The Hindu Business Line : “The law should protect investments in sport”

Earlier this year, the Indian sports industry saw one of the biggest financial investments, to date, with the launch of the Indian Premier League (IPL). With it also came concepts such as ‘auction of players’, ‘franchisee model expansion’ and direct corporate involvement, into the Indian sports market. With India’s recent success in the non-cricketing arena at the Beijing Olympics, financial investment into other sports is also likely to increase.

“The first season of the IPL has given us a glimpse of what is possible,” says Nandan Kamath, a sports lawyer and Director at the Bangalore-based sports career management firm GoSports and adds that the pace of growth in other sports will primarily be determined by how well our Indian sportsmen, sportswomen and teams perform in those disciplines.

Kamath foresees that once we have the performances, entrepreneurship will show the way in packaging, marketing and generating, and uncovering value. “While we are now a fairly well-established sports-watching nation, I feel that the sports industry will really transcend itself once we can also call ourselves a successful sports-playing nation.”

As the Indian sports ecosystem grows in stature and size and attracts larger financial investments, the Indian legal system will have to answer some difficult questions, he cautions. The success and sustainability of sports will, in large part, depend on the law’s ability to meet the challenges that are posed. In an email interview with Business Line, Kamath explains what’s at stake for the sports industry and the priority matters for Indian laws.

Do you think the Indian sports industry is ready to take off?

There is some inevitability about the growth of our sports industry. We have a large sports-watching population and that will remain the single largest driver of growth. While a number of other countries, arguably, have far more rabid sports fans, by dint of sheer numbers we have the potential to build one of the largest sports industries in the world. In some sense, the first season of IPL has given us a glimpse of what is possible.

But why exactly is the size of the sports-watching population relevant?

The fact is that sustained viewer engagement and participation is the source of most of the value in sport. The major sources of revenue for tournaments are broadcast rights, sponsorships, merchandising and ticket revenues. Each of these is premised on eyeballs and engagement.

Higher viewership will reflect in increased willingness on the part of advertisers to buy TV ad spots and this, in turn, raises the value of broadcast rights. TV broadcast also generates interests among sponsors to associate with the teams, the stadia and even the players. Viewer engagement and participation is, therefore, the central driver.

Aren’t you talking only about cricket?

Cricket is certainly at the forefront of growth of sports in the country. Engagement and fanaticism are usually driven by identification, and my personal view is that the pace of local growth in other sports will primarily be determined by how well our Indian sportsmen, sportswomen and teams perform in those disciplines. Once we have the performances, entrepreneurship will show the way in packaging, marketing and generating and uncovering value.

Today, the state of communication technologies means that we are not a one-TV-channel economy — diverse and niche interests (‘the long tail’) can also be fed in targeted manners without large investments. This is going to lead to better markets for both eyeballs and for talent — a natural consequence of market-making tools being more abundant and decision-making and power being decentralised. While we are now a fairly well-established sports-watching nation, I feel that the sports industry will really transcend itself once we can also call ourselves a successful sports-playing nation.

What are the financial and legal challenges here?

The first challenge is attracting investment into sport. The next is protecting the ROI (return on investment) made. If the law can protect the returns, it will do both jobs.

The primary challenge for the legal system will be in limiting revenue leakage. Once law can ensure that large portions of the revenue from sport remain in sport, more is available for re-investment in sport. Good laws and enforcement can thereby spur further growth. On the other hand, if the law doesn’t protect the investment and the returns, we may still see growth but it may not be at optimal levels.

What are the areas that are seeing this revenue leakage?

The major areas of concern, I see, are ambush marketing, broadcast piracy, counterfeiting of merchandise, ticket scalping/black marketeering, intellectual property theft and other acts of commercial free riding. All these acts divert money from the sport to private parties who have no interest in its long-term development. The law on the books, and in practice, must step in and protect leagues, teams and players from these infringements as the integrity of the sports system is at stake.

Can you detail these issues more specifically?

Ambush marketing is the act of suggesting an association with an event without authority or payment — we have no clear law on ambush marketing and one is needed especially to protect major sporting events and attract sponsorships.

With regard to broadcasting, the premise of broadcast rights valuations is exclusivity and control. At one end, we have acts of private broadcast piracy, especially on the Internet. Pirates ride free on digitised broadcast signals and generate revenues through donations, pay-per-view or advertising-based models with no real production costs.

Interestingly, Dick Pound (the Vice-President of the International Olympic Committee) was recently quoted as saying that he sees the Internet as the second most severe threat to the Olympics after doping. At the other end, we have the compulsory signal sharing regulations, where rights holders for sporting events of “national importance” must share their signals with Doordarshan for a pre-set revenue-share. Private piracy needs strict enforcement and consequences. The compulsory sharing legislation needs to be rethought in the interests of the longer term impact on the sports industry’s growth.

Ticket-scalping/black marketeering and other acts of free riding, whether victimless or not, must be cracked down. Logo issues on the players’ gear and equipment also seem to be on the rise?

A large revenue driver, in the future, is going to be professional leagues/team/player merchandising, where names and logos are placed on clothing, memorabilia, gadgets and the like.

We have very few real restraints on counterfeiting and a new legal culture needs to emerge to respect the rights of leagues, teams and players and to prevent free riding. The players also need specific legal protection. A publicity rights legislation that protects players against the unauthorised use of their names, images and likeness must be prioritised.

Recently, we saw sections of international media boycotting sporting events, as a result of ‘exclusivity’ clause. Your take on protection and prohibition…

The guiding principle should be that those who haven’t invested in sport shouldn’t gain from it. Having said that, sports will always remain part of the culture of any nation and in the name of protection you don’t want to completely close off opportunities for sports viewers and members of the public to interact with content. Over-reaching laws can backfire as the core value remains user engagement. This means that, whether or not for commercial gain, things like user-generated content, fair uses of content and journalistic reporting may need legal protection rather than prohibition as they add to the grandeur and the fanaticism that make for great sport.

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“The law should protect investments in sport”