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We’re freezing it at 10 teams for now

Sitting in the 33rd floor clubroom of a plush hotel, Lalit Modi surveys the city’s skyline like a monarch would --- or perhaps a mafia don, depending on how you look at it.

cricket Updated: Feb 24, 2010 09:29 IST
Anand Vasu

Sitting in the 33rd floor club room of a plush hotel, Lalit Modi surveys the skyline of the city like a monarch would. Or perhaps like a mafia don would, depending on how you look at it. In a lengthy chat he walked HT through some of the issues dogging the IPL landscape. Excerpts:

One edition at home, one abroad, how do you look back at two years of the IPL?

Both editions have been an incredible learning for us. At first there were a lot of apprehensions about whether IPL would work as a product, whether it was a one-time tournament, whether people would come and watch it, whether players would be able to perform in a team effort when they've not played alongside each other before. … There were a lot of question marks.

The first match in Bangalore, Brendon McCullum's performance was just the kind of spectacle you needed for a euphoric stadium ambience and for TV. That was the defining moment, for me.

We wanted to improve on that in the IPL II but the tournament had to be moved out at the last moment. Just moving it to South Africa in 23 days, when it normally takes a year to plan, was the single biggest challenge in my life. If, for any reason we failed to implement things, it would have been a disaster all round. People's belief in the tournament would have gone down to zero.

The primary objective was to get the tournament on the road. The second big objective - we already had all commercial partners in place - was to ensure that people came to watch matches regularly, to the tune of a 90% sell out. Sell out means people actually buying tickets, not just us giving them away.

Every creative and marketing agency we went to would only guarantee us 15-20% occupancy, based on what they believed to be the reality. To us that was unacceptable.

We wanted to people to come in for 59 matches across eight cities over 37 days and that was asking a lot, but it happened. We turned adversity into opportunity and this allowed us to gain new fans. Post-tournament research showed that 70% of people who came to IPL matches had never been to cricket before. That changed the face of the IPL, as being a product that can enter the global market and succeed. The quality of the product and implementation were severely tested and it came through.

The tournament returns home in a climate of fear. The talk is all about security …

That's the reality today. Everybody needs to be more vigilant. After 9/11 and 26/11 the world has changed. As sports organisers and administrators it's our job to look into every aspect of security. The challenges have become more because every (terror) group feels that this is a good way of getting attention. We have to work with state and central governments, with cricket boards … it's an ongoing task.

Why does the IPL refuse to deal with players' associations?

It's not that we can't talk to player associations. The Board of Control for Cricket in India has always maintained a direct line of communication with other boards. Certain boards have players' associations, certain boards don't. We have a standard policy that we'll work with the boards, and they can then interface with their players' associations. It's important because the players, at the end of the day, are the responsibility of the boards. It's important that the message and communication that we give out is to the boards. How they want to disseminate this information is up to them. At the end of the day they are the custodians of cricket in a particular country.

Eight teams to begin with, 10 from 2011 … that's 90-odd matches in a season … How much bigger can it get?

We're going to freeze it at 10 for the time being. At least for the next 8 years I don't see us increasing the number of teams. We have contractual obligations with Sony, there's a limit on the number of playing days available, there's the availability of players. Unless we go into two tiers and keep the number of games the same, I don't see how we can expand further. We're maxed out for the time being.

Is this because you don't want to dilute the brands of existing teams?

The EPL has 300-odd games and they play seven months a year. Brand equity increases with more games. The IPL is going to be restricted to the number of games we already play. But teams will play exhibition matches and through the year in different venues around the world. Also we need to take the experience to fans around the world to give them a taste of the IPL. It has a lot to offer for the entire family - entertainment, superb cricket, glamour.

In tough economic times you've pegged the base price for a new team at US$ 225 million, almost double what the highest team paid 3 years back. What does this do for team valuations?

You have to keep in mind that we have the most unique league model in the world. Two days ago we were nominated No. 2 most innovative sports company and No. 22 most innovative company in the world. That recognition comes from the fact that our model is unique.

Take the American leagues. All league valuations are in hundreds of millions, running into billions. They address a market of a few 100 million people. In Europe Man U is valued at 1.8 billion with 800 million pounds of debt on their books.

If you look at leagues around the world the highest cost components are depreciation on infrastructure and player wages. Flip that back to the IPL. Infrastructure costs are negligible because the BCCI provides infrastructure. The BCCI is a not-for-profit organisation and all its profit goes into building new infrastructure.

We can afford to do that and afford to give it at zero price to franchises because the core function of the BCCI is to develop and promote cricket in India. People keep saying the BCCI makes a lot of money. Please understand we're not in the business of being a money-making machine, but it is our job to monetise the game properly. Other countries monetised the game very well in the past and that's why you have modern stadia in Melbourne, Sydney, Cape Town, Auckland, London ... We did not have the resources, the monies or the TV audiences to put up modern infrastructure in the past. Now we do.

Our values are so high because infrastructure costs are negligible in the balance sheets of teams. We have a cap on players' salaries. Some of our players are paid very healthy sums, in fact the best compare to even someone like Kaka on a per-day basis. But at the same time the cap is fixed and every team owner knows what that is. The operating costs are negligible.

We're only a two-year-old league. If you look at century-old leagues around the world and see their valuations, cash flows, profitability and valuations based on future estimates and expectations of future profits, we're the most undervalued league in the world.

We're the only league in the world where all teams are pretty equally balanced because of our unique auction system. Take Man United, or the Dallas Cowboys or the Chicago Bulls - they have the most money, the best players, the biggest ratings, the highest fan following … this skews the valuations of these teams and ultimately there's a spiralling effect and these teams keep going higher and higher while other teams can't compete. Our objective is to have a balanced league. Naturally this is the opposite of what each team owner wants.

If you look at the IPL ratings through a tournament you'll find it's very stable because there's unpredictability in every game. That's a great factor for getting audiences. Unpredictability is the single biggest driver for consumers. When you go to watch Man U or Chelsea against a lot of teams, you know the big one is going to win. In the IPL you never know, and the format lends itself to unpredictability while there's action all the way through. We haven't even begun to hit big numbers in merchandising or licensing. We haven't got a grip on that yet. When that kicks in, numbers will increase further, so I won't be surprised if the numbers for the auction of the two new teams are high.

Initially there was the ego massage and hype over owning a team. Has it begun to make commercial sense now?

Without doubt. For the first eight owners it's probably the single biggest return on investment in any business they've done. The returns are in the order of a few hundred times over, not a few times over. At the end of the day as we grow the fan base in India and abroad, this is just going to go up.

Is it a valuations game?

It's not a valuations game. All teams are going to be in profit. We're the only league in the world where all teams are in profit. There isn't a single league in the world where every team is profitable. There are 25-plus clubs in the EPL that are in the red, some big teams, from Liverpool downwards.
Our model is different, so it's not a valuations game. We have a population base of 1.2 billion at home and another 700-800 million people around the world who know and understand cricket.

What exactly happened in the Ravindra Jadeja episode?

This is a serious issue. It's not to do with one player but has implications for the whole league structure. You buy players through an auction, with a defined purse. We would not allow any team to bypass this as it defeats the aim of equality and has multiple ramifications going forward. In 2008 we made a standard guideline where under-19 players went through a draft system and were allocated to x, y or z team for a year, for a flat price of Rs 40 lakh. In year two, the franchises all got together and decided that this should be extended for two more years. This was not a diktat from the IPL, it was something the franchises wanted.
All players were required to sign this extension. For some reason Ravindra refused to. We went to South Africa where he had another chance to come back in line. He started to negotiate with a third franchise and violated the rules of the IPL. The rule is clear on this matter - you cannot even negotiate with another team till you have an NOC from the team you represent. Otherwise all players, after going to the auction, will be negotiating better deals and it would affect the core fundamental of the defined purse and salary cap.

And that's why you refuse to deal with agents as well …

Correct. An agent's job is often to encourage players to keep moving and negotiate better deals. We have nothing against players making more. But there is a process, a window, an auction … and players are making windfalls that they had not heard of before so they really aren't in a position to complain. But players cannot their franchises for granted.
We offered Ravi a chance to follow the line, he did not. He wrote a letter to the BCCI president representing his case. I personally asked Ravi to sign the agreement. But some franchises arm-twisted him, saying they would take care of it and resolve the issue. When all the documentation came to light he was in clear violation and we had to ban him. There was no other way out.

You say the IPL had no role in Pakistani players not being picked. But you do understand how odd it looked?

I understand how it looks, but, put yourself in the shoes of a franchisee. There were 98 players vying for 11 spots. Pakistan have some fantastic players. But sometimes all you have to go by in our business is precedent. Your headlines today are about players being unsure about coming here, the second question you asked me was about security … last year we gave NOCs for all Pakistani players to play in the IPL but the Pakistan government did not give them clearance. All squads that had Pakistani players had to scramble in the last minute to adjust their squads and make do with whatever they got. That precedent was in people's minds. They chose the players who were sure they could be available 100% of the time.
I don't think this is going to be the case always. When you have only 1 or 2 spots available you can't take a chance. When there were 10 spots open, Pakistanis were picked and they will be picked in the future.

Some suggest you issued a confidential diktat to teams instructing them not to pick Pakistanis ...

Me giving instructions, confidentially or otherwise, to franchises makes little difference because at the end of the day each team is going to make a decision based on what's best for them. If the teams all listened to me they would not be doing back-channelling and hiring players and breaking rules. Franchises will do what's best for them.

Every IPL team is a melting pot. Players from around India, around the world, and yet you have groups like the Shiv Sena and the MNS making statements …

It's sad that statements come from different parties for motivated reasons. We are trying to build a first global Indian brand. We're proud of the fact that the entire country has supported us because at the end of the day we can't do this alone. Around the world we're being recognised for what we are. With cricket being an iconic sport in this country we have a genuine shot at making the IPL one of the foremost leagues in the world. I would only request parties not to politicise this matter.

You're on the fixtures committee. As someone who drives franchise-based T20 cricket isn't this a conflict of interest?

The bread and butter of the BCCI is still Tests and ODIs. For our fans it's very important and we have to keep developing that. It's really important for us to invest in this because it's at the core of our cricket culture. What Twenty20 is doing is bringing new fans into the game.
As cricket administrators we were all worried about football making giant strides around the world and capturing the minds of young people. Now Twenty20 has stemmed that, at least in our country. We need to innovate in ODIs and Tests. At least in certain countries in the world, we need to move to day-night Tests at some stage. It's the way forward because people don't have the luxury of taking five days off in a row, and if games are in the day not too many people can watch as they don't have televisions in offices. If you move into day-night people can watch at home, ratings go up, crowds can go to the ground with families and make an evening of it. The total entertainment options have increased so much. TV was a single-channel phenomenon, now you have 100s of channels pushing various products and offerings to consumers. Cricket is coming under pressure and vying for a market share with all these things. Our job is to ensure that we innovate and make sure the product is available to the consumer at the right time. We play the IPL in April-May, what used to be the lean season in India. The FTP will continue to emphasise on Tests and ODIs.

The IPL is your baby and it's something people clearly associate with you. Do you have the same passion for Test cricket?

Of course. Everybody said I had a great passion when I started off with the BCCI in 2005. We changed the way things were done at the BCCI. IPL is a brand new baby. A little more of my focus is on the IPL and the Champions League because they are brand new products and we have to put them on a strong footing so that they can run along with other cricket on a regular basis.

How big a blow was losing Rajasthan?

It' a blow in that I've done a lot of work there. It's a political issue. But it has no impact, directly or indirectly, on my operations in the BCCI. We live to fight another day.

The impression of your lifestyle is someone who jets around on private charters … fast cars … flash company … lavish parties …

That's what you see in the media. That's not me at all. I'm sometimes in many different places on a day, but that's because we have commitments to different people, not because I'm a jetsetter. Filmstars, businessmen … these are people I've grown up with. They're friends of mine. Because of the IPL the exposure may be ore, but there's nothing really different.

You work crazy hours …

My team works insane hours. When something needs to be done it's normal to be up till 5am. It's not unusual for a working day to be 20 hours long.

Do you have a personal life?

I take time off every few months to have short stints where it's just me and my family. This weekend I'm going away with the family before the IPL begins. It's difficult on the family because the pressure is very high and I need to be in different places at the same time.

You have a love-hate relationship with the media. You want them to love you, but they mostly hate you …

That's quite normal. You hope that everyone loves you, but that can't really happen.

Why the sudden wholehearted embracing of twitter? Administrators traditionally spoke to their public through the media ...

If there was accurate reporting I'd be happy to take the traditional route. Twitter and social media just cuts layers around the world. I get instant feedback from fans around the world. Lot's of messages are just to get your attention but there are many others that deserve a real-time response.

There's an impression that you'll do what you think is right irrespective of what others think. Do the opinions of others matter to you?

Of course it matters. If you look at my Twitter page, I react to a lot of negative feedback. I take advice seriously and dwell on it. Everything that we do is pre-checked before I speak about it. Every decision is taken after consultation. If I move games from Hyderabad it's not just my decision. I'm just the spokesperson and always the fall guy. When you're the bearer of news, that's going to happen because what's good news to someone is bad news to someone else.

I have to move forward. If I only focussed on controversies and convincing people I'd never get any work done. As long as the team believes we're doing the right thing, that's all matters. I have a dedicated, hard working tea and they wouldn't be able to put in what they do if they didn't believe in what they were doing. If I behaved dictatorially the team would not put their heart and soul into it and it would not work. You can't achieve what you want without taking people with you. People have to feel a part of decision-making.