More than the numbers, the kind of investors putting in bids tells a story. Glazers and CVC Capital bids indicate that the cricket franchise product has global appeal
The Indian Premier League (IPL) bids, and the astonishing bid numbers behind the teams, continues to enhance the allure of Franchise Cricket, and accelerates some of the changes in the world of Indian cricket which are evident for some time now.
But first the bids. It seems clear that neither of the new owners expects to make a profit over the 10-year period. The burn rates vary between 2000 and 4000 crs over the period, and these are significant investments for any corporation.
The objectives may be different, with RP Goenka group enhancing their sports portfolio, and CVC Capital partners clearly looking at enhancing the value of the franchise, and the exit valuations they may achieve at point and time of exit.
More than the numbers, the kind of investors putting in bids, itself tells a story. Glazers and CVC Capital bids indicate that the Cricket Franchise product has global appeal, and International Majors are now willing to try their hand at IPL. The valuations of the current teams itself takes a fillip, and suddenly what looked expensive is not so expensive anymore. aIt almost confirms my premise, which I have held for years now that IPL is ready to be a larger, longer league, with more matches, more teams and an extended window. Its almost certain that the league will go to 94 matches, there by extending its run by 3 to 4 weeks, and virtually owning the March to May cricket cycle in the international calendar. With 100 top international cricketers now participating in IPL, it virtually guarantees that all top international cricketers will be playing here which impacts the bilateral tours and domestic programs of other nations.
This valuation should have other interesting fallouts. The excellent Pakistan Super League (PSL) teams and the league will suddenly start looking cheap to global investors, and the Bangladesh League will really have to up their game as they have the player set and the audience to make it count, to become a part of choice set of the fraternity. But more interestingly, while it may sound counter intuitive, these leagues will compete against IPL, and as is the case with PSL today, could be an excellent marketing investment for emerging corporates in the region. The reason I mention this is because political considerations aside, it is difficult to manage audience conduct in the digital age, and these leagues have an incipient and growing audience in India. So, expect more investment and energy around the T20 leagues in our neighboring countries, and burgeoning investment for BCCI in this area.
But with such investment and interest following IPL, and as a corollary, Cricket in India, it is incumbent upon BCCI to look at the model and use this opportunity to make structural tweaks to the structure. In retrospect it appears that the Initial team investment has turned out a great one, and this bid process seems to indicate that BCCI could have raised three times the money if they wished to, and there is still enough capital chasing the game. While it is evident that investors are willing to burn cash, BCCI’s think tank has to work on ensuring that profitability is accelerated, and also have to provide the franchise owners with more leverage and encouragement to build and own the game at the grassroots, to enhance the economic spread of the Franchise model. The accidental demographic dividend is now ready to be harnessed in a structured and a corporate manner, and there in lies the opportunity.
BCCI through the auction, has enhanced its annual revenues by 1200 crs, with clear opportunities of having options for more teams, so they are aware there is more gas in their tank if they need it. Some of it is needed, of course, because of the expected decline in the value of bilateral cricket, and most of it will continue to be deployed in the enhancement of the game going forward. What would be interesting is that how this translates into the BCCI calendar of other events. BCCI has strong T20 and T50 tournaments along with the venerable Ranji and Duleep trophies, and these appear to be run as independent enterprises than IPL. Especially in the shorter formats, the linkages with IPL are tenuous, except for being talent identifiers, and there may be a need to build linkages which are more enduring. With the IPL teams now clamoring for expanding their footprint, there seems to be a conflict emerging with some of the regional federations which have started licensing their own leagues, some of which potentially could be opportunities the teams could build given their management structures and synergies. Also, there is a crying need to build more T20 content of the local kind which the Franchises would invest in, to enhance their revenue models, their business hang time, and their connection with their fan base and locations.
The next cycle of Media rights now becomes very piquant because of these variables at play. The regulatory environment around digital is fuzzy, and it might preclude content companies putting the bids the league deserves, given the uncertain cable environment. I expect some action on this front. The number of matches will clearly be up for discussion, and the full round robin of 94 matches should be reached sooner than later. We should also see more broadcast opportunities around different categories of matches like the Junior League, Women’s league which will enhance the revenue pie of IPL. BCCI needs a massive enhancement in the Media Rights to keep on accelerating the juggernaut, and will need to keep on looking to increase broadcast opportunities to add value to all participants.
BCCI now has ten Franchise Unicorns as a part of its Cricket Structure, and it has to leverage the combined capital, and the Management Expertise they bring to the table to continue enhancing the game. Partner expectations and partner expertise has to be managed productively and well, so it enhances the overall cricket development effort in our country. The very successful bid of the two new teams will trigger actions which are structural in nature and will continue to build the great game of India. With the impending stock market listing of some IPL teams, another dimension opens up in the Cricket Economic landscape, which the establishment will have to mull over , as they look at continuing enhance the value around this great instit
Atul Pande is a Director at Sportzlive and Emerging Sports, two companies which run the badminton and boxing leagues in India. He is the erstwhile CEO of Ten Sports and Managing Director at Cholamandalm Finance in his previous avatars . He can be reached at apande@sportzlive.net