A collaborative effort is required to drive Indian sport forward, and there is enough private capital available to support this initiative given the right strokes.
The recent pronouncement by a Sports Management Company, and their Franchise team partners to create a Private Volleyball league in India is an action that was overdue, and perhaps necessary. In my last week’s musings, I had indicated that this is an action that could happen given the structural imperfections in the system. This kind of an action takes the management of the league, and its various affiliations including players, formats, and the rulebook into a consultative and investment-oriented management structure focused on creating maximum value out of the opportunity, with virtually no oversight from sports bodies.
As I have stressed earlier, Private Capital in Sports and Sports Media needs an opportunity to make a profit, and build scale, and that it does through Intellectual Property Management, enough flexibility to build affiliation of the product with the viewers and the fans, and the resources to build scale which then drive revenue. This kind of a structure also gives the Franchise owners significant clout in the product environment to help them build stronger business models of their own, and start creating product strategies in their respective cities and states. This necessitates the creation of talent pipelines, development systems, academies, merchandising, and fan participation platforms; focused on building the game and the opportunity around it.
The US franchise sports system works on largely this premise, and if the success of Basketball, American Football, and Baseball is to be believed, there is much value, and success, to be created over the years in franchise sports. It is estimated that the combined revenue of these sports is upwards of 25 billion dollars per year (185000 Crores) with cumulative viewership that competes favorably with sports viewership in India, and is significantly lower than the IPL juggernaut we possess. The revenue opportunity aside, the American system has appeal because of the sheer flexibility, and the labour (read talent / player) market it creates for the athletes, coaches and support staff, which drives participation, improvement platforms and performance excellence eventually. It is, therefore, not a surprise, that the US is a sporting force in the world with minimum Government intervention in creating world standard athletes.
Volleyball in India, of course, is a specific case, where nefarious federation infighting and poor management has brought the newly formed league to this stage and ironically may set in action a series of events that will benefit the league structure for all sports in India. Currently, the leagues are allocated through mostly a licensing process by the federation(s), where the federation(s) gets a fixed and a performance share on the league performance. The federation then provides technical support to the league and the financial risk is borne by the league operator, and the Team Owner partners that come on board. As these are long-term speculative contracts, most operators seek funding to build their businesses. Given the conditions in the last two years, it has been challenging financially for all concerned, which has put the system under significant duress.
The big dissonance has been that the licensing organization does not carry the execution risk of the league, and in case of the business not meeting its numbers, is not beholden to turning the business around for the benefit of the sport. The revenue pressure on the federation also enhances the licensing cost on the private operator, which may have led to the specific situation on volleyball. The key question, therefore, is that whether Long Term Public Private arrangements, which is what a league licensing contract is, need to be rethought if the assumptions of the business being created are a bit off. Also, the nature of the Federation structure as the Sports Ministry has advised, is a Section 8 company, or a society, or a similar entity. This structure eschews the risk-taking which may be necessary for running a league and a media operation along with it . The committee-based decision-making also does not support running highly unpredictable league businesses, and it appears that private operators is the way to go to make these models work. Also, competition courts have continuously stated that league licensing, though desirable is not necessary, and virtually anybody can try their hand at it if they have the appetite, resources, and the management bandwidth to make it happen.
A case study to see how a new league with impact can be created is to document the process of Major League Soccer (MLS) in the US. It was founded in 1996, and in 25 years, it has emerged as one of the leading soccer leagues in the world. Its seed capital was venture-funded, and initial Franchise partners were co-investors in the league. As the revenues have grown, and the team partners expanded, the initial investors have significantly enhanced their investment value and revenue returns multifold. More importantly, the league management and structure include the franchises in expanding the game, and the result of that is the emergence of a Soccer Super System in the US, which has resulted in the creation of a new soccer nation in the world. As the Franchise owners are completely invested in the model, it is in their interest to enhance and build the overall model along with their own franchises, which has had a demonstrable impact in expanding the game.
.Because IPL was the first league in India, and a very successful one, most of the sporting league policy across the board has been conceptualized in that mould. That thought may now have to be tempered with caution, as that league came out of an already successful, revenue secure product, so the narrative and the build-up had to be of a different nature. A similar model in ISL has faced challenges, where team owners may not have been as invested in the model, as they should. The ISL principals are cognizant of this fact, and we should see the league addressing these structural opportunities as it matures. That continues to be one of the reasons I am bullish about Indian soccer over the long term, and we should see results soon.
A collaborative effort is required to drive Indian sport forward, and there is enough Private Capital available to support this initiative given the right strokes. Right moves must be made to get this capital, along with the talent and management to participate in this opportunity. We need also desired flexibility, the ability to innovate the game and the model, and tax support required on the CSR side to make it easy to invest in a financially attractive and, also genuine social cause. This long-term structural reset, will accentuate the efforts of our Sports Ministry, Sports Authority of India, and the Federations, and start building India towards becoming a real sporting superpower.
Writer is a Director at Sportzlive and Emerging Sports , two companies which run the badminton and boxing leagues in India. He is the erstwhile CEO of Ten Sports and Managing Director at Cholamandalm Finance in his previous avatars and can be reached at [email protected]