Sports the next big thing
However, since there were only two bidders in the fray, the IPL authorities decide to cancel the bids and revise the criteria. The bank guarantee to be provided by the bidder is subsequently reduced from $100 million to $10 million. March 21 will now be when the fate of Dhoot's bid is decided.
THE RINGMASTERS Vijay Mallya, Chairman, UB Group
Subroto Roy, Chairman, Sahara Group
Mukesh Ambani, Chairman, Reliance Industries
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The presence of heavy-hitters like Sahara and Adani amongst the bidders doesn't faze Dhoot (who is in the hotel but plans to make his presence felt only if he is one of the winners). "I was very confident-99 per cent sure that I would win. But then as they say in cricket: 'The Umpire's decision is final,'" grins Dhoot, whose flagship company bagged the franchise rights for India for the World Series of Boxing (WSB) last July.
Half an hour later, the Arcot room is abuzz as the results are announced. Sahara, with a $370-million bid, wins the Pune franchise. And the littleknown Rendezvous Sports emerges a surprise #2, with a bid of $333 million, to grab Kochi. Dhoot loses out by just a few million dollars. He's disappointed but hardly regretful. "Anything more than $320 million would not have made business sense," says the onetime captain of the cricket team of Pune's Ferguson College. And he isn't giving up on the IPL. "If anybody is willing to sell, we are ready to pick up a 10-20 per cent stake. But it should make business sense," stresses Dhoot. At the time of writing, Dhoot was keen to pick up to a 20 per cent stake in IPL team, King's XI, Punjab.
If it's sport, it has to be cricket. And these days, if it has to be cricket, it's got to be IPL-at least that's what team owners, wannabe team owners, advertisers, broadcasters, sponsors and fans seem to believe. Players who are being auctioned for record sums ($750,000 for Kieron Pollard in IPL 3 is perhaps equivalent to what the top 10 players in the domestic football I-league, the top tier in Indian football, earn in a year); broadcasting rights that are being sold for $1.64 billion for nine years with the broadcaster SET Max hoping to recover that, and more, by selling airtime at an average Rs 5 lakh for 10 seconds; a lead sponsor (DLF) that's willing to shell out Rs 40 crore a year for five years, and five associate sponsors who collectively bring in another Rs 90 crore annually; and don't forget the fans, many of whom in the East aren't thinking twice before forking out Rs 32,000 to watch a match sitting in a special VIP box with a tinsel town superstar (in Eden Gardens with Shah Rukh Khan, owner of the Kolkata Knight Riders).
To be sure, sport in India is synonymous with cricket-as far as viewership, sponsorship and the sheer moolah floating around go. But, just for a moment, shift your gaze away from the batting pitch and take a look at what the badshahs of the IPL are doing outside the cricketing arena. Last fortnight, Mukesh Ambani's Reliance Industries Ltd (RIL) struck a joint venture with global sports marketing and management company IMG to develop, market and manage sports such as football, athletics, tennis and golf (see Reliance Tees Off). Ambani is, of course, the owner of IPL franchise Mumbai Indians, which has paid top dollar to rope in the best in the 20-20 format.
Another IPL bigwig, Vijay Mallya, who owns the Royal Challengers, Bangalore has been dabbling in sports other than cricket for years now. In fact, Mallya's biggest kick in corporate life wasn't one of his against-allodds acquisitions (like that of one-time bitter rival Shaw Wallace or Deccan Aviation, to which he beat Anil Ambani). "It was the day I signed up both East Bengal and Mohun Bagan in 1998," beamed Mallya at a book launch in Delhi recently. Mallya had acquired a 50 per cent stake in the legendary Kolkata football rivals through group companies. In 2007, the liquor baron also spent $109 million on acquiring a Formula 1 team (a personal investment). Let's not forget the latest moneybags to hop onto the IPL gravy train, Sahara, which has been supporting sports like archery, shooting, boxing and hockey. The group has adopted 14 boxers along with some archers and shooters, and will pay for their training abroad and participation in tournaments till the 2012 Olympic games.
| CREATE SPORTS LEAGUES | SELL BROADCAST RIGHTS | SPONSORSHIPS | TICKET SALES | LICENSING & MERCHANDISING | TRADING PLAYERS |
| In India there is the I-league in football, and there was the PHL in hockey which fizzled out; the Mahindras will start a multi-city basketball league in a tie-up with the NBA; but the only league working like a charm is the IPL, which is valued at $4.13 billion (by Brand Finance) today. | British TV broadcasting rights for the English Premier League (EPL) for three seasons, till May 2013, were sold for some $3.3 billion. Back home, SET Max paid $1.64 billion for nine-year IPL broadcasting rights. | Emirates Airlines has a 15-year deal with Arsenal worth $100 million (Rs 460 crore) for having its name on the stadium and also on the team jerseys. DLF has taken the title sponsorship of the IPL for Rs 40 crore per year. | Includes corporate hospitality boxes and on-ground concessionaire outlets. Potentially, this can account for 30-50 per cent of total revenues. | Sports equipment, apparel, footwear, souvenirs-anything that carries logo of teams can be monetised. | Cristiano Ronaldo was transferred from Man U to Real Madrid last year for a record $130.7 million. Next year's IPL will see another round of player auctions. |
These are all very noble needs, but they pale in comparison to the Rs 1,700 crore that Roy will be pumping into his IPL franchise. "We want to ultimately have our own cricket stadium and a training academy so that we will have a steady stream of cricketers coming through, just as the European football clubs have their own infrastructure," says Roy. That's good news for budding flannelled fools, but perhaps the better news is that Sahara is keen to reinvest returns from the IPL in "poorer sports"-read archery, shooting, boxing. "We want to nurture these champions so that they win us medals in the Olympic Games. Only then will we stand to gain as a company," adds Roy.
One way of looking at the IPL razzmatazz is that this concept of super-fast sport is running away with the loot at the expense of other games. As P.B. Vanchi, Director, GMR Sports, a division of the GMR Group, points out: "We have been involved in sports at various levels, primarily as community development initiatives. However, with the IPL, the sports business in India now also makes good business sense."
But another way of looking at this winning proposition is that it could actually help provide the platform for developing other sports and eventually help them become viable on their own. Guru Malladi, Partner at Ernst & Young, points out that the IPL franchises could piggyback on cricket. "The IPL franchises are household names today. I do not see why these same franchises cannot create similar sports leagues under the same brand name, and own a hockey or a football or a basketball team. It is a great way of maximising brand value by expanding the franchise." Adds Udit Sheth, MD& CEO, SE TranStadia Pvt Ltd, a company that is into creation of infrastructure for sports: "The sports industry opportunity in India is over Rs 1,00,000 crore. This opportunity comes from the development of robust content, of sponsorships, from merchandising, infrastructure-creation and education."
Sounds great on paper, but before that a few reality checks:
Reality check #1: Is sports an industry in India? Perhaps not. And if that's the case, it makes it difficult for companies to monetise such activities (which explains why most corporate investments in sports are either made in a private capacity or as a corporate social responsibility). Says Sanjay Palve, Managing Director, Infrastructure Banking, YES Bank: "Everybody is talking about how to develop the sports industry, but few seem to know that it does not have exclusive industry status but comes under the amusement and entertainment category. So it is important for sports to be recognised as an industry."
Reality check #2: The sports governance structure is abysmal. This results in ad-hoc planning, selective development (of certain sports in certain regions), lack of professional management, transparency and accountability.
This, in turn, translates into inadequate sports infrastructure, and coaching and training facilities. Says Narendra Jadhav, Member of the Planning Commision, whose sectoral responsibilities include sports: "Despite sports being a state subject, most states have done nothing for the development of sports. They do not even have a sports policy in place." Of the 35 states (and Union Territories), only 10 end up spending more than 60 per cent of the funds they allocate for sports, he adds. The Commission, for its part, has increased its allocation for sports by four times in the Eleventh Plan, but at Rs 4,636 crore that's a drop in the ocean-or in the IPL perspective, roughly equivalent to just one-fourth the total valuation of IPL.
Reality check #3: Cricket rules the idiot box. Data put together by TV ratings agency TAM (based on 2008 estimates) indicates that cricket is by far the most viewed game, with 122 million viewers in India. Predictable, but guess what follows next: Wrestling, with close to 100 million viewers! If football- the most popular game in the world-follows next, it's only because Indian eyeballs are more glued to the high-jinks of Rooney and Terry in the English Premier League than to the gallant efforts of Bhutia and Chhetri in the I-league back home. The short point: Indian sports-the Indian football team doesn't figure amongst the top 100 in the FIFA rankings-isn't just with it. Except, of course, for cricket.
The Opportunity Amidst the Adversity
To use an analogy from one of the sunrise opportunities in the Indian industry, sports in India is not too different from the state of infrastructure in the country: Both are massively underdeveloped. But therein lies the opportunity-to build more and better roads, highways, airports, ports and power units. One solution, as YES Bank's Palve suggests, is to club the creation of sports infrastructure with overall infrastructure creation. And, here again, taking a leaf out of the highway development programme for instance, public-private partnerships could be a workable way of doing it. "The PPP model is the most viable option to develop sports infrastructure in India," avers Palve.
Indeed, PPP is one way of bringing in investment into sports. It's worked globally, too. In The Netherlands, for instance, the stadium Amsterdam ArenA was developed with the Amsterdam City Corporation taking a 30 per cent stake in the project, with anchor tenant Ajax AFC along with some other teams investing the rest. The Amsterdam ArenA has been built as a multipurpose leisure sports complex adaptable to both football and American football, with a luxury hotel, restaurants, VIP boxes and a retractable roof thrown in.
Back home in Gujarat, the state government and a private player, SE TranStadia, are doing something similar. The two are investing close to Rs 400 crore to build a multipurpose stadium (for 10 sports), which will also play host to exhibitions and conferences. With StadiArena of the UK as a technology partner, SE TranStadia hopes to complete the project by 2011. "PPP is the only way to develop world-class infrastructure for sport," insists Sheth.
PPPs are also a great way to nurture talent, with the government providing land and the private partner building the infrastructure and bringing in the trainers. That's how the Hyderabad-based GVK Group has gone about building its tennis academy together with the Greater Hyderabad Municipal Corporation providing the courts on lease after GVK Foundation won the tender bids for the courts in December 2007. "The idea is to broadbase the game and also to take the sports to the masses," explains Ilyas Ghouse, Director of the academy and a former player himself. The academy has some 130 children in the age groups of four to 14 with some on scholarship. The GVK Foundation, says Ghouse, "is now willing to go one step further and invest in building a worldclass facility through a PPP model with the government providing the land".
Clearly, if corporates have to look at sport as a viable opportunity, they should be willing to invest first at the grassroots level. The model is straightforward, and is what the likes of IMGReliance (the 50:50 JV, see Reliance Tees Off) have in mind: Identify talent, provide world-class training, facilities and opportunities and help create winners- that's where the investment is needed. The returns will begin to flow once these players have to be marketed and managed (just as IMG does for the likes of Venus Williams and Tiger Woods). It's a long haul and could take even two decades for returns to begin to accrue. In many ways, this is not too different from the bottom-of-thepyramid gambit that involves marketers going deep into rural India with the hope that one day significant disposable incomes will be generated there too by the masses.
Some baby-but significant-steps are already being taken by corporate houses to raise awareness about sports other than cricket. The Mahindras, for instance, will kick off a multi-city basketball league in a tieup with the NBA (see Mahindra's Slam Dunk). The league in its current form is only "recreational" with the purpose of making the game popular nationwide. Just as basketball could ride on NBA TV viewership (as India doesn't figure anywhere amongst the top basketball teams in the world), football too could hop on the craze back home for the Man Us and Chelseas in the EPL.
Twenty-eight-year-old Nandan Piramal is trying to inject that dose of savvy that Indian football badly needs. Along with his brothers and friends, Piramal has founded the Pune Football Club, which has worked its way up into the I-league. "We want football to be a moneyspinner just as it is in Europe or the US," says Piramal, even as he acknowledges that it's not going to be easy.
That's because football in the country operates in archaic ways, courtesy of the All India Football Federation (AIFF). For instance, in the EPL, most of the money earned through broadcasting and media rights goes to the clubs. Here, the clubs get zilch. Says L.V. Krishnan, CEO, TAM Sports: "The problem is most sport associations are just not media savvy. They still live in the world of stadiums- when the real game is on television." Yet, Piramal is attempting to open up revenue streams. In addition to tickets for home matches, he's also begun merchandising team colours and accessories. The club has an online store as well.
The good part for football is that it has a league. Now it's up to a private player to provide that league with some muchneeded muscle. Other sports could also do with the league concept. After all, the creation of a league is a starting point in opening up the floodgates for revenues. The IPL-valued at $4 billion or about Rs 18,000 crore today-is a perfect testimony to that. Once you have a league in place, you can sell broadcast rights, invite sponsorships, and earn moolah not just from ticket sales but from licensing and merchandising, and by trading players (which will begin in next year's IPL).
"The success of the IPL has shown us how a sport can be monetised," explains TranStadia's Sheth. "Similarly, other sports can also find a way of developing a system that can lead to monetisation." It won't be easy, it won't happen overnight but, in a country that will be home to 510 million people between 15 and 35 years of age by 2016, it's certainly not impossible.
- Additional reporting by Shamni Pande, E. Kumar Sharma, Kushan Mitra and Rahul Sachitanand
