ROI, steady revenue growth, multiple income opportunities, a short break-even period and the best of all, a huge bonanza on the valuation stakes.
His business model, roughly, was this :
Part 1 was related to the annual balance sheet, where profitability was around the proverbial corner. This was to be found by monetising assets, mainly uniform sponsorships, ticket revenue, licensing and merchandise sales. In addition, the IPL would share revenue – enough to meet operational costs of teams – from its central media rights and sponsorships.
Part 2 (and this is the clincher), was the long-term valuation game, the mirage and ‘maya’ of the IPL, where the 'brand value' of the franchise teams was supposed to reach an amazing level. The IPL was positioned as a brand valuation proposition, instead of an annual balance sheet examination.
Team owners were convinced they possessed an asset, a piece of art – the value of which would multiply. They believed they could cash out at any stage. This valuation game strategy was based on cricket's strong appeal, together with supply line scarcity, as there were only a limited number of teams in the market for someone to own.
The economic reality has disproved these expectations. On an annual balance sheet basis, most teams – barring a few – are struggling commercially. The reasons for this are not hard to find: cricket fatigue, competing avenues of entertainment and leisure, lack of freshness about the IPL, the recent economic lowdown, governance issues, controversies and corruption.
Are teams making profits? This is unlikely – except for one or two teams, sponsorship revenues have actually declined, tickets are difficult to sell, and licensing and merchandise/fan clubs/loyalty income is almost zero.
In this grim scenario, financial survival rests on the annual share of central revenue from the IPL, which in turn, depends substantially on the media rights from Sony. Last season, each team received Rs 60-70 crore from the IPL. But it can’t be argued that most of these teams would have been on ventilators without this kind of support.
The valuation game theory hasn’t played out according to script, either. In the past ten years, all teams have been in the market at some stage. They have prepared hundreds of due diligence documents, created spreadsheets and commissioned professionals to find buyers or strategic investors. But no deals were made. Not one. So either owners are being too greedy by seeking a value that is unviable, or the market’s instinct is to view the IPL as a risky investment.
Investors are unimpressed by the notion of an IPL brand value, as the teams are in business – and in the public eye – only for the six-week duration of tournament in a year, after which they go to sleep and disappear. In their books, the IPL is a glorified tournament, and not a fully-developed sports “league” like elsewhere in the world.
Team entities have limited commercial value. They may use player images during the tournament, give or take a few days before or after; But they have no tangible assets of brick and mortar, no real estate or properties, and no fan base to speak of because top stars keep moving every other year.
Experts feel brands are built slowly, brick by brick, for which investment is required. As things stand, IPL teams (with many bleeding financially) have neither the intent nor the appetite to allocate money for such investment or activities. Without this, 'brand value' is only a mythical paper asset that is about as useful as a demonetised Rs 1,000 note.
That the IPL has consistently courted controversy is another cause for investor disinterest. With numerous instances of teams being suspended, terminated and surrounded by a host of scandals and controversies, investor confidence is less than lukewarm.
And Still…
Despite its overly commercial character and brittle business prospects, the reality is that the IPL works because the cricket is outstanding – high on quality and compellingly exciting. Fans love the drama of a tight run-chase, innovative stroke play and sudden twists that a 20-over shootout delivers.
The IPL is a matchless alliance of cricket and entertainment, which is why it’s controversy- and crisis-proof. Despite all the problems surrounding it, the IPL continues to enjoy a vote of confidence from fans.
Interestingly, while the IPL struggles in brand valuation, the lack of brand loyalty around the teams actually works to the League’s advantage as a whole. In a normal situation, fans support would diminish with poor performance of a team but the IPL fan works with an altogether different mindset. He is not fussed with who is winning or losing, his agenda is only to watch cricket. Which is good (in a twisted way) because regardless of poor results, teams are still able to sell tickets and fill the stadium.
This odd trend reinforces the belief that the IPL is crisis- and controversy-proof and works in a mysterious manner that defeats conventional economics. When Pepsi pulled out as the main sponsor, Vivo was quick to step in at the same price.
Many teams are bleeding annually but these losses are accepted without so much as even a squeak. The new media rights deal, effective 2018 onward, has already triggered dreams of acche din. Analysts expect this to double from its current level; And if that materialises, every team's balance sheet would be profitable.
On the larger cost-benefit analysis, in the net-net concept, the IPL strangely ends up a win-win for team owners. Operating the team gives them a profile and an image, immense media attention and higher social standing. The IPL is useful for building business contacts and 'obliging' VIPs. Corporates, who were used to sending Diwali mithai to earn goodwill, now exchange cholesterol-free, healthy IPL tickets for the same purpose.
Then there are the other non-economic benefits that are visible to the owners’ friends, rivals and the general public. Mainly, the networking and bragging rights, which come with having celebrity cricketers on your speed dial – not to mention your selfie collection.
(Amrit Mathur is a senior journalist, former GM of the BCCI and Manager of the Indian Cricket Team. He can be reached at @AmritMathur1)
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