IPL is a breezy, entertaining business venture. Applying some stock market discipline will help boost valuations
It is best to start this with a disclaimer. I like to watch the Indian Premier League (IPL), even though I am not overly fond of cricket. Yes, I can hear cricket worshippers chorusing — ‘That just proves our point. If you are a real cricket fan, you can’t support the blasphemy that is the IPL. Look at the crass commercialisation, the vacuous commentary, skimpily clad cheerleaders, not to mention the mercenary players who ought to be playing for the greater good of the country.’
Hold your horses, and, for a moment, forget that IPL is an abridged (or if you like, thoroughly corrupted) version of the haloed game.
Instead, look at it as just another media venture aimed at providing entertainment on grand scale. You have to admit that it has been quite successful in its objectives so far.Mass appeal
Once you accept that the IPL is a commercial venture, it follows that it exists only to maximise profits for its key stakeholders — the sponsors, brands, franchisees and the players.
As any self-help book will tell you, the simplest way for a business to maximise its profits is by addressing its products to the largest possible set of buyers.
The IPL format has managed this remarkably well. By shortening a meandering test match into a snappy half-day affair, offering a king’s ransom as prize money and peppering the whole thing with impromptu jigs, jingles, the IPL has made the gentleman’s game quite appealing to the ladies, teenagers and even two-year olds.
The net result is that cricket — which in its pure test format had only a niche audience — has now acquired a never-before mass appeal.
You can watch an IPL match for the cricket if you will. But you mainly watch it because you root for your home city, love blonde cheerleaders or like to guess at the colour of the turban that Navjot Singh Sidhu flaunts in Extraa Innings.
Indeed, it is the eyeballs and footfalls resulting from all this entertainment that have allowed the market to assign fairly steep price tags not only to the IPL brand, but also to the teams and the players.
Therefore, you learn from Brand Finance India that IPL was worth a cool $3.03 billion in 2013, while each of the franchisees was worth between $25 and $45 million.
This year’s auctions have also shown how team owners ‘price’ their players with a keen eye to the scores. Every child now knows that only spring chickens and not 40-year olds can aspire to the best prices.Leave it to the market
Critics will now ask, isn’t this obsession with valuations and price tags corrupting IPL? Look at the allegations of betting, match-fixing and game-throwing.
On the contrary, the best way to clean up the IPL today is to allow market forces a free hand in valuing the venture and regulating it.
We all know that, whatever else they may or may not be, the stakeholders in IPL are all hard-nosed businessmen. If they’ve sunk money into the format, what they would dearly like is for the market value of their franchise to keep rising. For that to happen, the format must add rapidly to its huge viewer base.
Though the organisers may appear quite unmoved by the allegations so far, they are fully aware that betting and fixing issues can impact the appeal of the franchise.
If a good number of viewers believed that IPL matches were decided in advance, why would they continue to turn on their television sets or throng the stadiums?
If they stay away, this will directly dent the ‘valuation’ not just of the franchisees, but of the players too. Once corruption and match fixing allegations begin to hurt their ‘wealth’, you can bet that the players in the IPL drama will begin to clean up their act pretty quickly.
In fact, the Brand Finance India study shows that the IPL’s market value is indeed responding to changing ‘market conditions’. The 2013 valuation of $3.03 billion for IPL is well below the $4.1 billion that it enjoyed three years ago. And while last year’s winners — Kolkata Knight Riders — have seen their valuation shoot up this year, Rajasthan Royals, Pune Warriors and other also-rans have shed a few millions.Create a market
This suggests that one way to take IPL forward as a business venture would be to speed up its commercialisation, and kill the ‘grey market’ around it.
There is no reason why the IPL brand as well as its franchisee teams should not be valued on an ongoing basis, so that anyone inclined can place transparent legal bets on the future value of their favourite teams. These bets can then be disclosed just like the latest market quotes for the Reliance stock or Nifty futures.
Even if they don’t to go so far, the IPL organisers can take some cues from the stock market in ensuring a fair ‘valuation’ for IPL.
The franchisees can be made to reveal their profit & loss accounts on a regular basis, so that everyone can value them based on the latest information. All ‘material information’ about the franchisees (like the team owner going broke) can be made public on a real-time basis.
And yes, just like in the stock markets, the insiders – the team owners and their relatives, the managers and players themselves -- can be expressly barred from placing bets.
If found violating the rules, they can be barred from playing the IPL altogether and forced to play test cricket instead.
Now, cricket fans, how’s that for a win-win situation?