Ipl Report Essay
The Board of Control for Cricket in India (BCCI), the apex governing body for cricket in India launched the Indian Premier League (IPL) on 14th September 2007 on the lines of football’s English Premier League and the National Basketball League (NBA) of the U. S. A. IPL is a professional Twenty20 cricket league created and promoted by the BCCI and backed by the International Cricket Council (ICC), an international governing body of cricket.
The BCCI was instrumental in setting up a governing council to run the IPL as a virtual company.The IPL governing council will have five-year term and will run, operate and manage the league independently of the BCCI. The governing council of IPL comprises of former BCCI President I. S. Bindra, Vice-Presidents Rajiv Shukla, Chirayu Amin and Lalit Modi, Arun Jaitley, and former cricketers Mansur Ali Khan Pataudi, Sunil Gavaskar and Ravi Shastri. While the BCCI officials are honorary members, Pataudi, Gavaskar and Shastri will be paid for their services.
The winner and runner-up team of the IPL will qualify for the Champions League, in October 2008.For a start, domestic Twenty20 leagues would be conducted by the cricket boards of Australia, South Africa and England, for an eight-team Champions League. • A fast-paced, three-hour version of a game • Teams based in various Indian cities instead of for a national team • Creating the right set of incentives to motivate players, broadcasters, franchise owners, and the various cricket boards to support the IPL. • The English Cricket Board (ECB) designed Twenty20 cricket in 2003 as a response to continued loss of interest in cricket: match attendance, television viewership, and the associated revenues had steadily declined in Britain.Market research by the ECB suggested that a shorter, more entertaining version of cricket might appeal to a broader audience. • Twenty20 cricket was positioned as a “perfect blend of sports and entertainment.
” • It featured loud music, dancers, cheerleaders, and wired-up players providing commentary on the game as it was being played. • Spectators enjoyed being able to watch a complete game in three or four hours. • By 2005 the Twenty20 format had gained a reasonable level of popularity in most major cricket playing nations. India remained an xception; its national team had played no Twenty20 international matches. • It was also believed that more cricket, even if it could be fit in, would increase the risk of injuries to already overworked players, and create a situation in which too much live cricket was broadcast on television, leading to possible loss of interest in the sport. • Another reason was that the BCCI was comfortable with the money and clout it earned from one-day and Test cricket; each ODI, for example, fetched it around $7.
5 million in television revenue.Thus there appeared to be no compelling reason to introduce an unproven format that could only cannibalize ODIs and might bring in less media revenue per game due to its shorter duration. The BCCI therefore took a wait-and-see attitude. • Ayaz Memon, an editor at DNA, a Mumbai newspaper.
“The game has found favor across age groups, and more significantly, across genders. It could even emerge as a potent challenge to Bollywood, because it lasts just about three hours. • In India, cricket audiences have historically been devoted fans of their national cricket teams.Simply put, national teams have been the best available product. Many Indian sports authorities believe that Indians view in cricket a way for their country to compete with the nations of the world in something approaching parity; Indian children dream of playing for their country, not for their states or clubs.
• In Modi’s own estimation, “As far as entertainment was concerned, only two things mattered to Indians: Bollywood and cricket. ” In 2007 Bollywood, the Indian film industry, was poised for dramatic growth. In 2006 Bollywood generated revenues of $1. 75 billion, with that figure estimated to rise to $3.
billion by 2010. And other sports were also luring some traditional cricket fans into their stadiums. The average ticket price for a Bollywood movie in India in 2007 was $3. • ICL was owned and operated by a single entity, called the Essel Group. • According to Modi, the BCCI had several objections to the ICL concept: It does not respect official cricket, it contributes nothing back into the game. It is a commercial venture that in reality is created not for the good of the sport but for the good of the media company that owns it and of its shareholders • The BCCI refused to give its official approval to the ICL.
Further, it said that players who joined the ICL would be barred from representing the Indian national team or playing in domestic tournaments run by the BCCI. It also did not allow the ICL access to the cricket grounds it controlled through the various state cricket boards in India. • In another setback for the ICL, the cricket boards of all major cricket-playing countries announced their agreement with the BCCI’s position. They declared the ICL an unofficial cricket league and announced that players who signed with the ICL could not represent their countries in ODIs and Test.
Modi’s concept for the IPL was to “entice an entire new generation of sports fans into the grounds throughout the country. The dynamic Twenty20 format has been designed to attract a young fan base, which also includes women and children. ” • He said that the ultimate goal was to create a franchised domestic cricket structure for India. The league’s board would be responsible for creating the tournament schedule, providing regulations and match officials, maximizing media coverage, and guaranteeing exclusivity within a team’s geographic region. Each franchisee will get one home ground and will have to commit to building stadiums at their base,” said Modi.
“These franchisees will get marketing rights and also a share in the centralized revenue, they will also be entitled to local revenue from ticket sales and other sources. ” • Modi envisioned that each team was to have 16 players, including a maximum of four foreign players and a minimum of four players drawn from the Under-19 which each team was based.International players would require the approval of their respective countries’ cricket boards; matches to be played for their countries would always take precedence over IPL matches. Players would earn salaries, but not the options and bonuses common in American sports leagues. Many would likely earn considerably more from sponsorship contracts. There would be a player draft, similar to those in American professional sports leagues, and teams would be permitted to trade players.
Between September 11 and September 24, 2007, South Africa hosted the first Twenty20 World Cup, a 12-team international tournament sponsored by the ICC. Upon his arrival in South Africa, just after the formal launch of the IPL, Modi set out to meet with members of the ICC as well as with administrators of the various national cricket boards, which had authority over their own national and domestic teams. His IPL tournament, he knew, would raise two central concerns: the impact it would have on domestic and international schedules, and the extra demands it would impose on already overworked players.He sought to convince executives from the cricket boards that the IPL would accommodate their interests and not compromise their control over their own players and calendars. Modi also wanted to meet with players in order to convince them that far from being a hardship, the IPL would benefit them directly. • Modi knew that if he could not sign up great players for domestic Twenty20 cricket, his league would stand no chance.
“Without the players, we have nothing,” he said. Modi came to South Africa armed with BCCI approval to offer players contracts never before seen in cricket.In 2007 the annual salaries for cricket players ranged from $100,000 to over $1 million, depending on the player’s skill level and the country in which he played. Players—especially the Indian players, whose faces sold everything from soft drinks to refrigerators—also earned money from sponsorships and advertising contracts. • Modi had classified the top 100 players in the world into four categories, based on their annual earnings and skill levels. He decided to offer minimum salaries of $100,000, $200,000, $300,000, and $400,000 to players in the different categories.
In all, he was willing to offer $20 million for the top 100 players in the world. Modi determined that most players would at least double their annual earnings by playing 14 IPL games over two months, and could earn additional money from sponsorships. Modi had already spoken to many players, and they had reacted favorably to the proposed terms. With the check from the BCCI in his pocket, Modi could now offer them contracts. • After two days in South Africa, Modi’s focus unexpectedly shifted from negotiating player contracts to the games themselves. On September 14, India unexpectedly beat archrival Pakistan in a tense fight to the finish.
The tide had turned for India’s team and now all of India was glued to their television sets waiting for the rest of the tournament to unfold. The final match of the tournament, Pakistan, which appeared to be winning, lost the match when their most dependable batter, Misbah-ul-Haq, lofted the ball and was caught out with his team needing just six runs from the last four balls to win. • All of India was euphoric. “It was just something else,” says Modi. In a matter of weeks, cricket fans in India had gone from being curiously interested in Twenty20 cricket to becoming its most ardent supporters.
” Broadcast live to 100 countries, the India-Pakistan final achieved TV ratings in India of 21. 2 on ESPN, and Star Cricket captured 47. 2% of all TV viewers even though the matches competed against popular reality shows. • Modi identified four constituencies whose interests they had to examine in detail: players, broadcasters, franchisees, and cricket boards (including the BCCI, the ICC, and various country-level boards around the world).
PLAYERS The players—whose buy-in Modi and IMG knew was a prerequisite for a successful league—were on board. They had liked the offers Modi made at the Twenty20 World Cup. Modi had decided to sweeten the offers further. The amounts he had promised the players would now be minimum guarantees; franchises were free to bid for players in an open auction, and pay them market prices.
• Though he was sure this arrangement would strengthen the league by ensuring the attraction and retention of top players, he was concerned about the prospect of bidding wars, which could make the tournament lopsided—and even ruin some franchises.Richer and more aggressive franchises, after all, might lure all the top international stars, leaving the other franchises with unknown and lesser players. For the weakest teams, merchandizing and sponsorship revenue would be gravely affected. • A second issue concerned the inclusion of domestic players and the Under-19 players. Should they be promised minimum salaries and included in the bidding? • A third issue was the role that certain marquee players would play in the formation of the league.
It seemed to Modi that some players from the Indian national team were so closely associated with certain cities that they had to be assigned to these cities. The most prominent of these players were: Sachin Tendulkar (Mumbai), Saurav Ganguly (Kolkota), Virender Sehwag (New Delhi), Yuvraj Singh (Chandigarh), Rahul Dravid (Bangalore), and VVS Laxman (Hyderabad). Should these players be pre-assigned to the franchises associated with these cities? If so, how would the franchises and the players in question react, and how would they be paid if not through the auction? A final issue concerned the uncertainty around the availability of certain players. Some players might only be able to play for part of the IPL season if, for example, they were needed to represent their countries for Test matches or ODIs. Should these players be included? If so, how should they be treated in the player auction? BROADCASTERS • The primary revenue stream for broadcasters comes from advertisers, who pay to air commercials during breaks in programming.
Viewership of popular programming, particularly Bollywood movies and soap operas, had exploded in India since the 1990s.Likewise, cricket revenues had grown by extraordinary multiples, in large part because of Modi’s own efforts in marketing live cricket to television audiences. Broadcasters and advertisers recognized cricket as a powerful communication force. Demand for commercial TV spots had skyrocketed. • Just as broadcasters are paid by advertisers, sports leagues are paid by broadcasters. Cricket matches featuring the Indian national team fetched the highest broadcast revenues in the world.
Although it was not clear what audiences the IPL might obtain, Modi knew that ODIs in India fetched the BCCI approximately $7. 5 million per game. Modi was not certain what broadcasters would pay the IPL for each Twenty20 game. Wildblood, Griffiths, and their IMG team suggested $1 million per game for each of 59 games played per season. This was a good starting point, but Modi’s aim was to sell the broadcast rights for a ten-year period and he was not sure whether it made sense to commit the IPL to a set fee per game for as long as a decade. Broadcasters in India typically expected to earn two dollars in advertising revenues for every dollar they spent acquiring the rights to a given program; to pay Modi $1 million per match, a broadcaster would have to feel confident in receiving at least $2 million per match in advertising.
The league would be designed with advertising in mind: an IPL game could feature 72 30-second commercial spots. Each 30-second commercial spot during prime time sold for approximately $11,000 per rating point (one rating point equals viewership by one percent of all households with television sets in the country). Although interested, most broadcasters he met considered the IPL a risky venture compared to the revenue ODIs brought in: an ODI was a sure bet for broadcasters with 400-500 30-second spots per game garnering ratings in the 2-3 point range. Given the riskiness of the proposition, the broadcasters told Modi that the live TV coverage was feasible only if the IPL could deliver an average of 4 rating points per game—reasoning that since a Twenty20 game was half as long, they should be able to earn twice as much per second.Modi thought this feasible after the tremendous ratings achieved by the matches featuring India in the Twenty20 World Cup. However, a great deal would depend on when the IPL matches were played, and the audiences they delivered.
• Some broadcasters, like ESPN Sports, proposed a revenue-sharing arrangement. Modi was opposed to this idea because he thought the broadcaster must share some risk. Prime-time television (aired 8-11 p. m. ) had the potential of delivering the largest audience, but also the risk of more intense competition from other television channels.
Women had historically not been drawn to cricket matches in India.Most Indian households had a single TV, and there was a risk that a prime-time IPL broadcast might not garner the potential audiences unless it was compelling enough to attract a broad viewership. A lot would thus depend on how the IPL was marketed and how the television broadcaster packaged the programming surrounding the match play. • Modi also thought it might be possible to tie the IPL in with Bollywood.
Mixing the glamour of film with the fast action of Twenty20 cricket could be potentially irresistible for television audiences, provided it were done carefully and in good taste.He was aware that for many Indians, television shows were the principal form of free entertainment (See Exhibit 8. ) But how well would IPL cricket do against family-oriented prime-time television programs, such as the Indian version of Who Wants to Be a Millionaire, which was hosted by the famous Indian actor Amitabh Bachchan? • There was also the huge international market for pay-per-view (PPV) sporting events to consider; in fact, the BCCI earned more revenue from PPV in the United States than from the much more cricket friendly markets of Australia and England combined.FRANCHISES • Modi believed that a franchise structure, similar to the one used in American professional sports, had significant benefits over centralized ownership.
But it was still not clear if anyone in India would buy an IPL franchise. • After all, in selling an IPL franchise, Modi would not be selling a stadium, but instead would be asking the buyer to eventually build one at enormous expense. Modi had a work-around solution for the short term: he had access to existing stadiums run by state cricket boards, which reported to the BCCI. Modi figured that a fee of about $100,000 per game would cover the operating and maintenance costs for these existing stadiums. He also estimated that player salaries for each franchise would average $6 million in 2008, assuming a $5 million cap on auction bidding plus the cost of local players. But though he could convince prospective franchisees that league play could begin immediately, he still had to face a daunting sticking point to any sale.
On the one hand, franchisees were not likely to want to invest hundreds of millions of dollars in stadiums meant to host a 44-day annual tournament.On the other hand, the potential franchise owners to whom Modi spoke repeatedly asked him one question: what were they going to buy if not a stadium? Modi explained about exclusive franchise rights, but it remained unclear to them why these might be of any value. So how could Modi link the valuation of franchises to their projected revenue streams? He planned to distribute 80% of the revenues the BCCI would earn from broadcasters, split evenly among each of the eight franchises— with this dropping to a 60% cut in year five. The franchises could also make money from local sponsorships, gate receipts, merchandizing, and hospitality.
Cricket stadiums in India could accommodate between 30,000 and 90,000 spectators. Thus ticket revenues could be substantial, even if tickets to IPL games were priced at only $5 per game, which was slightly higher than the price of a movie ticket in India. However, gate receipts might be unpredictable since the IPL tournament was set to be played in the dead of the Indian summer—when even nighttime temperatures averaged close to 90 degrees—and in stadiums that were difficult to access and which boasted few amenities.Merchant and concession sales were expected to average $2 per ticket, with local sponsorships expected to earn an average of $1 million per franchise in 2008.
Modi estimated that corporate hospitality suites could fetch another $1 million annually. • Modi intended to use a sealed-bid auction for the sale of franchise rights. He hoped to raise a minimum of $50 million from the sale of each franchise, to be paid in 10 equal installments of $5 million per year starting in 2008. Equity in sports teams represented a lucrative investment around the world, but Modi needed a way to communicate the full benefits to potential owners in India.George Steinbrenner’s quip, that “owning the (New York) Yankees is like owning the Mona Lisa,” would not be well understood in a country without a history of private control over domestic teams.
Modi spoke to Sharukh Khan, an old school friend and now a leading Indian film star, about buying a franchise. Khan was interested but confessed to knowing next to nothing about cricket or franchising. Then on a visit to Thailand over the New Year break, Modi met Preity Zinta, another Bollywood star, who was vacationing in Phuket with her boyfriend, Ness Wadia.Would they be interested in buying an IPL franchise? Wadia was excited by the prospect, Zinta intrigued. Modi promised to help both Khan and Zinta understand the basics of the cricket business. An idea was forming in his mind—if he could get these stars on board, he might have a marketable IPL-Bollywood connection.
THE CRICKET BOARDS • The BCCI and state cricket boards were allies, but there were practical realities with which Modi had to contend. The BCCI was set to receive 20% of league broadcasting and sponsorship revenues.However, the major concern for the BCCI was the impact the IPL would have on Test matches and ODIs, and on the relationships with other cricket boards around the world. In 2007 there were 10 Test matches and 39 ODIs featuring the Indian national team. All these matches, and many others between non-Indian teams, were shown live on Indian television.
As a result, there was almost nonstop cricket coverage on Indian television. Test match attendances had diminished, although ODIs continued to draw almost-full stadiums; Eden Gardens in Kolkata, full to the rafters with nearly 100,000 spectators, was a sight to behold.Modi was committed to one overarching objective: any new format of cricket, including the Twenty20, must not compromise the traditional game of cricket in any manner. Test cricket was more than a century old, and he believed it must be preserved like the jewel in cricket’s crown.
ODIs were the bread and butter of cricket, the cash cow that had made the BCCI the richest cricket board in the world. India had become the economic powerhouse of cricket, earning, according to Modi, 80% of the worldwide cricket revenues. ODIs were central to this power and money.Thus he had to make sure that the IPL offered a differentiated product; it could not cannibalize ODIs and Tests.
Finally, Modi had to address the BCCI’s concerns about its relations with the ICC and the cricket boards of other countries, which already felt resentment at the economic clout exercised by the BCCI. Modi thought the problem was that the countries that had for so long controlled the game could not bear to lose their hold. Still, the BCCI had to act responsibly, as a member of the larger cricketing community.Already, the ECB—which had developed Twenty20 in 2003—was expressing displeasure at the prospect of the IPL. The ECB watched in chagrin as Modi looked to use English players for a domestic Indian tournament and ultimately announced that no English player would be available for the first season of the IPL.
Fortunately, the executives of the other boards, with whom Modi had spoken in South Africa, were supportive. The ICC had given its formal approval; thus Modi had to figure out how to include the ICC and the other cricket boards in the equation.