Billion dollar baby
The scene two weeks ago at the opening match of the Indian Premier League’s fourth season was an international grab bag of sports fandom.
The four-year-old Indian Premier League has been valued at $4.13 billion.
It should come as no surprise that fan elements from around the world found their way into a cricket stadium in eastern India. The IPL, after all, is perhaps the youngest and most successful sports league in the world, and a major reason the IPL has achieved that status is because it modeled itself on the professional leagues that preceded it.
The IPL borrowed the idea of cheerleaders and musical entertainment from the NBA, the stability of a salary cap from leagues like the NFL, and the revenue benefits of jersey sponsorships from the English Premier League. The resulting blend has created an immensely successful league in a short time.
In just four years, the IPL has sold a franchise for as much as $370 million — to Sahara Group Chairman Subrata Roy in June — completed a $1.69 billion, 10-year television rights deal with Sony, and seen the consultancy Brand Finance value the league at $4.13 billion.
“It’s the first sports product to capture the country’s attention and the consumer’s attention,” said Jamie Stewart, founder of the Indian-based sports marketing agency Commune. “It’s been unbelievably successful and will continue to be so.”
The league’s immediate success is surprising in light of the challenges the IPL has faced in its first four years. After its first season, the league had to relocate to South Africa for a year because an Indian election required most of the country’s security forces, making them unavailable for the season. Then the third season was marred by a scandal that resulted in the ouster of the league’s founder and commissioner, Lalit Modi, who has been accused of betting on IPL matches and holding a silent stake in three franchises.
The league has captured the country’s attention with the play on the field and the other entertainment elements that accompany each event.
“At the end of last season, there was some controversy, but the country has put this behind it,” said Sangeev Kapur, chief marketing officer of Citi India, an IPL sponsor. “This is a juggernaut that is going to keep becoming bigger in size.”
The IPL was born from two men’s desire to bring professional sports to India.
Modi, the son of a wealthy Indian family, attended college in the U.S. and was a longtime admirer of the NBA’s successful blend of sport and entertainment. Andrew Wildblood, an Englishman who ran IMG’s business in India, was intent on replacing state-run cricket teams with privately owned franchises.
The two met at a London hotel during Wimbledon in 2007 and spent the next nine months crafting the league’s structure and business model. They opted for a fast style of cricket called Twenty20 that could be played in about three hours, making it perfect for television. They proposed an eight-franchise league that would see each team play seven home matches during a 44-day season, allowing them to squeeze in a short season without interfering with the international cricket calendar. The top four teams would advance into a playoff to determine a champion.
Modi and Wildblood developed a prospectus for the league that emphasized strong central revenue. Television revenue would be the No. 1 revenue stream for each of the teams, which would split 80 percent of those monies. They would also share money from league sponsorships, including a presenting sponsorship for the league. The rest of revenue — local sponsorships, hospitality, ticket sales, franchise shirt sponsorship — would be kept by each team.
Teams would play at existing stadiums, which they would lease from municipalities, and ticket sales would not be expected to be a major revenue stream in a nation where the average Indian makes $675 a year. (Ticket prices this season go for as little as $6 a game.)
Before they auctioned off franchises, they sold the television rights. Only three bidders turned up at the table. One was excluded from bidding because of a technicality; another quoted a figure below the floor price. The last bidder, Sony, which owns a television network in India, offered $908 million for a 10-year deal. It was a monumental deal for a league that still didn’t exist, and it allowed Modi and Wildblood to bring their vision for an IPL to fruition.
“That gave us a sum of money that gave the potential franchise owners confidence this was for real,” Wildblood said.
Only 13 bidders showed up for the franchise auction that followed. Four or five of them were close friends or relatives of Modi, said Alam Srinivas, who authored the book “IPL Cricket and Commerce: An Inside Story.”
“If they had not been there, there would have been less than eight bidders for the franchises,” Srinivas said. “The IPL could have been a flop before it began. The fact that it didn’t was part luck and part the personal powers of Lalit Modi.”
Bollywood actor Shah Rukh Khan (left), part-owner of an IPL team, performs at this month’s IPL opening ceremony.
The owners shared in the league’s $90 million annual television rights fee and a half dozen sponsorships that ranged in value from $5 million to $12 million a year. Hero Honda, Citi, Pepsi and Vodafone were among the first to sign up. DLF, a real estate company, signed on as the league’s presenting sponsor.
Each of the IPL teams earned $12.5 million from central revenue in the first season, and that number rose to $18 million each in season three. Srinivas estimated total league and team revenue eclipsed more than $500 million in 2010.
“Most of us believed this would not click because there were too many ifs and buts,” Srinivas said. “Once it happened and it took off, the mix of cricket, entertainment and viewership in India took IPL to another level.”
Facing the future
There are a number of reasons why the IPL became such an overnight success. Much of it is due to the league’s stable structure and its ability to fill an entertainment void in a country with an emerging middle class.
Modi managed to marry Indians’ fanaticism for cricket with their fanaticism for Bollywood in a way no one had ever done in India before. In addition to the actor Khan owning a share of the Kolkata franchise, actors Juhi Chawla and Shilpa Shetty co-own the Rajasthan Royals, and Preity Zinta is a co-owner of the Kings XI Punjab.
Their star power was coupled with well-publicized late-night fashion shows and parties after games that provided plenty of copy and photos for the Indian press. There were also fireworks, cheerleaders and Super Bowl-sized concerts.
Teams averaged 58,000 spectators a match in 2008, and a poll by the Indian Times after that initial season showed more people attended or watched games on TV to see Khan than to see the cricket.
Citi, Hero Honda, Pepsi and Vodafone were among the first to buy IPL sponsorships, which range in value from $5 million to $12 million a year.
The emphasis on entertainment helped the league attract female viewers to a sport whose fan base historically was dominated by men. Their interest helped boost television viewership.
The IPL became the first prime-time sports programming in India, and it was immediately embraced. In 2010, an estimated 67 million Indians watched IPL matches on average. Viewers tune in to the games on a nightly basis over the season in much the same way Americans watch the Olympics over its 17-day run.
“The eyeballs are amazingly high,” Srinivas said. “Every day you have a captive audience. People are glued to the television set.”
As consumption of the IPL rose, sponsorship interest followed. The Mumbai Indians recently signed a $5 million-a-year jersey sponsorship with Hero Honda. By comparison, the jersey sponsorship with Herbalife sold by Major League Soccer’s Los Angeles Galaxy was valued at $4.5 million after signing David Beckham.
Mark Ingall, Citi managing director of global strategic media, said that the company has been pleased with the return on its investment as the league’s official bank. The company gets in-venue signage at every game and is the presenting sponsor on TV and at matches of “Citibank Moments of Success,” which recognize significant plays during matches.
“Being associated with the IPL gives us a chance to look a bit bigger than we probably are,” Ingall said. “That’s perceptual scale.”
Commune’s Stewart said the IPL’s ability to offer marketers scale was what made it so appealing to sponsors.
“It’s a nation with something like 30 languages,” Stewart said. “Cricket is a language itself that cuts across language, religion, caste and this large land mass. It’s the one thing that brings it all together.”
Some in the sports industry wonder if the IPL will miss Lalit Modi’s marketing instinct.
Srinivas expects that without Modi, who orchestrated much of the overlap between Bollywood and the IPL, the league’s entertainment quotient will decrease. Others anticipate the league will miss Modi’s marketing instinct. But few think the IPL will struggle without him, and that’s primarily because it has established itself as a player in the Indian marketplace so quickly.
“The IPL is not a flash in the pan,” said Sam Rush, Wasserman Media Group’s international chief operating officer. “It combines the key environments you must have for longevity. You have a huge audience, you have a sport with great appeal, you have the interest of top brands, and you have built a top brand in the IPL.”
Wildblood, who is still overseeing IMG’s work organizing and running the league, agreed.
“If the question is can the league survive and flourish irrespective of the controversy, then sure it can,” Wildblood said. “It is something that’s bigger than any individual. This is now the biggest rock ’n’ roll show in India by a mile. It’s huge. It’s absolutely huge.”