Watch out for the Indian Premier League! : Lalit Modi
For the past three years Lalit Modi has answered to the Chief Marketing Officer, or CMO, tag at the BCCI. Already, the BCCI’s revenues have grown ten folds and it is ready to roll out a new brand-the Indian Premier League, or IPL. Modi said that as many as 80 entities are keen to own the eight teams and there are still a lot more headroom to increase cricket revenues.
Excerpts from CNBC-TV18’s exclusive interview with Lalit Modi:
Q: You are the Vice President, in Charge of Marketing, and pretty much the CMO of BCCI, isn’t it?
A: Yes, I would say that.
Q: Can you tell us about the newest brand that you are going to launch, which is the IPL?
A: We are going to invite prospective people, who would like to own teams. At the last count, we had close to about 80 people wanting to buy eight teams.
Q: We heard that it is for about USD 40-60 million per team. Is there a bidding process and how is it working?
A: I think that is cheap. We have laid it down at a minimum price, which will probably be USD 50 million per team. But it is not a number that has been pulled out of the hat, and just put on the table.
The objective is that the team owners must make money to make it flourish and to make it successful. So, by the third year of operation, they must be cash positive or on the worst-case scenario, by the fourth year of operation. So, there will be two-fold revenues for them. One is the intrinsic value going up and second is the actual money coming in.
Q: Are you looking at eight teams?
A: Only eight teams to start with. The way it would work is that a team would be attaching itself to a city. Actual franchise, or the owner, would decide which city he wants to be in.
Q: What about the ticket sells and the merchandise? Will all this be shared between the IPL and the prospective team owner?
A: We have two sorts of revenues. One is called the centralized revenues and the other one is called the local revenues.
The centralized revenue is where we can broadcast revenue. The team naming rights, like we have the Barclays Premier League and ground sponsorship rights, that goes into the central poll. Probably, close to 70-80% of that will flow down to the team owners and 20-30% of that would be kept by the BCCI. We are just finetuning the model.
Then, there is something called localized revenues. The localized revenue is your gate revenue; including the ticket revenue, food and beverage revenue, team sponsorship revenues and merchandising revenues that will be associated with the game, at that particular ground. That revenue stays with the franchise owner, so when you actually look at it, the franchise owner has two sets of income. The third is the PR value and the fourth is the intrinsic value going up, in terms of selling the teams in the future. Its cost, on the other hand, is local cost.
Q: We know you have announced about 30 odd players so far. These players are contracted to the IPL and if I am a team owner, then do I buy these players from you?
A: The objective is twofold. Today, when we are launching in the first phase, there is always going to be a dilemma as to where do we get the players from. So, when we have eight new owners, they will not know where to go and buy the players, whom to contact to get the players.
So, we have taken from the ICC charts the top-50 players and said that we are going to go out and contract them. Right now, I have contracted about 34 players. Indian icons, which are primarily from a city, will be attached to their team to start with for the first few years. After that, the owners can decide whether they can sell or not sell.
Q: This seems to be a really exciting plan and you have got all other international cricket boards and the ICC to endorse your plans. You have got to admit that it was a reaction to the ICL.
A: I do not agree at all.
Q: I clearly remember you and the BCCI voting at the ICC, against the Twenty 20 format. You were saying that the Twenty 20 format is really not something you want to do right now, because ODIs are doing so well for us?
A: That is not true. We did say that we are planning a domestic tournament. We cannot afford to play a World Cup, unless we have played the game in India ourselves. Unless we have a domestic structure in place, we should not be indulging in something at that time.
When we came into power two years ago, the first statement we said was that we are launching a Twenty 20 League. When we put out our first tender for media rights and ground rights, we clearly marked out in our opening paragraph that BCCI will soon be launching its own Twenty 20 League, which is outside the purview of this contract and so it isn’t something that is going to happen overnight.
It has taken us two years to get where we are as far as Zee or ICL is concerned. They have been in negotiation with us for the last year and a half for this. When we told them it is not going to be possible to be doing it with you, we are not giving it out, they decided to go out and announce their own and it was not a knee-jerk reaction.
In fact, the Indian Cricket League is registered with me as a trademark 1995 company. So, this is the project that I started in 1995.
Q: Did you see it at that point as Twenty 20?
A: No, I did not. It was a 50-50 and identical to the IPL structure. So, it was not a knee-jerk reaction and actually we had a team working on this.
Q: ICL has finally announced its dates for this tournament, November 30 to December 16. You all are talking about April 2008. Is there any sense that you want to advance your timeline?
A: No, we cannot afford to advance our timeline. We have a very tight schedule, ours is a 44-day tournament, with 59 games floated in and it is a lot of movement of people across eight cities. They are playing two games everyday in two different cities and there is the movement of television crews and players.
Q: Are these IPL rights going to be coming up for bidding, like all other BCCI rights? Are they just going to Neo as that seems to be the perception. Neo Sports have got the rights, till 2010, of all international cricket played in India. The neutral territory rights went to them, when that went into dispute, and now is IPL going to them?
A: That is not true. Neo Sports only has rights till March 2010, for all games played in India, on an international basis. They have no rights post that.
They bought at the one-off the international rights of neutral territories, when Zee went out only for the past few series.
Q: Have you given them any Twenty 20 International that is scheduled?
A: We only have one international schedule and nobody is going to come out and buy one match because it requires television crews and production. So, we gave it to them as a one off. Going forward, as far as IPL is concerned, they have no rights at all. In fact, they are a totally new tender.
Q: We have heard reportedly, that they are aggrieved by the fact that they have no rights to IPL and might expect you to relook at the contract that they have already got, like you did post Prasar Bharti’s move?
A: The reason we gave them compensation, as far as the Prasar Bharti was concerned, was because we had an understanding with Prasar Bharti that test matches will not be shown on Doordarshan and on DTH.
That was an undertaking we gave to Neo, at the time of signing the contract, because we could not fulfill that part of the bargain. So, we gave a concession as far as that is concerned. But I can very clearly tell you that Neo will have absolutely zero rights, going forward, as far as IPL is concerned. They will be like any other bidder who will come up in the market place and bid for those rights.
Q: But there is also a sense that perhaps Neo has the right to refuse the rights to match any offers made and rollover of the contract, that they already have with you, for all international cricket in India?
A: No, that is absolutely not true again. They have the first right of negotiation with us for six months prior to the end of the contract.
Q: Is it only for that particular contract and not for anything else?
A: For that particular contract and for most of our contracts, so they can make an offer to us. If we like the offer, we may accept it. If we do not like the offer, we will go forward with the tender process and offer it to whoever is the highest bidder. They have no matching rights, as far as that is concerned, or rollover rights as you put it.
Q: What about Zee Sports, because there are other reports floating around that Zee Sports is going to be banned from bidding for any of your properties? Is that true?
A: That is absolutely true. Zee Sports or Zee-affiliated companies will not be allowed to participate in any tender process as far as the BCCI is concerned, going forward.
Zee owes the BCCI a large sum of money. They have defaulted on the money. As long as they make good the money they have defaulted on assigned contract, then only we will look at considering that. But till that time, Zee Group will not be allowed to participate in any tender.
Q: It is not because of the ICL?
A: Absolutely, if they make good of our money that they defaulted on, we will happily welcome them to the table.
Q: So are you saying that Neo Sports is not the most favoured broadcaster, Zee Sports is currently bad boy broadcaster?
A: No, there are many more. You have to understand that, as far as IPL is concerned, we not only have ESPN and Star Sports. There is also Sony and you cannot rule it out. There are three-four new boys on the table, who are looking at very aggressively at the space, and want to come in to the space.
Q: What happened to your project-BCCI TV? Do you have the money?
A: We have the money without doubt. If it would have been left to me, I would definitely go out and launch the BCCI TV. It is one project, that I have been pursuing and will continue to pursue with the BCCI, but it will take us some time to get to that.
People are happier in locking in the revenues, than taking risks at this point in time. As we stabilize ourselves and as the BCCI goes forward, people will have more confidence of doing it themselves.