Ten years of IPL: a story of India’s liberalization

Indian Premier League

April 7

The Indian Premier League (IPL) is in its 10th season. And it is hard to miss that the league has been a success story of post-1991 India. It was an enticing concept but the revenue outcomes were never guaranteed. In the end, the huge bets have mostly paid off. The Board of Control for Cricket in India (BCCI) is many times richer and the brand value of the IPL, according to Duff & Phelps, is currently about $4.2 billion. More importantly, Indian cricketers have benefited the most. They have earned good money—this is not just limited to star cricketers—and cricket is now seen as a financially viable career. No wonder other sports in India are also trying the franchise-based league model.

A lot of credit for the genesis of this massively successful brand is given to Lalit Modi, and justifiably so. But the unintended consequences of two landmark events of 2007 should not be discounted.

The first was India’s magical victory in the 2007 inaugural T20 World Cup. The previous year, in 2006, BCCI secretary Niranjan Shah had mocked the newest format of the game: “What is Twenty20? Why not Ten10 or One1?” The World Cup victory ensured that the world’s richest cricket board embraced the T20 format.

The second was Subhash Chandra’s attempt to do a Kerry Packer: The media mogul tried to end the BCCI’s monopoly on cricket in the country by starting a rival Indian Cricket League (ICL). Some marquee international players who joined the ICL were immediately banished but the BCCI had realized that they would soon have to offer something better.

And then the brand-building genius of Modi took over. The biggest names of the business and cinema world were roped in to bid for franchises. While one of India’s top industrialists, Mukesh Ambani, bagged the most expensive franchise, the presence of Bollywood stars like Shah Rukh Khan and Preity Zinta helped create the buzz the nascent brand required. The players went under the hammer and the city-based franchises jostled for cricketers with eye-catching payment figures. All this was not in line with the hitherto sedate working style of the BCCI but the board adapted to changing times.

There were many doubts to start with. The franchises had invested big money and were uncertain of recovery. The winners of broadcasting rights and title sponsorship were unsure if their extravagant bids would meet matching income streams. They were counting on the hope that the IPL would bring newer viewers into the fold, which it did. But equally, innovative strategies were developed to raise money. The franchises sold every nook and corner on players’ jerseys and kits. Additional breaks were taken during the games for teams to strategize—a euphemism for generating extra advertisement spots. The television commentators were made to utter the sponsors’ name with every six hit and each catch taken.

The result is not bad. Soaring valuations may not always be true indicators but sponsors have continued to keep their faith in Brand IPL. For instance, the current title sponsor Vivo has paid about the same amount for two years that the first title sponsor DLF paid for five years. The experience of franchise owners, however, has been a mixed one. Some of the franchises have even been terminated for being unable to meet contractual obligations. Except for Kolkata Knight Riders, none of them have been able to consistently post profits. To be sure, many of the businesses involved aren’t exactly looking for profits; the IPL is just a means for them to increase their brand reach and recall.

The success hasn’t come without costs. The tournament has had its darker side surface regularly over the years. Take the endless saga of conflict of interests. N. Srinivasan was a senior board official—and later rose to become BCCI president—and also the director of India Cements, the company which owned the (currently suspended) Chennai Super Kings (CSK) franchise. The former captain of the CSK team, M.S. Dhoni, was an employee of the same company. Srinivasan’s son-in-law, Gurunath Meiyappan, was indicted by the Mudgal committee on charges that amount to insider trading. Raj Kundra, a part owner of the (again, currently suspended) Rajasthan Royals franchise, faces similar charges.

Players have been arrested on charges of spot-fixing. Modi has himself admitted to rigging the players’ auction in favour of his former boss Srinivasan. People on the IPL governing council have also simultaneously found place on the league’s commentary roster. Eventually, the Supreme Court stepped in and is currently, in essence, running Indian cricket through a committee of administrators (CoA). The game has effectively been nationalized.

Liberalization in 1991 meant that the Indian economy was equipped to support one of the world’s top sports leagues—but the unfinished business of liberalization gave enough space for cronyism to flourish. And then the judiciary steps in with good intentions but often ends up achieving some bad results too. The answer lies in more liberalization, not nationalization. The 10 years of IPL offer this lesson as much as 25 years of liberalization in India.MINT