The Board of Control for Cricket in India (BCCI) launched the Indian Premier League (IPL) on September 14, 2007. The league follows the Twenty20 format and aims to replicate the triumphs of England's Premier League football and America's National Basketball League (NBA). Additionally, the International Cricket Council (ICC), which oversees cricket globally, endorses the IPL.The creation of IPL was facilitated by BCCI through the establishment of a governing council tasked with overseeing its operations. The council will function independently for a period of five years and will not be subject to any interference from BCCI. Its members consist of I.S. Bindra, a former BCCI President, Rajiv Shukla and Chirayu Amin, Vice-Presidents, Lalit Modi, Arun Jaitley as well as ex-cricketers Mansur Ali Khan Pataudi, Sunil Gavaskar and Ravi Shastri. Although honorary membership is granted to BCCI officials, Pataudi, Gavaskar and Sh...
astri are compensated for their contributions.In October 2008, the IPL winner and runner-up were both eligible to qualify for the Champions League. The domestic Twenty20 leagues of Australia, South Africa, and England cricket boards created an eight-team Champions League that featured a three-hour version of the game played by teams from various Indian cities. Proper incentives are crucial to motivating players, broadcasters, franchise owners, and various cricket boards to support the IPL. In response to declining match attendance, television viewership, and associated revenues in Britain, the English Cricket Board (ECB) introduced Twenty20 cricket in 2003. According to market research conducted by ECB, positioning Twenty20 cricket as a "perfect blend of sports and entertainment" appealed to a broad audience with its shorter yet more entertaining version of cricket.
By 2005, the Twenty20 format of cricket had gaine
popularity in most major cricket-playing nations except India. This format included loud music, dancers, cheerleaders, and wired-up players providing commentary while playing. Spectators enjoyed watching a complete game in three to four hours. However, some feared that more cricket could cause injuries to overworked players and reduce interest if too much was broadcast on television. The Board of Control for Cricket in India (BCCI) earned significant revenue and influence from one-day and Test cricket; each One Day International (ODI) match fetched around $7.
With 5 million in television revenue, the BCCI saw no reason to risk introducing a new, unproven format. Doing so could potentially harm ODIs and result in less media revenue per game due to its shorter length. Due to these concerns, the BCCI adopted a waiting approach. Ayaz Memon, an editor at Mumbai's DNA newspaper, noted this stance.
Across age groups and genders, the game has gained popularity and could pose a formidable challenge to Bollywood due to its concise three-hour format. In India, cricket has traditionally been supported by committed fans of their national teams, which have been the most prominent product available. Several Indian sports authorities suggest that cricket represents an opportunity for Indians to compete with other nations on a level playing field, with children aspiring to represent their country rather than their clubs or states.
Modi believed that for Indians, the only important forms of entertainment were cricket and Bollywood. In 2007, the Indian film industry was set to experience significant expansion. The revenue generated by Bollywood in 2006 was $1.75 billion, with projections indicating an increase to $3.
The Essel Group owned and operated the ICL, a commercial venture that
did not contribute to official cricket and was created for the benefit of its media company. The BCCI had objections to the ICL, and refused to give official approval due to its lack of respect for the sport and failure to give back. In addition, other sports were attracting traditional cricket fans, while Bollywood movies had an average ticket price of $3 in India in 2007.
The ICL faced multiple obstacles, as it was stated that joining the league resulted in players being ineligible to represent the Indian national team or participate in BCCI-run domestic tournaments. Additionally, the ICL lacked access to cricket grounds controlled by state cricket boards in India. Furthermore, all major cricket-playing nations' cricket boards supported the BCCI's stance, labeling the ICL as an unofficial cricket league and preventing players who signed with the ICL from playing in ODIs and Test matches for their respective countries.
Modi aimed to bring a new generation of sports enthusiasts to cricket grounds across India with the creation of the IPL. The Twenty20 format was designed to attract younger fans, including women and children. The long-term objective was to establish a branded domestic cricket structure in India. The League's governing body would schedule games, set rules and referees, and ensure comprehensive media coverage while granting exclusive rights to teams in their respective regions. Every franchisee would be allotted one home ground and would have to construct a stadium there.
Franchisees will be granted marketing rights and a share of both centralized and local revenue, which includes ticket sales and other sources. There will be 16 players on each team, with at least four from the Under-19 team and up
to four foreign players. Approval from their respective cricket boards is required for international players, and matches for their countries take precedence over IPL games. Players will receive salaries but not American-style options or bonuses. Sponsorship contracts may allow some players to earn more money. A player draft similar to that in American professional sports leagues will occur, and teams can also swap players.During September 11-24, 2007, South Africa hosted the inaugural Twenty20 World Cup, an international tournament with 12 teams that was sponsored by the ICC. After the formal launch of the IPL, Modi arrived in South Africa and began meeting with members of the ICC, as well as administrators from different national cricket boards who had the power over their domestic and national teams. Modi recognized that his IPL tournament would raise concerns about its impact on domestic and international schedules, and how it would increase demands on already overworked players. With this in mind, he sought to persuade cricket board executives that the IPL would cater to their interests and not undermine their control over players and schedules. Further, Modi wanted to assure players that the IPL would benefit them directly instead of being a disadvantage. He understood that signing up top players for domestic Twenty20 cricket was vital for the success of his league.
Modi received support from BCCI when he arrived in South Africa to establish exceptional player contracts for cricket, recognizing the crucial role of players in the sport's survival. Skilled cricketers earned annual salaries ranging from $100,000 to over $1 million depending on their country and skill level, with sponsorship and advertising deals also contributing significantly - often through
Indian athletes serving as brand ambassadors. Modi devised four categories that guaranteed minimum salaries of $100,000, $200,000, $300,000 and $400,000 to rank and compensate the top 100 players worldwide based on their talent.
Modi set aside $20 million to hire the best 100 players globally, aiming to increase their earnings by taking part in 14 IPL games and securing sponsorships. Many players were keen on Modi's proposal and were awarded contracts with payments from BCCI. Nevertheless, while visiting South Africa, Modi became absorbed in the matches. On September 14th, India triumphed over Pakistan in a nail-biting game that took everyone by surprise.
After an exciting match, India's citizens were overjoyed with their cricket team's comeback. During the final game against Pakistan, Misbah-ul-Haq was caught out at a critical moment when his team only needed six runs to win with four balls left. Modi noted that the whole country was thrilled by this unexpected victory. In just a few weeks, nervous Indian cricket fans became enthusiastic supporters of Twenty20 cricket.
The India-Pakistan final was broadcasted live in 100 countries and achieved high TV ratings in India, with 21.2 on ESPN and Star Cricket capturing 47.2% of all TV viewers, despite competing against popular reality shows. Modi identified four constituencies - players, broadcasters, franchisees, and cricket boards (including the BCCI, the ICC, and various country-level boards around the world) - whose interests needed to be examined in detail.
Modi and IMG understood that having the players on board was essential for a successful league. The players had already approved of Modi's offers at the Twenty20 World Cup, and he decided to improve them further by making the amounts promised to the
players minimum guarantees. Franchises could then bid for players in an open auction and pay them market prices.
The speaker expressed confidence in the potential of the arrangement to improve the league by attracting and keeping top-tier players, but also had reservations about possible bidding wars leading to an uneven playing field and harming certain franchises. Concerns included fears that more powerful teams might monopolize all notable international stars, leaving weaker teams with less prominent players and reduced revenue from merchandise and sponsorship. Another issue was whether minimum salaries should be guaranteed for domestic and Under-19 players, as well as their participation in bidding. Finally, there were concerns raised about the impact of marquee players on shaping the league.
During the discussion, Modi brought up the matter of Indian national team players having strong associations with specific cities, such as Sachin Tendulkar (Mumbai), Saurav Ganguly (Kolkota), Virender Sehwag (New Delhi), Yuvraj Singh (Chandigarh), Rahul Dravid (Bangalore), and VVS Laxman (Hyderabad). He questioned whether these players should be assigned to franchises based on their city association and what kind of compensation they would receive if not through auction. Additionally, there was uncertainty about player availability during the IPL season for those who have commitments to play test matches or ODIs for their country. The conversation also covered including these players in auctions and how they ought to be handled. It was noted that broadcasters derive most of their revenue from advertisers who pay for commercials during programming breaks.
Starting in the 1990s, Indian audiences have shown a marked increase in interest for popular entertainment like Bollywood films and soap operas. Simultaneously, Modi's efforts to air live cricket on television
has led to a surge in revenue for the sport. Advertisers and broadcasters acknowledge the influential role of cricket as a means of communication, which has resulted in a significant uptick in demand for commercial TV advertisements. Additionally, sports leagues compensate broadcasters who offer some of the highest broadcast revenues worldwide for matches featuring India's national cricket team.
With the potential audience for IPL uncertain, Modi recognized that BCCI earned around $7.5 million per game for ODIs in India. While Wildblood, Griffiths and their team at IMG proposed $1 million per game for each of the 59 games played, Modi wanted broadcast rights sold for a period of ten years and was uncertain about committing to a fixed fee for a decade. Typically, Indian broadcasters expected advertising revenues worth twice the amount they spent acquiring broadcast rights. Therefore, a broadcaster would need to feel confident about earning at least $2 million per match in advertising to pay Modi the proposed $1 million per match.
The IPL envisioned a league that would prioritize advertising opportunities, with each game featuring 72 30-second commercial spots. Broadcasters were initially hesitant due to the comparative safety of revenue generated by ODIs, which had around 400 to 500 30-second spots per game and ratings in the 2-3 point range, while also considering the IPL a more uncertain venture. They believed that the IPL's live TV coverage would only be feasible if it could maintain an average of 4 rating points per game, as they expected to earn twice as much per second due to the relatively shorter Twenty20 games. Although Modi found this feasible after the high ratings seen during matches with India
in the Twenty20 World Cup, much would still depend on when the IPL games were scheduled and how audiences responded to them.
• ESPN Sports suggested a revenue-sharing deal, but Modi disagreed, arguing that the risk should be shared. The prime-time slot from 8-11pm had the potential for a large audience, but also posed the risk of fierce competition from other channels.
Traditionally, cricket matches in India did not typically attract women. As most Indian households had only one TV, there was a concern that prime-time broadcasts of the IPL might not garner sufficient viewership unless the programming was captivating enough to appeal to a wide audience. Successful marketing and packaging of the match play likely played a major role in determining its popularity on television. Additionally, Modi conjectured that connecting the IPL with Bollywood could potentially increase its appeal.
The potential to captivate television audiences by combining the excitement and glamour of film with the fast-paced action of Twenty20 cricket is significant. However, careful and tasteful execution is key. Exhibit 8 shows that for many Indians, television programs are a primary source of free entertainment. While IPL cricket may face competition from family-oriented prime-time TV shows like the Indian version of Who Wants to Be a Millionaire hosted by Amitabh Bachchan, there is also a vast international market for pay-per-view sporting events that must be considered. The BCCI earns more revenue from PPV in the US than in traditionally cricket-friendly markets like Australia and England combined. Modi sees benefits in adopting a franchise structure similar to American professional sports over centralized ownership.
Despite the possibility of significant expenses, it remained uncertain whether there would be interest in buying
an IPL franchise in India. This was because buyers would not be purchasing a stadium, but would instead have to build one at great cost. However, in the short-term, Modi had a solution: existing stadiums under the control of state cricket boards, which answered to the BCCI and could be used for a fee of approximately $100,000 per game to cover operating and maintenance costs. Additionally, Modi estimated that player salaries for each franchise would average $6 million in 2008 with a $5 million cap on auction bidding plus the cost of local players. Despite being able to assure potential buyers that league play could begin immediately, there still remained a significant obstacle to any potential sale.
Modi faced reluctance from franchisees to invest heavily in stadiums solely for a 44-day annual tournament, leading him to explain the value of exclusive franchise rights. However, potential owners remained uncertain about their worth. To tackle this issue, Modi aimed to link franchise valuation with projected revenue streams by distributing 80% of the BCCI's earnings from broadcasters equally among all eight franchises. This cut would decrease to 60% by year five. In addition, franchises could earn revenue through local sponsorships, gate receipts, merchandising, and hospitality.
With a seating capacity ranging from 30,000 to 90,000 people, Indian cricket stadiums can generate substantial ticket revenue. Even at a modest price of $5 per ticket (comparable to the cost of a movie ticket in India), IPL games can result in significant income from ticket sales alone. However, accurately predicting gate receipts is difficult due to harsh weather conditions during Indian summers with temperatures reaching up to 90 degrees and limited stadium accessibility and
amenities. On average, merchant and concession sales are estimated at around $2 per ticket while local sponsorships are predicted to earn each franchise an average of $1 million in 2008.
Modi aimed to generate an additional $1 million annually through corporate hospitality suites. He planned to conduct a sealed-bid auction for the sale of franchise rights, with a target of raising at least $50 million from each franchise sale. The payment would be split into 10 equal instalments of $5 million per year, starting in 2008. Though investing in sports team equity was a lucrative opportunity globally, Modi sought a way to communicate the full benefits to potential investors in India. As private ownership of domestic teams was uncommon in the country, George Steinbrenner’s metaphorical comparison of owning the New York Yankees to owning the Mona Lisa might not be well received.
During a conversation with his old school friend, Sharukh Khan, who is now a famous Indian movie star, Narendra Modi discussed the idea of buying an IPL franchise. While Khan was interested in the proposal, he admitted he had limited knowledge about cricket or franchising. However, while vacationing in Phuket with her boyfriend, Ness Wadia, Modi met another Bollywood actress, Preity Zinta. When Modi approached Zinta about investing in an IPL franchise, she appeared intrigued, and Wadia was excited by the idea. Modi promised to provide both Zinta and Khan with a basic understanding of the cricket business. He saw this as an opportunity to develop a marketable IPL-Bollywood connection by bringing these film stars onboard.
Modi had to deal with practical realities even though the BCCI and state cricket boards were allies. The BCCI
was poised to receive 20% of league broadcasting and sponsorship revenues, but it was also concerned about how the IPL would affect Test matches and ODIs and its relationships with other cricket boards worldwide. At the time, Indian television broadcasted all 10 Test matches and 39 ODIs featuring the country's national team as well as several matches between non-Indian teams.
Although cricket coverage on Indian TV is almost constant, Test match attendance has decreased while ODIs still attract large crowds. However, Eden Gardens in Kolkata remains a magnificent spectacle with close to 100,000 fans filling the stadium. Modi's primary goal was to preserve the traditional game of cricket in any new format introduced, including Twenty20. He felt that Test cricket, which is over a century old and considered the jewel in cricket's crown, must be protected.
ODIs, which are the mainstay of cricket and have made the BCCI the wealthiest cricket board worldwide, are crucial to India's economic dominance in the sport. According to Modi, India earns 80% of the global cricket revenues, with ODIs being a key contributor. As a result, it was imperative that the IPL distinguished itself from ODIs and Tests in order to maintain their importance and avoid competing directly with them.
Modi finally had to address the BCCI’s concerns about their relationship with the ICC and other cricket boards who felt bitter about BCCI’s economic dominance. Modi believed that the long-standing controllers of the game were unable to bear losing their grip. However, BCCI had to act responsibly, being a part of the larger cricketing community. The ECB, who had developed Twenty20 in 2003, expressed their dissatisfaction with the IPL. Modi aimed to
include English players for the domestic Indian tournament but ultimately announced that no English player would be available for the inaugural season.
Modi received support from the executives of other cricket boards he spoke with while in South Africa. The ICC had officially approved, so Modi needed to find a way to involve both the ICC and other cricket boards in the plan.
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