The launch of World Series Cricket (WSC) and Indian Premier League (IPL) changed cricket forever. Kerry Packer, Australia’s media mogul, and Lalit Modi, an Indian businessman and cricket administrator will always have a special legacy in cricket’s history books.
Packer launched World Series Cricket (WSC) way back in 1977 and Lalit Modi launched Indian Premier League (IPL) in 2008.
This is the second of three articles’ series on the mega success of IPL.
Packer wanted to secure the exclusive broadcasting rights to Australian cricket. On the other hand, Lalit Modi had a lifelong dream. It was to make “Indian cricket the most powerful brand in world sport”. He wanted to create an empire in the cricketing world. An empire India controlled.
Lalit Modi’s masterplan
On September 10, 2007, Sharad Pawar, the chairman of the Board of Control for Cricket in India (BCCI), gave Lalit Modi a check for $25 million. He was given full freedom to recruit cricket players to the Indian Premier League.
This was a ‘dream come true‘ moment for Modi but how did it all happen?
The story dates back to Modi’s time at Duke University. He saw the rising success of American professional sports and realised the potential of a similar kind of league back home.
When he returned to India, Modi knew he’d need to have the expertise in majorly four areas – Entertainment, Marketing, Licensing, and Television. Modi’s journey started in 1991 with a joint venture between Modi Entertainment Network (MEN) —the television production and distribution company he’d set up within his family’s multi-billion-dollar conglomerate, Modi Enterprises—and the Walt Disney Company.
As part of the venture, Modi spent nearly two years learning about the business model of Disney. As Modi and Disney worked to set up licensing and marketing operations in India, it dawned on Modi that Disney needed to be in the television business if it wanted to get its brand in front of Indian consumers. On that front, Modi assisted Disney enter into broadcast television, and later into theatrical distribution of Disney films.
Modi approached the BCCI on Disney’s behalf, inquiring about the prospect of Disney being a licensee of the BCCI. BCCI were least interested. In Modi’s words – ‘BCCI’s doors were closed in those days.’
In 1993, Modi Entertainment Network (MEN) joined the American television broadcaster ESPN in a joint venture. ESPN wanted to broadcast matches for crickets and earn revenue from cable subscriptions. But India did not have a pay TV system at the time.
During those days, BCCI used to knock on Doordarshan’s doors to broadcast the matches and the state broadcaster would broadcast it, however, a fee was charged by Doordarshan. Did it raise your eyebrows?
TV business was a tough nut to crack back then. The cable operators would string wires onto the roof, set up dishes, and sell to local subscribers the channels they received. Modi used “Modi Enterprises national sales force to identify the 70,000 to 80,000 of these cable operators.” He encrypted the signal and only allowed cable operators to decrypt it if they collected revenue on behalf of ESPN from subscribers.
Modi suggested that ESPN pay the BCCI in 1995 for exclusive rights to live cricket coverage. BCCI entered into an agreement with ESPN on revenue sharing and sold the rights to live cricket broadcasts. ESPN quickly became India’s number one sports channel. Indian cricket rights fees started to rise.
I had learned what the value of the sponsorship was. ESPN would spend a small amount of money to buy 5% of the content for cricket, but that would finance 100% of the channel. The broadcasters were basically using cricket to finance everything else. So I worked to clean that up and, over the years, built the revenues of the BCCI to over three billion dollars. – Lalit Modi
Modi approached the BCCI again in 1996 with yet another proposal to start a professional cricket league. The league would have Indian fans cheering for different city – based teams, not a national team, as they had for a long time. Modi would own the league and sell franchises to the teams. The matches would be broadcast by ESPN and they would pay the BCCI an annual royalty fee. Modi called it the Indian Cricket League, and he spent millions of dollars signing up for his eight teams after obtaining BCCI approval.
Then, as Modi recalled, a BCCI non – profit honorary officer requested a bribe. Modi did not budge and thus vehemently refused.
Modi was vocal about the alleged bribe and it created a wall between BCCI and ESPN. Modi terminated his part of the deal with the network.
Broadcaster turned BCCI member
Modi knew he had to find a new way to bypass the hurdles caused by BCCI’s members in order to achieve his lifelong dream. He left the business of broadcasting and registered his name in BCCI itself as member of a local club. He only used his first name and middle name.
The value of cricket had changed, and I found that billions and billions of dollars were being siphoned out of the BCCI. The BCCI could have earned a lot more. So I found a few members of the BCCI who believed in my plan; one of the key members was Mr. I. S. Bindra, President of the Punjab Cricket Association (PCA) and a past president of the BCCI. I said that if we got into the BCCI, the revenues could go up by a billion and a half dollars — they actually went up by three—if we were to clean it up and be transparent in our operations. – Lalit Modi
Lalit Modi rose through BCCI’s ranks and made a name for himself. After becoming Rajasthan Cricket Association’s (RCA) president, he sold the boundary-rope advertising for INR 1.5 million per spot, more than double the previous rate. During those days, corporate box seats used to be given away for free. He stopped this practice and sold the corporate box seats for INR 125,000 each.
Modi was appointed BCCI’s vice-president in 2005. With Lalit Modi at the heart of BCCI’s dealings with big companies and brands, BCCI’s revenues increased sevenfold and touched the $1 billion mark between 2005 and 2008.
Laying the foundation of IPL
Lalit Modi, then BCCI vice president, went to Wimbledon finals and there met Andrew Wildblood, a senior vice president at IMG World, a leading international sports marketing company.
Modi and Wildblood felt that the time might be right to build an intercity league. “In the big metros where the money is in India, people identify much more with their city than with their state. So nowadays you are a Mumbaiite or a Bombayite first and a Maharastraite second. ” – Snippets from Andrew Wilblood’s interview.
IMG decided to give Modi’s plan a clear vision. As they were puzzled about how to structure the proposed revenue sharing, how much money they would need in broadcast rights, how much money they could afford to pay players, and other basic league organizational issues, they thought hard about the experience of prospective franchise owners.
Announcement of Indian Premier League
The Indian Premier League was formally launched on September 12, 2007 in a high profile ceremony in Delhi. Some of the most powerful men in cricket joined Modi.
Modi announced that eight franchises, each linked to a city, would form IPL. The teams would play a Twenty20 cricket annual tournament.
The league’s board would take full responsibility for the schedule of the tournament. They will also provide regulations and match officials, maximize media coverage and ensure exclusivity within the geographic region of a team
He further explained that each team would have sixteen players, including a maximum of four foreign players and a minimum of four players drawn from the Under-19 teams or from the metropolitan area in which each team was based.
“Each franchisee will get one home ground and will have to commit to building stadiums at their base. These franchisees will get marketing rights and also a share in the centralized revenue, which is yet to be decided. They will also be entitled to local revenue like ticket sales.”
The international players would require the approval of their respective countries’ cricket boards. The matches played by countries shall always be preferred first. 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.
The format of the league was similar to that of NBA in United States. In the meantime, the first T20 World Cup (2007) had already started. The Indian side MS Dhoni led Indian side stamped their name in cricket’s folklore as they won in the finals against arch-rivals Pakistan.
As a result, the love for T20 format started to grow. They wanted more of it.
Lalit Modi knew if he could fit Bollywood in his grand IPL scheme, he would have an unbeatable cricket product. Modi met his school friend Shah Rukh Khan, one of the biggest movie stars in the world, and convinced him to buy a franchisee. He also convinced Preity Zinta who was yet another Bollywood star.
After shaping the IPL model, the franchisee auction was held on 24 January 2008 with the total base prices of the franchises costing around $400 million. At the end of the auction, the winning bidders were announced, as well as the cities the teams would be based in: Bangalore, Chennai, Delhi, Hyderabad, Jaipur, Kolkata, Mohali, and Mumbai. In the end, the franchises were all sold for a total of $723.59 million.
Lalit Modi – The Marketing Magnifico
Indian Premier League is the true descendant of World Series Cricket. Lalit Modi’s big ambitions and grit paved way for one of the greatest innovations in cricket’s history.
Lalit Modi’s wrote a letter to BCCI’s Rahul Johri in Aug 2017 – ‘When I came into the BCCI [in 2005], the revenues were languishing at about 260 crores and when I left in 2010, the reserves were more than 47600 crores. In 2010 it was valued at $11 billion and today the value of IPL has fallen to $4 billion due to lack of innovation.’
With Lalit Modi at BCCI’s helm and peak of his powers, he monetized Indian Cricket to a whole new level and made India a global cricket powerhouse.
That’s how the Indian Premier got launched and I hope you are all aware about big it has become. We covered that in our last week’s story.
Liked the article? Stay tuned for the last piece on the mega success of IPL. It’s on the one season wonders and huge paychecks given to the players over the years.
Snippets were taken from Rajeev Kohli’s (Professor, Columia Universoty) case study on ‘The launch of IPL’ with his full approval. Writers need readers. Follow me @pilania_gourav on twitter.