Indian Premier League: A sustainable ball game for franchisees?

When Lalit Modi said “Let the games begin”, following a glitzy ceremony at Bangalore with superstars of Bollywood in the audience, the luminaries of Indian cricket in the field, and the biggest Indian corporate honchos owning teams, no one would have imagined this would be the state of the league five seasons down the line. What started off as a league where money was thrown around is now a league in deep trouble: two teams (Kochi and Deccan Chargers) have been terminated; one team had trouble paying wages to its players (Royal Challengers Bangalore). Pune Warriors India left the league, and then came back on board after assurances. Not to forget Kings XI Punjab and Rajasthan Royals have had their own set of issues with BCCI as well. The former chairman of the league was ousted and is now living outside the country, and continues to throw allegations at the IPL from time to time.

MUMBAI, INDIA – JANUARY 19: (L-R) Manoj Badale of Mumbai Indians, Ness Wadia co-owner of Kings XI Punjab, Shilpa Shetty owner of Rajasthan Royals, Lalit Modi Chairman and Commissioner of IPL, Preity Zinta owner of Kings XI Punjab and Gayatri Reddy of Deccan Chargers attand a press conference during the Indian Premier League Auction. (Photo by Ritam Banerjee/Getty Images)

Where did things go wrong? Was it the hurry with which the league was conceived as a reaction to Zee’s ICL? Was it the urgency to have something, anything in place that led to the creation of a non-sustainable business model for franchisees? Or was it lack of due diligence in bidding for franchises that has led to owners being unable to manage their finances with the teams? Was it the auction model that led to a major wage budget for the franchisees despite the wage cap? Or is it just the fact that the holding companies have been having trouble with their core business, which has nothing to do with the IPL as such?

The IPL, when it was conceived, was not designed to be a short-term money-spinner for the investors, but promised to be a major revenue generator once the league was well-established. But consistent controversies have plagued the league (including those of fixing) that, in turn, led to questions about the sustainability of the IPL. The recent bidding for the Deccan Chargers franchise saw only one interested bidder: PVP – a film production house in Andhra Pradesh. While Videocon was rumoured to be interested, they did not express the same with an official bid. It appears that the days of the sky-rocketing team valuations are long gone by, and reality seems to have sunk in about the actual money that IPL generates for a franchisee.

Why some have got it right

Undoubtedly, the IPL has been a tremendous money-spinner for the BCCI in itself. A few franchisees like KKR and Chennai have even started making profits, according to reports that have been doing the rounds. The success of Chennai can be attributed to the extraordinary spell that the franchisee has enjoyed in the 5 seasons in the league. It has established a solid and loyal fan base in Chennai. Chennai Super Kings have also managed to engage the ‘knowledgeable Chennai crowd’ in a way that no IPL team has managed to do – a fact that is reiterated by the variety of fan videos that have sprung, flash mobs across the world, team songs, etc.

KKR, on the other hand, prides itself on a strong marketing base that sees every bit of the value available to be mined, being extracted through endorsements & tie-ups. Kolkata Knight riders also enjoy the unquestionable brand pull of the owner who is none other than the Bollywood Badshah himself.

JOHANNESBURG, SOUTH AFRICA – SEPTEMBER 26: The Kings celebrate during the 2010 Airtel Champions League Twenty20 final match between Chennai Super Kings and Chevrolet Warriors from Bidvest Wanderers Stadium on September 26, 2010 in Johannesburg, South Africa. (Photo by Duif du Toit/Gallo Images/Getty Images)

Chennai has also maintained the core of the team consistently right from season 1, unlike most other teams, that has led to a greater fan connect – the most important factor for any sport club. Other teams (excluding Mumbai) have consistently chopped and changed their teams that led to a situation where the non-hard core audience had difficulty in relating to the team. The ‘local’ aspect that was central to the development of the franchisee and the fan connect seems to have gone missing with very few teams having local players who are central to their team.

What has gone wrong

BCCI’s initial idea to establish a football-like Champions League tournament hasn’t quite succeeded, with lead sponsors having changed for the Champions League T20 thrice already. There is an imbalance of team strengths in favour of the IPL teams in the Champions League. While other countries send in the winners of their national T20 championships, India is represented by the cash-rich IPL teams (instead of say a Rajasthan or a Tamil Nadu Ranji team). There have been many situations where players from foreign countries turn up against their own state teams, while playing for their IPL team!

The establishment of alternate local revenue streams from merchandising and local advertising (other than the central sponsorship pool) has not taken off as was expected during the conception of the league. TV Revenue and central sponsorship still form the major chunk of the revenue streams for a majority of the franchisees, which makes their sustainability as a stand-alone business for owners questionable. Another unfortunate issue has been the untimely financial issues in the core businesses of a few owners that made the cash-crunching maintenance of the franchisee a non-starter.

CAPE TOWN, SOUTH AFRICA – APRIL 16: Shilpa Shetty of the Rajasthan Royals, Preity Zinta of the Deccan Chargers and Shah Rukh Khan of Kolkata Knight Riders talk to the press conference at the CTICC on April 16, 2009 in Cape Town, South Africa. (Photo by Tom Shaw/Getty Images)

TRP ratings have fallen (or stabilised based on whether you see the glass half-full or half-empty) and IPL is no longer the scary entertainment giant that put off movie releases during the summer. The IPL does not seem to be a money-making investment for most owners and is more of a ‘pride factor’ – that they own an IPL team. The reputation of the IPL has taken a major hit where fans (and owners?) believe it is more about the partying than cricket or the business.

What needs to be done

The IPL needs a fresh format that is not as long-drawn out. Playing 76 matches in a span of two months no longer seems the right approach. It causes boredom to the fan and results in a stupendous amount of matches that have no consequence. The IPL needs a format where players are not burnt out and give their best shot in every match.

IPL will have to reinvent itself in order to stay relevant to the cricket fan in India. It needs to inject some transparency into proceedings to prevent controversies like the match-fixing scandal during the previous season. This is essential in order to appear honest to the fan who watches the games. After all, the IPL, and as a proxy, Indian cricket, cannot afford to lose the fan who is central to the entire business model, because of something as simple as sheer disillusionment.