Indian Premier League Cricket

0:00 I am listening to the Clakuta Night Riders anthem as my pump up song. Oh nice. It is so awesome. Have you seen the music video with Shah Ru Khan, the owner of the Kolkata Night Riders? No. He is the main character with the Bollywood dance around him. Okay. I'm gonna go watch it right now. And it's a little cheesy because I think it's from two thousand and eight era. But it is perfect Pumpa music. Oh yes. We've got the player silhouettes in fire. Yes, that's exactly the one. This is incredible.

0:34 How have I not seen this before? This is something that American sports definitely need to adopt. Oh man, we've got like a construction crew. Too hot, too cool. That is exactly the right reaction. Okay, I'm gonna pause it. We're not even gonna record an episode of it to watch this show.

0:52 All right, let's do it. Let's do it. Who got the truth? Is it you, is it you, is it you Who got the truth now? Is it you, is it you, is it you? Me down

1:06 Straight! Another story No way! Welcome to the spring twenty twenty five season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.

1:18 I'm David Rosenthal. And we are your hosts. Today, we cover the most interesting story in sports. Cricket. Now, when David pitched me this idea a few months ago, I thought Uh, I'm not that interested in cricket.

1:32 And to all of our US listeners out there, I am guessing you feel the same way. But I was very Wrong. Hey. There are twenty million

1:40 hardcore cricket fans in the US today. Great point. As we will get into later in the episode. Great point. And listeners, this story really isn't about the game of cricket, anyways. It's about how to create a massively successful sports league from scratch, something that I thought was impossible after doing our NFL and NBA episodes, which each took a hundred years to get to where they are today. Indian Premier League Cricket

2:03 started a mere seventeen years ago in two thousand and eight. And even more than a sports league, the IPL is a case study in how to create the perfect entertainment product. They took this sleepy, polite British sport. with matches that lasted five days and they completely transformed it. It is compressed down to three hours.

2:23 It's a high octane slug fest that is all about power hitting and hitting sixes, the sort of cricket equivalent of a home run. It's got Bollywood glamour and on field dance performances, cheerleaders, fireworks. And the way they started the league itself was a high stakes auction to a group of billionaires and movie stars. And of course, they carefully studied all the mechanics that made the NBA and the NFL as successful as they are today, and then applied them on steroids.

2:52 It's an amazing story. On top of all of this The story itself has just about the most palace intrigue of any company we've ever studied. You've got Disney, Philip Morris, Ruper Murdoch, Reliance, Tata, and even Google are

3:07 There's a very, very complicated founder figure. There's corruption, there's potential self-dealing. Betting rigging and miraculously the league has been successful despite all that. So successful, in fact, that it is the fastest growing major sports league in the world.

3:24 Growing twenty X in value since two thousand and eight. To be worth more than sixteen billion dollars today. Insanely. The media rights to each match are so valuable. That they're second only to the NFL.

3:39 The TV broadcast rights, we just say this again, for each match are worth more than an English Premier League soccer match. Or an NBA game, or a major league baseball game. Yes. There's one angle where IPL cricket looks like pure unadulterated capitalism applied to the world of sports. But there's another angle where it looks a lot more like a religion. Yeah. Or a unifying cultural force.

4:02 Or even a mechanism of diplomacy, as we shall see. And David, I don't want to spoil too much. But last night before we were recording, you were pitching me that twenty years from now the IPL will be the largest sports league on the planet, period. Bigger than the NFL. That is the case I'm going to make on this episode. It's funny, on our N F L episode we came to the conclusion that the NFL is this

4:25 perfect blend of communism and capitalism. And I was thinking, Oh, maybe the IPL will be an even more perfect blend. No, it's the perfect blend of capitalism and religion. Yes. Ooh, that's a great way to put it. Even more lucrative.

4:39 Yeah. So listeners, is this a bubble waiting to pop? Or the future of entertainment. Today we dive in. If you want to know every time an episode drops, check out our email list. It's the only place where we share a hint at what our next episode will be.

4:53 and share episode corrections, updates, and little tidbits that we learned from previous episodes. And we actually had quite a few little ones from all the Rolex enthusiasts, so thank you to the deluge of people who wrote in With little corrections. to particular reference numbers about the Rolex episode. That's acquired.fm slash email to join the list.

5:14 Join the Slack and talk about this with us afterwards with the whole acquired community, acquired.fm slash slack. And if you want more acquired between each episode, check out ACQ2, our interview show where we talk with founders and CEOs. Building their businesses. In real time. This most recent one was with Bill McDermott, the CEO of Service Now. Talk about

5:34 the art of enterprise sales. that he used to grow a service now to over ten billion dollars in revenue. So with that, this show is not investment advice. David and I may have investments in the companies we discuss, and this show is for informational and entertainment purposes only. David, take us in. Well we start

5:52 In the early nineteen nineties with a colorful character. Shall we say Named Lollet Modi. No relation to Nahendra Modi, the Prime Minister of India. But

6:05 He is from another famous Modi family. Lalit is the son of the renowned Indian industrialist KK Modi. who had built a fairly large conglomerate in India, you know, in the vein of reliance or Tata or Whatnot?

6:22 It seems like all these big Indian companies are conglomerates. Like it was actually kinda hard to find a scaled Indian company that did one thing. Yeah, the industrial structure in India, at least to date, seems to be more like South Korea or Japan with the Big conglomerates. Yeah.

6:38 But in this case Modi's conglomerate. primarily is based around the tobacco industry. And they have a J V partnership with Philip Morris and uh One of India's leading tobacco and cigarette companies.

6:53 Lollet as the air apparent son in this family to this business, he gets sent to college in the US for his education. First he goes to Pace University and then he transfers to Duke University. He ends up not finishing and coming back home and rejoining the family business. But when he comes.

7:11 Back. Inspired by his time at Duke and helped. basketball crazy Duke is he's like Man, the thing that really struck me about America is how sports crazy everyone is there and how big a business sports is in America. And

7:26 How big the sports media business is around it. Yes. We should get into that. Specifically, I saw him reference Monday night football as this appointment viewing. My friends all would gather around it. We couldn't do anything Monday nights at that time because they're all glued to the TV watching Monday night football. Yep. And this is kinda the perfect time for it because here in the early nineties

7:47 Indian households are for the first time starting to get television. And so there hadn't been a sports culture, there certainly hadn't been a sports media culture in India. Up until this point. But it's fertile ground. So Lollet.

8:00 goes to the Walt Disney company. Disney, of course, owns eighty percent of ESPN. this point in time. And says, Hey, my family has this JV with Philip Morris, you know, help them enter the Indian market.

8:12 We can help you, Disney, do the same thing. And at first it's not sports, it's not ESPN yet. It's Disney Disney. Kids' movies, merchandise entering the market. That way. Yes. So in kind of a genius fashion

8:26 While it uses the sales force that the Modi company has for their tobacco products, they have Eighty thousand, a hundred thousand sales reps that are going to convenience stores, corner stores. you know, in every part of the country in India, this vast, vast country where the majority of people do not live in large cities. They've got A sales channel relationship into these stores distributing cigarettes. So Lollett says, hey, we can leverage this sales force and use those people.

8:54 To go hook up with these early wild west proto cable operators. out there in these towns and villages in India. And bring them Disney content. It's amazing. And so this isn't like distributing home video, right? This is finding the local person who has set up all the wires to go out to

9:13 the other homes in the neighborhood and going to that person and saying, Hey, I know you have hundreds or thousands of homes that you're sending content to, can you send this content there? Yep. There is a national over the air broadcast. network in India, national network called Dordarshan. But just like happened decades earlier in the US.

9:33 Little mom and pop cable operators are starting to pop up and saying, Oh yeah, we'll run a wire, you know, we've got a satellite dish, we're pulling down signal from CNN or what have you and We'll rebroadcast those channels out to you. Via wire into your home. Makes sense. So at this point, Modi is sort of acting as a middleman between the content creation business and the distribution business. He neither has to Create

9:55 the Disney movies and the Disney content, but he also doesn't have to lay wires. Yep. He is the J V partner that Disney is entering India. With. Got it.

10:05 So now here we are in the early nineties. Disney isn't the only major global media conglomerate that sees the potential of this. newly television hooked up Indian consumer market.

10:20 There's News Corp out there. Rupert Murdoch. And Rupert, of course. really built the television side of News Corp, but Fox on the back of two things. It was news at first, but then it was really sports.

10:32 That helped Fox. Totally take off. I mean The NFL Sunday deal here in the US is what put them on the map. This is the blueprint for bringing Fox into a News Corp into a new country. And Fox Sports and eventually all the regional sports networks in the US.

10:47 Exactly. So Newscorp had just launched a new brand and channel in India called Star. And Rupert's going around looking for how he's gonna run this playbook in India. What sports is he gonna broadcast?

10:59 And pretty quickly he figures out that There's really only one sport that matters in India. And that's Cricket. And it just so happens.

11:08 That he thinks he can actually get the rights To broadcast Indian national cricket. Pretty darn cheaply. We're gonna come back to that in a little bit. And the question is, what is cricket at this point? You know, this is the Indian national cricket team playing other countries in these

11:24 international matches and then there's a big world cup. But it's not like each city has a team or something like that. Yeah. There's no English Premier League of cricket. At this point in time

11:36 Cricket is just this international game. And now that The Indians are getting Televisions. the Indian national team playing cricket is becoming must see television.

11:47 Yeah. It's Monday night football. It's the playoffs. It's probably every Indian male who has access to a TV. And I say male because at this point in time cricket is a male game. Is watching when the Indian national team is playing. Yeah.

12:01 So Rupert hoovers up these rights pretty cheaply. And all of a sudden Star is now the place to watch cricket in India. Lollett sees this, he's got the partnership with Disney. He's always been interested in sports, and he's like Well, hey guys, you have ESPN.

12:16 We gotta get in this game. We gotta be getting cricket too. Yeah. So Lollett and ESPN and Disney. They go to IMG.

12:24 The big international sports agency, which we didn't plan this at all. Amazing crossover with our Rolex episode. The same IMG. IMG, of course, helped Rolex design the testimony. program that brought in Jack Nicholas and Arnold Palmer, and then ultimately Roger Federer and all of the athletes who partner with Rolex over the years. Yep. So Lala and ESPN and IMG

12:47 They go to the national Cricket Board in India that controls these broadcast rights. The National Cricket Board is called the BCCI, the Board for the Control of Cricket in India. And They say hey, you sold these. Pretty cheaply to Rupert.

13:04 We'll pay you more. We'll take'em. We should run an auction process here. And it's worth knowing the BCCI's responsibility Is not really a profit maximizing organization.

13:18 It's kind of a regulatory body. It's not the government, but they're tasked with Developing the sport of cricket and in particular cricket in India, ensuring that the sport has longevity and it has all the infrastructure that it needs. They're like the stewards. Of making sure that Indian cricket has a long and successful future.

13:38 And all of the other cricket playing countries from England to Australia to Sri Lanka to the West Indies, they all have The same type of structure. In their countries. And they all actually roll up to the ICC. Which today is called the International Cricket Council. But interesting to know when it started in nineteen oh nine, it was the Imperial Cricket Conference.

13:58 So that gives you a sense of The way that cricket was spread around the world by the British. Yes, it is the British Commonwealth countries that are historically the Cricket playing nations that are part of the ICC. Yeah.

14:08 So we've been talking about how these early cricket rights here in the nineties Star and Murdoch. They're able to get them super cheap. It actually wasn't Until right before all this goes down.

14:21 that India even realized they had the broadcast rights to cricket at all. Yes. They didn't even know. And this is crazy. You can't make this up. How do they find it out? In nineteen ninety one The South African national cricket team.

14:36 Comes on a tour. To India. It's international cricket. They're playing in India. And the South African cricket board is like Hey.

14:44 We wanna broadcast this. Uh How much do we owe you for the rights? Cricket was newly extremely popular in India. It was nineteen eighty three, eight years before, where India had won the Cricket World Cup for the first time. This is really a big deal. The nation comes together, they're all excited about it. Then eighty seven is the first time the World Cup is actually hosted outside of England. It's actually in India and Pakistan. So the power of the cricket globally is starting to shift to India. And so this is only four years after India hosted the World Cup for the first time and cricket's kind of on the rise.

15:15 Yeah. And it's all tied up with the television penetration of India. Yes. The first time that it's even possible for these to become Big national pride type.

15:25 Events. So here South Africa is just coming for a tour. national team and uh

15:31 Well, how much do we owe you for this? They don't know how to respond. So This is great history of They're sort of like talking amongst each other.

15:39 Well what did we think we should say? We should say Ten thousand dollars? Is that crazy? Let's start with twenty. See what they say. Twenty thousand dollars and then You know, they can bargain us down from there.

15:48 So they go to the meeting or phone call with one representative of the B C C I with the South African board. And before The B C C I representative can open his mouth at all. The South African board member says, We're thinking two hundred thousand dollars. Does that sound good to you? And then you guys like uh yeah.

16:07 Yeah, that sounds great. Let's do that. So they only just discovered that This thing had value. They even had these rights and that they could sell them.

16:16 And then it got really concretized into law a couple of years later. There's a legal battle between the BCCI and And this legendary leader of the B C C I Dalmaya And He

16:29 goes to war against the national state broadcaster Dardarshan. And The outcome of this legal battle is yes, even the Indian government, the state broadcaster, has to pay the BCCI for these rights. The BCCI is the owner the rights and they can sell them to anyone they want. Yep, and that guy Del Maya, he was the B C CI board member.

16:50 Who was negotiating with South Africa. He was the guy on the call who earned two hundred thousand dollars and was like Okay. Yeah. It's like look, South Africa has to pay us and then they come home, they get into a legal battle and the even the Indian government has to pay us. We really own these rights. Yeah. He was like the Proto Lollit Modi. Lollit before Lollet. Yes.

17:09 There's one other really fun sort of history turns on a knife point element to cricket in India. So Like you said, Ben. Cricket was the most popular sport in India before nineteen eighty three.

17:23 But that didn't mean. That much. It hadn't captured the country's imagination that much yet. Also, England always hosted the World Cup. The center of gravity was England. And so it wasn't India's thing. It was just a thing they participated in.

17:35 It was a British thing. There's an amazing line about this. by an author named Ashish Nandi who wrote a book called The Tao of Cricket. And he says cricket is an Indian game. accidentally discovered by the English. While we're on this topic of things the BCCI

17:50 realizes they own. And in particular, Dalmaya, and I hope I'm pronouncing that correctly. is the one who gains these rights the same way that he solidifies the broadcast rights. In two thousand and one, Dalmaya introduces central contracts.

18:05 for Indian players. And pensions for retired cricketers. as a part of the BCCI's rebit. The B C C I is the one Who pays the players.

18:17 This is so critical, and at the time it's almost like oh, of course. The B C C I pays the national team. But it sort of sets up this umbrella that No matter

18:27 how an Indian cricketer is playing cricket. We are the one who pays them. Or at least who sort of has a contract with them. And that, along with the BCCI's ownership of media rights. is this killer combo that would eventually lead later to the IPL as we have it today. Yeah.

18:44 So all this launches ESPN in India. And there's back and forth for a couple years between Star and ESPN. They're bidding over these cricket rights with the BCCI. Eventually in nineteen ninety six they decide hey Let's stop fighting each other. Let's just merge. Uh antitrust uh regulation in India is not quite at what it is in the US at this point in time.

19:05 No. So Star and ESPN merge and to hear Lollet tell the story. Rupert Murdoch is kind of a you know. sore loser here that Lalak came in and increased the money that he had to spend for these cricket rates, ultimately had to merge with ESPN. He decides that he's gonna kick Lollett.

19:23 out of His baby. out of this company post merger. Mm. Now is that really what happened? That's Lollett's side of the story. Um

19:33 Star Disney, the merged entity, would allege that Lalit underreported revenues that they were collecting and was Accepting kickbacks from the cable operators, all sorts of stuff. There's a big lawsuit about it. goes on for a couple years and at the end of it While it gets

19:49 booted out of the business and despite his family's fifty percent ownership in that original ESPN Disney joint venture. He gets nothing. He's out in the cold. Brutal.

20:01 Hey. I started Disney India. I modernized cable in India. I brought sports. To India. I did this.

20:11 And now all of a sudden I'm out in the cold and I get nothing. And in his mind Rupert Murdoch is the reason that this happened. He's the villain. Rupert stole it away from the Modi family. My sworn enemy.

20:24 From here. Onwards and thus begins a ten to fifteen year journey. That is not just The ultimate revenge play by Lollett on Rupert. But

20:37 Accidentally along the way. Starts the biggest. Sports. entrepreneurial story phenomenon that has ever existed. Yep. Crazy out of this feud.

20:47 And I will say More than any other episode that we've done. It seems like Every element of this has two completely different sides to the story.

20:58 Both of which The leaders of that side dig in and maintain their side. In most companies we study There kind of becomes one canonical truth.

21:10 And it's mostly written by the victors. But In the history of the IPL and Especially with Lalit Modi. There's always two completely different stories representing how it went.

21:21 And nobody ever gives an inch on either side of them. They just say, Oh, that's all lies. That never happened. No way did that ever happen. Zero truth to that. And so it is a little bit difficult to tease out what actually did happen given There is no convergence of story. Yep. And this is probably the right moment to say a word about the nature of doing business in India, at least at this point in time. The eighties, early nineties. The euphemism I believe that the Indian business environment is referred to as a low trust environment.

21:51 I. e. this is par for the course. Yes. If you make an investment, you should be babysitting it very carefully, very actively making sure that your interests are protected.

22:02 A lot of corruption. A lot of kickbacks. And particularly doing business in India as a foreign company at this point in time is At your own risk, shall we say. And I will say these phrases corruption kickbacks

22:15 That is a Westerners way or an American way of describing it. I think another way to look at it is just these are just the norms. This is the way you do business. I don't know What you expected Totally. You Disney, you News Corp, you are foreign

22:31 corporations coming into our country. And trying to play by your own rules here, like No, this is India. You play by our rules. So the net of it is Lollett's got this blood vendetta against Not just News Corp and Star, but like Rupert Murdoch.

22:46 Personally, specifically. And What's the way to hit him where it hurts the most? Well, it's the biggest piece on his chessboard pillar of newscorp, it's sports. And it's what Wallet thinks is like

23:01 His birthright, like he brought to India, was professionalizing and televising sports. He needs to take that away from Rupert. So how you gonna do that? Well Who controls cricket in India? It's the National Cricket Board, the BCCI.

23:16 So Lollit figures okay. I need to engineer getting myself installed on the BCCI board. But turns out the way that you get to be on the board of the B C C I is first you need to be either president of or just on the board of a state cricket association. So there's states within India. So

23:34 In nineteen ninety nine Lollett manages to join the board of one of the smaller Indian state cricket associations That ends up not working out. And then in two thousand three

23:45 He manages to get appointed to the Rajasthan state board. And then Quickly engineers. What basically amounts to a coup of the board and gets himself elected is In two thousand three, two thousand four.

23:58 as president of the Rajasthan board. So now he's got a path. To the B C C I. He starts waging a campaign. Yeah.

24:06 The BCCI is vastly under monetizing. The television rights. To international cricket. Mind you, he was like directly involved in buying them for cheap when he was back at ESPN. But now he's like, I know how valuable these are. I know how many eyeballs these are getting.

24:21 And like You guys now you're selling them for ten, fifteen million dollars a year. These are worth hundreds of millions of dollars a year. Right. Other than the latest slate of Bollywood movies, this is what the Indian population cares about. So why are we making 10 to 15 million dollars on it?

24:38 Yeah. This is An outrageous claim in two thousand four. It also just happens to be right. But

24:46 Saying something like this is crazy. He is a dark horse candidate to come in and reform the BCCI and fulmercialize this. quasi governmental entity. Right. That is the important thing. They're remit was not make the most money. They were not acting as a capitalist enterprise with shareholders. It was too

25:05 preserve and promote the game of cricket to make sure that our national team is good. Yep. But most of the members are industrialists from the industrialist families. Just like Modi. You know, their interests are Disney

25:17 News Corp, these big multinational corporations. Hmm, I would really like to have a relationship with you all. Oh, maybe there's stuff we can do together. Maybe we sh we should advertise our company's products. on these cricket events. And Oh, maybe we can get to know you and advertise on other programming that you're doing. So it's Rif with conflicts of interest, shall we say. And the only reason that Lollett doesn't have this conflict of interest because he got ousted. He's ousted, exactly. And his life mission is to extract revenge here. So this campaign succeeds.

25:47 And In two thousand five He finally gets appointed. To the BCCI. And this is wild.

25:54 Within a span. Of like two months. He completely upends. Everything. He's not the chairperson of the BCCI. He's just a newly elected board member, one of, you know, I don't know, five or seven board members. He comes in like a wrecking ball.

26:09 So the first thing he does. He goes to the main sponsor of the team. Like the title presenting sponsor of the Indian national cricket team. I

26:20 probably already the logo is on the jersey. That's like one of the main things you're gonna get is the title sponsor. And Maybe at this point in time you're also getting the logo on the broadcast.

26:34 But pathetically commercial versus cricket today. Well, let me give you a sense of how commercial it is at the time. So the Presenting team sponsor.

26:45 is the Sahara group, which is another one of these big Indian family conglomerates. How much do you think they are paying? the B C C I for This sponsorship. I don't know, a million bucks.

26:57 One hundred thousand dollars. Per year. I thought a million was low. Wow. Well, just you wait, a million is low. Mind you, when we've said that cricket is the biggest sport in India. Nothing else matters. It borders on religion. It has ninety three percent mind share.

27:16 Of sports. in India. And I think that calculation is done by viewer hours. Yeah. If you look at all sports watched, cricket is ninety three percent of the hours.

27:26 People paid attention. If You look at American football at the NFL in America, it's like I don't know. Thirty seven percent or something like that.

27:34 It is less than fifty percent. Cricket in India is ninety three percent. Yeah, it's a one sport country. And it happens to be a one sport country. with one of the two largest populations in the world that is growing the fastest in the world. And the middle class is rapidly expanding.

27:50 So like this is exactly as, you know, if you're Pepsi or you're Hundred thousand dollars to sponsor. Oh my God. Oh my God. Unbelievable. Now you might think Oh, okay. Well you just told me that

28:02 this sport is sort of in the model the Olympics right now, it's international competition. Maybe they're not playing that much. You know, is this team only playing for two weeks in the summer, maybe there's just not that much inventory. No, they're playing a hundred and five days of competition. Per year. Oh.

28:18 Nationally televised. And not to mention one of those days is when they play Pakistan or more than one of those days. And the whole country stops to pay attention on that day. That game alone you would think would be millions of dollars. You say day. At this point in time there are two forms of cricket.

28:34 There are one day international. Which is the new fancy version of cricket that came about, what, in the seventies, eighties? Seventies, eighties. And that really was to enable tournaments to happen. Like you can play a match In one day. Takes all day. These are eight hour games. So it's all day.

28:51 The country's eyes are glued on this. The other form of cricket The classical form of cricket is test cricket. Test cricket a match less. Five days.

28:59 So one day internationals were invented so that you could have kind of a round robin tournament with different teams. Otherwise There's no way you can have a ten country tournament. Where every match takes five days. Right.

29:10 The vibes are very different, shall we say. The uh Test cricket. Is very do you know why it's called test, by the way? Uh I believe it's 'Cause it's a test of the strength, will, you know, the team.

29:22 And in particular to test the English team. When they first brought cricket out to the rest of the Commonwealth It was that those teams could then come and test against the English team when they came to Lords

29:35 Lloyd says the hallowed cricket ground in England. Yes. To play this five day Thoughtful, quiet, strategic The vibe is like golf, even though you're playing something that looks like baseball.

29:47 Totally. I have to bring in some personal history here. So I am a quarter British. I'm genetically predisposed to, you know, already be into cricket. But when I was growing up, my grandmother was British.

29:58 Probably every other summer I would go spend Two, three, four weeks with my family. In the Midlands in the countryside in England. visiting my grandmother's family. And

30:08 Yeah, as a little kid, what would be on T V in the summertime in England. It was this test cricket. And so I grew up, even though I play baseball and I love baseball at home in the summers when I would go to England. I turn on the TV and watch this test cricket like, Oh, this is super cool. But yes, exactly like you say, Ben, this is

30:24 The gentleman's game of gentlemen's games. You play it in like a white V neck cable knit sweater. Right. In the middle of the summer, by the way. Yes. And the incentives are all funny too. It's not about swinging these big home runs. Your goal is basically Uh hit little line drives and keep it on the ground and make sure that you're able to score one run.

30:44 at a time, not six runs. You have a lot of time over the course of five days. to let your strategy play out. And so you're not trying to make the absolute most use of every ball bold. the way that you are in modern versions of cricket. To give you a little sense of this.

31:01 Test cricket. And I believe one day internationals as well. There are four possible outcomes. Of the game. You can win.

31:10 You can lose You can tie. Wait, so what's the fourth? The fourth outcome is a draw. Which is different than a tie.

31:18 A tie is if the score is tied. At the end of the match, which almost never happens because you're playing for at least eight hours, if not five days. You know, the scores are in the hundreds here. So the odds that they're going to be. Tide or very, very low. I see. A draw happens. When One team

31:36 is not able to finish their innings. In the time of the match. So if you get to the end of the day. Like oh sun goes down, it's time for dinner and all of your batsmen have not yet gotten out.

31:48 In your Innings. Oh, well then you could be behind, ahead, whatever, like oh just didn't finish. It's like a DNF. Did not finish. What? Just a draw. And so then you have this funny strategy where you're trying to drag the game out if you're losing. If you're behind and you're batting second or in a test match in your second innings if you're batting second and you're behind, yeah, you're just trying to draw the game out.

32:09 Amazing. All right, so we're gonna leave the world of test cricket behind in the seventies. There's a lot of test cricket still played today. But Oh yeah, it's still a big thing. For these big international tournaments, the World Cup, all that, that's one day internationals. this ODI format. All of this amazing and delicious sidebar.

32:26 It's just to point out that There's a lot of inventory here. The Indian national team is playing a hundred and five days. Per year. And the Sahara Group is getting their logo on their

32:37 White cable knit vests. For a hundred thousand dollars a year. I think one day international is they actually did start wearing more athletic clothing. That's right. That's correct. That's not the white sweaters. Indeed. So Lollett here now in two thousand five when he finally gets on the B C C I First thing he does is he goes to Sahara and he says The price is going up.

32:58 It is now one million dollars. As you were saying. Per day of competition. So you are gonna go. From spending one hundred thousand dollars a year.

33:08 to spending one hundred and five million dollars Per year. And oh, by the way, if you don't want to do that, that's fine. I'm happy for you not to do that. I'm then gonna go put this out to auction. And we'll see who is willing to pay that. Wow.

33:22 To give you a sense of just how much latent value there is here. I don't think it goes to auction. I think Sahara just says, Okay. Yeah, they're very aware that this is a very good deal, even at this price. I mean if you want to reach the nation of India. There are two ways to do it.

33:37 Bollywood. And cricket. That's it. Yep. So

33:41 When This Massive escalation happens in two thousand five. I believe this is correct. Overnight.

33:49 This becomes the highest paid Jersey logo deal. of any sport on the entire planet. Oh, interesting. So basically not even commercial to now The single largest logo sponsorship.

34:04 in the world. And now why is Lollet able to all of a sudden extract this huge record breaking amount of value for the sponsorship, whereas before it was really not even commercial. We alluded to it before, but The rise of the Indian middle class is what's driving.

34:20 Everything here. So one stat I saw was that in the early nineties when we started our story a little bit ago, while it was first getting involved, Disney and Star were entering the Indian market. There were only about two million Households in India.

34:34 That had a disposable income of ten thousand dollars or greater. Wow by the time here we are now that Lollet gets on the B C C I it is Reckon all these deals. It's ten X that so there's Call it twenty, thirty million.

34:48 Households now in India. That are By that definition at least middle class. Fast forward to today. It's another ten X plus.

34:57 That number. four hundred, close to five hundred million. People households in India. That have that level of spending. It's actually even more. It's five hundred and fifty million people.

35:09 who are a part of India's middle class. Now that middle class is defined differently than the American middle class. It's seven thousand to forty five thousand dollars in Annual income. But that really gives you a sense You said

35:21 that in the early nineties there were two million people That made more than ten K. And now half a billion people make more than seven K. Yeah.

35:31 Those numbers are pretty close. So we went from two million to five hundred plus million. That is an emergence of the middle class in Unbelievably rapid succession there. And I think the thing to keep in mind about India is

35:43 Anytime you're saying a percent of the population. You're still talking about a large number of people. Right. The absolute Amount of people. Is huge. The middle class in India today is thirty one percent of the population.

35:56 But thirty one percent of India is more than all of America. Right. Yeah, you just said it was five hundred and fifty million people. Yes. I mean, full stop, pause, let this sink in. The middle class in India.

36:09 per this definition, but still like that is enough annual income that you can spend it on consumer goods. Is bigger than all of America. That's what's going on here. Another statement. We may as well just start

36:22 really contextualizing the shift here. The Indian government Says that Two hundred and fifty million people. have been lifted out of poverty.

36:31 between twenty fifteen and today. They An entire America's worth of adults out of poverty. Yeah. In India.

36:40 Two all of a sudden Buying Pepsi. Buying cell phones, buying mobile data plans. Right. Buying. Oh I don't know.

36:48 Nike's and rebox. So what's the next thing? That Lollett does after this Sahara deal. There's no gear sponsor. There's no kit sponsor for the team at this point in time. I think some of the individual cricketers had had

37:03 Some super cheap early deals with you know Nike or Reebok or whatever. Lalit goes to the three big companies, Nike, Adidas, Rebok, and says Hey, I'm putting out forbid. For auction. being the

37:16 Kit provider, the gear provider. It being the British term for Athletic gear. More cycling. Oh exactly, yes.

37:24 To the Indian national team. And yeah, if you wanna win this, I'm expecting minimum fifty million dollars a year. Just to float a number. So Nike comes in and wins. At fifty two million.

37:37 Dollars a year. Oh, and by the way, since Lollett knows that there's gonna be competitive bidding between Three shoe companies. He makes a media event out of it. So he has them all submit their bids in like sealed envelopes. He has a whole press conference, opens the envelopes in front of the media, makes it a whole circus. It's like uh LeBron's the decision.

37:56 So this is enormous. Loll it. He's two months in to his tenure on the BCCI board, and he just found a hundred and fifty million dollars a year. Whereas Previously. Sponsorships were nothing.

38:12 They were making call it ten, fifteen million dollars a year in T V rights. He just ten X that from something that's worth far less than the T V rights. Yep. So Then he sets up a personal meeting.

38:26 Ruper Murdoch. Hmm. At this point in time, Via Star Has all the T V rights. To Indian international cricket.

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40:56 Okay, David, so Rupert Murdoch. Back entering the picture. Uh well While it probably thinks here. That it's coming full circle. We're only just getting started. He sets up.

41:09 A personal Meeting. With Murdoch and he sets the meeting For a friendly.

41:15 Friday afternoon. How very cricket. And remember, at this point I think Star is paying Ten, fifteen million dollars a year for these TV rights.

41:25 Lollett walks in. I am informing you. That your contract is terminated right now. We are going to rebid the contract.

41:36 And you are Welcome to submit a bid. We are mandating that the minimum bid is five hundred million dollars for four years. And Murdoch like basically spits his tea out. He's like, uh

41:50 You're crazy. That's what, ten X the current value? Totally. So obviously he's offended by that. But he's like

41:58 Who are you and why do you think this is gonna work? Remember, Star and ESPN had merged. There's no other sports channels in India. There's no other sports in India. Rupert's like Who's gonna bid on this?

42:11 You're all hot air here. There's no way that this is gonna work. I'm the only game in town. You're basically trying to extort me and oh yeah, rip up my contract that I have with the B C C I You're two months into the job, like Get lost. Right. You need me. You need me. Yeah.

42:27 Hm. But of course, Lollett has a plan for this. He's gonna do Just what he did back with ESPN in the first place back in the day was It's not that hard to set up a new network.

42:39 To come in. And did you think. On These rights. And by the way, it is now clearly

42:46 Demonstrably and provably. so much more valuable. Than back in the day. We're now fifteen years into the

42:55 Television. penetration of India, shall we say. There are tons of other broadcasters and cable channels out there. They're just not sports channels. Well, what's a sports channel? That's just a marketing term. It's just a channel. You add another channel.

43:08 You make a ABC Sports, NBC Sports, CBS Sports, Fox Sports. Anybody can do this. So Lolit goes to Sony, who's the number two broadcaster. Yeah.

43:19 India he goes to Sky from the UK and says hey You want to enter India? And he ultimately goes to an Indian entertainment company called Nimbus. Which was a broadcaster, but Also didn't have a sports channel.

43:31 He says to all of them. These rights are now available. Minimum bid is five hundred million for four years. This is going to be very profitable for you. It's very easy to set up a sports network. I've already done it. I will help you do it.

43:44 You are welcome to bid. Nimbus ends up winning the auction. with a six hundred and twenty million dollar bid For four years. Wow. They set up the Nimbus sports channel. it uh I believe quickly becomes the number one sports channel in India. I mean there's nothing else. Like if you got cricket, you're the number one sports channel in India and star

44:03 And Rupert Out. In The cold. Wow, so Lullit really did make the BCCI an economic powerhouse where they really didn't have material revenue before, and now suddenly they have

44:15 hundreds of millions of dollars coming in. What? Two hundred million a year ish. Between TV and sponsorships. Yeah.

44:22 They've got a hundred and fifty million from sponsorships. And then they've got yeah, what's that? Twenty five from this. Yeah. And then another hundred and fifty million. From broadcast. Yeah, so hundreds of millions of dollars a year. Unbelievable.

44:36 Totally unbelievable. With more potential to monetize Beyond that, I mean he got a hundred and fifty million from two sponsorships. You can have more than two sponsors here. Yeah, he completely commercialized the BCCI. Transformative. when he later gets kicked out of the B C C I and there's tons of controversy and everything we'll get into later.

44:55 People are accusing him of self dealing, doing all these things. He's like I created billions of dollars of value. For Cricket in India, the BCCI, the government. All the players involved from nothing. And he's absolutely right.

45:09 Yep. Absolutely right. And by the way, he shot Rupert Murdoch out of All of it. So here we are now. He's won.

45:18 He's extracted his revenge. He's taken over Indian cricket. He's created The single biggest pool of money. Anywhere around the globe in cricket as a sport. I mean this is

45:29 way more money that we're talking about here than England or Australia or The West Indies or Sri Lanka. New Zealand, you do the other cricket playing Nations in England and Australia are big media markets, but they're not this big. Well, on a sheer population basis, they just can't come anywhere near India. Totally.

45:47 And we're not even at the end of 2005 yet. This guy is a force. But as you might expect. He's not quite satisfied. Shocking.

45:55 If we've learned anything studying all these characters over the entire arc of Acquire's history, They're never satisfied. Totally. He's I gotta assume thinking about this Hundred and five.

46:08 Days of competitive play that the team is playing. Yeah, that's a hundred and five cricket matches. That's not a lot of inventory. On the one hand it's a lot. But it's

46:19 Only one team. That you're talking about here. Playing a hundred and five matches. The NFL plays what, I think two hundred and eighty five games, including the postseason. So

46:29 More than double that. And that's the scarcest sports media in the world. Yes. And The only reason that the NFL

46:37 Can't take any more. They would fall apart. Right.

46:43 Major League Baseball, almost twenty five hundred games are played per season. Yes. Thousands. Of games. Cricket is not like

46:53 American football. This sport. was designed To be played five days in a row. Yes.

46:59 The cricketer's bodies are not Falling apart. There is a lot more juice to squeeze here. So the sparks. Unquestionably.

47:08 Truly unquestionably, this is in Zero way a controversial statement. The most brilliant, most successful. Sports. entrepreneurial business plan.

47:18 Of all time. The Indian Premier League. A domestic City based cricket league.

47:26 In India. That Lollett is gonna set up In the model of the very best elements of the NFL of the English Premier League.

47:35 Of the NBA. Of international cricket. Yep, of international cricket. Leveraging the assets that they have with the BCCI's control over cricket. I mean this is something that is not emergent in any of these other sports we're comparing to.

47:50 There's no BCCI for football in the US. There's nobody telling the NFL what they can and can't do. The B C C I Is the one who controls the players contracts with how much they make.

48:03 who decides what leagues they can play in or can't play in. Who cuts media rights deals. This is all happening. by this organization organization that Lalit now de facto controls. That is not the league. It's a parent to any league or organized play.

48:20 And so you mentioned that with the Indian Premier League they get to learn all this stuff from the other great leagues, but they have this asset, this structural advantage. That no other sports league in the world has. Which is the B C C I control. Absolutely. They innovate beyond the other leagues too. Yeah, totally.

48:35 To me, this is not a controversial statement. The IPL is better set up. Structurally. Than the NFL. It is the

48:43 Most Perfect. sports league that exists. All right. So So how does he do it? Yes. What is it? You're telling me it's the most amazing thing ever. Prove it.

48:51 So besides Lollett seeing that there's a inventory opportunity to expand cricket in India here beyond the hundred and five or so days of competition that the international team is playing. There's also The perfect opportunity. at this moment within the cricketing world.

49:08 Which is that the whole game itself. is undergoing a major Revolution. England Had just introduced

49:18 A brand new version of the game. Up until this point there are only two versions of cricket that were played professionally. There's the test match cricket, the five day gentlemanly event with the cable knit sweater we talked about. And then there's the one day, eight hour matches that are for international tournaments and competitions, one day internationals.

49:36 Yeah. Back home in England. Cricket was basically starting to become a dying sport. The nation that invented The game.

49:46 That was the home of everything sacred in this sport in this industry. Empty stadiums. I mean truly empty. They had the most incredible stadiums built for cricket, and you look at these old videos and just empty seats everywhere. Empty sections. And the only people still left watching it. Are Old men.

50:03 Basically. Yeah. Women have never really cared and kids are like I'm interested in football, European football. Like I d I I don't care about this. Not to mention who can take five days off work. All day to go watch something.

50:18 Yeah, this is happening during the day. Or even one day during the international tournaments. Yes, it is made for retired men, or especially in the old days, the elite. People who didn't have jobs. Exactly. That was the whole point of the game. It was for the nobility. Yes. Exactly.

50:35 But not gonna work in the modern world. Yeah. So In two thousand three. The English cricket board finally realizes like hey.

50:43 We're desperate. We gotta do something. So There was another form of cricket. That was mostly played recreationally and by school teams. That was twenty over cricket.

50:55 So rather than these five day events or the one day events It was a limited number of Balls of pitches, essentially, to use the baseball analogy. For each side. And that was twenty overs, and over is six balls.

51:09 Each team gets 120 balls bold to them, and you gotta make do with just those hundred and twenty balls. So all of a sudden you're going from Test cricket, which is thousands of Balls bold. pitch is equivalent in the baseball world over five days.

51:25 Then you've got the One day international one day version of the game, hundreds. You're going down to two hundred and forty. Total balls. Bold, a hundred and twenty for each side.

51:35 Compare that to a major league baseball game, for instance. Hasn't. average of about three hundred pitches per game, about a hundred and fifty each side. So Now all of a sudden. Cricket went from like the boring version of baseball to the more exciting version of baseball.

51:50 Purely and with this just very interesting different thing. The balls are scarce. You have to get the most points possible. Based on a small fixed number of opportunities to hit it. Right.

52:02 A baseball game can go on forever. Pitches could go on forever, extra innings, et cetera, et cetera. Nope, these T twenty games, it is a strict balls bowl. Count. Yeah.

52:13 It's tight. And that means Games take two and a half to three hours. That means games can be played in prime time. In the evening.

52:20 For the very first time in the sport. Finally, we have a cricket for the masses. I mean, how was anyone even supposed to watch these O D I's unless it's on a Saturday? You now can watch cricket every night of the week because there's a three hour prime time format. for everyone of every class to watch. Yeah.

52:37 So all of a sudden you start seeing these green shoots in England. Two thousand three, two thousand four, two thousand five, domestically they start playing T twenty, they start televising the matches. Younger people start Paying attention again. There's a revitalization. So

52:52 Obviously the international game sees this. Lollett sees this, he's thinking about starting up a domestic league in India. This is the perfect opportunity. What an amazing gift of a new format of the game. Perfect for prime time.

53:08 An incredible opportunity. There's one other thing that fell in their lap, which is The Fuddy Duddies. Who love test cricket. Absolutely hated it.

53:18 Yes. Which made it more exciting. Yes. And so the way that the original T twenty was advertised. Even before we get to IPL, you just look at There's a famous match of Australia versus New Zealand. New Zealand doesn't take it seriously at all. They come out with crazy hairdo's and they're wearing whatever

53:38 T twenty is kind of a joke from the start. And once the players do that, then the advertising kind of leans into that. This is not a serious sport. This is like party time. And you know, we just have to be playing cricket. This is all but the Savanna Bananas version of baseball. Yes. Which we'll talk about the Savannah Bananas later.

53:58 For folks who uh don't know or who are not in the US Savannah Banana is like the Harlem Globe Trotters of baseball. It's a purely entertainment spectacle. It's a spectacle, for sure. And IPL is not quite. that. I mean the T twenty is Definitely competitive. But the old timers look at it as a joke.

54:16 Even though it's a highly skilled thing. And that's a perfect spark. Totally. So The Australian domestic T twenty league that gets started right around this same time. To give uh you a sense of this, is called the Big Bash League.

54:30 That's the image that they're projecting. And the Big Bash League is like they are legitimately a real sports league today and probably the Second biggest, second best. T twenty cricket league in the world behind the IPL. But This is not targeted at the test cricket loving audience. Right.

54:44 And it sends the right message too because you were trying to bash the ball. This is a game of batsmen. There's an amazing moment that happens. I forget exactly which competition it's in, but someone gets six sixes in a row. It's like the most amazing thing ever to watch. It's basically home run derby. Yes.

55:00 When there's no limit on the number of balls. You're trying to play for a draw if you're behind. You're trying to make things go longer. Now all of a sudden it completely changes the strategy of the game. You only have a hundred and twenty balls and you need to maximize your score. Yep. So rather than trying to run out balls or whatnot, like sixes become Way more important. Yeah. So Lollett knows this is

55:21 The perfect opportunity. He goes back to IMG. who remember he had initially partnered with with Disney and ESPN way back in the day to start broadcasting cricket in India in the first place and says Hey, I need to hire you as consultants from the BCCI.

55:37 We're gonna set up a whole new league. And Andrew Wildblood, who runs IMG's India operations. becomes essentially Lollett's partner in setting up How are we gonna structure this? What are we gonna create as the business plan of this new league? We've got some time.

55:52 We've just done these major rights deals and sponsorships deals for BCCI. Let's be really thoughtful about this. Will plan to start it in two thousand nine. So here we are. We're now in end of two thousand six, beginning of two thousand seven, we got two to three years. To set this up.

56:09 And then In the spring of two thousand seven. A rebel league Starts Up. Under

56:19 Their nose. In India. Another Domestic T twenty league with city based franchises. Announces that they're gonna launch.

56:29 And they are gonna call it. The Indian Cricket League. And it's backed. by the broadcaster Z

56:37 T V Not only was it called the Indian Cricket League, which is just a great name, That is actually An entity name? That Lalit had registered in the Ninti's.

56:48 Yes. I don't know if Let was thinking he would actually call IPL the Indian Cricket League, but then something else launches called the Indian Cricket League. Yeah. It's a good point.

56:58 This opportunity for a domestic cricket league was not some like Aha brainstorm that Lollett had once he took over BCCI. Everybody knew that this would be a huge opportunity. Right. This is like social networking in two thousand four. The time just wasn't right yet. So he had been thinking about it all the way back when he was first working with Disney to fight against Star and enter the market. But the timing just wasn't right. All right, so what is this Indian Cricket League? Where did it come from? What is Z T V?

57:24 So way back in nineteen ninety six, Subash Chandra The founder of Z T V Kind of recognize Hey. Exactly what you're saying, David. I'm a TV distributor. He owned a satellite TV company. He saw exactly what Lalette saw. Sports are the most important thing. India increasingly cares more and more and more about cricket.

57:43 This is gonna be the perfect thing to distribute over my airwaves. Ninety six to oh four, he's trying to get the rights to cricket and not getting them. Finally in two thousand four He bid the highest for domestic cricket in India, But the BCCI still did not award.

57:59 The right st. Oh, interesting. So this must have been right before Lollett joined the board and then restructure the whole thing. Must have been. right around that time. Finally, two more years goes by

58:12 He wins. He gets a five year deal. between the BCCI and Z TV for the exclusive rights to broadcast cricket. Oh wow, I didn't even find this that they had a deal with BCCI. They had a deal. Wow. One year into the deal, there's something that passes called the sports broadcasting bill.

58:32 And this requires broadcasters to share feeds. In real time, like live feeds without ads. directly back to the state owned broadcast channel. Mm, mm, mm, interesting. Which of course destroyed the profitability of

58:50 this enterprise that Z T V is trying to create here. of broadcasting Cricket. if they have to give away the very thing they're collecting without an ability to generate revenue on it.

59:00 So BCCI ignores Z T V's attempt to renegotiate this. Because at this point in time Lollett is starting to work on setting up IBL. Yeah, and I think the Z T V side of the story is where did the sports broadcasting bill come from? Why won't they renegotiate? I think, David, you are correctly reading into

59:19 The BCCI is starting to say, uh, just hold tight. We're gonna make some changes here. Not knowing what's going on yet with IPL. Z TV is like, this is so weird. That You know, I'm not making any money on this thing that I finally got rights to, that I really want the rights to.

59:33 B C C I won't negotiate with me. So I'm just gonna start a new T twenty leag outside of the BCCI universe without their cooperation. Ah, so this is spring two thousand seven when they announce ICL. Yes. The B C C I Immediately says any players who sign up for the Indian Cricket League are banned for life from playing for India nationally or any other domestic tournaments.

59:57 This includes if you are a young player who had never even played for the Indian national team yet. Chandra's freaking out. He's like, wait, wait, what? So he then tries to make this big appeal, the economic benefit that's gonna come from a domestic league like this. Everyone's gonna watch this. It's gonna promote the local economies of all these places.

1:00:17 We're gonna pull in talent from all these other countries, which by the way, this is straight up the premier league. Playbook. This is what IPL ends up doing. It's gonna be broadcast on Z T V. I'm gonna fund a million dollar prize pool. BCC I ignores this again. And in fact, what they did was they went and pulled pensions away from any retired cricketers.

1:00:37 Who then went and joined the ICL. Oh amazing. They're raising the stakes. They're saying no one who has any affiliation with us at all can do this. So then other state organizations like BCCI The Bengali equivalent. recognized that this was going to be an issue if entrepreneurs started going around the state organizations.

1:00:57 So they also banned their players. from joining the ICL. So this really hamstrung the whole thing before it could even get going. And then finally I'll flash forward one year and then we'll come back. In oh nine, the BCCI announced an amnesty and all players could return to official cricket without penalties. If they cut all ties with the ICL.

1:01:16 So that was the final nail in the coffin. And then in two thousand nine they would shut down. Yeah, so they do play actually two seasons. Two thousand seven, two thousand eight, and into two thousand nine and then they fall. But this was someone making it A true run. What if we go around the state institutions, these regulatory bodies of cricket, and try to start something on our own.

1:01:37 It just didn't work, period. You can't go around them. Well I mean this brings up probably the most important power and playbook theme that I was gonna save to talk about later, but We've talked about now. The cornered resource of the players.

1:01:49 If you are Creating or running a sports league. It is of paramount importance that you have the best players in the world. If you do not have the best players in the world Your toast.

1:02:00 Nobody wants to watch. The second best players in the world play each other. Well I think that's right, but it it is a two sided equation. Like B C C I worked themselves into the choke point or ended up in the choke point or the linchpin or the aggregator position where they aggregated both all the best players. At least the Indian best players.

1:02:18 And the broadcast rights. It's the two different things that Dalmaya did under his term at BCCI, both the centralized contracts for players. and the centralized media rights that they had the Supreme Court approved right to auction off to

1:02:35 any capitalist companies that want to bid for these rights. So they owned the two things that mattered. Yes, that is absolutely true. The players are the primary thing though. The broadcasters will follow the players. Star is desperate to rebroadcast.

1:02:48 cricket at this point in time. They would have loved for the ICL to take off. And be able to broadcast that and go around the B C C I. But It just wasn't a compelling product. And the BCCI is basically using the mafia tactics of like

1:03:01 Hey, if you even think about going and playing there, you are banned for life from At that point in time what really mattered, which was the chance to play international cricket for India. Yep. So Lollett and Andrew Wildblood and I M G

1:03:15 Like Okay, we gotta accelerate this. Uh we were planning to launch What becomes the IPL in two thousand nine. We need to launch Now.

1:03:23 Next season. April two thousand eight. I will say, given how rushed this was, it is shocking how well it is all set up. All these dynamics, all the rules and auctions and everything about this league are so well balanced given they pulled it forward a year.

1:03:38 Absolutely. It's also lucky for them that they do. Pull this forward in response to the competitive threat from the ICL. Because there's another media marketing gift.

1:03:49 Which is that unexpectedly India. ends up winning The first T twenty World Cup.

1:03:57 That Summer. Yes. And they were initially really dragging their feet. They were resistant to T twenty.

1:04:03 They already had ODI. They loved it. And I think You may have more details than I do. Three of their best players Didn't go to the World Cup. So

1:04:12 What happened was T twenty was introduced by England in two thousand three. It takes a couple of years for other countries to catch on, start playing it. Like you said, Ben, you know, there was that Australia, New Zealand thing. Two thousand seven is when the IC finally starts to recognize Uh, maybe there's something to this and this is the first

1:04:30 T twenty. World Cup that they organized. So they've been doing the one day international world cup for years, all the way back to before nineteen eighty three, when India won it. But two thousand seven is the first. T twenty version of this that they're putting on. Well, the sort of first team of the Indian national team, they'd already just played

1:04:47 The one day international version. So they were tired. The best players. You know, look Tired. I think tired is in quotes for cricketers. They can play any day of the week. But They weren't that interested in the star players. They're like, uh, let's let the young guys Have a go at this.

1:05:02 New tournament. Mm. So the young guys go and the tournament is being held in South Africa. They go over there. not expected to win. The other countries are sending, you know, their first teams to this. Amazingly.

1:05:16 The young guys end up Winning the tournament. In Incredibly Dramatic.

1:05:22 Fashion. And guess who they are playing in the final? Pakistan. Yes. So during the group play.

1:05:30 stage, the early stages of the tournament. The Indian team is playing The England team. England. Home with cricket. Yes.

1:05:39 Massive underdogs here. You've got the young Indian players. Lollett has come over, of course, to South Africa to watch the World Cup. He's working on the IPL. accelerated launch in the meantime. And he's like, Okay, great. We're playing in T twenty World Cup. This is an opportunity. I want to create some Exciting moments here.

1:05:57 So he tells all the guys on the team. If any of you Hit. Six sixes in an over. So you know an over like we talked about is six balls and T twenty twenty overs. This is six home runs in an at bat. Back to back.

1:06:13 Essentially, yes. Very, very, very difficult to do. Oh, and they're bouncing the ball. Right. You're trying to hit a ball that is bouncing Somewhat unpredictably, The bowlers.

1:06:25 can either bounce the ball or throw it like a baseball pitch. They can do whatever they want. You don't know what they're gonna do. And it might have spin, you know, like a baseball you can throw a curveball. A curveball curves a little more than a fastball does, but can't move that much. When you spin the ball and then it hits the ground, it can move A lot.

1:06:41 So you really don't know what's coming. Not to mention. A running start. The pitcher has a running start, the bowler. Kids. Remember they're kids from India.

1:06:51 Not from wealthy families here. If any of you can hit six sixes in and over. This is gonna be such a dramatic event. I know this is gonna capture The public's imagination here. I will personally give you.

1:07:04 A portion nine eleven. I swear to God this is true. Wow, the acquired universe crossover. The crossovers are amazing. And I believe in fact. Th when they were talking about this in the locker room

1:07:19 He might have first offered a Rolex. And then the players were like, No, that's not enough for doing like I need a portion of an eleven. No, it's amazing. I think that might be the story. Either way. To drive a Porsche nine eleven in India, period, is like That's a big statement.

1:07:35 Especially back in two thousand seven. For a young kid. This is the pinnacle of anything they could ever dream of. Yep. So they're motivated. So they're playing England in the group round. And one of the young players.

1:07:47 Givraj Singh. Is up at that. He hits one six. Yeah, it's two sexes. Three sixes, four sixes.

1:07:57 By God he hits. Six. Sexes. In it over crowds going insane against England in South Africa. The crowds going insane. I believe

1:08:07 Something like less than twenty people. have ever done this in history, even to this day. This is one of the rarest feats. Certainly in cricket, if not all of sports. And he did it.

1:08:18 And so He comes running over to Lollit, who Lollit's there at the stand Jingling his hand back and forth, feeling I want the keys, my Porsche, my Porsche. Amazing. And he gets his Porsche. And Lollett would tell you that he paid for it out of his own money.

1:08:34 I'm sure. Lollett's quote on this is That lit up the Indian television screen. It turned the entire country upside down. Everybody started to tune in. So they win that match against England.

1:08:46 Next thing you know, they find themselves in the final Against Pakistan. Now the Indian national team, the first team at this point in time.

1:08:54 Despite India being the biggest market for cricket in the world. Was not that good. I believe they had not won a An ODI a one day international world cup in Quite a while.

1:09:05 Here now. These young guys, the T twenty team is in the finals against Pakistan. They win. On The last over.

1:09:14 An incredibly exciting Dramatic finish. The Television audience back home in India for this. was four hundred million people. Wow. The numbers are just staggering. When India plays Pakistan in cricket, it is a national holiday.

1:09:30 That Game that match. was the tenth most watch T V event of the year. Period.

1:09:38 Around the whole globe. Wow. The young team comes home. Lallet calls up Nike. before they leave South Africa and he's like I need

1:09:46 Open air tour buses. For the team, for the whole retinue. You can meet us at the airport. We're gonna do a parade to the stadium in Mumbai. And we're gonna have a big, huge victory celebration just like they do in Western sports after they

1:10:00 Win a world cup. They come home, the team arrives at the Mumbai Airport at six AM. The crowds are packed. There four million people on the streets.

1:10:10 It takes them eleven hours to get from the airport to the stadium. It's all televised all across the country. It's like a national holiday. And it is the most Perfect. Fertile ground in which to insert the

1:10:24 Imminently about to launch. I T L. Amazing. Which will lead us to The Specific

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1:12:25 Alright, so David. India's coming hot off winning the T twenty World Cup cricket. Final. And it's time for the birth of the Indian Premier League. Yep, we have finally arrived at what we've been hitting at the whole episode.

1:12:38 Just the sheer brilliance of how IPL is architected. So If you are from a clean sheet of paper. Trying to design. The perfect sport league.

1:12:49 There are two things that you need to really try and maximize. To make it appealing to an audience. First is that it needs to be the best place in the world to showcase human skill and achievement in that sport. I e you need the best players in the world playing there.

1:13:05 Two though. And this is where A lot of sports leagues go wrong. You need Uncertainty.

1:13:11 About the outcome. You need competitive Parity. Amongst the teams in the league. This is the any given Sunday element of the NFL that has been

1:13:21 the key critical ingredient to making the NFL the most valuable sports property in the world. Every little year they're tweaking things here and there to try and make it a little bit more balanced. The NFL would love nothing more than every team to go eight and eight. and then have an incredibly competitive, who knows what's gonna happen playoff situation. It was almost a disaster what happened when the Chiefs almost won three Super Bowls in a row. That was so un NFL that that was a possibility. It took'em a hundred years, but they became wizards of that competitive balance. And David, I'll say one quick thing. It's not to create the best sports league.

1:13:57 It's to create the best business. Yes, I was taking it as tautological that that is what you are trying to achieve. If you want to create the best business out of sports. you need it to be the most entertaining version of that sport, which means you need uncertainty as much as possible.

1:14:13 Now importantly This does not mean You are simply creating spectacle and controversy and entertainment without Quality sport.

1:14:24 You know, that would be the Harlem Globe Trotters, that would be the Savannah Bananas, amazing, incredible businesses and products. Never gonna be the biggest thing in the world in their sports. Correct. And on top of that It has to remain a game of skill. Not chance.

1:14:37 So it can't be Pure BS entertainment show. And it can't be too subject to randomness. It has to be the best people competing. In skill. against each other to create the most thrilling product.

1:14:51 But in the most balanced game design. That you could possibly offer. Yeah. So because of everything we've talked about to this point in the episode. The first part of getting the best players in the world is

1:15:04 That was actually Pretty easy for the IPL. That's what created the opportunity. Assuming it was birthed out of the BCCI, yes. If it had come from elsewhere, it would have been a non starter and impossible. Correct. The B C C I

1:15:15 Has courted resource access to the best talent in the world. Yeah. Because they have all the money and they have the Indian fans who care about watching the best Indian players and they have essentially veto right over the best Indian players playing anywhere else. Now the trickier one.

1:15:29 Competitive parity. This is where so many leagues go wrong. To get Competitive parity. Among

1:15:38 The teams on the field. You need every franchise to have access to the same opportunity to win. No matter how much money they have or how much money the ownership group has. outside of the franchise. Or how big of a market they're playing in.

1:15:56 Exactly. Or how good they were last year. You can't throw the board up in the air too much every single year, cause you need some continuity of fan base, but you also kinda can't really allow for dynasty creation. There's a million little ways that a misalignment could get in there. and ruin competitive balance and you have to

1:16:15 think through all the different variables and balance them all. Yep. And we'll get into this later in the episode, but Here in the US, I think this is where Major League Baseball has gotten really, really, really wrong. Over the last set of decades. Yeah, it's the Yankees, it's the Dodgers. They've never successfully implemented a salary cap in baseball. And so Guess who's in the World Series? The New York team and the LA team?

1:16:36 Yep. And then the worst example of this is the European Soccer Leagues. It's the top. two five franchises at the top that are spending the most money, buying the best players and Winning every year. And you have owners.

1:16:48 that are willing to spend hundreds and hundreds of millions of dollars on players and essentially run the teams in the red. Because they have to spend so much money on players to win. Yeah. So, now think about setting up this new league in India. For reasons I'll get into in a sec.

1:17:04 You need to have a diverse ownership group. As in You can't just have Super wealthy industrialists owning. All these teams.

1:17:14 But if you look at Indian society at this point in time, it's so bifurcated between the billionaires of these conglomerates, the Ambani's of the world and et cetera, et cetera, you know, the Tata family. And then Other people who you would want involved. But are gonna have nowhere near the same amount of godlike resources that these other people have.

1:17:33 Coming out of the nineties and it's starting to change already here in the mid two thousands. It's essentially an impoverished nation. with a very thin slice of billionaires. Yeah. So as you're setting up these franchises

1:17:46 You need to make them no brainer investments for whoever makes them and you can't have this have and have not dynamic. So the first Order a business, which is the easiest one is stadiums. So Ben, you were mentioning teams running in the red in the English Premier League.

1:18:01 This is I think Beyond just overpaying for players. The biggest problem. in the English Premier League. Which is a lot of teams own their stadiums.

1:18:11 And then the debt payments that you gotta make on these stadiums are just Crippling. This is soccer for anyone who's not a Premier League fan. Yeah, exactly. These are hundreds of millions, if not billion dollar edifices. That you have these teams

1:18:24 funding and owning through debt and then the debt payments are just Astronomical. on top of astronomical player salaries that they're paying. So First thing that Lollett and Andrew Wildblood and IMG decide as they're setting up the league.

1:18:38 No debt. No team is allowed to have debt. And De facto, no team will own their stadiums. And the driving force of all this is the teams have to be profitable. Because we want to incentivise

1:18:53 this diverse group of people to own them. Yeah. You need to make it so that if you are entering this auction for the first eight teams. You sort of have capped downside.

1:19:04 So Thing number one, make sure that they're not gonna have Insane stadium debt right out of the gate. Yeah. Well

1:19:11 Guess what? India already has Pretty big cricket stadiums in All the cities that you would want to put franchises in. And who owns and controls those stadiums?

1:19:21 The BCC. The state cricket associations, which all roll up to the BCCI. So problem solved. Problem solved. Awesome. So Next and most important.

1:19:32 is what happens to Meteor rights deals for broadcasting the games. and central sponsorships within the league. Are media rights deals negotiated by each team individually, like they are in major league baseball? Or are they gonna be negotiated centrally and split evenly amongst the teams like they are in the NFL?

1:19:51 Obviously there is a superior model here. And hey, guess what? The B C C I and Lollett are already in position to run this as a central model because they already do that. for the international cricket rights of the BCCI that Lollett has just Hugely successfully done the six hundred and twenty million dollar.

1:20:08 D L four. Yep. So okay. We're going central rates. And then we're gonna distribute

1:20:14 That central revenue From both sponsorships. And T V rights. Equally. To all the teams.

1:20:20 But As Lollett and IMG are thinking about how are we gonna maximize The T V rights deal that will do for this new IP L, this new domestic cricket league. They kinda have a problem.

1:20:36 From The success that they just had selling. The international rights. And that problem is They already saturated the entire market.

1:20:46 Of Buyers. for This form of entertainment. being cricket broadcast in India.

1:20:53 Yes, there are other broadcasters who would love to have these rights. But ultimately the end buyers are the consumer brands that are buying advertising. Against this programming. And The six hundred and twenty million dollar rights deal was so big that they just absorbed the entire market.

1:21:10 Of cricket advertisers. Yes. Basically the broadcasters who now own those rights took on such a big liability That there are trying like crazy to get their sales force to go.

1:21:23 And sell as many ads as possible. Get Pepsi, get wireless carriers, car companies, et cetera, et cetera. And keep in mind, this is something I didn't realize until I mean last night, like the end of my research. India's advertising market was historically small. So the entire total addressable market for advertising, not digital advertising, not mobile advertising.

1:21:47 In two thousand and eight in India. was two to three billion dollars. Right. And a huge chunk of that. Just went to international cricket. So even to break even on these rights.

1:21:58 Those broadcast networks now need to go sell what was it, six hundred million dollars? Yep, six hundred and twenty million dollars over four years, so Call it one hundred and fifty ish million a year. So assuming it's a two billion dollar ad market. they need to go sell and take up five percent of the entire advertising market per year. Just

1:22:18 advertising during cricket games. This is before the IBL. Right. So that is a real liability. They are signing up. Even to break even to go sell five percent of the ads, they probably need to sell like ten percent of the ads to turn it into a real business. In the entire country.

1:22:33 for that year across all products. So this creates, to your point, this new problem for Lalad and the gang creating the IPL. Where are we gonna get the money? You now need to go find a whole new set of advertisers on top of that you've just sold. to go and buy a new rights package to advertise into that new rights package. So Lollet actually has a great

1:22:53 Amazing quote. About this dynamic in the way only Lalak can speak. Here's the quote. Being the big daddy for all sporting events in India.

1:23:03 already with the B C C I bilaterals, which are the international matches bilaterals against other countries. all the money that was there in the market that brands had for spending Was consumed. There were no more budgets left.

1:23:16 We had sucked it all out. By taking the price of B C C I In aggregate from a few million dollars to a billion dollars. I had already sucked that money out. And so when I looked at where are we gonna get the money to make IPL work

1:23:30 I needed women and children. God, it sounds diabolical in his words. He's spot on. It's exactly What the dynamic is. Yeah.

1:23:40 And again, back to the now league dynamics of setting up this league versus B C C I just running the one international team. Again, look at the NFL. It is super important. that your central revenue stream of your T V rights deals and your central sponsorships, that that be very, very large. And that that be the most important revenue stream for your teams'cause that's what keeps competitive parity.

1:24:01 the risk to the NFL's model Is that the Dallas Cowboys Or the San Francisco Forty Niners start making too much local revenue. And then they're making more money than the other teams and all of a sudden the balance is out of whack. Yeah.

1:24:14 Although theoretically the salary cap keeps that in check. Ah well we'll come back to that in a minute. Okay. So You would think they're kind of between a rock and a hard place here.

1:24:23 And this is where Lollard and IMD is just Incredible. Entrepreneurial genius comes in. They say

1:24:32 We're going to make the IPL into an entirely Different product. With a different Target advertiser and sponsor.

1:24:42 than our international cricket. By having a different audience. Yes. They need to attract. women to view the game.

1:24:51 And then advertisers who are gonna advertise products. Uh women for IPL. So totally different. market segments in terms of advertisers. Essentially you need to make the product one where if mom sits down or if your sister sits down and throws something on for the night, she's gonna pick IP L versus whatever else she was gonna put on.

1:25:10 Yes. And whatever else she was gonna put on Or soap operas. So I'm gonna read a quote here from Andrew Wildwood at IMG, who was Lollett's partner.

1:25:19 There were a number of guiding principles behind how we put IP all together. One was that it should reflect the characteristics of modern India. So energetic, colorful. Noisy, exciting.

1:25:30 Two. It should not compete. With the other forms of cricket. But rather It should compete with other forms of entertainment.

1:25:40 So that's evening prime time view. Not only is India somewhat short in terms of supply of sports content It's actually quite short in terms of general entertainment content. Apart from Bollywood. Lollett and I agreed.

1:25:55 That we didn't want to compete with other cricket. We wanted to compete. With the soap operas. We therefore needed to create IPL in the image.

1:26:04 Of a soap opera. So that if you didn't watch last night's episode, you're not in the conversation at the water cooler the next morning. Most households in India. We're single television homes. And women control the remote control, watching soap operas at night.

1:26:19 The man of the house had little to say in what was seen. So in order to create a successful television product We had to make something that women would be attracted to And that's what caused us to bring in Bollywood.

1:26:31 Hm. No other sports league in the world has done what IPL has done here. Today. IPL viewership is entirely fifty fifty. Gender parity between men and women.

1:26:42 And the reason That that is the case. is because they bring Bollywood in to the ownership groups. So Bollywood and cricket were and still are the two biggest things by far in India, as Andrew Wildwood was saying. Like there is no number three.

1:26:55 It's Bollywood. In cricket. And when it comes to Bollywood. There is one star. That shines.

1:27:01 Brighter. than everyone else. So there's a quote from Manoj Badali, who is the principal owner of the Rajasthan Royals and wrote a book about his experience. He writes. Within Bollywood, there are B listers. A listers.

1:27:13 Double A listers. And way above them all Is Shah Ruk Khan. Richer and more famous Then Tom Cruise or Clint Eastwood.

1:27:22 And adored by the entire country. Turns out He and Lollett had known each other sin, and there were few others within Indian cricket who could have convinced him to invest and participate so actively in the league. The profile that he provided as the tournament was launching. Was

1:27:40 Incalculable. So Lalit no Shah Rakhan. Biggest star in India. There's one problem though. Sharuk.

1:27:47 Is not A cricket fan. He's into soccer. Really? So Lalik goes to him and is like I need you to be part of The ownership group. No way. 'Cause retroactively I watched an interview with Letterman and he's making jokes about

1:28:02 He was never good enough, like he's fulfilling a childhood dream. He was never good enough to play cricket, so he may as well own a team. That's totally retcon. All post facto retcon. Yes, yes, yes. Here's the real story. This is amazing. We should say all the quotes from Wallet and the direct firsthand information from Wallett come from a great series of interviews that he did on the Sports Entrepreneurs podcast that we'll link to in the sources. So Lalit obviously knows Shah Ru. This is the perfect, you know, get him in on the ownership group. He's the brightest star in India, have him at the matches.

1:28:30 Oh, I could Tune into a soap opera at night. Instead I could Go watch like the biggest star in India there dancing on the field with all this incredible going on at the matches. But the problem is he's not into cricket. So

1:28:43 Tells the story. Shaaruk said, Lollet. I don't know how to do this. My passion is football. I have no idea how to run a team or do anything. Being Wallet. said Sharuk.

1:28:54 Let me handle it. I'll put a consortium for you together. You just need to write a check. He says, You're gonna take my life savings. And it was his life savings in those days. I said

1:29:03 Just write the check. And we'll talk about it if you end up winning the team at the auction. This is the most incredible. Gangster type stuff. So here's what Lala did.

1:29:13 Because he's friends with Shah Ruk. He knows That Nokia The big Handset manufacture at the time. Remember, we're still

1:29:21 Slightly pre smartphone era here. We're in two thousand seven. Yeah. And definitely pre smartphone in India. A way pretty smartphone in India. Nokia is desperate.

1:29:31 to get Shah Ruk as their celebrity spokesperson. In India and for whatever reason Shahuk is not engaging with them on it. So Lala says Shadreek, just trust me.

1:29:42 Do I have your word? That if I put a consortium together for you, you're in. He says sure. While it turns around and he goes to Nokia. And he says, I know you want Shah.

1:29:52 He's not gonna do it. But You can become The jersey sponsor Of his new team that he's about to have

1:30:02 in this new cricket league that is gonna be the biggest cricket league the world has ever seen. Wait, wait, David, I have an alarm bell going off on my head. What do you mean it's going to be his team? That seems like something you can't promise when there's an upcoming auction and you don't know how the auction is gonna end. Would it be would it be? Yeah. Well, if he were to have this. New team. He's gonna be in the stands, he's gonna be on the field.

1:30:28 He's gonna be wearing it, he's gonna be singing, he's gonna be dancing, he's gonna be doing The music video introduction to the team in the league. T V cameras are gonna be all over him. And he's gonna be wearing the shirt. with Nokia right there in the front on the chest.

1:30:45 add You can have all of that. For the low low price of five miljan dollars. per year in cash up front. Wait, is this to be the jersey sponsor of one team?

1:30:54 Yes. Jersey sponsor, one team. Five million dollars in cash. One team that doesn't exist. That Theoretically might.

1:31:02 Be won at the auction by Shah Ruk? Con theoretically. It is crazy the amount of things that need to come together here. This is some major chicken of the egg stuff that does need to come together before a ball is ever bowled. The sponsorships, the media rights, the ownership group, an immense amount of money being promised in contracts. Changing hands for a league that has never existed.

1:31:25 India, baby. And Lalit. And Lala, I mean he's an incredible entrepreneur. So Lolly goes back to Sharuk and he's like All right.

1:31:33 I got you, your team. So I'm gonna set the minimum reserve price in the franchise auction. At fifty million dollars. But it's gonna be payable over ten years. And

1:31:43 No matter what you bid and what you win, the first year's payment Is gonna be five million dollars. So if you bid fifty, it's five million dollars a year for ten years. You bid a hundred. It's ten million dollars over you know, a year over ten years on average, but I'm only gonna charge you five.

1:31:57 In the first. I believe that's how it was set up. I mean On top of it, if you're trying to get people over the line. Just generally, yeah, make it payable over ten years. Right. The capital calls are the way to do it. I mean, it's kind of an incredible way to get someone to bid fifty to a hundred million dollars for something that doesn't exist yet to say, well, in the first year it you're only out five million. And then there's a sweetener, which you're gonna get to in the media rights with the way that they tear that down.

1:32:21 But Lalin is a genius at structuring Your own out of pocket money. I'm not sure how much risk you're actually gonna be taking, even though all of these dollar signs are eye-wateringly large. Yes. Well again. Importantly, we can't get to the media rights yet, because like we said, there's the problem of to sell the media rights, you gotta bring

1:32:40 Oh. female audience in. And you gotta prove that. And you gotta prove that. Which means you need Shah Rukh and you need Bollywood. So now he goes back to him, he's like, I got you, your team.

1:32:49 First year payments gonna be five million dollars. Guess what? Nokia is sponsoring your team for five million dollars. You are already in the black. You have a profitable enterprise. Day one.

1:32:58 Wait, is this after the auction? No no this is before the auction. Got it. This is you know, I've got you your team in quotes here. I see. Got it.

1:33:08 So Shadrick's like, Oh wow. Okay, great. I'm in. That is an offer I can't refuse. Wow, uh free cricket team, sure. So We're now fast forwarding slightly to when the auction actually happens in January two thousand eight. The auction happened.

1:33:21 Shadruk won the team at twelve o'clock. At three o'clock he had a signed agreement with Nokia to pay the five million for the front of the shirt for that year. So he had a wash and was laughing all the way that wouldn't have happened for anybody else. Amazing. Okay, so Now back to the fall here when they're getting this all set up.

1:33:37 Lollett can now go around to everybody and say Shahuk is in? We got Bollywood. And oh yeah, Nokia's in. And they're in for five million dollars for Jersey sponsorship of a single team.

1:33:49 So now they've set the price. This thing. Is for real. They have set the market. Exactly. Okay. So Now that Shah Ruk's in all the rest of Bollywood.

1:33:58 wants to come in because wherever Shah Ruk goes, you know, he's the leader of the pack, the whole rest of the community wants to come along too. He's unbelievably charming, by the way. This Letterman interview He's like butter. Unbelievably charming. I'm trying to think of an analogy in like Hollywood. There is no analogy.

1:34:15 So One of the top Triple A list actresses. An actress named Pretisinta. She ends up

1:34:23 Becoming the principal owner. To buy another one of the teams. So This is even more amazing. Now you've got one of the top

1:34:30 Actresses. Who's coming in as the principal owner of a team. So now you've got Not just Shah Rukh who

1:34:37 Even alone that would have been enough to draw in the women in the general entertainment audience and beat the soap operas. Now you've got Triple A Top list one of the best actresses.

1:34:49 Yeah. Bollywood, who's also gonna be a principal owner. one of the teams who's also gonna be at all the games, also in the stands, also gonna have T V cameras all over. Uh. And then it's just gonna bring the whole circus. So

1:35:02 Well it says. In one way. They are ninety percent of the market, day being. Bollywood. Once I had their reporters and their people in there and all their stars starting to attend and everybody getting their makeup artists and their people and their endorsers and their brands.

1:35:17 Talking about them attending a match. It changed the whole thing around. Them being on the field sent a whole different message to the crowds who wanted to see these people. Who could only otherwise see them on screen. But now they can buy a ticket.

1:35:29 Or they can tune in on TV and they can come see the stars there out. Even far away. Every night of the week. And Then

1:35:38 Uh. designing this product for a general T V audience and competing. With.

1:35:45 Soap operas. Wild Meant the quote about competing with them. Quite Literally.

1:35:51 So when IM G and Lalit go out to bring the bidding to the T V networks for this. They say Here's our schedule and time slot. We are going to have matches.

1:36:03 Every night of the week. Seven days a week. One match at a time. At eight PM We're going to go directly up against the soap operas.

1:36:12 Which also run. Every night of the week at eight PM. These can be three hour matches. Eight PM. Two eleven PM

1:36:20 And it's gonna be like Monday night football. Every Single night of the week. Only one match at a time. for two months and you're gonna have all the biggest Bollywood stars there. All the Triple A listers who

1:36:31 By the way. will never act in soap operas because they're only acting in the big time movies. Right. We're gonna have them in Our soap opera. We've got them coming.

1:36:41 Captive in the stadium. With the cameras on them. And then Also, by the way, from a sports programming perspective This is also going to be the best cricket in the world. So all the men who are already watching the international cricket, they're gonna come here too. The whole family is gonna watch. And for anyone who's a little skeptical of this.

1:36:59 Just think in the US. How many people watched NFL games in the last few years just hoping to catch a glimpse of Taylor Swift when the camera goes to her for the Gosh, I don't know, thirty total seconds per game. that it's on. I mean the amount of newsworthiness That came out of

1:37:15 Oh, here's what Taylor looked like when she was in the stands making an expression. Here's the jacket she wore. Imagine if she's the owner of the team. Yes, imagine if Taylor owned the Chiefs. That's What is going on here. There really is no comp for this in sports. Except for the single game of the Super Bowl.

1:37:34 I think the Super Bowl is like this in the US, where It's a family event. Everybody watches. I mean Jenny watches my wife, she has no interest in football. She hates

1:37:46 Sundays and Monday nights during the season when I wanna watch football and like she could care less. But the Super Bowl, even though she has no interest in football, she will tune in to watch that. Just'cause it's an event. She wants to see the commercial, she wants to see who's there, et cetera. This is what IPL is. Every single night of the week. The IP L'cause like the Oscars, or it's awards season. But it's every night instead of just four Sundays.

1:38:08 Yeah. Exactly. Okay, so so far you've got three pillars of competitive balance. that they've managed to stabilize here at least at the start. Yep, you've got first the stadiums and

1:38:20 No debt, not owning stadiums, asset light business model. Second you've got A diverse ownership group. Which is necessary. Both to ensure that

1:38:30 No one group has financial resources outside the system that can outspend any other but More importantly, you really need Bollywood to be involved here to unlock the media budgets. Yep. So then now Three falling into place here is the media budgets and being able to get a huge Central broadcasting rights deal.

1:38:49 Yep. Which gets evenly distributed. Yep, exactly. So Here we are now by January two thousand eight.

1:38:55 All the pieces are in place to get that deal. Lolland and IMD are ready to take it out too. The market's forbidding. Of course. Per usual, there's just one problem.

1:39:06 Which is that Nimbus, remember, which had spent six hundred and twenty million dollars to buy the international cricket rights from BCCI. They're like Wait a minute. We already own this.

1:39:17 We paid you six hundred and twenty million dollars over four or five years or whatever it was. Four. The rights to all of B C C I Cricket. This is what we're paying you for.

1:39:26 IPL is a BCCI product. We should have this already. Makes sense to me. I see the argument. Uh, and of course, you know, what do you think Lala says? Like Nope. IPL was not specifically laid out in the contract. And if you would like to sue me, you are welcome to go ahead and sue me. Good luck here, winning. Of course. It wasn't specifically called out by either party.

1:39:46 And so therefore Wallet gets to say This is something different. And I mean look. Nimbus is already making out great. They went from being like a

1:39:56 Middling broadcaster that had no sports rights. to all of a sudden having all of the sports rights and yes they paid a lot of money for it, but they're making a lot of money for it here too. Which this is always Lollett's argument of I make money for everybody.

1:40:10 And this just is how was how business in India gets done in this time frame. You know, call it two thousand eight. Sure, from our US American and Western perspectives, we can look at this and be like

1:40:24 Well, what was actually the letter of the contract? And shouldn't there be a process here? And does Nimbus have these rights? And you just wanna deal in good faith. You just wanna assume that if someone knows that they're about to launch a huge new cricket league that's not included in your contract and you're operating under the idea that it is included in your contract. What's in the contract doesn't matter as much as what you both feel like you're agreeing to

1:40:46 And it's a shame that if what you're relying on is well, the letter of the contract says this, you know Yep, exactly. Okay, so Nimbus. Does not have the broadcasting rights, how do they get sold? So Nimus, they're out.

1:40:58 A star is still out because Uh another amazing. Lalic quote, he just doesn't let bygones speak bygones. He's talking about how he sets up the broadcasting rights auction. Rupert Murdoch, I had blacklisted.

1:41:12 I would never allow him in, due to what had already happened. So I blacklisted Ruper Murder. Amazing. I mean this was ten years ago that that happened. ESPN and Disney

1:41:24 corporate says that they are interested in bidding on these rights separately from star, which they're already a J V in, but they think this is so interesting. They're interested in bidding. Ultimately though They can't get comfortable enough to put an actual bid in. They say we will broadcast it.

1:41:41 over the top as Disney soon to be Disney plus in the coming years. But we're only gonna do it on a Rev share basis. We won't give you cash up front, we'll just share advertising revenue with you. And Obviously that's not what Wall at once, because he needs the cash to have the central sponsorship guarantees, central media guarantees out to the franchises. Right. Cause if no one's gonna bid on one of these teams for eighty million bucks unless

1:42:06 somebody is guaranteeing you there is media revenue there. Exactly. So what does he do? He just runs the same playbook. He's always been running, which he goes to another broadcaster. Who does not have a sports channel or sports presence.

1:42:17 This time it's Sony. which is the number two broadcaster at India at this point, but like Nimbus before And Disney before that did not have a sports channel. And

1:42:28 He says, I will make you a sports channel. And by the way, this isn't just sports. This is sports and Bollywood and the greatest entertainment product that India and the world has ever seen. Yep. And the minimum bid for this is six hundred million. For ten years. But I'm expecting a billion. Over ten years.

1:42:44 Which would put it roughly on parity with the India. international cricket rights that Nipis had bought the year before. Sony's like Okay. We're interested. We see the value here, but

1:42:57 Ten years is a big commitment for what is essentially a startup. And we don't know that it's gonna work. I mean, again, not a ball has been bowled. Exactly. Not a ball has been pulled. No teams have been established yet. There are no official ownership groups that have bid on franchises. Yes, this is a very compelling business plan, Lollett and I M G, but

1:43:14 No domestic cricket league has ever proven valuable. Anywhere in the world. Mm. You know, there are domestic leagues in Australia, in England, in New Zealand, et cetera, but they're Peanuts, you know, they're The minor leaks, so fine.

1:43:29 They're not gonna justify a Hundred million dollar a year, billion dollar every ten year. Medior right stealing. But they say we are interested, so what we would like to do is we would like to buy just the first year. at the same pro rata price as the six hundred million dollar minimum bid for ten.

1:43:45 We'll pay you. Sixty million dollars. For year one. So you know, it's something. It's

1:43:53 Money. On the table. But it's not really gonna send the signal of strength to Franchise bidders.

1:44:01 That Lollett wants for the auction coming up. He really wants the ten year deal. To project stability and cash flow certainty. That also, by the way, is gonna match up the ten year payable period of the franchise because that's why he wants ten years. So

1:44:15 He and I M G Say to suddenly like okay, we hear you. Hang on. They turn around and they go to a sports rights group. Based out of Singapore called World Sport Group.

1:44:26 And It's basically just like the Nokia and Shah Rukhan deal. They say Two W S G World Sports Group.

1:44:35 Here's what we need you to do. We need you. To bid and buy the ten year media rights deal at the billion dollar price that we want.

1:44:45 But We'll only charge you sixty million dollars in year one. So then they would owe the remaining nine hundred and forty over nine years. Exactly. And so you're gonna put up sixty million dollars in year one.

1:44:56 And this is for the global rights. By the way. to IPL broadcasting. And what you're gonna do Is you are gonna turn around and immediately sub license

1:45:06 The Indian domestic broadcast rates. Back to Sony, who is good for that sixty million dollars on the table. Cash on the table. And then you as your, you know, VIG for facilitating this. you will have the rest of the world international broadcast rights that you can then go sell and profit from.

1:45:24 At your pleasure. Oh my God. But I mean it's kinda crazy. Sure, there is the rest of the world. But without that, what you're basically saying is Sign this contract.

1:45:35 You'll be cash neutral in year one. And then you will have a massive liability in years two through ten. Good luck. hopefully you can make money on it. Yes.

1:45:45 Well So here's the lollip quote. I knew That once we had the T V deal signed. all the rest would follow. Remember, he's already set all this up with Shah Ru Khan, you know, he's got the players.

1:45:57 He's got Sharuk Khan, he's got the stadiums, he knows this is gonna work. If they can Secure the bag on the T V money. So he says. Although the deal was for one billion,

1:46:07 I told the broadcasters I only needed sixty million in year one. Let's get the first year done. We'll worry about the rest later. I promise if we don't accive what we set out to achieve. I won't carry on the IPL after year one.

1:46:21 So he's basically saying, You have a gentleman's agreement from me. That if this doesn't turn out like we think it does, I will pull the plug on the whole thing and you won't be on the hook, W S G for Nine hundred and forty million in years. Two through ten. So if you believe that, then it really is a free option for the international rights for year one. Exactly.

1:46:41 Like I said, it's the same Sharuk deal. It's like Hey. I am finding you the money. to cover your costs in year one and you are in the black, you can make whatever profits you want from the rest of it. Yep.

1:46:55 Fascinating. Which again. Legality or to the Western view ethics aside. Actually is brilliant. What an amazing way.

1:47:05 To start something from nothing. Yep. Transactions create value. Let's throw that abstract idea out. When I pay you for something and you deliver me that good or service, value is created in the world by that transaction happening.

1:47:19 Otherwise it wouldn't happen. Otherwise I'd say I'd rather keep my money, you'd rather keep your good or service. And so If you can make transactions happen. Where it actually is in the interest of both parties to do it.

1:47:30 where they otherwise wouldn't have happened, that is literally a value creative event. Totally. And What Lollet is Architecting here is Not just saying.

1:47:41 transactions. He's saying no risk transactions. I'm going to create no risk transactions where you have no downside. And all outside. And he actually genuinely is able to align all the players here such that like Nobody is really holding the bag. But there's an if it's there is no risk to this transaction if

1:47:59 You trust that I'm gonna pull the plug in year two if it's not working and you don't owe me a hundred and ten million dollars a year for something that you're not getting value out of. Yeah, exactly. You need to have Some level of trust here. Actually a pretty high degree of trust.

1:48:13 That's essentially the trade. In exchange for telling the world that I trust you. I am getting a free option to sell the international rights in year one. Yep. I am valuing

1:48:24 your trustworthiness. Yeah. Well, You could argue if you're WSG whether you should have or should not have Valued Lollett's trustworthiness.

1:48:35 Because what he offers does end up coming to pass, just not in the uh spirit in which he offered it. All right, so how's it go? Okay. So they announced the billion dollar deal with WSG and Sony. This is like a earthquake that hits the cricket world.

1:48:49 no domestic league had ever remotely been valued from on a media rights basis like this before. Not to mention the league doesn't exist yet. There are no franchise owners, you know, et cetera. It's just a business plan. Then on the back of that momentum. Ten days later, at the end of January. They launch the franchise auction. And like we said, the minimum reserve bid for each of the eight franchises

1:49:11 Is Fifty million dollars for the ownership groups. But The T V money is now in place. This is why it was so important.

1:49:18 Yeah. So how much of the T V money are they entitled to? That will help me evaluate whether I should bid fifty plus billion dollars for a franchise. So Here is the prospectus that gets distributed out to potential bidders on these.

1:49:33 Franchises. Of the Central Media rights revenue. Yeah.

1:49:39 Broadcast deals like they've just done with W C and Sony. And also the central sponsorship deals. Fifty percent. One half of that. will get distributed out to

1:49:50 The collective eight. Franchises. to be distributed equally. But Here's the kicker.

1:49:56 Lollett is the master of manipulating time in his deals. That is what it will be at steady state. In the first year It will be eighty percent. Eight zero. So

1:50:07 Eight out of every ten dollars that are coming in centrally to IPL. Will get distributed out. Just happens to be eight teams, so each of the eight teams is gonna get ten percent. Of the total central money. that's coming into the league. And then it's gonna be a sliding scale over the next ten years that's gonna take it down.

1:50:25 To fifty percent. And so how does the math work out now? Okay, you already know what the T V rights deal is. It's sixty million dollars in the first year. Hard cash that's coming in.

1:50:36 And then there's upside from sponsorships that Lollett might go sell. But he needed to get the franchises in place before he sells the sponsorships. So that's about five million in cash to each team in revenue from that deal in year one. Bingo. TV rights alone. Five million dollars in cash.

1:50:53 Coming in each year. And remember what he told Shah Ru Khan. What's the deal on the franchise fees? Paid over ten years. But I'm gonna let you pay

1:51:03 The effective minimum price in year one, only five million dollars in year one. Magically. It works out. You get a free franchise for the first year. Amazing.

1:51:13 Amazing. No matter what you did. you're probably gonna be break even or close to it, even after paying players, which we'll get to. very early in the life of your franchise. And guess what?

1:51:23 Magically, once all the central sponsorships are sold. It ends up being Ten million dollars. Per team. Distributed.

1:51:31 From the central revenue pool. Exactly the straw man that you're setting up, Ben. You're giving me ten and you're saying no matter how much I pay for this team and you're one, I only owe you five? That sounds like a great trade. And it's an asset light business model. You don't have to invest any balance sheet dollars. There's no stadiums, no hard assets, et cetera. Well. If you are a smart sports investor.

1:51:52 The first most important question you would ask next is What's the salary cap? What's the salary cap? What about the players? Which here's a funny thing. In most leagues, what's the salary cap is the same as asking On my P<unk>L, what is the expense line for players?

1:52:08 Interestingly, in the IPL. They don't Pay the full salary cap. Plenty of teams are running around there with seventy five, eighty, ninety percent of salary cap and having a competitive team. It's actually a different question in the IPL of asking what's the cap versus

1:52:25 Actually what's my team expense gonna be. Yes. And what makes the IPL Unique. Relative to

1:52:32 Every other sports league in the world. What they uniquely innovate on this. Is the auction system. Players. In the IPL.

1:52:42 are auctioned off just like a Sotheby's auction, like a piece of fine art or uh as the media Say when covering it like cattle and sheep. It's like the draft, but with money. It is the draft. With money.

1:52:56 And it is Absolutely freaking brilliant. All right listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team, and deploying them is uh no longer the hard part.

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1:54:29 And in a future, that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is. Who's managing them all? So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale. Go check out service now dot com slash acquired and tell'em that Ben and David sent you. Okay, so David, I said the player auction is like the draft with money. But that's not really giving it enough credit.

1:54:56 The NFL draft did manage to turn itself into a huge ridiculous viewer spectacle. big thing at Radio City Music Hall in New York and T V coverage. But the player auction is both a live spectacle and a key piece to the way that they balance the whole league.

1:55:13 And the rules for the annual player auction were nailed down even before the initial bidding for the teams happened, which is important to understand. You need to know before you bid on a team as an owner, how this whole auction process is gonna work. It is Tied as top priority for

1:55:30 the most important thing to know along with how the central revenue is getting distributed. Because By far the biggest expense for any premier sports team attracting the best players in the world is Player salaries. Put aside.

1:55:43 Capital expenditures and potential debt payments for stadiums. That's not part of this league. And that makes sense, by the way, that player salaries should be your biggest expense. Because that is The most important raw ingredient to your business.

1:55:57 Yep. So Different leagues have different ways of dealing with this in different sports and We talked about this a little already, but

1:56:05 I would say until the IPL auction innovation. What was generally regarded as the most effective way to deal with this is a hard salary cap. And that's what the NFL has. Every year you have a dollar amount that is the same for every team. You cannot spend more than that dollar amount. It is simply not allowed.

1:56:25 And How high that dollar amount is is the result of collective bargaining between the players union and the ownership group. Yeah. Which is a very sane way to do it. Just taking the three big US sports leagues.

1:56:38 NFL. Clearly the gold standard has the best way to manage competitive parity. Which is the hard salary cap. Next is the MBA. They're somewhere in the middle. The MBA has a soft salary cap. Where is it?

1:56:51 Yes, there's a salary cap. But under some exceptions you can go beyond it, and then there is an associated luxury tax. With. Going. Beyond it.

1:57:01 This is a big problem. Not as big a problem as baseball, which I'll tell you about in a sec. But The reason this is a problem is it all of a sudden introduces the amount of wealth that your ownership group has outside of the business of running the team and outside of the league. now starts to play a factor in how much you can spend for players and starts to affect

1:57:21 The competitive. Balance of the league. Or maybe to put it in a more generic way. the amount of access to capital the ownership group has. Cause whether or not they're wealthy, if they're in a market where you're in a team that can produce a lot of local revenue, well then you can afford to pay for more expensive players out of your

1:57:39 local revenue and pay the associated luxury tax fees. Now, in theory, the luxury tax should address this because you're then now redistributing some of the extra money that you're spending on salary and an equal amount to other teams. But in practice. It doesn't really work out this way. So if you look at

1:57:55 competitive dynamics in the NBA versus the NFL. You get dynasties in the NBA. Like The Warriors or the Lakers or the Celtics or the Spurs a few years ago. Yep. Cavs heat. Yep. The heat The spurs are the anomaly'cause they're not in.

1:58:09 A major market, but All those other cities, all those other teams I was talking about. San Francisco. Bay Area, Los Angeles, Miami. These are big markets. Right. The luxury tax sounds great in practice, but the uh existence proof that you are now naming Shows the flaw.

1:58:26 So that's the MBA. Somewhere in the middle. Then you've got Major League Baseball. Major League Baseball has no salary cap at all. They do have what is called a quote unquote competitive balance tax.

1:58:39 Which sort of operates like a soft salary cap like the NBA. But in practice it's a total sham. Because in the MBA there are at least strict rules about when and how and how much You can exceed the salary cap by

1:58:54 In baseball it's just like, Hey, there's some tiers and if you go into the higher tiers of excess over the competitive balance thresholds, you pay more. But there's no cap on how much you can pay. You can pay an infinite amount and then just pay penalties to an infinite amount. So last year in twenty twenty four

1:59:10 Nine teams in major league baseball exceeded the competitive balance tax threshold. By far the worst offender. were the Los Angeles Dodgers. Who exceeded it by one hundred million dollars. Ha.

1:59:25 Which is just ridiculous. And then of course They won the World Series like duh. Gee. Gee, how did that happen? And why did the Dodgers feel comfortable exceeding it by a hundred million dollars and paying such a huge luxury tax? Oh. Guess what? They're in Los Angeles, the biggest media market

1:59:41 in the US and oh guess what? Major League Baseball does not have central media rates. The Dodgers have their own TV deal in Los Angeles, which is by far the most valuable. Yeah. The sport. the funding. Yeah, as you said, the access to capital to do this.

1:59:56 Of course they're gonna win the world series. It's a big problem. Yep. Why would anyone tune in to watch that? Totally. I mean

2:00:04 Sure. Also the separate problem with baseball of a hundred and sixty two games. Like who cares about a game on a Wednesday night in the middle of the summer? Totally. I tuned in to watch the ALCS and the World Series last year. It was great. I will say the ALCS I'm from Cleveland.

2:00:19 The Guardians total payroll was a hundred and six million dollars playing the Yankees. Who is three hundred and nine million dollars. I mean It's amazing the Guardians got close. Right. I mean that's just such a stark example.

2:00:31 You've got one team that has three X. the annual salary payroll of the other team. Like there's just no way. Yeah. Springing is more compelling than the regular season. At least spring training is fun. And I say this as somebody who deeply loves baseball, but Okay.

2:00:48 So that's at least state of the art in the Big North American. Sports League. As I said, before the IPL comes along. NFL is the gold standard. I mean, they are the true any given Sunday league.

2:01:01 Not true in any of the other North American leagues. European soccer is even worse. It's a very, very small number of teams in La Liga or Bundesliga or English premier league that are. Winning. Not to mention they have relegation. If you perform badly, rather than adjusting the league balance, they just kick your team out of the league.

2:01:17 Which is great as an owner. Wow, my media rights and my everything is so valuable. That uh oh actually it all just went away because I'm out of the league entirely. Right. That is the ultimate disincentive to investment and ownership in a league. You definitely don't want that. Yes. Okay.

2:01:33 So Loll it. comes up with this incredibly brilliant idea and says, you know what? Instead of having a salary cap I've got something that I think might work even better.

2:01:44 All these auctions. Then I keep running for all these media rights and sponsorships and everything. They work really, really, really well. Because they collapse Everything down to a super clear

2:01:54 one time in the moment transaction and I can set the guardrails. For minimum maximum. And Lollet. This man is so good at using the business laws of physics out there in the world to figure out what things are actually worth.

2:02:08 He just makes sure every time somebody pays what it's worth. There's never any money left on the table on any side. It is very clearly does price discovery and makes the transaction happen for the exact right amount of money. I'm trying to remember there's some episode we did recently. Where we referred to uh either the company or the founder as Uh value maximization pioneer. Or value capture pioneer. Value capture pioneer, yeah. Lollet Modi

2:02:33 is a value maximization pioneer. Yes. It was Qualcomm, by the way. Ah, quell come. So here's Lollett's quote on

2:02:42 how the auction comes about. I got the idea of the player auction. Because our family company had a partnership with Sutheby's auction house in India. Where you offer the item to the highest bidder. What's wrong with that? Great transparency.

2:02:55 I also knew it would be the talk of the town. Extremely controversial. That was a central part of My strategy. Then he says in a different quote.

2:03:04 Our number one pillar. I would call it The pillar of the IPL. was that we needed to have a department called controversy. And controversy allows us to get front page news if you're controversial.

2:03:16 Good or bad. Doesn't matter. As long as people talk about us, they hate us. They like us. Great. No problem.

2:03:22 They want to talk about us. Let them talk about us, and we don't clarify anything. I love it. Amazing. Okay, so back to the auction. Of course this is gonna be controversial. Like I said earlier, you know, the media is writing about this. Like The world's best cricketers auctioned off like cattle and sheep.

2:03:37 But This ends up being The perfect economic system for all the parties involved. Because it gets around A key problem with salary caps, even hard salary caps with hard limits.

2:03:49 They're always susceptible to dealings. outside of the structure. So The NFL is really good about policing this. But that's not to say that this doesn't happen, either explicitly or implicitly.

2:04:01 Let's say you're a player. The NFL, by the way, has two hundred and fifty five million dollars of salary cap. available per team. So Let's use this example. You're up to two forty five.

2:04:14 You have two players left and you want to sign them both for eight million dollars. What do you do? You don't have room in the cap, you only have ten million, you don't have sixteen million available. Right. No. You're setting up something that in practice I think the Cap probably would do its job and there's enough policing to ensure that

2:04:30 The low trust environment thing you would do would say, Oh, great. Sign both players for half and then go to him on the side and say, like, Oh, hey, by the way These other companies that I control, they're gonna do a sponsorship deal with you. Like you're gonna become a celebrity endorser for them and that's gonna be another three million dollar contract that you're gonna get on the side. Or look, you get to be an owner in a team at a low basis and immediately you gained three million dollars of on paper wealth or something. Point being you can't police what happens. outside the sort of artificial construct of like a direct

2:05:00 Salary contract negotiation. Yep. And the way I think this plays out in practice in the NFL is let's say you're a player mid to late career. Travis Kelsey is a great example here.

2:05:12 Travis Kelsey Probably at some point in recent years. I don't remember when he was up for free agency, but could have gone somewhere else. Mm. Arguably could have signed for more money than the Chiefs were willing to pay him.

2:05:27 However He has other business interests. Especially now that he's got his podcast, you know, et cetera. Does he really wanna be seen as the heel who's turning his back on the chiefs? Ooh, that was a good pro wrestling reference there, the heel.

2:05:40 Exactly. Yeah, right, right, right. Hey, this is all a soap opera. It's all entertainment at the end of the day. Okay. Point being there's all sorts of considerations about why a player might be willing to accept more or less money for a given team to play in that city or not to have his storyline affected In a certain way.

2:05:57 Et cetera. Auctions. Eliminate. All of that. So the point you're making here is

2:06:03 if you have only ten million dollars of cap left, but you need sixteen million You might be able to Use some emotional tactics or non monetary tactics. to get sixteen million dollars of value out of just ten million dollars of cap.

2:06:18 depending on the relationship that you have with each player and what their unique situation is. Exactly. Then you get into all sorts of gaming of You're signing multi year deals, right? And so you can set the number of years of that deal that's negotiated and you can set the dollar amount in each year. And the cap impact in each year. This happens all the time. Right. You trade money from one year to another in order to free up cap space. Yep. Oh, I've got the perfect example.

2:06:42 Quarterback deals. The biggest deals in the NFL. So Obviously they're gonna wanna make a lot of money. And that's gonna have the biggest impact on your cap. Because they're by far the highest paid player on your team.

2:06:53 At the same time, they also want to win a Super Bowl. And so a highly effective argument for a quarterback to take less money up front than they might otherwise. is to say like, Hey, we've got a window right now. We've got some star wide receivers, we've got a star running back, we've got some star defensive players. We'll give you a big contract. And we'll guarantee your money out in the out years. But if you take less money in these early years to allow us to keep to retain or go get some key weapons for you in the parlance of the NFL, you know, some receivers for you.

2:07:24 Be a team player here, right? Yeah. This stuff happens. All the time. So the great beauty of the auction But Lollett.

2:07:32 Sets up. is that he sets both a maximum spend a purse for every team coming into the auction. And a minimum spend. And that minimum's like seventy five percent of cap, right?

2:07:45 Seventy five percent of the maximum. And he sets the maximum. At a level that keeps every team in the black. So he knows now what the central TV right and sponsorship dollars are that are coming in. He knows what the franchise fees that all the owners are gonna be paying are.

2:08:00 So he can basically mastermind all of their P and L's. And he sets the maximum that you can spend In the auction. Such that every team is still gonna be profitable.

2:08:10 And then he also sets the minimum spend so that one team doesn't say, like, oh hey, I wanna be super profitable and I'm only gonna buy scrubs at the auction and have a really low. Salary base. Now you might think, wait a minute, an auction? That seems like it's gonna be way more susceptible to the stuff you were just talking about, David, with the salary cap and all the deals and incentives that are happening outside. No, it avoids all that because it collapses everything down to a single point in time.

2:08:33 Everybody in the same room with the same finite resources, it turns it into a monopoly game. It doesn't matter what happens outside the room. Sure the owners could say, Oh, my star player, you come play for me, I'm gonna give you an endorsement deal worth millions of dollars. Sure. No problem.

2:08:49 That doesn't get you any more resources to spend at the auction. Well, and even if you and the player collude on a lower price to save cap space. it doesn't mean that the bidder at the table next to you isn't just gonna bid a higher amount for that player. Everyone ends up going for their actual market value. You can collude all you want and it will never work. Because everyone goes for their market value because an auction is a point of time event that maximizes

2:09:13 Market value for each asset. Right. And the order that players come up, they come up in lots, and then the order within those lots is randomized. And it is all architected in a way. Such that the only way for a team to gain

2:09:27 an advantage over any other team. And The auction. is to have superior market intelligence. Which

2:09:34 has come to mean have superior analytics and superior Pla evaluation. So in the first year of the league The Rajasthan Royals. who have the lowest salary, they actually don't hit

2:09:47 the minimum salary and they get fined by Lollett. So the maximum salary that he sets for year one is five million dollars or maximum purse for the auction. And then that means the minimum purse is I think three point three million. The Royals don't even hit three point three million. They're so cheap. They were the cheapest franchise that was sold at the franchise auction, too. So they get penalized by the league.

2:10:07 They end up winning the championship. 'Cause they come into the auction. with better analytics than everyone else. Amazing. I do think the the one thing that's really important in this, though, to your point of collapsing it all into one single point in time.

2:10:22 All contracts Our three year contracts. Which really reduces the gaming. Well, I think that there's two important impacts of that.

2:10:30 One, most important for competitive dynamics is You can do all the gaming, all the colluding, all the side deals that you want. That won't get you any more resources. In the auction. And it

2:10:42 Also Won't get you any superior information. Unless you were to do something really crazy, like collude with a player to say I'm not gonna bid on you. You will go to another team and then I will pay you money to play worse for that team, like to throw matches.

2:10:58 Which, hey, by the way, kind of might start to happen in the next couple of years here, as we'll see. But you would have to get really dark. To impact the competitive. Spirit of the game here. And then the other important impact that I think you were saying there, Ben.

2:11:14 Is Because all this collapses to a single point in time, it means the IPL and Lalak can say all player contracts are standard contracts. There's no terms. There's no negotiations. Every player will be at

2:11:27 Three years. And both sides have an option to pull out. after each year. So the team could say after year two, you're not playing good anymore. I'm cutting you, I'm gonna send you back to the auction pool. Likewise player can pull out.

2:11:39 And that also means no agents. So at this point in time, I think most IPL players probably do have agents, but agents just can't impact things that much. Because it's a standard contract. Value discovery happens in the auction process. And then all the contracts are standard. It's like what YC tried to do with the safe. It's just look, you fill in the number. It's the cap. Whatever the cap is, is the cap. Exactly. Really reduces the legal fees.

2:12:02 Yeah. So now you might say. Well wait, why would players agree to this? This seems really team and owner friendly and not Player friendly. And indeed, if you look at the percentage of revenue that IPL players

2:12:17 make in the IP L versus in the NFL players are essentially getting fifty percent of The league's revenues. In fact, almost every sports league now, it's on average players get fifty percent. Except on English Premier League soccer. It's something like players get sixty plus percent, but

2:12:33 Like we were saying, the economics of those teams are upside down and it's actually a Bad thing for the league. Yeah. In IP L Even today, I think players are getting twelve to fifteen percent of the revenue of the league. It's extremely low. Yeah.

2:12:46 But They're thrilled. This is great for the players. Fair. Two reasons. There's a carrot and a stick here.

2:12:52 The carrot is Before the IPL. They weren't making any money. There was nothing. Yeah. This is constantly Lollett's argument. Yeah, I know my side is making out great, but guys, we're all making out much better than before. Yeah.

2:13:05 Before this All the players were paid by their international boards. Which meant one, you had to make it onto the international team in your country. There was just one team. So there were such a small number of players that could even get paid at all to play cricket.

2:13:20 Now all of a sudden you have eight teams within India. So it it increases the pool of players. Two, there's just way more money to go around. Yeah, you're only getting twelve, fifteen percent of the revenue, but it's a really big pie. And then the third reason is The actual IPL season is Very short, and you are not locked up for the rest of the year.

2:13:38 So It's like oh yeah, you can complain in the IP L for the two month window, that is their season. You can then go play for your international team or other leagues around the world. Do whatever you want the rest of the year. Earn as much money as you want elsewhere. Yeah.

2:13:51 It's funny, my issue with the salary cap Disparity. It wasn't that big a deal in oh eight, oh nine, two thousand ten. If the cap was five million dollars And each team is only making ten million total from the central pool.

2:14:04 It's actually a fine agreement. It's the fact that The media rights and the sponsorship rights have since Blown up like crazy. But the salary cap is pretty moderated in how much it's allowed to grow. And interestingly

2:14:17 It's not an IPL thing, it's a BCCI thing. The BCCI determines Those contracts. With the players. Of course they do.

2:14:26 So that's all the carrot incentives and then that brings up the stick incentive, which is at least if you're an Indian player. The stick incentive is Hey, you're gonna be happy with this or We're not gonna let you play. on the international team.

2:14:39 In India. Yep, that's exactly right. But all that said, even if you were to have a better collective bargaining system players were to make More

2:14:49 in the auction purse relative to the revenues of the league. This would still be an incredibly beautiful system. Every other sports league in the world should adopt this. They won't because the existing systems that they all have are too entrenched, but This is the new optimal system for running a sports league.

2:15:06 The last point to the structure of the auction is every three years there's a super auction. Where Everybody gets back in the pool and it all resets except Each team can retain Four players.

2:15:18 'Cause you want that local fandom, those franchise players to stay franchise players. You want the equivalent of Tom Brady playing for the Patriots and building that brand equity for The Patriots. Importantly though, there is still a salary cap that applies to that retained pool. That then does start to get a little harder to police and opens the door up for more side deals and other incentives, et cetera.

2:15:42 But for the most part. It really is an incredibly elegant system here. Okay, so here's the thing we glossed over listeners, and if you've been paying a lot of attention You might have caught it and expected us to address this. It's actually an enormous deal.

2:15:56 We said Right now the teams in year one get eighty percent of the central pool revenue and over time that goes down to fifty percent. The question you should be asking yourselves is Well wait, where does the other fifty percent go? Cause if you listen to our NFL episode, we said the NFL basically is a clearinghouse that retains zero dollars at the end every year.

2:16:18 And redistributes a hundred percent to the teams. What do you mean teams only get fifty percent of the central pool? The BCCI retains Fifty percent. of the central pool revenue, which eventually

2:16:30 Gets huge. I mean these media rights deals, these team sponsorship deals, I don't wanna spoil the numbers yet. But That is one enormous difference between Any other

2:16:41 sports system, especially the big four in the US. What we're talking about here is there actually is a governing body for the sport. In the country. That sits atop the league. That takes half the money.

2:16:53 You know. India. It's crazy.

2:16:58 It's totally crazy. But It's super not clear where the money goes. Definitely, they spend a lot of money on stadiums and upkeep and developing the game and hiring coaches and Here's the rationale.

2:17:09 I will give you the argument. The role of the B C C I is they are the stewards of the game in India. And as the largest and most important cricket playing country in the world. De facto they're the stories of the game around the world. So what that money is intended to go to is two things. One infrastructure, like you said.

2:17:28 Improving the stadiums, you know, et cetera, et cetera. Spoiler alert for later in the episode, doesn't really go there right now. And then the Second and um you know, arguably more important thing that the BCCI does with that money.

2:17:41 is player development. So Still today. Because the IPL is in its infancy relative to other established sports leagues.

2:17:51 The teams and franchises themselves Aren't set up to develop talent. in the way that say You know, major league baseball is the most developed on this front. If you're a major league baseball organization, you have minor leageball teams around the country and academies around the world where you are

2:18:08 Signing and developing players. You've built out a spring training facility. Yep. And not just that, but it is a three hundred and sixty five day around the world global operation where you are Identifying developing Preparing talent.

2:18:23 To play at the highest levels of the game. Right now, none of the individual teams, franchises themselves in the IPL are doing that. They are starting But mostly that work falls on The B C C I. Yep.

2:18:37 I just call this out to say Two things. One, as we now move forward in the story to the actual franchise auction and who is buying them. It's very different than buying an NFL team where you are entitled to one hundred percent of one thirty second of the league wide revenue. As a team owner in the IPL, you're entitled to fifty percent of the league wide revenue. And does the BCCI need hundreds of millions, if not billions of dollars to do player development and sort of non existent stadium infrastructure development? No. And the second reason is to put the question back to you, David.

2:19:10 You're harping on the fact this is the new gold standard. Which I agree with. Do you need a BCCI in order to create this system? Do you need a parent governing body above the league? 'Cause the league is just the

2:19:25 thin agreement between a web of capitalist entities called teams. And then the question is. Do you need some. Force above that. Oh, this is great. You're setting up a question I have at the end of the episode. So we will come back to that. Great.

2:19:38 So Okay, that's how the franchise auction works. That is in the information memorandum that goes out to all the franchise bidders for the franchise auction. I mean, basically the net of this, as we've implied all along, is you're getting a pretty sweet deal. Almost no matter what you bid. This is one of these crazy situations in the world where

2:19:57 It's not about how big of a finance brain you have. to figure out, ooh, is this a good investment opportunity? It's access. If one of these franchises is offered to you

2:20:08 You should have just said yes immediately. And bid whatever everyone else was gonna bid. This was a complete no brainer. And the question was, did it get offered to you or not? That's the investment decision.

2:20:20 Yes. Lollard and the BCCI would say, Oh no, no, no. Of course it was open and transparent. Anyone could have walked in. Sure. In practice on the ground, almost assuredly, what you just said there is Hundred percent true. So minimum reserve auction price for the franchise auction. It's fifty million dollars per franchise. Which would be paid over ten years.

2:20:42 Four hundred million dollars for the collective eight. Franchises. They end up selling for seven hundred and twenty four million dollars. collectively. So there's a lot of bidding that happens. So what, ninety ish million a team is the average Yes.

2:20:55 The most expensive franchise is the Mumbai franchise, unsurprisingly being the biggest city to where Bollywood is located, et cetera. That Gosh, really you couldn't script this any better. Uh.

2:21:07 is bought by Mukesh and Bani. The wealthiest person in India and the CEO of Reliance. For a hundred and twelve million dollars. highest bid in

2:21:17 that much more. The spread here is not that big between the highest and the lowest. the way that the weighing machine of this market Turned out is Hey, the teams actually are all pretty equally valuable.

2:21:30 They did a great job balancing the league. That's exactly what I read to Um Bani only paying a hundred and ten million. Totally. The central revenue stream. This is an incredibly well architected league. Yep. The cheapest franchise, as we said, is the Radistan Royals. Which is bought by a UK investor consortium led by Minog Badali, who's actually lives in the UK.

2:21:49 In London. For sixty seven million dollars, so roughly Half the price of The Mumbai franchise Shah Ruk Khan's group gets the Kolkata Nightwriters for seventy five million.

2:22:00 Pretisant's group gets the King's Eleven Punjab for seventy six million dollars. Suspiciously close in price to the seventy five million dollar Sharu Khan Vid, but only one million dollar more. Anyway. This I think is known at the time. one of the other board members of the BCCI who would soon become the chairman of the BCCI

2:22:19 A gentleman named N Srinivasan. Who also is an industrialist who owns the Indian Cement Company. He buys the Chennai Super Kings for ninety one million dollars. Despite also being a board member of the BCCI. Hey. Hey. What do you know? He's very interested in the development of the game. Yeah, exactly. Very interesting.

2:22:37 This is Huge resounding success. And then on the back of the franchise auction Couple weeks later now the Player auction actually happens and

2:22:47 It goes exactly as predicted. Interestingly MS Doney, who's legendary Indian cricket player. He goes for a million and a half Dollars in the auction.

2:22:58 Which was A huge spend. I mean, remember the cap on the purse is five million dollars. So you're spending one and a half of your five on one player. And how many players per team? There are eleven players that play on the field at a given time. So you know

2:23:13 one of your eleven playing players. You're spending thirty percent of your cap on. So anyway, all this. Just like Lalett prophesized, huge headlines, just adds to the media buzz. And then

2:23:25 At least from a competitive parity standpoint. It actually works. So The Rodestan Royals, despite being the Cheeboes. they bring better analytics than anyone else to the auction. They win the championship in the first year. Now.

2:23:38 We should also point out that they have not won a championship since then in the subsequent sixteen iterations of the IPL season. But Today there are ten teams in the league. And seven of the ten teams have won the championship.

2:23:53 in the what does it call it, seventeen seasons that have been played so far. Yep. And every single team has at least been Runner up. I don't know. Second place lost in the championship game. Sounds well balanced. So if you're trying to design a

2:24:06 Competitive parity league. This is a A plus plus plus. You can see why so many people tune in every single night in prime time and to march through and to May. Yep. Okay, so the promise of all this sounds totally amazing. And we know it worked eventually.

2:24:23 But most of the things that we study on this show that worked eventually kind of don't work at first. That is not the case here. Yeah, what does the first season look like? I would say explosive right away is an Understatement. As you might expect. Given

2:24:41 The incredible architecture of it and Lollett's force of will personality. This thing. Is A sensation is All of the predictions

2:24:52 that they made the business plan, the soap opera, the every night that this is gonna be the biggest thing ever to happen to media in India. It's true. And it's true. Right away. Hm.

2:25:04 This never happens. Never. The Rolex Daytona flop at first. The

2:25:12 Birkenbag. not heralded as anything special for like twenty years I think it happened in part because it had to happen. Lollett was running such a high wire act with all of these year one deals, like, hey, I promise you this is gonna work like we all think in year one, and if it doesn't, I'll shut it all down. Oh, right. And acquire it is subject to heavy survivorship bias. So we don't cover the ones that No, this was like a one shot opportunity. There have been many other high wire act one shot opportunities that we're just not talking about.

2:25:40 The one that immediately comes to mind is Activision Blizzard selling the Overwatch League. bids. I mean that just didn't work right away and then proceeded to continue not working. Yes. To use a cricket analogy here, this would be like You are

2:25:54 A batter facing the last ball of the game. And your team is down by five runs and you need to hit a six to win. I P. L It's a six. But you've bet your entire life savings and reputation on the fact that a six is getting hit. If it hasn't been obvious enough from what we've

2:26:10 been implying throughout the episode. The underworld of India and the mafia is definitely involved in all of this. And that is gonna come up in a minute. So It might not be an exaggeration to say lives are being bent on this. To some extent.

2:26:23 Hm. So April eighteenth. two thousand eight. First game.

2:26:28 First match happens. The Royal Challengers Bangalore. As the visiting team Versus the home. Calcata Night Riders, owned of course by the one and only.

2:26:38 Shah Ru Khan. There. He's leaving the parade. Into the stadium. Doing the big opening event.

2:26:46 Broadcast around the country, every T V is watching. And in the game. One of the star players for the Night Riders, the home night riders. Brandon McCullum. Interestingly here, international player, obviously not an Indian, but bought at auction by the Night Riders.

2:27:02 It's One hundred and fifty eight. In that first game. For the Colkata Night Writers. To win.

2:27:08 That number probably means nothing to many of you who are not cricket fans yet. I say yeah, because you might become one after listening to all this. And the people of you who do know cricket are like, Oh yeah, that was one of the greatest moments of all time. To hit a hundred and fifty eight, which means be responsible for a hundred and fifty eight runs. in a T twenty game where your entire team is only facing

2:27:27 A hundred and twenty balls, you know, pitches, opportunities to score. And you personally Score a hundred and fifty eight runs on the balls that you face. That is an epic performance. Wow.

2:27:40 What is your sense of how organic it was that this was an incredible spectacle right out of the gate. I mean it's hard to fake hitting sixes. There's a lot of rigging that would need to happen. There's a lot that would need to go into that.

2:27:54 From the IPL's perspective, this could not Storyline. So The whole season.

2:28:01 Basically Goes. Amazingly. The average T V share viewership for the entire season.

2:28:10 is four point nine percent of all active televisions. In India. Are watching. IPL, like on average. In the first season.

2:28:18 First season. Yes. A lot of T Vs. There is no single soap opera between eight and eleven PM. That is getting that kind of viewer share.

2:28:27 In India. It works. The final match, the championship match. is one in the last ball by the underdog, Rogestam Royals, the Cheebos in dramatic fashion. Yeah.

2:28:38 Final gets ten percent. viewership share of all TVs in India are tuned in. to that final match. So it goes Really, really, really well.

2:28:48 Oh, and we should say one other element of this, there's a prize pool that we didn't talk about. So just to add one more great game design mechanic. the winner of the whole thing. It's I think a three million dollar Grand prize in that first year? Five percent of the central media rights deal.

2:29:05 And then that prize pool is shared among the teams that make the playoffs with the winner obviously getting the most. Which is great,'cause that actually is one thing that is kind of a bummer about other sports leagues is You're not monetarily compensated for winning it all. I mean of all the playoff games, the Super Bowl, all that. you get to win by having a franchise that people love more and it sort of helps the durability of your franchise.

2:29:27 But you don't to financially win that year from that. the way that you would if there was a prize pool of millions of dollars like how there is in the IPL. Yes, this is the great irony of the NFL that We learned after doing our episode and we talked about when we

2:29:41 reprised it on the Arm Chair Expert podcast, which was super fun with Dax and Monica. Winning the Super Bowl is actually like a net negative economic event for an NFL team. Now in the long term, of course it's super positive. It's super positive. But for the actual fiscal year that you were operating when you win the Super Bowl. It's massively net negative. And as we all know from the Dallas Cowboys, you don't need to win Super Bowls to make a lot of money.

2:30:06 Jerry Jones, baby. Hm. Just to tie the bow on that, the reason why winning the Super Bowl costs you money. Is

2:30:13 You gotta go play those games usually In the playoffs. Best case scenario if you've got the number one seed, you're playing home games all the way through, so you're not losing money. But usually you're playing some away games and then the Super Bowl is a

2:30:24 de facto away game for everybody. But either way, you're not getting the same share of tickets and luxury suites that you usually would. And then the kicker on top of that, all that is If you win

2:30:34 Then the city makes you pay for the parade yourself. So anyway. But In all seriousness, back to the point of the IPL This is so well architected. Yeah. They're solving every little pain point of other sports leagues.

2:30:47 Super interesting on the whole thesis underlying the whole thing of like can we get non male viewers. Can we get women to watch this thing? Resoundingly yes. In the first season.

2:31:00 viewership was about thirty to thirty five percent women. So not fifty fifty, although today it is truly fifty fifty. Yeah. But That's up from zero. No women were watching international cricket before. I mean no, I'm sure there were some. So

2:31:14 thirty to thirty five percent is a huge win. Like I said, today it's fifty fifty. Not only Does this mean that Brand sponsors of

2:31:23 commercials during the broadcast. Can be. both general interest brands and brands focused at women. In twenty nineteen the King's Eleven franchise

2:31:35 They actually, as one of their shirt sponsor logos, bring on a beauty brand. Really? So this is the first women's focused brand advertising directly as a sponsor and as a jersey sponsor of a male sports team anywhere in the world.

2:31:51 Fascinating. And I think that's continued and probably a bunch more uh have uh come from it. There's a great passage in Minosh Badali, the principal owner of the Royals book, where he talks about this. Says The sight of Chris Gale, monster hitter. Chris Gale's one of the West Indies player, one of the legendary

2:32:08 Big, huge think like Barry Bonds of cricket, essentially. The sight of Chris Gale, Monster Hitter. Sporting a woman's beauty brand across his right pectoral is quite something to behold. This is the definition of disruptive advertising. Or as one ad executive put it, a hardcore female brand on an alpha male chest.

2:32:26 Sales of Lotus Herbal's SPF moisturizer were up 20%. The year that they decided to sponsor the team. Wow. It is a hugely important development. Absolutely. They totally unlocked a new market. Wow.

2:32:41 Okay. So that's the first season. Everything goes to plan and just kinda continues exponentially and perfectly up from there, right? Yes, monotonically, up and to the right, straight line from there. To today. No.

2:32:53 Year one. Incredible. Today. Even more incredible times twenty.

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2:33:56 So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. Okay, so how does the IPL almost all fall apart in years two and three? Well Before It all almost falls apart in year two.

2:34:17 The off season after year one. Loll it. The B C C I All the teams, all the owners, they're all riding high. This was

2:34:27 An enormous success beyond anyone's wildest dreams. So I foreshadowed a little bit ago. And the T V rights deal with World Sports Group and Sony. Uh Lollett had given him his word as a gentleman.

2:34:40 That if this whole thing doesn't work. I'll rip up the deal and I'll won't carry IPL forward. You won't be on the hook for the nine hundred and forty million. For the next nine years. Yep. Well

2:34:52 This thing was such a success that All of a sudden nine hundred and forty million for the next nine years is Looking like a hell of a steel. Which they should benefit from for signing a long term deal. That's what you would think.

2:35:04 Loll it. Rips up the deal. Oof. Specifically, he engineers an excuse and says that Sony had been allowing Reliance's telecom division.

2:35:16 to advertise during their commercial breaks. And that that violated Vodafone's exclusivity over everything IPL because Vodafone was a central corporate. IP L Telecom sponsor. He also alleges that He has evidence that Sony had been

2:35:34 at least in certain markets cutting away from the game early to squeeze in extra commercials and Not showing all the balls that were bowled in. I know. Who knows if that's true or not? I don't know.

2:35:47 Could be. Is that the kind of thing that means you tear up the contract or do you call them and say, Hey, we know you're doing this, please don't do that anymore? I suspect that had the IPL not been such a huge success And lollett were not looking to tear up the contract, he would not have caught these discrepancies, shall we say. Yes. And of course, it's not till the end of the season that he points all this out.

2:36:07 On the back of this, he's strong arms. Sonian. World sports group. into renegotiating Uh new deal.

2:36:16 That is gonna be direct with Sony. They throw World Sports Group a bit of a bone. I think maybe they let them keep the international rights but Sony is now gonna directly Do a ten year deal. With the IPL. For two point four billion dollars.

2:36:30 So two hundred and forty million dollars a year. Quite a bit more than the sixty million dollars that they had paid. For year one. So that's four X the actual cash. out per year and it's

2:36:43 two point four X. what the theoretical value of the contract was gonna be on an annual basis. Yeah. And really just Tells you everything you need to know about how much of a success this is here because Sony is willing to say

2:36:57 Okay, fine, I'll let you rep up the contract and I'll pay you roughly four X. Right. Ultimately they kept the same broadcast partner. but started charging them four times as much. And the broadcast partner was like, Yeah, that's still fine. Clearly it meant that there was a lot left on the table that Sony was benefiting from.

2:37:14 in year one because of how big of a success it was. As Lollett would point out. I made a lot of money for everyone. Yep. So things start off

2:37:22 Well, I guess you would call that well, from uh IPL's perspective during the off season. But then as we're getting closer to The season launching in two thousand nine. General elections are happening in India. And elections are contentious. There are security issues.

2:37:39 And The government. And various state police. organizations. start coming to the B C C I and the IP L and saying, Hey, I'm not sure that we can promise

2:37:48 Security. At The matters this season. And so they go back and forth. They're like, Oh, we gonna move some of the matches and some of the states and could some of the states provide security and not others. Ultimately they decide.

2:38:00 Shoot. We can't hold this thing in India at all. They go full NBA bubble, right? It's like the Disney bubble from Covid.

2:38:08 Yes. So on very short notice, I think like a month notice. They airlift the entire tournament. out of India and move it to South Africa. And then they reset up

2:38:21 All the teams in South Avon, they're the same team, same ownership, same player, but they just assign like oh Mumbai, you're now in Cape Town or you know, where reassign teams to all the cities. And they restart the IPL and they play it. In South Africa. Amazingly.

2:38:38 It goes pretty well. And this actually becomes a great thing for the IPL because It's still very popular in India. It's broadcast back in India. Yep. Local revenue for the teams and the stadium Gate receipts and sponsorships. for the local teams was never that much in India. Still isn't that much to this day. So you're actually not sacrificing much revenue by doing this.

2:38:59 I think by our calculations we tried to estimate a P N L for any given team. We're looking at something today, like sixty six million coming from a central pool, and only like four ish million coming from tickets. This is a T V product. Yes. And satellite signals work just fine from South Africa to India. Maybe even better'cause close to the poles.

2:39:20 Yeah, maybe. This really accelerates IPL. becoming a global phenomenon among the cricket playing and cricket watching countries of the world. The fact that you can airlift the tournament. Out of India.

2:39:34 Put it in another cricket playing country. Have it be Just as successful. Have everybody be happy you only growing the game by doing this. Yep. On the back of that. Heading into season three.

2:39:45 They decide, all right. Time to expand. We're gonna add Two teams to the league. We're gonna do a two team franchise auction in the same model as the first one.

2:39:55 Except now we expect the prices are gonna be much higher. And I will say only two teams does show some restraint. The NFL's thirty two teams, the NBA I mean I could imagine a scenario where they think Hm let's double it.

2:40:09 We're really feeling ourselves. Well let's at least do six eight teams. Yep. They do only do two. That does show some restraint. The two franchises that they auction off are Pune and Kochi.

2:40:21 And those go for three hundred and thirty three million dollars and three hundred and seventy. million dollars. A little bit higher than ninety. Now Central revenue is higher. from the new broadcast deal that got renegotiated.

2:40:36 renegotiated, quote unquote, with Sony. But they are on the hook for paying thirty three million dollars a year and thirty seven million dollars a year. Yeah, so if you believe that the Team value should go up exactly commensurate with the annualized value of the TV contract, then this is the correct price.

2:40:54 They just had a Big payment that they owed the BCCI right out of the shoot. in year one. Yeah.

2:41:01 So unfortunately These two new teams. Don't make it. The Kochi franchise goes bankrupt after their first season in the league, withdraws from the league.

2:41:11 The Pune franchise makes it Two seasons and then also withdraws. From the league citing financial difficulties. And This is the first time really

2:41:23 Where the music stops playing for a lollet. And Despite his incredible entrepreneurial success. He has made a lot of enemies along the way. Yeah, and everything was up and to the right. Everyone was making money together to this point.

2:41:36 You know, there were some collateral damage from these other people who had lost auctions or people who lost out on the media rights. But nobody had ever actually lost money yet. Right. And now for the first time. People are losing money.

2:41:50 And this is when the knives come out for Modi. Right. And so he's got all these Enemies that w were sort of dispersed. But never had any sort of real ability to come after him. Yeah.

2:42:01 This is their moment. So after the twenty ten season The BCCI suspends Modi. From the BCCI board. On twenty two charges.

2:42:13 Including Bypassing the governing council when making decisions. Not following proper processes. Bid rigging in auctions. That's a big one. Who's gonna get teams?

2:42:25 Yeah. Pretty hard to Say that didn't happen. Awarding contracts to his friends. Excepting kickbacks on the broadcast deals.

2:42:35 And then the big ones first Secretly engineering for members of his family and close associates to have initial ownership stakes in three of the original eight. IP L teams. Now

2:42:49 another BCCI board member and Srinavasin who I think by this time had become the chair of the board and was Lollett's sort of main nemesis on the B C C I board. He directly owned the Chennai Super Kings through Indian cements. So like hey pot calling the kennel black here. Right. And then the last two are big ones that he's accused of.

2:43:08 Betting. On The league and Money laundering. So

2:43:13 I referred a minute ago to sort of the underworld of India being involved here. Gambling In India. is illegal. writ large back then and still to this day, it is illegal to gamble full stop in India.

2:43:26 However. As you might expect. Much like the movie. Casablanca, you would be Shocked, shocked to find gambling going on in this institution.

2:43:36 There is a lot of money gambled on cricket in India broadly and on IPL specifically. After it gets Going. In many cases through foreign bookmakers. Yeah, so much so.

2:43:47 The statistic is that Just trackable bets plays through Ben, like you said, foreign bookmakers in countries where gambling is legal On IPL matches. I believe is something on the order of like

2:44:00 Seven hundred and fifty million dollars per match. Big business. Huge. And that's just what is trackable legally in foreign countries. Clearly there is also a big domestic bookmaking market happening. Here too.

2:44:13 It's just happening by Thunderworld, the mafia. Yeah. So the accusations are that Modi is participating in this and actively betting on games. Obviously these are really serious accusations.

2:44:25 the courts in India, the legal system gets involved, the police get involved. As this is all going down, Modi ends up leaving India and relocating to London. Where he still lives to this day, and he has not set foot back in India. Since twenty ten when this all Goes down.

2:44:44 And in twenty thirteen the BCCI bars him from India cricket for life. I mean this thing that he like willed into existence that he created billions of dollars of value for all these other people. He has been barred from. Yes.

2:44:57 Modi, of course, denies all of this and defends himself vehemently to this day. you might ask why did he leave the country then when all this went down? He actually recently said on a podcast and has uh said this publicly in several news outlets. that the Indian mafia had placed a hit on him.

2:45:15 And were looking to take his life. As he put it because he refused to allow Match fixing. To happen. in the IPL and obviously the mafia wanted match fixing to happen. They're facilitating all this illegal betting that's happening and

2:45:28 Ooh, wouldn't it be great if we could also fix the matches? Dark stuff. Again. The stories you hear. Are so divergent.

2:45:35 Then it's impossible to know there's no reconciling There's no truth that is converged upon. You know, as we started off the episode with. He's a colorful character. I think what really happened here and the major point is

2:45:47 Hey, everything was working great as long as the music was playing and Lalat never lost money for any of his partners. And then That happened and then the knives came out. Yeah. And it's interesting, quite interesting. All these

2:46:00 Very serious allegations, they get. brought up against Modi and then he ultimately The B C C I decides that he did do them and bans him for life in twenty thirteen. Because the chairperson of the BCCI at this point in time and Lalit's great rival who's

2:46:14 One of the forces behind ousting him. Is And Shinabasin. D. Owner of the

2:46:21 Jedi. Super Kings. Via his family's business. Indian. Cement.

2:46:27 Well That very same season in twenty thirteen. The Indian police run a sting operation And Bust.

2:46:36 members of two teams in the IPL, the Rajasthan Royals And That's an I Super Kings owned by N Shrinavasin. for

2:46:47 Spot fixing. Matches. Oof. That'll kill a league quickly if you don't get that in check. Yeah. I mean already like all the controversy from Lick kicking out.

2:46:57 the founder, the driving force behind all of it. That's not good. The two expansion teams folding. Now you've got A police bus of actual

2:47:07 Spot fixing happened. Now not match fixing. Match fixing would be throwing the whole match. That would be a big operation. You'd basically need whole teams involved. Spot fixing, this is saying like There's a betting line on what's gonna happen in each over, like each set of six balls. And so saying like

2:47:22 Oh, I'm gonna pay this bowler on this team to bowl poorly in this over so that the batter he's facing. Well perform better or vice versa on the better. Right. What's the real harm? It doesn't affect the outcome of the game. Exactly. Arguably, but massive trust destroying.

2:47:39 Amongst the fan base. horrible for the league. Especially horrible when it's the BCCI chairperson's Team That is.

2:47:48 Doing it. At first Enshinavasin denies everything, refuses to step down from the BCCI. This ultimately does become The best thing to happen.

2:48:00 to the IPL. I think if this hadn't happened And they've just been the forcing out of Modi. Things might really have gone sideways here. Because they got so much worse.

2:48:11 This forces the government of India to step in. So the s Indian Supreme Court Steps in They Basically take over the BCCI. They spend two years investigating and restructuring everything.

2:48:25 And then in twenty fifteen They announce all their verdicts, they force and Shinavasan to step down for the BCCI, they restructure the B C CI They suspend the two teams that had been spot fixing the Royals and the Chennai Super Kings for two seasons. Those teams are replaced.

2:48:43 For two seasons by Temporary franchises based in Pune and Rajikot. And then The court institutes a whole new clean slate set of reforms and governance. And I've been referring a couple of times to Minoj Badali and the book he wrote in New Innings about his experience.

2:49:01 Owning and running. The Ratistan Royals. The other team that was suspended for two seasons. Does he write about this in the book? Totally right about this.

2:49:10 This is his quote on he says this was a critical moment. In the IPL's evolution and also in India's evolution. The IPL was fast becoming a microcosm. Of the challenges of doing business in India writ large. For years foreign direct investment into India had been slow.

2:49:26 Historic concerns had included political stability, Concerns about corruption. And the risk of Retrospective. Legislation.

2:49:34 And so the Supreme Court here Stepping in and basically saying. We're gonna backstop and fix all of this. The IPL is by far the most visible industry where India is the global leader. with the global most important

2:49:49 business brand entity in the world. We can't be seen as like This is a whole sham run by the mafia. We're gonna clean it all up. And they basically did.

2:49:59 I mean from here on out It's save. Professional organization. Totally. So another quote from Our good friend of the show here, Ed Cowan, who is a

2:50:09 investor at T DM Growth. We did a great A C Q two episode with them a couple years ago. And was the perfect person for us to talk to during this episode because Not only is he a good friend of the show He is a former Australian professional cricket player.

2:50:23 Who was coming up right around the time the IPL was started. was actively playing right through all of this happening. And Ed did the business breakdowns episode about the IPL

2:50:36 Which has been an amazing resource for us and we'll link to the show notes as a Great, great episode. And then we talk to him afterwards. So here's Ed's quote about this. In many ways, the IPL was a bit of a bellwether for foreign investment at scale. And the government realized that it was in their best interest to promote a vision that proper governance really was at the forefront of the new modern India.

2:50:55 And it was important for people to be able to invest in India. And in many respects the current structure where we have Redbird or C V C big institutional investors in the IPL, which we will get to in just a sec. That wouldn't have been possible without the new governance structures that were put in place circa twenty fifteen by the Supreme Court. I mean this whole thing almost went down the tubes. Like it was

2:51:15 This close. And the Supreme Court saved it. You had something on the order of at the time four or five billion dollars of enterprise value across all the teams that almost went to zero. Yeah. But the more important thing though is yes, there's the value and money aspect of it. But

2:51:31 It's India's reputation. There are other industries where India is a global leader. But they tend to be more back office type industries like outsourcing like Infosys, Wipro, et cetera. You look at the biggest companies in India. By market cap and they are

2:51:44 All either global outsourcing companies, back office type companies. Or purely domestically focused companies. So like Tata, Reliance, et cetera. These are huge, huge conglomerates.

2:51:56 But especially at that point in time, they're not particularly active as global leaders outside of India. The IP L has Kind of against all odds. become like India's national champion here. That's such a great point. That's kind of a crazy statement to make, but it's true.

2:52:12 Wow, yeah. So Again. Horrible moment. For the league, for the owners.

2:52:18 For Modi, for Srinivasan. But frankly kind of necessary to clean this all up and Make it Ironclad enough that global private equity firms

2:52:28 Global media companies. In the ensuing years. Continue to come in and Invest in this league. Right, so catch us up then through the twenty tens. There's another meteorite deal, right?

2:52:39 Yeah. So twenty seventeen After the dust has settled on all this. The original Meteorite steal is finally up, right? The renegotiated quote unquote original meteorite steal.

2:52:50 The ten year Sony redone deal. Yes. It's finally up. And Modi's no longer in the driver's seat here.

2:52:58 So who And does the deal. Rupert Murdoch. Star. Rupert finally

2:53:07 Finally, after what are we now? Ten, eleven years in, twelve years in. Comes back. To Indian cricket. And

2:53:15 Does a Two and a half billion dollar Five year deal. So twice The value of the

2:53:23 renegotiated soda deal. So five hundred million dollars a year media rights. Yeah. The renegotiated Sony deal. Was Two point four billion over ten or nine.

2:53:33 So we've gone from sixty slash a hundred to two fifty to now to five hundred. A year. Yep. So that happens in the first half of twenty seventeen. And then

2:53:45 The other shoe drops. December twenty seventeen. Disney acquires all of twenty first century Fox. For I think about seventy billion dollars. Inclusive of Star

2:53:55 And all the operations in India and this contract. Now, obviously that deal was about way more than just this contract, but this was an important piece of it. It's so funny that it ends up being Fifteen years later, twenty years later. I mean, recall all the way back there was the India subsidiaries

2:54:13 of Fox and Disney merged. And got the the cricket deal. Pre IPL. And now You have Disney and Fox globally.

2:54:22 Merging. And I PL was a Big part of this. Because There's something else that happens in India.

2:54:29 The year before in twenty sixteen. Which is reliance. Launches. Reliance Geo. Yes. I remember when this was happening.

2:54:38 Facebook. Invested. Five point seven billion dollars for a ten percent stake in this. New subsidiary of Reliance. What is Reliance Geo?

2:54:48 It is a Smartphone data provider. It's a telecom Wir haben Data

2:54:54 Service for smartphones in India. And Mukash and Bani and Reliance Geo basically Slash the price of data plans to Effectively zero.

2:55:04 In India. So Before Reliance Gio launched in twenty sixteen. Smartphone ownership in India was De minimus thirty million handsets was the active install base.

2:55:15 Wow. out of one point four billion people. The upper class. And twenty sixteen, that's nine years after the iPhone came out, and like five or six years after it became the de facto standard computing platform in the US. Yeah, and there's already cheap Android everywhere. This is like the version of India not getting television until the nineties. We're talking twenty sixteen here. And smartphone penetration is still basically zero. And the reason was because data plants were still really expensive. Mm-hmm. Vodafone, the other carriers.

2:55:44 They were pricing data In India at the same level as data in the US. So it's just Totally inaccessible to the population. Crazy.

2:55:53 Ryan Steel comes in. Thirty million handsets when they launched in twenty sixteen. Fast forward Six years. to twenty twenty two.

2:56:01 eight hundred million install base of handsets. So This is the other thing that completely turbocharges IPL. And Is why IPL and IPL rights become so important for Disney.

2:56:15 Because Smartphone adoption, mobile adoption is happening. And India. What is Disney and Bob Iger's number one strategic priority?

2:56:23 During this period. Globalization. Well, not just globalization. That's always a priority, but Disney Plus. Oh, right.

2:56:30 And uh what are you gonna count in Disney Plus? I mean, Netflix counts their subscribers all over the world as Netflix subscribers. Iger has those three big principles in his book. The first was around the best IP in the world. The second was around going global. And the third was about technology leadership and ow distribution platforms. 100%. And so Disney Plus is the major Strategic priority.

2:56:54 You've now got star. That has the digital and terrestrial TV rights to IPL, which is the biggest driver of media consumption. in the country by far, not even close. Disney's trying to

2:57:08 grow and juice Disney Plus subscribers, what is the very best thing you could do? Get IPL rights. And stream'em on Disney Plus. Boom. There you go.

2:57:16 So Five hundred million. A year for five years starting in twenty seventeen. That goes. Up until there's a new deal that comes online in twenty twenty two.

2:57:27 Yep. Before that, though, The other piece of this star deal, new deal for IPL was Because

2:57:37 A it was a much bigger investment. And Star and Rupert were dying to get back into Indian cricket. And now you've got this mobile streaming opportunity happening, especially once Disney acquires the company. They invest a lot more in production values.

2:57:51 For these IPL broadcasts. All the stuff that you see in North American or European sports broadcasts, they do. They mic up the players. They put mics on the wickets. They add graphics packages. There's way more cameras. There's like little cameras all over the place on the field. The I don't know if it's called an umpire or referee, but someone wearing a hat has a little camera on the top of their hat.

2:58:12 Yep, exactly. Remember The broadcasters before this for all of Lollett's entrepreneurial Success and talent. He was getting Broadcasters that weren't

2:58:23 Experienced in sports. to come do this. This was Nimbus's first Sports. Entree. This was Sony's first sports entree. In India

2:58:33 You have Star, Fox, News Corp, Disney coming in now and taking over. Like there's gonna be a whole new level of Professionalism coming in. They also start marketing. the matches differently. So like there's always been the incredible soap opera story to

2:58:48 IPL and that's the appeal too. At least half the country. Oh come on, these storylines are so appealing to men, too. Just look at college football, look at the NFL. It's the storylines, it's these dramas, it's the soap operas that captivate us. Any NFL football fan who pretends that it's not a soap opera is lying to themselves. Oh, the ESPN alerts during the off season of who's signing where and yeah. Totally.

2:59:09 So Starts Marketing matches differently. They have like Rivalry Week. They basically take the playbook from

2:59:18 All the best practices of Fox and ESPN. all throughout the world and bring'em here to the IPL. The other thing they do. Is Yeah.

2:59:26 Dynamics of language in India are super interesting. So English is the lingua franca. of the country. But It is almost everyone's second language.

2:59:37 Hm there are a whole set of Big languages that are primary different languages spoken by different regions in the country. And Hindi's the biggest of those, right? Hindi's the biggest, yeah. So the official languages of India are both Hindi N.

2:59:53 English. And can't just be Hindi because then you're leaving out a huge portion of the population that doesn't speak Hindi. Sure. This is amazing for all the dynamics here at play in these international companies and foreign direct investment. But

3:00:07 Not everybody speaks English. And it's the second language. So remember. The whole genius of the IPL is that there's only one game going on at a given point in time. So Star takes the feed from whatever the live game is.

3:00:21 They set up a central studio in Mumbai with eight different floors and eight different anchor desks who have commentators commentating in the eight biggest Indian languages. that are then rebroadcast out to those regions in the primary local language. And this one game at a time thing is so genius too because The way that they

3:00:40 make the whole thing work with this player auction. The players are kind of moving around a lot. So you're a fan of a team. But your favorite player might go somewhere else. And so if you're a fan of a player, you're kind of fans of multiple teams. So what ends up happening is. you end up becoming a fan of the league. You have a team you like.

3:00:59 You have players you like, but since the players are kind of everywhere, you just like IP L. Period. Yes. There is definitely some affinity to your you know, if you live in Mumbai, you probably have affinity for the Mumbai Indians. T.

3:01:12 You probably have more affinity to Virat Coli or M S Doney or et cetera. You're not gonna miss those games. Yes. And you may not speak that. Primary language there. In fact you probably don't. Yeah.

3:01:25 So All of this works. Incredibly well. You've got the major tailwind of Reliance Geo, you've got the professionalization, you've got the local languages. The twenty nineteen IPL final match. is broadcast on seventeen channels across the country in different languages.

3:01:40 Plus digital over the top. The Final viewership numbers. Best estimates are in three to four hundred million. Unique.

3:01:49 Viewers that are. Watching. The twenty nineteen IPL final. And just for context on that. The most recent Twenty twenty five.

3:01:58 Super Bowl. Was the biggest. Super Bowl ever. And I think De facto that makes it the biggest

3:02:05 Broadcast. T V event in US history. Ben, do you remember what the viewership numbers were. on this twenty twenty five Super Bowl.

3:02:15 Comped against the twenty nineteen IPL final. You told me this recently Uh one twenty, one thirty, something like that. Yep. A hundred and thirty eight million viewers for the biggest US TV event in history. Back in twenty nineteen there were already three, four hundred million people over twice that.

3:02:34 Watching. The IPL final. And it would only grow from there. In twenty twenty two, the IPL regular season uniques across the season were Three hundred and sixty one million. Twenty twenty three, that would grow to five hundred and five million. And then last year.

3:02:52 It was reported that On streaming alone, six hundred and twenty million people watched it. I mean so you're talking about Close to half the country. Is watching.

3:03:02 The regular season. Yes. Yes. This thing is So big. On streaming. So presumably once you put TV in there too.

3:03:11 Yeah. That was the Big bet and the payoff of the the reliance Gio entering the data market in twenty sixteen and smartphone adoption just exploding in India. Right.

3:03:22 So then twenty twenty one IPL does expand successfully this time. There are two new teams sold at auction. The Gujarat Titans. Which are

3:03:32 Acquired. by the big British private equity firm CVC. For seven hundred and fifty million dollars. That's the new high water mark before that. I think it was what, three hundred million? Well it's the new high water mark for

3:03:45 A minute. Because the other team The Lucknow Supergiants are bought by a domestic investor group for nine hundred and fifty million. So just a hair under a billion. Ten X off the original purchase price of the teams in two thousand eight.

3:03:57 Now the payment terms are paid in equal rattable installments over ten years. And then This time those payments are redistributed. to the other existing eight teams in the league. Oh, really?

3:04:11 Because the new teams coming in are diluting the central meteorite values. In full? Or fifty percent of it? That's a good question. I don't know if it's fifty percent B C C I fifty percent to the teams. Either way, the BCCI is still taking their fifty percent cut. However, post the Supreme Court reforms is a much more Buttoned up organization. Makes sense.

3:04:31 Also in twenty twenty one Redbird, which is a US New York City based sports focused private equity firm. They invest in the Rajstan Royals. So we've come so far here that the Rajasthan Royals, the cheapo franchise in the beginning, had the original foreign direct investment from The UK. Then

3:04:50 We're part of the spot fixing scandal gets suspended for two years. Now you've got one of if not the biggest sports private equity firm in the world, I think Redbird is like a ten billion dollar Assets under management firm.

3:05:04 coming in and investing in that franchise in the IPL. Yep, global stage. And it really just speaks to like The Supreme Court cleaning things up in twenty fifteen was absolutely huge. For the IPL.

3:05:15 Yeah. So all that takes us to Summer of twenty twenty two. After the IPLC's in. The Star Deal is up. Time for a new rights deal.

3:05:26 Time for a new rights deal. And the BCCI Signs. Not one. But two deals. Separate deals for terrestrial television. And digital streaming. They break it into a two by two matrix.

3:05:39 They say there's International and there's domestic. And then there's streaming and there's T V The international deals are small. Now

3:05:47 Who wants to bid on which one? So The big ones, the domestic deals. Star Re ups on the T V deal for just over three billion dollars.

3:05:56 For five years. Yes, for the five years Disney Star re ups their deal, but they just get the TV rights. Right. And it is just on the Indian subcontinent. for three point one ish billion.

3:06:09 So That's only five hundred million more than the two and a half that they did. the previous time in twenty seventeen, but that was both T V and streaming. This is three billion.

3:06:20 Just for terrestrial TV. Yes. Now the other side of this, the digital rights. The streaming. is Viacom eighteen for another three point one ish billion.

3:06:32 Yeah, actually slightly more. Than the T V deals. Ah. Do you know who Viacom eighteen is? Oh boy, do I ever know who Bay Kame Teen is.

3:06:42 This is a huge part of the story. Viacom eighteen is a joint venture between Paramount And Reliance. Yep. So locally that ends up being broadcast on what they call Geo Cinema, which is their streaming service. Yep, when you say broadcast.

3:06:57 Digital over the top. Geo Cinema on smartphone apps. Now we're just talking about the Indian subcontinent here. It's quite interesting that they're about the same price, the streaming and the TV. The streaming is small but growing way faster. And the TV is very large but flat.

3:07:14 And it's really interesting, I think Disney wanted to also go for the streaming rights. But I think the assumptions you have to make. about the growth and monetization potential of streaming. are a pretty big leap to say, Yeah, they're worth the same as T V Now, which has

3:07:31 a lot of hungry advertising customers standing there with cash now saying I want to advertise on this product. Whereas you're really betting on the next four or five years on streaming to materialize. But who better to bet on that materializing than Reliance Geo? This is

3:07:48 Enormous. Disney. It was a real Real problem. That they lost the digital rights in the bidding here.

3:07:57 Remember. Disney Plus. is the cornerstone of Disney strategy. At this point in time. Under Iger. I has come back. That's right. Twenty twenty two was the return of Bob. He architected this before he left.

3:08:10 Stop comeback from retirement. And Disney Plus has gone from the most incredible greatest strategy, greatest thing from sliced bread to this total albatross. Hanging around the company's neck.

3:08:22 And now they lose IPL digital streaming rights. So the next quarter when Disney reports earnings. Remember, Disney Plus has been the cornerstone of the company's strategy for the last Five, six, seven years.

3:08:34 And it had been growing, it had been this great success story, success story through Covid. It's now up to people are talking about is this a true competitor to Netflix, Disney's Past. A hundred and fifty million global Disney Plus subscribers. This turns the tide. I think it's the first quarter where they have a net subscriber loss. I think of what, like two, three million

3:08:54 Disney plus subscribers that they lose on a net basis. Something like that. But you can very clearly see in this chart, though, it's growing and growing and growing every quarter. And then it starts this five quarter slide. right there in twenty twenty two. And the interesting thing is if you break it out, the Disney plus core actually does keep growing. But

3:09:12 Disney Plus hot star takes this huge hit and starts contracting. That's right. They start breaking it out, I think, at this point to be like, Oh no, it's India. Yes, it's exactly right. Yeah, this is a huge problem for Disney. So you got this two three billion dollar deals that don't quite add up to six point two. We haven't talked about the international rights yet. Interestingly enough, Viacom eighteen not only acquired the digital rights on the Indian subcontinent, They also acquired

3:09:38 Both the terrestrial and digital rights. internationally. So Part of that. three billion dollar deal.

3:09:47 That Viacom eighteen did. is for the other three quadrants. It's not just the Indian subcontinent. Digital. It's

3:09:56 That and all international. Uh interesting. But it's not quite all international. It's international in Australia, New Zealand, the UK, South Africa, the cricket playing countries. Yep. There is a second little carve out, this piddly little thing. There's a company called Times Internet. That paid twenty six million dollars for the Middle East and thirty three million dollars for the USA.

3:10:18 The current Five year rights to watch cricket in the USA are only worth thirty three million dollars out of a six point two billion dollar package. And I will say I tried really hard to go watch some full IPL matches.

3:10:34 Times Internet's US property, Willow TV. Yeah. Terrible. I couldn't find a single match to watch. Presumably during the season, it's easy to watch what's currently live right now, but trying to watch last year's matches on Willow in the US.

3:10:49 thirty three million is apparently not paying for a very good website to be able to do that. So The real question. Basically right now is What is that going to be?

3:10:58 the next time the rates come up. Yes. in January twenty twenty four, so a year ago the presenting sponsorship for the whole league came up again. Tata, the of course big Indian conglomerate.

3:11:11 bought it for sixty million a year for five years, so a three hundred million dollar deal. That brings us to today. You've got under these new media rates deals that we were just talking about. call it one and a quarter billion dollars in Media rates revenue coming in central to the league. Yep.

3:11:28 Then another, you know, call it hundred and fifty to two hundred million in total central sponsorships coming into the league. Of which Tata is the anchor at sixty million a year. So round that up to call it all in a billion five annually coming in central to the league. Guaranteed. Revenue. Yep. Guaranteed long term rights deals.

3:11:49 Asset light, so to speak. You can now start to understand why the league collectively has been most recently valued at sixteen billion dollars and why the most successful teams Like the Mumbai Indians are.

3:12:03 Around one point three billion average teams about one billion in valuation. There's real revenue here to support those numbers now. Absolutely. So This is a T V game. Media rights and central sponsorships are still by far the lion's share of Total revenue coming into the league.

3:12:21 Local revenue that the franchises are generating, this is ticket sales. luxury boxes such that they exist, uh suites at the stadiums. We'll get into that in a minute. Local sponsorships, etcetera. That's probably fifteen ish percent of total revenue in the league. So eighty five ish percent.

3:12:38 revenue on the central media rights and sponsorships, fifteen ish percent local. Yep. Add all that together, you've probably got One point seven, one point six billion in total revenue that's flowing into the league annually. Now. Here's the kicker.

3:12:55 All of this is for a league that currently Only plays seventy four games. In a season. That only lasts two months. So

3:13:05 One way to benchmark different leagues against another By scale, impact, revenue, value, et cetera. Is to adjust for How many matches they play. There's a difference between the IPL that only plays seventy four matches and major league baseball that plays

3:13:22 What did you say about the two thousand some odd games? About twenty five hundred. So if you look at That revenue coming into the league. On a per match basis.

3:13:32 IP L is already The second most valuable league in the world behind the NFL. Second most revenue per match. In the world. per match in media rights that are sold.

3:13:45 Yep. So Ben, I think you have like the whole list here that you built out. Yeah. Well I read so many articles about this. That all seem to contradict each other. And

3:13:56 From our NFL episode, I felt like you and I had a pretty good understanding of all the different ways that the NFL had sliced their revenue. And I just thought that these people are all misreporting this information. So I went and added all the deals together. from each league, divided it by the number of games played in each league. The NFL is so far ahead of everything else.

3:14:15 That It's a little bit farcical to say the IPL is second. If you include the NFL network, which I think you should. Even though some of that is non-game content, the reason people care about NFL network is that it has red zone. So I included that. So You got

3:14:30 ESPN, ABC Disney's deal, Fox's deal, CBS's deal, NBC's deal, Amazon's deal. Google Zeal with YouTube. Netflix's deal. Peacock's deal. And the NFL network.

3:14:42 The NFL does a total of fourteen billion dollars a year in media rights revenue. Across Not that many games, two hundred and eighty five total games. So the NFL does somewhere between forty five and forty nine million dollars per game.

3:15:00 in media rights revenue. Now sure, IPL cricket at sixteen is number two 'Cause English Premier League somewhere in the fifteen, sixteen range. But the NFL is three times the next highest. Right.

3:15:12 And so then if you look at a Total revenue basis. The NFL total annual revenue, everything local central added up. Is on the order.

3:15:21 of twenty billion dollars a year. And then Like we just walked through IPL right now. It's called w one six, one seven. Yep. billion dollars a year.

3:15:30 For a seventeen year old league that only has ten teams. And only play seventy four games a year. All of this incredible. Already if you look at it on the Per match basis, it's number two to the NFL. And everyone else is really far behind. We should say English Premier League is the only one that's sort of rivaling IPL cricket. But

3:15:47 The NBA is the next closest at five point three million, so a third of soccer or cricket. Then you've got La Liga, which is the Spanish soccer league. You've got uh what's Germany's league, David? Bundesliga. And that's also around five.

3:16:02 But then MLB's like a million seven per game. The NHL is eight hundred thousand per game. Major League Soccer, five hundred thousand a game. The quote unquote. big four in the US. It's really the NFL and everyone else.

3:16:15 in terms of media rights revenue per game. Yeah. So the per match thing is an interesting way to look at This From an advertising perspective, it's interesting if you really have to be a little bit more.

3:16:26 renting the facility. And you're trying to get the most money out of my facility rental for that night. Or you know, some Sort of Classic unit economics like that.

3:16:36 But really if you're a team owner The interesting thing is not how much revenue or profit is generated per game from me, right? It's absolute economic impact of this. Right, and I don't care how many games they play. At all. I care how valuable is the franchise that I own. And how big of a business can I build?

3:16:54 around owning the franchise. Totally. It's a tenth the size of the NFL today by that respect. Right. Now the question is what is the total value of the MLB, if the total value of the IPL is sixteen billion dollars.

3:17:07 How does that league value compared to other league values. I think that's an interesting way to look at it, but again, nobody owns a league. People own teams. So probably the most interesting way to look at it is How does a one billion dollar valuation for the average IPL team stack up? to

3:17:25 other leagues around the world. It's not NFL, it's not NBA, but it's kind of amazing that in sixteen, seventeen years These things are in the billion dollar conversation. Remember the Clippers when Steve Ballmer bought it was only two billion. NBA franchises today are like, five, six, seven billion dollars, something like that. But

3:17:43 It is sort of quickly entering that conversation. And Half of the revenue gets taken before you even get to see a dollar by the BCCI. Yes, I mean. Yeah, it's crazy.

3:17:56 So Maybe put another way. Is there a world where these are actually two billion dollar teams? If the BCCI wasn't taking half of it. Yes, absolutely.

3:18:05 you would have a lot more costs like player development and stadiums. So anyway. That's sort of the few different ways to slice it. There's the per game, there's what's the league worth. There's what's the individual teams worth. I also wanted to try to figure out on a multiple basis. How reasonable are these valuations? It's a billion dollar valuation.

3:18:24 on these teams for anyone buying in. Again, on average, I suspect some of them will go for more. What is the actual income statement look like? It's impossible to know for sure,'cause none of this is public and reported. It seems reasonable that they would do seventy, eighty million in revenue.

3:18:40 That's after the BCCI's take. That's inclusive of the local revenue. So think about a business that's doing 70, 80 million dollar top line. The salary cap is seventeen million dollars. And you're not paying any stadium and your only debt service is if you are still paying a franchise fee back to the BCCI. You have almost no costs in this business.

3:18:59 Right. So as you're comparing business dynamics here versus other leads and particularly the NFL. On the one hand you've got this Albatros, if you will, of the BCCI taking fifty percent of central revenue. But you don't have the players taking fifty percent of your revenue the way the NFL does. And you don't have the capital heavy nature of the stadiums.

3:19:18 Which there's risk and opportunity to that, as we'll get into in a minute. Exactly. So I think the Team net income right now. Is a About fifty million dollars.

3:19:29 On a pretext basis. But there's no depreciation in other I mean the not material anyway. So You got a business that is doing eighty million dollars top line and fifty ish million. on the Ebat line.

3:19:41 This is a sixty, sixty five percent. Eva Da margin business. They're growing really quickly. Like every five years, there's this massive step up in media rights. And because these businesses have crazy operating leverage.

3:19:57 It all kind of does fall to that bottom line. And again, the reason for the operating leverage is Because the player contracts just don't grow that fast, but the media rights revenue is going incredibly fast. So there's this ridiculous operating margin. that has kind of kicked in this media right cycle. They used to be

3:20:13 break even and then they were pretty profitable and now they're really, really profitable. And as revenue keeps going, they're gonna get Really, really, really profitable. Right. So right now at a billion dollar valuation that's twenty times.

3:20:27 EBITDA, you know, pre tax earnings, whatever you want to call that. And it's what, twelve X? Revenue. That's a pretty attractive valuation as an investor. Right. Well whatever they are.

3:20:37 They're market valued. There is a competitive market both to buy and sell equity in these teams right now. We aren't saying that something's high or low. It just It's interesting to see what the market values it at.

3:20:49 And there is a reasonable Financial valuation here. Unlike many of the other leagues where the teams trade primarily on asset values. Instead of as P and L as you know, scarcity value.

3:21:01 Right. So David, we're sort of arriving here in analysis and to start There's sort of an idea that you planted. Yes. So I proposed to you a couple days ago that we bring back a version of the bull and bear case that we used to do. Here in acquired.

3:21:16 And In this case, I think we should do Bull Bear. And megable case. Because I think there is a megable case here. And the question specifically we should address.

3:21:29 In this. Should be is there a reasonable path? That The IP L Could be.

3:21:36 Ten X in revenue economic impact over the next set of time. and be equal to or perhaps even in megabull case greater than the NFL. In terms of economic value and revenue generated. to be the number one or tied as the number one sports league in the world.

3:21:53 And the reason I think this is particularly interesting conversation coming out of the valuation conversation we just had. Is The number one thing that matters in valuing any asset is what assumptions you are making about its future. And so you can't say that something is expensive or inexpensive. Unless you talk about what your inputs are to guide that future.

3:22:13 So the most important input. In the IP L team P N L right now. There's sort of three big levers as I see it. One is

3:22:23 Are the media rights deals gonna keep growing at the rate that they have been growing? Which on the media rights, our good friend Arvin Navaratnam at Worldly Partners has actually done the math to look into this. And as always, we will link to his excellent report. In the show notes. Since two thousand and eight to twenty twenty three.

3:22:41 the media rights have grown at an eighteen percent compound annual growth rate from that hundred million dollar a year mark. Going with the hundred million, not the sixty million. The headline hundred million dollars, to the one point two billion that we have today. Lollett math. Yes. And so then the question is will it keep at that eighteen percent? Growth rate.

3:23:01 The second big lever is Is the BCCI permanently going to be taking fifty percent of the revenue. It seems like they will, but I think it's worth examining what could cause that to change. That's a big swing, one way or the other. And then the third one is

3:23:18 Is there any natural force that will cause the salary cap or the player cut of revenue. To grow as fast as the top line. Or is it gonna keep

3:23:29 getting smaller and smaller and smaller on a percentage basis, or even stay the same if it was just sticking around at this 12, 13, 14% of total team. Revenue. Yeah. From a team owner basis, that's fine.

3:23:43 Right. I think this is intrinsically linked with the BCCI conversation because It's almost like in The IP L. Not only do you not have a player union

3:23:53 First of all, let's just say there's no equivalent of the N FLPA, the MLB PA. There's no players union to bargain. Do you know that there actually is a players union? Yes. Do you know what the players union is? Yes. It was put into place by the Supreme Court ruling and the players' union is only retired players. Yes, it is the union of retired players. It's the pensioners from the PCCI unbelievable. No current players are allowed to be involved. Amazing. So not only is there no ability to bargain. And clearly it's in no player's direct interest to walk away, because it's life changing money, it's fame, it's like your childhood dream. You're going to play in the IPL.

3:24:31 There's the element that you can't go play outside of India. Or else then you can't play on the national team. So that's a big hammer or stick. But there's actually a third and a fourth thing. your income is determined by the BCCI, who determines your income if you play for the national team or other Indian leagues.

3:24:50 Or indirectly the IPL. Yep. Yeah,'cause the B C C I sets the salary cap or the auction purse size. Right. And then there's the fourth thing, which is okay, cool, there's these other leagues popping up. There's South Africa. There's the US.

3:25:04 The IPL Team owners. are starting to own or have partnerships. with the other

3:25:13 T twenty leagues that are popping up. And so It's very easy for them to be like, uh You guys shouldn't allow players union And we won't allow a players union. Okay, great. You guys shouldn't pay higher salaries. We also won't pay higher salaries. Okay, great.

3:25:26 And this sort of happens at the international governing body level anyway. The effective state of play right now. They are all effectively serfs to The B C C I and the IPL. Which is crazy. This whole thing

3:25:41 Is effectively fifty percent owned by a quasi governmental regulator. Amazing. So I just lay those things out there because I think those are sort of the big levers. as you consider valuation of what's going to change.

3:25:54 Okay, I love it. That is the right backdrop investor mindset. To think through. Evaluating these cases. First. Bullcase.

3:26:02 Is just simply media rates. Expansion. Which is Just simply demographics. If nothing else happens

3:26:10 Except that India and the Indian middle class keeps growing like it has been and is projected to. Both in the year. absolute size of the Indian middle class and relative wealth of the Indian middle class relative to other countries in the world. That alone is probably the biggest lever here.

3:26:29 And to put some numbers to that, remember we were talking about the advertising market was just two billion dollars. I think was that two thousand seven? Yep. Somewhere around there that we were Talking about that. That is expected to be twenty billion dollars this year, growing six to seven percent per year. It's

3:26:47 Interesting. In seventeen years it's ten X from two billion. Like you were pointing out all the way at you know, a couple of hours ago. the thing that matters for the valuation of these teams and you keep following it back for the revenue for these teams. is the media rights and what do the media rights need. They need to be able to advertise to consumers. What do you need for the advertising to consumers? You need consumers to be able to buy things.

3:27:10 Have disposable income. Right. Make the cost of acquisition actually make sense for the advertisers on these media rights. And So far, the growth of the purchasing power of consumers in India totally supports the increased media rights purchases and thus the valuations. And if they keep growing it.

3:27:29 Six, seven percent. Then it should continue to support six to seven percent growth in the media rights per year. Does it support the sixteen percent growth that we had seen? Historically, no.

3:27:42 So that media rights packages probably will grow slower and they probably should grow at the rate of the Indian advertising market. At least in your case that you're scoping this to right now, which is the Indian bull case. Yep. So

3:27:55 If that current growth rate in the domestic Indian ad market of call it six, seven percent per year. Sustains over the next twenty years. That I believe Compounded over twenty years is about a ten X growth.

3:28:10 If that happens with no slowdown. Great, there's ten X right there. So that gets your media rights to twelve billion twenty years from now. To NFL size.

3:28:20 And obviously there'll be growth in the NFL too. But Here's why I think demographics is actually the single most important thing. The NFL has

3:28:30 Basically already saturated its Tam. The total addressable market. of people who care about American football. Is that most five hundred million people.

3:28:42 It is all of the US. It is arguably Canada. You could throw that in there. Although to a lesser degree, I think, than the US. Yep. And then maybe you find some pockets of other people around the world, but there's not a lot. You gotta stretch to get to five hundred million. And this is the NFL's big initiative. They are trying to figure out how to make people outside the US care. But I think that's right.

3:29:04 And they have been trying for a long time and They have not. thus far been succeeding to any meaningful degree. Right. So they would need to expand the number of people who care. Or they would need to expand the monetization potential per person who watches.

3:29:19 Sure, like Americans. Are getting wealthier. Have gotten wealthier every year for a long time. Certainly the NFL will grow. I just don't think it will go.

3:29:28 That much. So I think there's a plausible argument to make On demographics alone. That The

3:29:36 Indian Ad market will support Ten X IP L media rights revenues, which gets it into the ballpark of the NFL today. Well, let's put it another way. The US advertising market total

3:29:48 today is four hundred and fifty billion dollars. We are already a absolute behemoth. India over the time of the IPL went from two to twenty. There's a lot of growth left. Right. There's a lot of room left to run.

3:30:01 That is the case for just how does it become NFL scale. If it just Keeps matching. the growth of the advertising TAM in India. As I was

3:30:10 Thinking about this before recording. I was using more kind of population numbers and there's estimates that the middle class is supposed to double. over the coming ten, twenty years in India. The middle class in India grew six point three percent annualized between nineteen ninety five and twenty twenty one. So that just matches.

3:30:28 every other stat that we're talking about. GDP per capita is growing ten percent per year. So If GDP per capita grows at ten percent per year, do you think advertising continues to grow at six point five percent? Sure. I think advertising tends to index GDP. Yep.

3:30:42 Okay. Biggest lover number one. I sort of haircut that in my analysis. So let's say it's five X. I think you then basically immediately

3:30:51 Double that. Multiply by another two X and get to ten X total. Simply by IPL expanding. I think it is Almost a foregone conclusion, no brainer.

3:31:01 Yeah. Yeah. Number matches that IP L plays Will expand.

3:31:08 Likely in multiple ways. Number of teams and lengthening of season. So number one is simply just extending the season and extending the window of the season with the existing teams that they have. Playing. More matches over a longer period of time.

3:31:22 Right now this is only eight week season. It's the shortest season of any major sports league in the world. And there's Reason for that of like they had to work around the international cricket calendar, the B C CI also controls International cricket for India, so they care about this, but

3:31:37 As IPL becomes bigger and bigger and bigger. And all of the international players are playing in the IP L. It's gonna expand the window here. Yeah. So that's one. The main windows can expand.

3:31:48 Two. Team expansion. India as a country geographically and certainly population wise can support more than ten teams. In this league. No brainer.

3:31:58 At least two more teams are gonna get added in the next X period of time here. The real wild card here is there. Is Talk.

3:32:08 of a second IPL window. Which would be interesting. This is kind of a risk. So like have the first Part of the season happen. When it currently does between March and May.

3:32:18 And then have the second part of the season or maybe the playoffs Happen. after the international calendar over the summer. And then come back at the end of the year. Weird.

3:32:28 Anticlimactic almost. I don't know how you would design the media product. I think this is a wild card. It doesn't sound that compelling to me, but I don't know. I PL has designed incredibly compelling media products, maybe they could find a way to make this really interesting. Yep.

3:32:44 So that's a wild card. I don't think you can bet on that, but I think you definitely can bet on two X expansion of just simply inventory of games played. Which combined that with five X expansion in the ad market. Boom. There's your ten X. It's gonna take you to like

3:32:59 roughly the same scale as The NFL. A supporting point on this, which I don't think grows revenue necessarily, but makes it more likely to happen. As we alluded to.

3:33:12 The IPL has basically become the national champion of India. Like the Indian government is highly, highly, highly incentivized. Two. make this continue to be a shining success story.

3:33:25 For India. And With Reliance so deeply involved. I mean, Reliance is the largest telecom operator. In the country. the largest or one of the largest diversified companies, period. So they're also an advertiser of their products.

3:33:40 They own the biggest team. You know, they're deeply involved in the league, like The Umbani's in Reliance are not gonna let this thing fail. Domestically and internationally on streaming. Yeah. Exactly.

3:33:52 So That now brings us into The most Obviously. revenue stream expansion opportunity here.

3:34:02 Which is the stadiums. And local revenue. Right. It's kind of a pittance. Yeah.

3:34:08 I think it would be an exaggeration to say that the stadiums are Crappy? They're not crabby. You watch IPL games and They're fine. They kinda look like

3:34:18 American sports stadiums from the seventies or something like that. It's not dirt fields, but it's also not Chase Center or like the Vikings Stadium or any of these new NFL stadiums that are just gleaming multi billion dollar palaces. And there's good reason for that. Yeah, they make ten x more revenue. And also

3:34:38 Because the IPL is so short. Right now it doesn't even make that much sense. If you were to flip over to having Teams build and own their stadiums or be more deeply involved. They just don't play that many games. They only play seven home games right now. Right.

3:34:52 But as you expand the league, expand the number of games this starts to make. More sense. So I think If you can find a way to smartly without risking the economics of the league.

3:35:04 upgrade the infrastructure and the stadium infrastructure here. Like there is just so much low hanging fruit. I mean all the playbook that is run In the NFL, in the NBA. Luxury suites, seat licenses, fan experiences, mixed use of the real estate. Dining, shopping.

3:35:21 Cinema, Bollywood. Huge opportunities. You sound like Jerry Jones over there. Just basically send Jerry Jones to India and take care of this. So what's the opportunity there? Like right now IPL teams are making fifteen percent of their revenue locally and eighty five percent is central revenue. If you could get to an NFL type model where it's forty percent local, thirty five, forty percent local for the best teams.

3:35:46 That's a whole nother significant amount of revenue coming in there. Yeah. Hundreds of millions for the league. I think if you do that.

3:35:53 And you have the media rates on par with the NFL. Then you bring up the rest of the revenue streams up to on par now. You're definitely on par with the NFL. And this is still all domestic. Totally all domestic. So that brings us to I think

3:36:07 one of the two biggest wild cards. For the IPL. And that's the Saudis. And Middle East money. Hm.

3:36:16 They Absolutely. wanna get involved here. Yeah, there was a news story in twenty twenty three, I think, about them trying to invest in

3:36:26 the IP L at like a thirty billion dollar valuation, which is two X even the highest number I've seen. The most recent IPL super auction that just happened. was held in Saudi Arabia. Really?

3:36:38 Not just is it they want this to happen. Inroads are being put in place. that something will probably happen here. Now this could go either way. It's sort of like a carrot and a stick, a thread and an opportunity. the threat is that you have a live golf situation.

3:36:53 That they say well. They have basically unlimited money. We can set up a competitive league here. And you know, the ICL tried this, but the ICL didn't have Kingdom of Saudi Arabia money. Yes. It would be very interesting to see.

3:37:07 Could you actually just go completely around the ICC, the B C C I, the existing cricketing system and say, look. There's so much money that we are actually just gonna get all the best players in the world. Yep. I think that is unlikely. because of the hammer that the B C C I has of hey you Indian players

3:37:26 If you do that will ban you from international competition. And They would also not be able to play domestically in India. They'd have to play in the Middle East or South Africa or somewhere else, and so that would also hurt Indian viewership. I think it is unlikely

3:37:43 But I think it's more likely that the Saudis or some other very large sovereign wealth funds. both come to that keeps everyone happy. Uses this as negotiating leverage. Exactly. Yeah. And I think interests are really aligned here on my prior point around infrastructure.

3:38:02 I think the Saudis want to get involved or Soviet Wealth Funds generally want to get involved because They see this as a great long term Growth investment. Also investing in this infrastructure, physical infrastructure in India is probably a great long term growth investment that

3:38:18 An investor like a Public investment fund of Saudi Arabia is well set up to make those. Yeah. Infrastructure investments. Yeah. So if that happens

3:38:28 There's certainly plenty of upside on every revenue stream that can come from that, but I think at a minimum That makes the local stadium real estate revenue streams an almost certainty of happening. If the Saudis get involved. It's interesting.

3:38:43 Right,'cause what do you do with that money? What do you do with billions of dollars if it's thrust upon just ten teams? Totally. The Saudis don't just want to invest in the league. They wanna invest in the whole ecosystem. They want to invest in the infrastructure projects. They want to invest in the stadiums. They want to invest in the buildings. They want to invest in the retail going in around it. Yep. All of that. Hm.

3:39:02 So Coming into doing this and starting the research. If you had told me that Bulkase. I would have said that's

3:39:09 Insane. I know the IPL is big. I know India is big. I know it's an exciting, compelling product, but Really? In ten to twenty years this will be as big as the NFL. But you go around and you talk to people who are

3:39:21 in the sports industry and you put this question to them. And you talked to some executives at Teams. You sanity check this with people who have thought about this. Yes. And the response I got was no, that is not a crazy statement. I could totally believe that happening. Crazy. Things started seventeen years ago. And in theory by the time it is call it thirty years old.

3:39:40 Could be as big as the NFL. Yeah. It's writing this incredible Demographics wave. This

3:39:48 development of the middle class wave. And this globalization of Sport Wave. And I think also just the development of India, period. Which plays into demographics too, but There's such a infrastructure opportunity here, too.

3:40:00 That makes it really attractive, too. The Saudis or whomever else. Right, tangible assets where you could park billions and billions of dollars. Yeah. It may end up being

3:40:10 That Actually Lollett's sort of grand plan of being asset like Debt free, no stadiums in the beginning. in the long run was actually just a temporary thing. Right.

3:40:20 But you might have needed that to get started. Yeah. Okay, so This is not your extreme bull case. No, that's not the extreme bull case. That's the bull case. Next we'll do the bear case. Okay, so bear case, I think they're basically two big things in the bear case.

3:40:32 Number one is just challenges of doing business in India. Period. I mean, I think if you talk to anybody who invests in India, this is the number one challenge for everything. Right, the low trust environment. They have to change that reputation. And they have been It definitely has been changing, definitely has been getting better as you talk to folks. Almost assuredly will continue to do so.

3:40:51 However, in order to support An NFL size business. This needs to operate in an NFL like environment. Yeah. And right now I think we're basically there.

3:41:02 Institutional money. is now coming in foreign direct investment. is coming into the IPL. And it's coming into India writ large in a big way. So like I think we're there. But if there's any backsliding, that's gonna be a real big problem.

3:41:14 Yeah. Okay. That's The biggest one kinda writ large. And I think the specific one to IPL.

3:41:21 We haven't talked about this yet. In November twenty twenty four. Viacom eighteen slash Reliance. And Star Disney.

3:41:31 Merg. in an eight and a half billion dollar deal. Oh, I actually didn't realize that, really. Oh yeah. Oh, so they lost their competitive environment. So

3:41:40 Basically we are now down to one viable at scale bidder. For All the domestic media rights. Terrestrial and Streaming. Which

3:41:51 Who knows how that is gonna Lollett was a genius at Finding and engineering the creation of Alternative bidders. On the other hand, this is now at such a big scale. Could you really

3:42:04 Engineer a competitive bid. Next bidding cycle is gonna be A billion and a half to two billion dollars of media rights a year. Who else can do that? Google and Facebook are extremely credible bidders here. And in fact Google Did you get it? At one point have a deal. In twenty ten, YouTube did a media rights deal with the IPL.

3:42:22 And in twenty seventeen a Facebook bid on the digital rights. I'm lost. Now you might say well Is that for real? Google and Facebook you could say they're credible bidders for any media rights. Anywhere in the world.

3:42:34 True. But they also particularly care about India. India is YouTube's largest country. By user base. That's so crazy. Isn't that wild?

3:42:43 India is number one, US is number two. For YouTube. So Yeah, Google cares a lot. And then

3:42:50 Facebook and Meta probably care even more. Because India is I believe the largest user base for WhatsApp and also Instagram. India is the largest.

3:43:02 populations of users on Instagram. Interesting. So They both care a lot and they have a lot of money. I didn't know they emerged. Yeah, you do not want your two legitimate competitive bidders to merge.

3:43:14 Yeah. Basically I think you have to get Google in. Meta bidding. Sometime in the next five years a competitive bidding environment will emerge. That's the nice thing about these deals being that long. Well, the size of the prize is just so big.

3:43:29 Yeah. If people thought the auction price might drop low enough that you could You know, really make a Guaranteed win here other betters would emerge. Right.

3:43:39 It's funny, the bear case that I was thinking of is sort of a valuation based bear case. Viacom eighteen paid three point one billion dollars For the digital rights. There's a lot of sensitivity.

3:43:55 in that model to how fast streaming grows and how fast streaming monetization grows. The T V rights that Star owns fine, very predictable. But It's not like

3:44:07 you're buying equity in something and if it happens in year eight instead of year six, that's fine. They really need all this growth and monetization to happen in years two, three, four, five, or else like if it happens Two years later than they thought. really bad news and they're underwater for that three point two billion dollars. Which again, if they're the only bidder in the next auction means that price is coming down. Right. So I mean, all of the revenue and all the valuation is

3:44:32 really based on these media rights and these media rights, at least as paid in this last auction, are really sensitive to that future happening real fast. So that brings me To the mega bull case. Yeah. Here's the Megaball case.

3:44:51 This thing. goes global beyond the traditional cricket playing countries. And the US Maybe China. other countries around the world who historically have not cared about cricket.

3:45:04 get really into the IPL. There's some interesting stuff to talk about here. So How likely do you think it is that people in America actually start tuning into the IPL? Cause India's twelve, thirteen hours off. It's really hard. Yeah.

3:45:19 This is the biggest challenge. In England. It's actually great. It's only five hours off. So there's this nice like you could do it as sort of a day night game on the weekend. The US, you're like tuning in at eight in the morning.

3:45:31 If you want to watch something That's happening in India. Eight PM in India is I believe seven thirty A. M. on the west coast of the United States. That is the single biggest Challenge.

3:45:42 So this is the argument for a domestic cricket market, major league cricket. for listeners out there, I spend a good amount of time with Soma Soma Sagar, who is the former Microsoft exec now at Madrona. who is a co owner with Satina Adela of the Seattle major league cricket team.

3:45:59 is very interesting getting his perspective on developing major league cricket in the US because I think the whole bet with major league cricket is we got a Building. cricket fandom domestically

3:46:12 In a grassroots way. With Players here. Slowly over time. This is not gonna be this big explosion out of the shoot.

3:46:20 And Frankly, Americans are just not gonna start caring about IPL cricket. They need to start caring about US based cricket. Yeah. Okay.

3:46:30 Whole bunch to talk about. So the biggest swing On this is going to be a single event. That is gonna happen in twenty twenty eight. Oh, the Olympics. Which is

3:46:41 The Los Angeles Olympics. Which T twenty cricket is going to be in the LA Olympics. First time since nineteen hundred that cricket is in the Olympics.

3:46:51 Yeah. First time in a hundred plus years that cricket is back in the Olympics. Essentially it is cricket for the first time in the modern Olympics here. In LA. In America.

3:47:01 In a big way. And a lot of vested interests. are gonna be riding on. This Olympics here. Yep. So

3:47:10 Time zones are definitely the biggest challenge here. But if you put that aside. Cricket is Actually I think totally poised to take off in the US for a couple of reasons.

3:47:21 One, most importantly, baseball is stagnating. We've alluded to it a little bit on this episode, but Major League Baseball has serious problems. Hey man, pitch clock. It really changed the game experience. I actually think

3:47:34 Managing major league baseball is really challenging right now and They're arguably doing a pretty good job of maintaining value Capture it over the long run. While there's just like a whole bunch of factors fighting against them.

3:47:47 You just think it's like an inevitable decline and they're doing a nice job managing the pace of that decline. The issue is that because teams can have their own media deals Locked into long term contract. And then because there's no

3:48:00 Effective salary cap, competitive parity. Every wealthy team. Is gonna be wholly intransigently against any major structural change to the sport. Yeah. And

3:48:12 The structural changes that need to happen are at multiple levels. There's the way The business is organized. There's the product itself. They've done a good job with the pitch clock. I think that's actually good, but like the biggest problem is 162 games.

3:48:26 Baseball was built For an era when the revenue model of sports was the tickets at the gate. It was not built for the T V era and certainly not built for this era. And they've done a also a really nice job. With

3:48:38 M L B dot TV and their owned and operated streaming product. BamTe is a huge success for MLB, but again, you're basically just Extending out the current state of play. As long as possible. interest in the game and particularly interest in the game among young people is

3:48:54 We're entering a scenario that could end up looking like cricket in England before It got so bad that they had to introduce T twenty. Oh, that's interesting. So then at the same time, cricket has already gone through this cycle and come out the other end with T twenty and the IP L. So they have the right product and the right business model coming out the end of it.

3:49:12 That's one. Two. There is a Pretty significant Indian. diaspora population here in America.

3:49:20 It's not huge, huge in terms of all of America, but it's several million people. And actually right now, like Indian Americans are Kind of at their

3:49:30 Pinnacle in terms of influence. On the country. So you've got CEOs, like you mentioned, Satian Adela. Sundar Pachai. Chantan ad Adobe.

3:49:39 Yep. Just percentage of market cap in America. Neil Mohan at YouTube. Absolutely. Like Indian American CEOs control a ton of it. And as we've talked about. In every episode on this show, basically.

3:49:52 The influence of Tech. On culture is becoming hugely outsized. So okay, that's one is the business community and the influence there. Two is actually entertainment in Hollywood. You actually have Indian Americans who are

3:50:04 becoming stars in A list stars in Hollywood. Bigger though, three is politics. I mean, just look at this last election cycle. You got Camell Harris. You got J D Vance's wife, Usha, who's second lady of the US now. Nikki Haley, she's Indian American.

3:50:19 There actually are quite a lot of Indian American politicians now. So Anyway, all that to say relative to their size as a minority within America, Indian Americans have Quite a lot of influence in the country.

3:50:33 Is the Indian American diaspora really that small? Yep, it's about five million people. Wow, I would have expected it to be bigger. And you said there's twenty million cricket fans in the US currently? Yeah.

3:50:44 Hm. Interesting. That's two. Point three is just that like The IPL is

3:50:49 Actually. Genuinely a really compelling product. Right. This feels like the biggest reason to me. If it's super entertaining. And it's well engineer to be entertaining. it will continue to spread.

3:51:00 Jump. So Time zones. Definitely the biggest challenge. Could you imagine a future, especially if sovereign wealth money gets involved in the IP Laire

3:51:10 They borrow the NFL playbook and they start staging matches. Here in the US. Absolutely. That's like Number one biggest megaball.

3:51:20 Case is Americans actually start to care about cricket. And not just Americans, but other markets around the world outside traditional cricket playing nations. Related to that, number two is IP. It is the great irony.

3:51:34 As you talk about the sort of Indian expansion of influence around the world. That It was British imperialism that brought cricket to India. But it may be cricket that expand India's influence on the world.

3:51:47 Totally. Cricket imperialism, I guess. Yeah. Indian imperialism? Which is sort of happening with the leagues that They're setting up around the world. Totally.

3:51:57 I think four of the six Major League Cricket. Teams in the US. have IPL ownership. I think all of the South African teams have IPL team affiliation or ownership. It kinda feels like the big bash league in Australia is the only T twenty league around the world that

3:52:14 doesn't have any sort of ties to the IPL. Yeah. And I think that's just simply because it was set up around the same time or maybe even slightly earlier than the IPL. But yeah, I think that's the other path that IPL could come. to the US. Like one is the NFL playbook of

3:52:29 You adjust match times, you stage some matches here, you try and drum up interest in the main teams in India. The other path and maybe you marry this with the second window idea is Because the season's short, you keep the season short in India. And then you have the same players with effectively the same organizations come over here in the fall or at a different time of the year. And stage another tournament here with US based city teams.

3:52:53 Or wild card, you do an American league national league thing, and then you have the American teams and the Indian teams play each other in the playoffs. Yep. And maybe this all ends up coming together through the Olympics and the World Cup and all that and it's more grassroots over time. Development. The ground is fertile for cricket in America right now, especially because baseball is declining. Totally. There's a vacuum.

3:53:16 Yep. Okay, so then the next and other kind of Big megaball thing is IP. And I P Basically boils down to two things.

3:53:26 With one kinda in the middle. There's Non game media. And streaming, so this is F one Drive to Survive or Full swing golf, you know, stuff like that. Documentary is professionally produced.

3:53:38 And social media. Around the league. So there actually was A Netflix cricket documentary that came out in twenty nineteen called Cricket Fever.

3:53:48 Yeah, you mentioned it. I couldn't find it. I watched it back in twenty nineteen. It's not on Netflix anymore, which sucks. It's super compelling. So this documentary, Cricket Fever. was part of what turn me on to IPL itself being a big thing.

3:54:01 I'd always Sort of been interested in cricket'cause of my British DNA. But I didn't know I PL was so big until I watched This documentary.

3:54:09 For some reason it's not on Netflix right now. Actually I think I know the reason, which is it's Basically flawed. The problem with The existing documentary Cricket Fever is it only follows the Mumbai Indians. It doesn't follow the whole league. But I think if you were to, and I'm sure people are in development on this.

3:54:27 If you were to produce a drive to survive full league narrative, full production value, Netflix. ongoing annual season special. About the IPL. It would crush globally, like absolutely crush.

3:54:42 I mean, the whole league is architected as a soap opera. And then you make a soap opera about the soap opera, like it's gonna be so good. Yeah, to validate this point. I used to think Bollywood stars were the biggest stars in India. Sharu Khan has

3:54:57 forty eight million Instagram followers. That's a pittance. Verat Kohley, the top cricker in the world, has two hundred and seventy million. And he's approximately tied with Taylor Swift. Yeah.

3:55:11 I mean the cricketers Are the stars. In India. And actually it's kind of weird. If you scroll through Virat Coli's Instagram. All thirty three of the last thirty three posts. Are sponsored.

3:55:24 It's him with a product. I can't figure out if it's just the Indian tolerance for commercial placement is much higher than the American audience's tolerance for it. Or if Verat just lost the personal creds himself and his business manager is the only one posting the account or what the deal is. But you've got What two hundred and seventy million follower account only posting paid posts.

3:55:45 Wow. That's wild. I mean, that just speaks to the demand to follow him. Yeah, his influence is insane. Interestingly, during the season, the way the IP L rights work the teams actually own the IP of the players during the season and can monetize them. Oh you'll get multiple commercials in a row. with star players on that team during the match.

3:56:08 That's amazing. Anyway, that's one side of the IP and then then the other side is gambling. So Again, mega, mega, mega bull case, gambling becomes legal in India, like Game over. If there's seven hundred and fifty million dollars. There already is a good amount of fantasy.

3:56:24 Now it's technically a game of skill, but There is the equivalent of draft kings. For the IPL in India. It's a company called Dream Eleven. There are eleven players on a side in cricket, so it's Dream Eleven. And it operates just like DraftKings.

3:56:38 But it is classified by the government as a game of skill, not a game of luck. So that's how they get away with it. Dream Eleven has two hundred million users. And is valued at eight billion dollars. And Redbird, the big sports private equity firm in New York, that's an investor in the Rajasthan Royals, they're also a big investor in June 11. Interesting. That said.

3:56:57 It's still kinda in this Gray area right now. I don't know what the likelihood of this is, but If true gambling were to become legal in India. Given that seven hundred and fifty million dollars of betting.

3:57:11 is already happening on foreign bookmaking markets per match. That's a huge revenue unlock there. Yeah. I don't know.

3:57:20 How likely is either the US getting interested or other non cricket playing countries around the world getting interested. And or IP and gambling. I could totally see.

3:57:32 Some of that happening. We may have some hand in this. You know, the week after this episode comes out is the start of IPL season. We'll have to see if All of our US listeners are cricket curious. It's like we timed this. Yeah. Alright, should we do uh

3:57:46 Power playbook and then Our quintessence. Yes. Let's do it. So power is a section that we always do that takes Hamilton Helmer's framework of what enables a business to achieve persistent differential returns.

3:58:00 on a sustainable basis. So we kind of apply it to the business we're studying. To apply this to the IPL, the question is who are the IPL's competitors? And I think because they are so N of one at this point, you kind of have to think about it as their potential competitors or potential competitors in the past that they have since vanquished.

3:58:19 The biggest one. The reason that the IPL gets to be so much more profitable than any other league in the world or potential league. is clearly a cornered resource and it's the players. Yeah.

3:58:32 Hundred percent. That's The big one. And so David, the question I have for you is Why does

3:58:37 the IPL have a cornered resource on players because While There are a lot of good Indian cricket players. All the best cricket players in the world are not Indian, and conversely

3:58:49 It's not like the only people who watch cricket are in India. I think like thirty five percent of the people who watch cricket in the world live in India. Yeah, cricket is actually the second biggest sport in the world with two and a half billion fans. Behind soccer.

3:59:03 Right, so there's a lot of fans elsewhere, so plausibly could have set up a league elsewhere. Yeah. Totally great question. I think the issue is just that India is such by far the center of gravity.

3:59:14 By which I mean, you know, the other billion cricket fans in the world. are too dispersed among other countries. So like if you're gonna set up a rival league You gotta set it up. Somewhere.

3:59:26 So where are you gonna choose? You gonna do Australia? You gonna do Pakistan? Are you gonna do the UK, are you gonna do the West Indies? And there are rival leagues in all of those countries. But The percentage of

3:59:38 mind share that you're gonna be able to get Of the global cricket audience caring about your league and the cornered resource that you would then have of your domestic cricket board of those players in that league. You're not gonna be able to restrict enough talent density of players relative to a fan base.

3:59:56 in any other single country in the world. So it's almost a tipping point thing where whoever was the biggest, even if they weren't the biggest by a lot, was able to basically have A Pretty large. group of people who cared the most about their domestic players.

4:00:10 And therefore start this flywheel of We are able to attract people from Other areas. to come and play here. And if you get someone from like the West Indies.

4:00:20 You get all the small countries, then suddenly you build from like thirty five percent to maybe forty five or fifty percent, and then these blocks of ten and fifteen percent. are kind of dominoes that fall into you because now you've as the biggest player aggregated all the small ones. And now You start the flywheel and you can add in additional constraints on top like Indian players aren't allowed to play elsewhere. Well, okay, that just kinda creates lock in.

4:00:43 Totally. That's the biggest thing. And then you build the IP around those teams, the viewership, the media rights, and it becomes really hard to dislodge it. the West Indies cricket board could say, Chris Gale, you can't play In The IP L. And at one point in time they did try to say that. Huh.

4:01:01 But if they don't have enough leverage, it doesn't matter. Right. The Indian market would say, like, Okay, fine. We don't need Chris Gelllight, we'll still watch without him. And then because they had so much leverage and there was so much money. I think if I remember right, when discussions were being bandied about about this happening, Chris was like I'm just gonna go play in the IPL and no longer play international cricket for the West Indies. Like what are you gonna pay me that's gonna come close to this? This is the argument for a potential live golf.

4:01:26 Yes type situation is that everyone would react in that way if the prize was big enough. What's the phrase, if you're gonna go, go so big you never have to go again. You better get enough cash in just a few years of playing in some new league that it doesn't matter if you ever need to do anything else again. Yes. Exactly.

4:01:41 But to your point, counter positioning initially in the takeoff phase, T twenty had counter positioning versus ODI. Yeah, but that wasn't an IPL or a BCCI innovation. They just borrowed it. Right. In a way the media rights deal is a scale economies thing. Oh, yeah, production value. And then if and when they do get into local revenue streams and stadiums, that absolutely becomes scale economies, but

4:02:05 the production value associated with the broadcasts of IPL are now Yeah, no, again, are they like quite at NFL Monday Night Football levels yet. Maybe. I don't know. They're pretty close.

4:02:16 Like you're not gonna do that anywhere else. Yeah. So one question I have for you that I was thinking of after power is a good time to do this. Why can't other leagues make big money like this during the other 10 months of the year? The world's not paying attention to IPL. You would think you could get all the best players in the world to go play in matches that you could sell the meteor rights for for a lot of money.

4:02:35 Right. That's a good question. I mean international cricket and test cricket is still a thing and The Indian national team playing is still a big deal. But not one point two billion dollars of media rights per year big. Right, exactly. I think it's kind of the same reason as the cornered resource and the players of If a rival

4:02:54 true rival league in another country were to try to do this, you just can't Attract the critical mass. of advertising dollars to Make it worth it given that so much of the market is in India. That said, I do think this is a version of the megaball opportunity of like

4:03:10 the IPL either itself directly or through its surrogate leagues. that it has investment in like Major League Cricket or the Hundred in England. They say, Yeah, we're gonna do this and we're gonna send our players. I was leading the witness here, you brought up the hundred. For listeners who've never heard of it, which is probably most listeners.

4:03:28 There is a new fourth version of cricket after T twenty, that instead of a hundred and twenty balls is just a hundred balls bowled per game. There's an English league called the Hundred And they have managed to attract some super superstar investors. And raised.

4:03:44 I think a billion or close to it. Yeah. At obviously a a valuation significantly larger than that. four of these teams in the hundred. The hundred is a four year old cricket league. Based in England. Now you have a lot of reason to believe, cause sort of a native sport there, that it can be successful and there should be some cross pollination with India because they're only five hours apart. So there's time zone stuff that could work.

4:04:06 But I think the hundred will be the first challenge. to can you create something IP L like? in another country during another time slot. Yep. Except it's not really a challenge because a whole bunch of the IPL franchises are invested in

4:04:22 Hundred franchises. So it's sort of like half a challenge. Half a Further exploration of Does IPL use the other leagues to effectively build their own other windows?

4:04:32 Hm. We'll have to see. Okay, so Playbook. You texted me an interesting question saying for Playbook. Why don't we just ask the question? Could the MLB or NBA be disrupted like this?

4:04:42 Did you have a thought on that? When I texted you the question. I obviously was leading the witness and would have said absolutely one hundred percent. I now think it's a little More grey.

4:04:55 And when you said like this, did you mean What the IP L did to traditional cricket. Yes. The combination of T twenty of a new format of the game. And a new league.

4:05:05 That is. run with a different business model. Right. So could someone do that to baseball. And I think reflecting on your comment earlier, You think baseball may not be in bad enough shape. in order to warrant this yet. Well

4:05:18 Now after totally uncovering the IPL story. I think there were enough unique N of One dynamics about Cricket. The B C C I

4:05:28 T twenty coming in and just sort of the state of The primordial soup. When IPL was formed. That Do make it difficult to replicate directly.

4:05:39 Probably the biggest of which being the BCCI's overarching control of the sport within India and the cornered resource of the players and being able to ban them from Playing in other leagues. That obviously doesn't exist in the US. I think what

4:05:53 Is a total Analogy is M L B And there's some Potential risk of

4:06:02 early signs of the NBA too. Are Going in a direction that long term. Will not be good. I don't know why I would watch one of the first three periods of an NBA game or the first three quarters of the season.

4:06:17 With the first Ninety five percent of the season. I grew up a Cavs fan. They're the best team in the league, and I haven't watched a game yet. There's a huge problem there. Huge, huge problem in the NBA. Now the NBA is in a better position than MLB. Because

4:06:33 They have a soft salary cap. So not as good as the N F L, but better than no salary cap in The M L B. And they have now moved to mostly a centralized Revenue sharing media rights.

4:06:44 Deal. Yeah, and so next they need to shrink the number of games. And then they need to Make sure the stars are playing Whenever anybody's going to watch a game and they gotta make every game count and they gotta make every quarter count.

4:06:56 And then it'll be a great sport. Problem is those are hard things to do. Because it's in direct opposition to the media, right? Every minute Less of basketball that is played is many dollars lost.

4:07:07 Yeah. So you know. Armchair uh quarterback, armchair GM right now, you know. I think I would diagnose the MBA as Fine. And in some sense doing better than ever

4:07:17 But Some early red flags that in the long run, if they don't manage the game well. Worst case, they have thirty more years of success. It's not an immediate problem. It's a problem for two commissioners from now. Yeah. M L B.

4:07:30 I don't know that it's a this commissioner problem, but like they're farther along the decline curve. Yeah. The Rubber is gonna hit the road for MLB.

4:07:40 Once enough generational shift happens. That there's just No longer enough supply of players and fans. But all that said, there is one thing really, really going.

4:07:51 For MLB, which is international. Baseball is an international game. And It would be devastating to the sport if American Interest.

4:08:00 continues to decline both in terms of players and fans. But it's still very, very strong and vibrant in Japan and South Korea. Yeah, but that doesn't help the M L B. Well, it helps them on the player front. And it does help them on the audience for I mean

4:08:14 Man, Shohei is a Very valuable commodity, both in terms of playing on the field and the market. That he generates in Japan. Yeah. Anyway, all that to say.

4:08:25 Baseball Obvious And I think you have the first example with the Savannah bananas. I don't think the Savannah Bananas Are going to become the IPL per se. We gotta do an ACQ too on Savannah Bananas. Oh, we got it.

4:08:39 So for folks who don't know we alluded to it earlier, but It is a totally zany Incredibly fun. Like everything that is sort of a problem for baseball, the Savannah Bananas have fixed. Except that it is not an actual sport. Right. It's a pure entertainment product right now.

4:08:55 Yeah. But the fact that it exists at all should be very alarming to MLB. Yep. Agree. Okay. I've got

4:09:02 three playbook themes in addition to everything we already covered on the history. One Assets can get more valuable with the right owners. Shah Ru Khan. deciding to own that team.

4:09:14 made it much more valuable. This is almost Obvious. Like we started the show and it was called acquired and we talked about when you could buy something and the right buyer would make it more valuable. But think about if passive money had bought The Kolkata Night Riders versus Shah Khan buying it.

4:09:30 It's Existential. I know that Sure, he was made whole right away through the deals, the five million dollars we talked about earlier. But

4:09:38 He was in the black on brand value for that thing as soon as he bought it because his association is worth so many millions of dollars. And him putting his face on it and doing the Anthem video and all that great stuff. It's just a smack you in the face reminder. Of

4:09:54 Assets need to find The right owner to maximize their value. And sometimes it's just a gigantic multiplier. versus passive dollars. Yeah.

4:10:04 My second one is from Arvind at Worldly Partners. Sports teams are an amazing asset to own. In the write up that he did that I read to prep for this episode, he highlighted that the big four sports leagues in the US The M L B, N F L, NBA, and NHL. have outperformed the stock market. Meaningfully.

4:10:22 And over a period of nineteen sixty one to twenty twenty four. It's thirteen percent annualized versus ten percent annualized. And I know it doesn't sound like a lot when I bill it that way. But that's a long time period. But The stock market

4:10:35 has five hundred and fifty X during that period. While an index of sports teams is a twenty three hundred X. It's massive. And on top of that. The stock market has these big drawdowns. That doesn't

4:10:48 really happen in an index of sports teams. They've also historically been very uncorrelated with the stock market. So these are very scarce assets that sure are nice to own if you can get one. I was thinking a lot about it like

4:11:01 Should everyone have been an automatic yes? in the two thousand and eight auction. Probably who is invited to bid was. Yes. There are these examples of failed sports leagues, the USFL, the XFL, the Overwatch League.

4:11:18 So You're not guaranteed that you're getting into one of these great leagues, but man, once they start to become the dominant league for a sport that people really care about. It's one of the best assets you could own durably.

4:11:30 Totally. This is another bull case, at least valuation wise on IBL franchises that Someone made to me in the research. India.

4:11:38 Far punches above its weight relative to its GDP. When it comes to billionaires. There are a lot of billionaires in India, so there are a lot of potential buyers. Of sports franchises in India. And there are only ten viable major sports franchises

4:11:54 The ten IPL teams. And let's say they expand to twelve or fourteen or sixteen, you know, whatever. There's gonna be more demand for those assets relative to the supply. Yeah. Absolutely.

4:12:05 My last one is Probably the important question of the episode. You couldn't have the IPL without Lalat Modi. Period. So how path dependent?

4:12:17 Was this Could you have something of this scale and success? Without Taking the good with the bad. Uh

4:12:27 Everything Lolly accomplished. No way. You needed Lalat Modi. But did you need every business practice? Would it have been possible for him to create something so valuable and to align so many interests

4:12:40 Without Having allegedly had stakes in three teams. Capitalism is great because when you have an incentive to succeed.

4:12:50 You succeed, and if everybody is pushed to succeed, you create value in the world. There's kind of this question of If he was hired into a regulatory bureaucratic organization

4:13:02 could you have created something so valuable without dealing some cards to yourself. I don't think so. The only example I can think of from our sort of acquired canon here is Visa and D Hawk. Of

4:13:15 A founder. That Did it without really realizing any

4:13:24 Equity for himself. I mean I guess Morris Chang and T SMC too. Although. Morris over time did get. Quite a significant stake in T SMC through. Equity grants. And D I think got paid quite a bit at Visa too.

4:13:36 So it's not to say like it couldn't happen, but I think it's pretty rare. And that B C C I structure was really a blocker for the incentives here. So it's like you almost needed allow it to come along and be like Do this on behalf of the BCCI.

4:13:53 Wow. Wetting my beak, so to speak, on the side too. Right. Yeah, they're a partner with me in creating this. Yeah. You really do need these crazy Dhawk type

4:14:03 above reproach people. to walk into a low trust environment, a low trust ecosystem. And need to do these deals to create something from nothing. without Crossing any

4:14:16 Lines and It's a rare bird. Yeah. All right. Let's land the plane.

4:14:21 I have two points to my quintessence. One is Ed Cowan put it best, if you were to design a sports league to maximize the bottom line. This is how you would do it. My second one.

4:14:33 Is this the product and I mean that in a mathematical sense, multiply the these things together. The Indian middle class emergence. T V penetration and smartphone explosion.

4:14:46 the T V penetration went from forty percent to seventy four percent during the IPL's run. Internet usage went from under five percent to over sixty percent today. The population The literal number of people increased by two hundred and thirty million. That is the adult population of the US stacked onto the existing

4:15:06 population since the IPL was created. Perfect storm. of tailwinds for this to exist. Yep.

4:15:14 One hundred percent. All right. I've got A quintessence for IPL and then I have two related.

4:15:22 Broader takeaways. Associated with it. My quintessence for the IPL Is that They're

4:15:30 And by they I mean Specifically Lollit Modi. And I M G Designed.

4:15:38 the thus far most perfect sports entertainment product. That mankind has ever known. Previous to the IPL That was the NFL. But they actually managed to improve

4:15:52 The sports entertainment product. If you are designing A sports entertainment product. For the Modern

4:16:00 Media. Landscape. The NFL, because of its history, it actually started in the previous pre-television world and certainly pre-streaming world. It's kind of an accident that The NFL was able to massage the product enough and Pete Roselle made enough great decisions. to make it so compelling as it is now.

4:16:19 But it's Only seventy five percent of the way there. The IPL though from whole cloth was designed as a major league In

4:16:29 the post television and anticipating streaming and social media world. And so this architecting Of the one game every night. Every match matters. I mean it's Monday night football every single night. For two whole months. And then explicitly

4:16:45 Bringing in. The Bollywood, the Taylor Swift element. Like we've seen what Taylor Swift did for the NFL. Accidentally on a one off basis. Right. And this was architected from day one. The fact that Viewership.

4:16:58 Oh, the IPL is truly fifty fifty gender equal. Yeah. There's no other men's sports league like that in the entire world. It is astonishing that they managed to Make something That For your argument.

4:17:12 the perfect entertainment product. That is not physical, like the NFL is. I always assumed the brutality was actually part Uh required. To be that entertaining.

4:17:23 No, and in fact, thinking about it through this lens It totally holds the NFL back. Whereas the IPL like was architected from day one of We need to sell shampoos and beauty products here. Right. And the brutality definitely holds the NFL back from its future.

4:17:36 that's so core to the sport, but also a hindrance to it. Totally. Yeah, concussions, et cetera. Okay. So that is my quintessence on the IPL. And then my two takeaways are

4:17:46 This is an amazing case study of Sports Truly are. We talked about this in the NFL episode. The most important media property in the world. Today.

4:17:58 because they're the only property left where there is true uncertainty and thus True appointment live viewing. Has to happen. There's nothing else left.

4:18:09 Yeah, it's that in award shows. The Oscars. You don't know who's gonna win. Yeah, the Oscar show, but that's one time a year. Right. Yeah. But the fact that they were able and this comes back to IPL being the perfectly designed sports entertainment product. Sports.

4:18:23 King. In live content in the modern world. Fun fact.

4:18:28 Bollywood. studios are now very, very, very Reticent. to release movies during the IP L season because they don't want to go head to head. And this two month period.

4:18:41 is effectively their summer. It's when kids are out of school. And so Bollywood is no longer releasing their blockbusters during the best time to release blockbusters. because they don't want to compete with IPL.

4:18:54 It says it all. Right. The best Bollywood product. is the IPL games right now. Amazing. And then my second takeaway is that even I before doing this had no idea.

4:19:05 You may listen to this and think my bullcase and certainly my mega bullcase It's crazy. I actually don't think they're crazy. There is a Possible future here. Where this thing

4:19:18 Is as big or bigger than the NFL. I hope acquired keeps going for another couple of decades. So you can you and I can test this thesis. And we can see. Yeah. Uh. Awesome. I'm so pumped we did this episode. Me too. This was so fun.

4:19:31 Of course, as a cricket fan, I'm biased, but You're gonna have to let us know what you think in the Slack. How off his rocker is David? Carve outs. Carmel. Let's do it.

4:19:40 First one I have is Severance season two. By the time this airs, I think Severance will have just ended. But Season two is just exceptional. This is a work of art. It's brilliant cinematography, brilliant story, the whole thing is incredibly high taste. And

4:19:55 I coincidentally also just re watched Lost, which I will uh say was a mistake. Lost didn't go anywhere. It was a great journey and then there was no reward. And it turns out that The writers. didn't have a cohesive plan. I feel like severance

4:20:09 I'm in good hands. Maybe I'm over trusting right now. But I feel like I have some guesses. I can see where it's going. And I've been afraid of mystery box style shows since Lost disappointed me. And I think Severance is gonna give me a warm, nice embrace. So

4:20:23 Than Stiller and the crew there. Why sports are king. True uncertainty. You can't count on scripted television anymore. It's true. Maybe Severance will bring it back. Yeah, severance is so great.

4:20:35 My carve out is An oldie, but definitely goodie, at least as far as acquired is concerned, because Actually I think as much as anything, it was our original inspiration for doing the show. And that is Tekker and Ben Thompson. Yeah. He's been killing it recently. Obviously I've been a fan for

4:20:53 A decade, but like he's just killing it. Both Shatekuri itself. But I'm also loving Sharp Tech, the show that he does with Andrew Sharp. bi weekly show as part of the Strategic plus.

4:21:03 Bundle I just think he's Doing Some of if not his best work of his career right now, which is saying a lot. This is the man who invented aggregation theory. And I'm just loving the work he's doing. In his second decade.

4:21:16 Yeah, I agree. It's his best work yet in the AI era. I would say He was an inspiration to us when we started acquired. And he continues to be an inspiration to us as we get ready to enter. Our second decade here.

4:21:28 Yep. Okay, that's carve out number one, and then uh I got parenting carve out number two. We went on a family trip to Dallas recently. And for the first time when travelling as Just our own.

4:21:40 Family of four here. Rented a minivan. I have rented a minivan in the past when traveling with, you know, multiple families and groups, but We bit the bullet. Rented one.

4:21:51 For a trip, I gotta say, like It was freaking amazing. I'm not gonna buy a mini man. I'm not gonna drive on on a day to day basis here in the city in San Francisco, but My God. Traveling as a family of four. The thing is a beast. And the sliding doors and loading up the cargo. Dude, you gotta get Priscilla's Porsche minivan.

4:22:09 That is exactly what I need. I need the Priscilla Minivan. That is my car about. Awesome. All right, next time I'm down. I'll send her a WhatsApp. Let's rent a minivan and uh we'll go for a ride. Yeah.

4:22:23 Alright, on that note. Special thank you to All of the cricket fans that we talked to and People who helped you. Who are

4:22:30 In and around the game. A few that we want to thank in particular on air. Or Soma Soma Sagar. One of the owners along with Satya Nadella of the major league cricket team in the US, the Seattle Orcas. He is, of course, a partner at Madrona Venture Group here in Seattle. And a former Microsoft exec who helped us on those episodes too.

4:22:48 Arvin Navarotnam at Worldly Partners for his great write up linked in the show notes. Ed Callen. David, you want to say a few words about Ed? Yes, Ed is great friend of the show and former Professional test international Australian cricket player himself.

4:23:03 And did the great, great business breakdowns episode. on the IPL that we'll link to. Next to Finn Bradshaw. Finn is the head of digital for the ICC. And was super generous to talk to me. He's based in Dubai.

4:23:18 And stayed up. Very late at night. to chat with me about how the ICC works and the B C C I and all the dynamics there. This is so fun. I actually had no idea who you talked to other than Ed. Yeah.

4:23:29 Finn was great. And extra thank you there to the management team at the Golden State Warriors who connected me. With Finn. And then finally, thank you to Parag Marate, the president of the Forty Niners. Prague is Awesome.

4:23:43 His day job is Literally president of the Forty niners. Some relevant experience. His evening job is

4:23:50 is chairman of the Leeds Football Club. The Soccer team in England at the Forty Niners. are the majority owners of huh. And then for a long time his night job

4:24:01 was basically leading setting up major league in the US. Paraguay. Awesome on so many dynamics, but especially sanity checking and talking through this. Crazy bowl and mega bowl case for IP L.

4:24:14 It's awesome. Alright, well if you like this episode, go check out our other episodes on the NBA or the NFL. If you want more acquired, check out ACQ2. Recent episode with Bill McDermott, the CEO of ServiceNow. And after you finish this episode, come talk about it at acquire.fm slash slack. Without listeners. We'll see you next time.

4:24:34 See you next time. Who got the truth? Is it you, is it you, is it you who got the truth now? Oh.

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