Lalit Modi
Appearances
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Indian Premier League Cricket
And before the BCCI representative can open his mouth at all, the South African board member says, we're thinking $200,000. Does that sound good to you? Yeah. And then you guys are like, uh, yeah. 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.
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Here, too, it's just happening by the underworld, the mafia. So the accusations are that Modi is participating in this and actively betting on games. Obviously, these are really serious accusations. The courts in India, the legal system gets involved. The police get involved.
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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 2010 when this all goes down.
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Yes. 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?
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He actually recently said on a podcast and has said this publicly in several news outlets that the Indian mafia had placed a hit on him and were looking to take his life, as he put it, because he refused to allow match fixing to happen again. in the IPL, and obviously the mafia wanted match fixing to happen.
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They're facilitating all this illegal betting that's happening, and wouldn't it be great if we could also fix the matches? Dark stuff.
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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... hey, everything was working great as long as the music was playing and Lollet never lost money for any of his partners. And then that happened and then the knives came out.
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And it's interesting, quite interesting, all these very serious allegations that get brought up against Modi and then he ultimately, the BCCI, decides that he did do them and bans him for life in 2013.
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Because the chairperson of the BCCI at this point in time and Lalit's great rival, who's one of the forces behind ousting him, is N. Srinivasan, the owner of the Chennai Super Kings, via his family's business, Indian Cements.
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Well, that very same season in 2013, the Indian police run a sting operation and bust members of two teams in the IPL, the Rajasthan Royals and the Chennai Super Kings, owned by N. Srinivasan, for spot-fixing matches. Oof.
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Yeah. I mean, already, like, all the controversy from Lolic kicking out the founder, the driving force behind all of it. That's not good. The two expansion teams folding. Now you've got a police bust of actual spot fixing happening. 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.
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Spot fixing, this is saying, like... there's a betting line on what's going to happen in each over, like each set of six balls. And so saying like, oh, I'm going to pay this bowler on this team to bowl poorly in this over so that the batter he's facing will perform better or vice versa on the batter.
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Exactly. Arguably, but massive trust destroying amongst the fan base. Horrible for the league, especially horrible when it's the BCCI chairperson's team that is doing it. At first, N. Srinivasan denies everything, refuses to step down from the BCCI. This ultimately does become the best thing to happen to the IPL.
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I think if this hadn't happened and there'd just been the forcing out of Modi, things might really have gone sideways here. Because they got so much worse... This forces the government of India to step in. So the Indian Supreme Court steps in. They basically take over the BCCI. They spend two years investigating and restructuring everything. And then in 2015... They announce all their verdicts.
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They force Enshrinivasan to step down from the BCCI. They restructure the BCCI. They suspend the two teams that had been spot-fixing, the Royals and the Chennai Super Kings, for two seasons. Those teams are replaced for two seasons by temporary franchises based in Pune and Rajakot. And then the court institutes a whole new clean slate set of reforms and governance.
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And I've been referring a couple times to Manoj Badali and the book he wrote in New Innings about his experience owning and running the Rajasthan Royals, the other team that was suspended for two seasons.
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Totally writes about this. This is his quote on it. He says, For years, foreign direct investment into India had been slow. Historic concerns had included political stability, concerns about corruption, and the risk of retrospective legislation. And so the Supreme Court here, stepping in and basically saying, we're going to backstop and fix all of this. The IPL is...
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by far the most visible industry where India is the global leader with the global most important business brand entity in the world. We can't be seen as like, this is a whole sham run by the mafia. We're going to clean it all up.
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Totally. So another quote from our good friend of the show here, Ed Cowan, who is a investor at TDM Growth. We did a great ACQ2 episode with them a couple of years ago. Ed... 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.
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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 which has been an amazing resource for us. And we'll link to the show notes. It was a great, great episode. And then we talked to him afterwards. So here's Ed's quote about this.
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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. And it was important for people to be able to invest in India.
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And in many respects, the current structure where we have Redbird or CVC, 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 2015 by the Supreme Court. I mean, this whole thing almost went down the tubes. Like, it was this close. And the Supreme Court saved it.
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But the more important thing, though, is, yes, there's the value and money aspect of it, but 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, etc.
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You look at the biggest companies in India by market cap, and they are all either global outsourcing companies, back office type companies, or or purely domestically focused companies. So like Tata, Reliance, etc. These are huge, huge conglomerates. But especially at that point in time, they're not particularly active as global leaders outside of India.
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The IPL 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. Wow, yeah.
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So, again, horrible moment for the league, for the owners, for Modi, for Srinivasan, but frankly kind of necessary to clean this all up and make it ironclad enough that global private equity firms and global media companies in the ensuing years continue to come in and invest in this league.
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Yep. So 2017, after the dust has settled on all this, the original meteorites deal is finally up. The renegotiated, quote-unquote, original meteorites deal.
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Yep. And that guy, Del Maya, he was the BCCI board member who was negotiating with South Africa. He was the guy on the call who heard $200,000 and was like, okay, yeah.
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Yes. It's finally up, and Modi's no longer in the driver's seat here. So who comes in and does the deal? Rupert Murdoch. Star. Rupert finally, finally, after, what are we now, 10, 11 years in? 12 years in? Yeah. comes back to Indian cricket and does a $2.5 billion five-year deal. So twice the value of the renegotiated Sony deal.
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Yeah. The renegotiated Sony deal was $2.4 billion over 10 or 9. So we've gone from 60 slash 100 to 250 to now to 500 a year. Yep. So that happens in the first half of 2017. And then the other shoe drops December 2017. Disney acquires all of 21st Century Fox for, I think, about $70 billion, inclusive of Star and all the operations in India and this contract.
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Now, obviously, that deal was about way more than just this contract, but this was an important piece of it.
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And IPL was a big part of this because there's something else that happens in India, right? the year before in 2016, which is Reliance, launches Reliance Geo. Yes. I remember when this was happening. Facebook invested $5.7 billion for a 10% stake in this new subsidiary of Reliance. What is Reliance Geo? It is a smartphone data provider.
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It's a telecom wireless data service for smartphones in India. And Mukesh Ambani and Reliance Jio basically slashed the price of data plans to effectively zero in India. So before Reliance Jio launched in 2016, smartphone ownership in India was de minimis. 30 million handsets was the active install base. Wow.
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Yeah, and there's already cheap Android everywhere. This is like the version of India not getting television until the 90s. We're talking 2016 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, they were pricing data in India at the same level as data in the U.S.
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Yep. He was like the proto-Lalit Modi. Lalit before Lalit. Yes.
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So it was just totally inaccessible to the population. Crazy. Reliance Jio comes in. 30 million handsets when they launched in 2016. Fast forward... Six years to 2022, 800 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. Because smartphone adoption, mobile adoption is happening in India.
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What is Disney and Bob Iger's number one strategic priority during this period? Globalization. Well, not just globalization. That's always a priority, but... Oh, right. And what are you going to count in Disney Plus? I mean, Netflix counts their subscribers all over the world as Netflix subscribers.
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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 1983. But that didn't mean that much. It hadn't captured the country's imagination that much yet.
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100%. And so Disney Plus is the major strategic priority. 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 grow and juice Disney Plus subscribers. What is the very best thing you could do? Get IPL rights and stream them on Disney Plus. Boom. There you go.
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Before that, though, the other piece of this star deal, new deal for IPL, was... Because 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 for these IPL broadcasts.
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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.
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Yeah, exactly. Remember, the broadcasters before this, for all of Lalit's entrepreneurial success and talent, he was getting broadcasters that weren't experienced in sports to come do this. This was Nimbus's first sports entree. This was Sony's first sports entree in India. You have Star, Fox, News Corp, Disney coming in now and taking over.
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There's going to be a whole new level of professionalism coming in. They also start marketing the matches differently. So there's always been the incredible soap opera story to IPL, and that's the appeal to at least half the country.
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Any NFL football fan who pretends that it's not a soap opera is lying to themselves.
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Totally. So Star starts marketing matches differently. They have like rivalry week. They basically take the playbook from all the best practices of Fox and ESPN all throughout the world and bring them here to the IPL. The other thing they do is... The 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.
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There are a whole set of big languages that are primary different languages spoken by different regions in the country. And Hindi is the biggest of those, right? Hindi is the biggest, yeah. So the official languages of India are both Hindi and English. And it can't just be Hindi because then you're leaving out a huge portion of the population that doesn't speak Hindi.
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So this is amazing for all the dynamics here at play and these international companies and foreign direct investment. But 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.
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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.
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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.
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Yes. There is definitely some affinity to your, you know, if you live in Mumbai, you probably have affinity for the Mumbai Indians. But you probably have more affinity to Virat Kohli or MS Dhoni or etc. You're not going to miss those games. Yes. And you may not speak that primary language there. In fact, you probably don't. Yep. So all of this works incredibly well.
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You've got the major tailwind of Reliance Geo. You've got the professionalization. You've got the local languages. The 2019 IPL final match is broadcast on 17 channels across the country in different languages, plus digital over the top. The final viewership numbers, best estimates are in three to 400 million unique viewers that are watching this. The 2019 IPL final.
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And just for context on that, the most recent 2025 Super Bowl was the biggest Super Bowl ever. And I think de facto that makes it the biggest broadcast TV event in U.S. history. Ben, do you remember what the viewership numbers were on this? 2025 Super Bowl comped against the 2019 IPL final.
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Yep, 138 million viewers for the biggest U.S. TV event in history. Back in 2019, there were already 300, 400 million people over twice that watching the IPL finals.
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Is watching the regular season. Yes. Yes. This thing is so big.
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That was the big bet and the payoff of the Reliance Jio entering the data market in 2016 and smartphone adoption just exploding in India. Yeah. Right. So then 2021 IPL does expand successfully this time. There are two new teams sold at auction. The Gujarat Titans, which are acquired by the big British private equity firm CVC for $750 million. That's the new high watermark.
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Before that, I think it was, what, $300 million? Yeah. Well, it's the new high watermark for a minute because the other team, the Lucknow Super Giants, are bought by a domestic investor group for $950 million. So just a hair under a billion.
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Now, the payment terms are paid in equal ratable installments over 10 years. And then this time, those payments are redistributed to the other existing eight teams in the league.
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Because the new teams coming in are diluting the central meteorite values.
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That's a good question. I don't know if it's 50% BCCI, 50% of the teams. Either way, the BCCI is still taking their 50% cut. However, post the Supreme Court reforms is a much more buttoned up organization. Makes sense. Also in 2021, Redbird, which is a U.S. New York City-based sports-focused private equity firm, they invest in the Rajasthan Royals.
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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 U.K. Then were part of the spot-fixing scandal, get suspended for two years. Now you've got one of, if not the biggest, sports private equity firms in the world.
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I think Redbird is like a $10 billion assets under management firm coming in and investing in that franchise in the IPL. Yep. Global stage. And really just speaks to like the Supreme Court cleaning things up in 2015 was absolutely huge for the IPL.
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So all that takes us to summer of 2022 after the IPL season, the Star deal is up. Time for a new rights deal. Time for a new rights deal. And the BCCI signs not one, but two deals. Separate deals for terrestrial television and digital streaming.
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So the big ones, the domestic deals, Star re-ups on the TV deal for just over $3 billion for five years?
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So that's only $500 million more than the two and a half that they did the previous time in 2017, but that was both TV and streaming. This is $3 billion just for terrestrial TV.
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Yeah, actually slightly more than the TV deals. Ah. Do you know who Viacom 18 is? Oh boy, do I ever know who Viacom 18 is. This is a huge part of the story. Viacom 18 is a joint venture between Paramount and Reliance.
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Yep, when you say broadcast, digital over the top, GeoCinema on smartphone apps.
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This is enormous. Disney, it was a real, real problem that they lost the digital rights in the bidding here. Remember, Disney Plus is the cornerstone of Disney strategy at this point in time. Under Iger, Iger has come back.
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He architected this before he left. He's now come back 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. And now they lose IPL digital streaming rights.
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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. 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 passed 150 million global Disney Plus subscribers globally.
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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 Disney Plus subscribers that they lose on a net basis?
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So the real question basically right now is, what is that going to be the next time the rights come up? Yes. In January 2024, so a year ago, the presenting sponsorship for the whole league came up again. Tata, the, of course, big Indian conglomerate, bought it for $60 million a year for five years, so a $300 million deal. That brings us to today.
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You've got under these new media rights deals that we were just talking about, call it one and a quarter billion dollars in media rights revenue coming in central to the league. Yep. Then another, you know, call it 150 to 200 million in total central sponsorships coming into the league, of which Tata is the anchor at 60 million a year.
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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, asset light, so to speak.
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Absolutely. So this is a TV game. Media rights and central sponsorships are still by far the lion's share of total revenue coming into the league. Local revenue that the franchises are generating, this is ticket sales, luxury boxes such that they exist, suites at the stadiums. We'll get into that in a minute. Local sponsorships, etc., That's probably 15-ish percent of total revenue in the league.
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Yep. 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 1996, they decide, hey, let's stop fighting each other. Let's just merge. Antitrust regulation in India is not quite what it is in the U.S. at this point in time. No.
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So 85-ish percent revenue on the central media rights and sponsorships, 15-ish percent local.
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Add all that together, you've probably got 1.7, 1.6 billion in total revenue that's flowing into the league annually. Now... Here's the kicker. All of this is for a league that currently only plays 74 games in a season that only lasts two months. So one way to benchmark different leagues against another by scale, impact, revenue, value, etc., is to adjust for how many matches they play.
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There's a difference between the IPL that only plays 74 matches and Major League Baseball that plays, what did you say, about 2,000 some odd games?
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So if you look at that revenue coming into the league on a per-match basis, IPL is already the second most valuable league in the world behind the NFL. Second most revenue per match in the world.
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So Ben, I think you have the whole list here that you built out.
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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 of $20 billion a year. And then, like we just walked through with IPL, right now it's call it $1.6, $1.7 billion a year. Yep.
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And only plays 74 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.
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So Star and ESPN merge, and to hear Lollet tell the story, Rupert Murdoch is kind of a sore loser here that Lollet came in and increased the money that he had to spend for these cricket rights, ultimately had to merge with ESPN. He decides that he's going to kick Lollet out of his baby, out of this company post-merger. Now, is that really what happened? That's Lollet's side of the story.
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Totally. It's a tenth the size of the NFL today by that respect.
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Right. So as you're comparing business dynamics here versus other leagues and particularly the NFL, on the one hand, you've got this albatross, if you will, of the BCCI taking 50% of central revenue.
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And you don't have the capital heavy nature of the stadiums, which there is risk and opportunity to that as we'll get into in a minute.
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And as revenue keeps going, they're going to get really, really, really profitable. Right. So right now, at a billion-dollar valuation, that's 20 times EBITDA, you know, pre-tax earnings, whatever you want to call that. And it's, what, 12x revenue? That's a pretty attractive valuation as an investor.
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Star Disney, the merged entity, would allege that Lollet 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, Lalit gets booted out of the business. And despite his family's 50% ownership in that original ESPN Disney joint venture, he gets nothing.
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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&L, you know, scarcity value. Right.
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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 at Acquired. And... In this case, I think we should do bull, bear, and mega bull. Because I think there is a mega bull case here. And the question specifically we should address in this should be, is there a reasonable path
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that the IPL could 10x 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 impact. to be the number one or tied as the number one sports league in the world.
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Or indirectly the IPL. Yep. Yeah, because the BCCI sets the salary cap or the auction purse size. Right.
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So from his perspective, he's like, hey, I started Disney India. I modernized cable in India. I brought sports to India. I did this. 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.
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The effective state of play right now, they are all effectively serfs to the BCCI and the IPL.
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Okay, I love it. That is the right backdrop investor mindset to think through evaluating these cases. First, bull case is just simply media rates expansion, which is just simply demographics.
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If nothing else happens except that India and the Indian middle class keeps growing like it has been and is projected to, both in 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.
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Yep. So if that current growth rate in the domestic Indian ad market of call it six, seven percent per year sustains over the next 20 years, that I believe compounded over 20 years is about a 10x growth. If that happens with no slowdown, great, there's 10x right there. So that gets your media rights to $12 billion 20 years from now. To NFL size.
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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 basically already saturated its TAM. The total addressable market of people who care about American football is... is at most 500 million people. It is all of the U.S. It is arguably Canada. You could throw that in there.
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My sworn enemy from here onwards. And thus begins a 10 to 15 year journey that is not just the ultimate revenge play by Lollett on Rupert, But accidentally along the way starts the biggest sports entrepreneurial story phenomenon that has ever existed.
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Although to a lesser degree, I think, than the U.S. Yep. And then maybe you find some pockets of other people around the world, but there's not a lot. You got to stretch to get to 500 million.
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And they have been trying for a long time and they have not thus far been succeeding to any meaningful degree.
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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 grow that much. So I think there's a plausible argument to make on demographics alone that the Indian ad market will support 10x IPL media rights revenues, which gets it into the ballpark of the NFL today.
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As I was 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, right? over the coming 10, 20 years in India.
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Yep. Okay. Biggest lever number one. I sort of haircut that in my analysis. So let's say it's 5X. I think you then basically immediately double that, multiply by another 2x and get to 10x total simply by IPL expanding. I think it is almost a foregone conclusion, no-brainer, that the number of matches that IPL plays will expand, likely in multiple ways. Number of teams and lengthening of season.
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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. 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.
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The BCCI also controls international cricket for India. So they care about this. But as IPL becomes bigger and bigger and bigger, and all of the international players are playing in the IPL, it's going to expand the window here. So that's one. The main window is going to expand. Two, team expansion.
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India as a country geographically and certainly population-wise can support more than 10 teams in this league. No brainer. At least two more teams are going to get added in the next X period of time here. The real wild card here is there is... talk of a second IPL window, which would be interesting. This is kind of a risk.
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So like have the first part of the season happen when it currently does between March and May, 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. Anti-climactic almost. I don't know how you would design the media product. I think this is a wild card.
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It doesn't sound that compelling to me, but I don't know. IPL has designed incredibly compelling media products. Maybe they could find a way to make this really interesting. Yep. So that's a wild card. I don't think you can bet on that, but I think you definitely can bet on 2X expansion of just simply inventory of games played, which combine that with 5X expansion in the ad market. Boom.
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There's your 10X. It's going to take you to like 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've alluded to, the IPL has basically become the national champion of India.
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Like the Indian government is highly, highly, highly incentivized to make this continue to be a shining success story for India. And with Reliance so deeply involved, I mean, Reliance is the largest telecom operator in In the country, the largest or one of the largest diversified companies, period. So they're also an advertiser of their products. They own the biggest team.
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You know, they're deeply involved in the league. Like the Umbanis and Reliance are not going to let this thing fail.
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Yep, exactly. So that now brings us into the most obvious revenue stream expansion opportunity here. Which is the stadiums, to come back to that, and local revenue. Right. It's kind of a pittance. Yeah. I think it would be an exaggeration to say that the stadiums are crappy. They're not crappy. You watch IPL games and they're fine.
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They kind of look like American sports stadiums from the 70s 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 10x more revenue. And also, because the IPL is so short,
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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. But as you expand the league, expand the number of games, this starts to make more sense.
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So I think if you can find a way to smartly, without risking the economics of the league... 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, cinema, Bollywood, huge opportunities.
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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 15% of their revenue locally and 85% is central revenue. If you could get to an NFL type model where it's 40% local, 35, 40% local for the best teams... That's a whole nother significant amount of revenue coming in there. Yeah. Hundreds of millions for the league.
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I think if you do that 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, one of the two biggest wildcards here for the IPL. And that's the Saudis and Middle East money.
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The most recent IPL super auction that just happened was held in Saudi Arabia. Really? 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 threat and an opportunity. The threat is that you have a live golf situation that they say, well...
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Yep. I think that is unlikely because of the hammer that the BCCI has of, hey, you Indian players, If you do that, we'll ban you from international competition. And they would also not be able to play domestically in India. They would have to play in the Middle East or South Africa or somewhere else. And so that would also hurt Indian viewership.
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I think it is unlikely, but I think it's more likely that the Saudis or some other very large sovereign wealth fund... There's an agreement that they can both come to that keeps everyone happy. Uses this as negotiating leverage. Exactly. Yeah. Yeah. And I think interests are really aligned here on my prior point around infrastructure.
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I think the Saudis want to get involved or sovereign 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 an investor like a public investment fund of Saudi Arabia is well set up to make those infrastructure investments.
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So if that happens... 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.
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Totally. The Saudis don't just want to invest in the league. They want to 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. Hmm.
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So coming into doing this and starting the research, if you had told me that bull case, I would have said that's insane. I know the IPL is big. I know India is big. I know it's an exciting, compelling product. But really, in 10 to 20 years, this will be as big as the NFL. But you go around and you talk to people who are in the sports industry and you put this question to them.
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Yes. And the response I got was, no, that is not a crazy statement. I could totally believe that happening. Crazy. Things started 17 years ago. And in theory, by the time it is, call it 30 years old, could be as big as the NFL.
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And I think also just the development of India, period, which plays into demographics, too. But there's such an infrastructure opportunity here, too, that makes it really attractive to the Saudis or whomever else.
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Yep. It may end up being that actually Lalit's sort of grand plan of being asset-light is debt-free, no stadiums in the beginning, in the long run was actually just a temporary thing.
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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 there are basically two big things in the bear case. 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.
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It definitely has been changing, definitely has been getting better as you talk to folks. almost assuredly will continue to do so. However, in order to support an NFL-sized business, this needs to operate in an NFL-like environment. And right now, I think we're basically there. Institutional money is now coming in.
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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.
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Foreign direct investment is coming into the IPL and is coming into India writ large in a big way. So I think we're there. But if there's any backsliding, that's going to be a real big problem. Yep. Okay. That's the biggest one kind of writ large. And I think the specific one to IPL... We haven't talked about this yet.
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In November 2024, Viacom 18 slash Reliance and Star Disney merged in an $8.5 billion deal.
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So, basically, we are now down to one viable at-scale bidder for all the domestic media rights. Terrestrial and... streaming, which who knows how that is going to play out. 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 engineer a competitive bid?
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And in 2017, Facebook bid on the digital rights and 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. True. But they also particularly care about India. India is YouTube's largest country by user base. That's so crazy. It's not wild. India's number one, US is number two for YouTube.
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The euphemism, I believe, that the Indian business environment is referred to as a low-trust environment, i.e., this is par for the course.
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So yeah, Google cares a lot. And then 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 populations of users on Instagram. Interesting. So they both care a lot and they have a lot of money.
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Yeah. Basically, I think you have to get Google and Meta bidding.
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Well, the size of the prize is just so big that if people thought the auction price might drop low enough that you could really make a guaranteed win here, other bidders would emerge. Right.
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Which again, if they're the only bidder in the next auction, means that price is coming down.
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Here's the mega bowl case. This thing goes global beyond the traditional cricket playing countries. And the U.S., maybe China, other countries around the world who historically have not cared about cricket get really into the IPL. There's some interesting stuff to talk about here.
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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.
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8 p.m. in India is, I believe, 7.30 a.m. on the west coast of the United States. That is the single biggest challenge.
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Whole bunch to talk about. So the biggest swing on this is going to be a single event that is going to happen in 2028. Oh, the Olympics. Which is the Los Angeles Olympics, which T20 cricket is going to be in the LA Olympics.
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Yeah. First time in 100 plus years that cricket is back in the Olympics. Essentially, it is cricket for the first time in the modern Olympics here. in L.A., in America, in a big way. And a lot of vested interests are going to be riding on this Olympics here. Yep. So time zones are definitely the biggest challenge here. But if you put that aside...
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Cricket is actually, I think, totally poised to take off in the U.S. for a couple reasons. One, most importantly, baseball is stagnating. We've alluded to it a little bit on this episode, but Major League Baseball has serious problems.
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I actually think managing Major League Baseball is really challenging right now. And they're arguably doing a pretty good job of maintaining value capture over the long run while there's just like a whole bunch of factors fighting against them.
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The issue is that because teams can have their own media deals locked into long-term contracts, and then because there's no effective salary cap competitive parity, every wealthy team is going to be wholly and intransigently against any major structural change to the sport. And the structural changes that need to happen are at multiple levels. There's the way the business is organized.
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There's the product itself. They've done a good job with the pitch clock. I think that's actually good. But the biggest problem is 162 games. Baseball was built for an era when the revenue model of sports was the tickets at the gate. It was not built for the TV era and certainly not built for this era. They've done also a really nice job with MLB.tv and their owned and operated streaming product.
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BamTech 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 we're entering a scenario that could end up looking like cricket in England before it got so bad that they had to introduce T20. Oh, that's interesting. Yeah.
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So then at the same time, cricket has already gone through this cycle and come out the other end with T20 and the IPL. So they have the right product and the right business model coming out the end of it. That's one. Two, there is a pretty significant Indian diaspora population here in America. I mean, it's not huge, huge in terms of all of America, but it's several million people.
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And actually right now, like, Indian Americans are... kind of at their pinnacle in terms of influence on the country. So you've got CEOs, like you mentioned, Satya Nadella, Sundar Pichai. Shantanu at Adobe. Yep. Just percentage of market cap in America. Neil Mohan at YouTube. Absolutely. Like Indian American CEOs control a ton of it.
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Totally. You, Disney, you, News Corp, you are foreign 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, Lalit's got this blood vendetta against not just News Corp and Star, but like Rupert Murdoch personally, specifically. And what's the way to hit him where it hurts the most?
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And as we've talked about in every episode on this show, basically... 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 becoming stars and A-list stars in Hollywood. Bigger, though, three is politics.
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I mean, just look at this last election cycle. You got Kamala Harris. You got J.D. Vance's wife, Usha, who's second lady of the U.S. now. Nikki Haley, she's Indian American. 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 on the country.
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So that's two. Point three is just that the IPL is actually genuinely a really compelling product. Right.
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So time zones, definitely the biggest challenge. Could you imagine a future, especially if sovereign wealth money gets involved in the IPL where they borrow the NFL playbook and they start staging matches here in the U.S.? Absolutely. That's like number one biggest mega bowl challenge. case is Americans actually start to care about cricket.
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And not just Americans, but other markets around the world outside traditional cricket-playing nations. Related to that, number two is IP.
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Yeah. Indian imperialism, which is sort of happening with the leagues that they're setting up around the world.
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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 U.S. Like one is the NFL playbook of you adjust match times, you stage some matches here, you try and drum up interest in the main teams in India.
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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 U.S.-based city teams.
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Yep. And maybe this all ends up coming together through the Olympics and the World Cup and all that, and it's a 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. Yep. Okay, so then the next and other kind of big mega bowl thing is IP. And IP...
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Basically boils down to two things with one kind of in the middle. There's non-game media and streaming. So this is F1 drive to survive or full swing golf, you know, stuff like that. Documentary is professionally produced. and social media around the league. So there actually was a Netflix cricket documentary that came out in 2019 called Cricket Fever. Yeah, you mentioned it. I couldn't find it.
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I watched it back in 2019. It's not on Netflix anymore, which sucks. It's super compelling. So this documentary, Cricket Fever, was part of what turned me on to IPL itself being a big thing. I'd always sort of been interested in cricket because of my British DNA, but I didn't know IPL was so big until I watched... this documentary, for some reason, it's not on Netflix right now.
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Well, it's the biggest piece on his chessboard, pillar of News Corp. It's sports. And it's what Lalit thinks is like his birthright. Like he brought to India was professionalizing and televising sports. He needs to take that away from Rupert. So how are you going to do that? Well, who controls cricket in India? It's the National Cricket Board, the BCCI.
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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.
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But I think if you were to, and I'm sure people are in development on this, 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. I mean, the whole league is architected as a soap opera. And then you make a soap opera about the soap opera.
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That's amazing. Anyway, that's one side of the IP. And then the other side is gambling. So, again, mega, mega, mega bull case. Gambling becomes legal in India. Like, game over.
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for the IPL in India. It's a company called Dream 11. There are 11 players on a side in cricket, so it's Dream 11. And it operates just like DraftKings, 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 11 has 200 million users and is valued at $8 billion.
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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 Dream 11.
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That said, it's still kind of 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 $750 million of betting is already happening on foreign bookmaking markets per match, that's a huge revenue unlock there. Yep. So all that to say, I don't know how likely is either the U.S.
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getting interested or other non-cricket playing countries around the world getting interested and or IP and gambling. I could totally see some of that happening.
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So Lalit figures, okay, I need to engineer getting myself installed on the BCCI board. It turns out the way that you get to be on the board of the BCCI 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 in 1999, Lalit manages to join the board of one of the smaller Indian state cricket associations.
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Yeah, cricket is actually the second biggest sport in the world with two and a half billion fans behind soccer.
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Yeah. Totally great question. I think the issue is just that India is such by far the center of gravity, 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 going to set up a rival league, you got to set it up somewhere, right? So where are you going to choose? Are you going to do Australia?
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Are you going to do Pakistan? Are you going to do the UK? Are you going to do the West Indies? And there are rival leagues in all of those countries. But the percentage of mindshare that you're going to be able to get
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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 going to be able to restrict enough talent density of players relative to a fan base in any other single country in the world.
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the West Indies cricket board could say, Chris Gale, you can't play in the IPL. And at one point in time, they did try to say that. Huh.
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Right. The Indian market would say like, okay, fine. We don't need Chris Gale. 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 going to go play in the IPL and no longer play international cricket for the West Indies.
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Like, what are you going to pay me that's going to come close to this?
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Yeah, but that wasn't an IPL or a BCCI innovation. They just borrowed it.
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That ends up not working out. And then in 2003, 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 in 2003-2004 as president of the Rajasthan Board. So now he's got a path to the BCCI.
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Oh yeah, production value. And then if and when they do get into local revenue streams and stadiums, that absolutely becomes scale economies. But the production value associated with the broadcasts of IPL are now, you know, again, are they like quite at NFL Monday night football levels yet? Maybe. I don't know. They're pretty close. Like you're not going to do that anywhere else.
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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.
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Right, exactly. I think it's kind of the same reason as the cornered resource and the players of... If a rival, 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 mega bull opportunity of like,
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The IPL, either itself directly or through its surrogate leagues that it has investment in, like Major League Cricket or The 100 in England, they say, yeah, we're going to do this and we're going to send our players.
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Except it's not really a challenge because a whole bunch of the IPL franchises are invested in 100 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?
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When I texted you the question, I obviously was leading the witness and would have said absolutely 100%. I now think it's a little more gray.
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Yes. The combination of T20 of a new format of the game and a new league that is run with a different business model.
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Well, now after totally uncovering the IPL story, I think there were enough unique end-of-one dynamics about cricket, the BCCI, T20 coming in, and just sort of the state of the primordial soup when IPL was formed that do make it difficult to replicate directly.
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He starts waging a campaign that the BCCI is vastly under-monetizing the television rights to international cricket. Mind you, he was 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. And you guys, now you're selling them for $10, $15 million a year.
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probably the biggest of which being the BCCI's overarching control of the sport within India and the coordinated resource of the players and being able to ban them from playing in other leagues. That obviously doesn't exist in the U.S. I think what is a total analogy is MLB, and there's some potential risk of early signs of the NBA, too, are going in a direction that long-term will not be good.
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Huge, huge problem in the NBA. Now, the NBA is in a better position than MLB because they have a soft salary cap. So not as good as the NFL, but better than no salary cap in the MLB. And they have now moved to mostly a centralized revenue sharing media rights deal.
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Yeah. So, you know, armchair quarterback, armchair GM right now, you know, I think I would diagnose the NBA as fine and in some sense doing better than ever. But some early red flags that in the long run, if they don't manage the game well.
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Yep. MLB, I don't know that it's a this commissioner problem, but they're farther along the decline curve.
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The rubber is going to hit the road for MLB 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 for MLB, which is international. Baseball is an international game, and... It would be devastating to the sport if American interest continues to decline, both in terms of players and fans.
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But it's still very, very strong and vibrant in Japan and South Korea. Yeah, but that doesn't help the MLB. Well, it helps them on the player front. And it does help them on the audience front, too. I mean, man, Shohei is a very valuable commodity, both in terms of playing on the field and the market that he generates in Japan. Yep. Anyway, all that to say, baseball is the obvious.
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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.
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Oh, we got to. 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. Yeah. But the fact that it exists at all should be very alarming to MLB.
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Yeah. This is an outrageous claim in 2004. It also just happens to be right. But saying something like this is crazy. He is a dark horse candidate to come in and reform the BCCI and fully commercialize this thing. quasi-governmental entity.
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Totally. This is another bull case, at least valuation wise on IPL franchises that someone made to me in the research. India 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 10 viable major sports franchises, the 10 IPL teams.
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And let's say they expand to 12 or 14 or 16, whatever. There's going to be more demand for those assets relative to the supply. Yeah, absolutely.
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I don't think so. The only example I can think of from our sort of acquired canon here is Visa and DeHawk of a founder of something of this magnitude that did it without really realizing anything. equity for himself. I mean, I guess Morris Chang and TSMC, too, although Morris over time did get quite a significant stake in TSMC through equity grants.
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And Dee, I think, got paid quite a bit at Visa, too. So it's not to say, like, it couldn't happen, but I think it's pretty rare. And that BCCI structure... was really a blocker for the incentives here. So it's like you almost needed a Lollet to come along and be like, do this on behalf of the BCCI while wetting my beak, so to speak, on the side too.
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All right. I've got a quintessence for IPL, and then I have two related broader takeaways associated with it. My quintessence for the IPL is that they, and by they I mean specifically Lalit Modi and IMG, designed the thus far most perfect sports entertainment product that mankind has ever known.
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Previous to the IPL, that was the NFL, but they actually managed to improve the sports entertainment product. If you are designing a sports entertainment product for the modern media landscape, the NFL, because of its history, it actually started in the previous pre-television world and certainly pre-streaming world. Yeah.
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It's kind of an accident that the NFL was able to massage the product enough and Pete Rozelle made enough great decisions to make it so compelling as it is now. But it's only 75% of the way there. The IPL, though, from whole cloth was designed... as a major league in the post-television and anticipating streaming and social media world.
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Yep. But most of the members are industrialists from the industrialist families, just like Modi. You know, their interests are Disney, News Corp, these big multinational corporations. I would really like to have a relationship with you all. Oh, maybe there's stuff we can do together. Maybe we should advertise our company's products on these cricket events.
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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 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.
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The fact that viewership of the IPL is truly 50-50 gender equal.
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There's no other men's sports league like that in the entire world.
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No, and in fact, thinking about it through this lens, it totally holds the NFL back. Whereas the IPL was architected from day one of, we need to sell shampoos and beauty products here. Right.
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Concussions, etc. Okay, so that is my quintessence on the IPL. And then my two takeaways are, 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 because they are the only property left where there is true uncertainty and this true appointment live viewing has to happen.
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But the fact that they were able, and this comes back to IPL being the perfectly designed sports entertainment product, sports are...
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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 that You may listen to this and think my bull case, and certainly my mega bull case, is crazy. I actually don't think they're crazy. There is a possible future here where this thing is as big or bigger than the NFL.
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Of course, as a cricket fan, I'm biased, but... You're going to have to let us know what you think in the Slack.
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Maybe we can get to know you and advertise on other programming that you're doing. So it's rife with conflicts of interest, shall we say. And the only reason that Lollet doesn't have this conflict of interest is because he got ousted. He's ousted, exactly. And his life mission is to extract revenge here. So this campaign succeeds. And in 2005, he finally gets appointed to the BCCI.
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We can't wait. 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 Stratechery and Ben Thompson.
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Obviously, I've been a fan for a decade, but he's just killing it. Both Stratechery itself... But I'm also loving Sharp Tech, the show that he does with Andrew Sharp, a biweekly show as part of the Stratechery Plus 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.
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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. Yep. Okay, that's carve-out number one, and then I got parenting carve-out number two.
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We went on a family trip to Dallas recently, and for the first time when traveling as just our own 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 for a trip. And I got to say, like, it was freaking amazing. I'm not going to buy a minivan.
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I'm not going to drive one 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 car. Dude, you got to get Priscilla's Porsche minivan. That is exactly what I need.
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Yes. Ed is a great friend of the show and former professional test international Australian cricket player himself 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.
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He's based in Dubai and stayed up very late at night to chat with me about how the ICC works and the BCCI and all the dynamics there. This is so fun. I actually had no idea who you talked to other than Ed. Yeah, Finn was great. And extra thank you there to the management team at the Golden State Warriors who connected me with Finn.
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And this is wild. 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. 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.
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And then finally, thank you to Parag Marate, the president of the 49ers. Parag is awesome. His day job is... literally president of the 49ers. Some relevant experience. His evening job is chairman of the Leeds Football Club, the soccer team in England that the 49ers are the majority owners of. Huh.
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And then for a long time, his night job was basically leading, setting up Major League Cricket in the U.S. Parag was awesome on so many dynamics, but especially sanity checking and talking through this... crazy bull and mega bull case for IPL. It's awesome.
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I think at this point, probably already the logo is on the jersey. That's like one of the main things you're going to get is the title sponsor. And maybe at this point in time, you're also getting the logo on the broadcast.
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Well, let me give you a sense of how commercial it is at the time. So the presenting team sponsor is the Sahara Group, which is another one of these big Indian family conglomerates. How much do you think they are paying, the BCCI, for this sponsorship? A million bucks. $100,000 per year. I thought a million was low. Well, just you wait. A million is low.
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Mind you, when we've said that cricket is the biggest sport in India, nothing else matters, it borders on religion, it has 93% mindshare of sports in India.
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If you look at American football at the NFL in America, it's like, I don't know, 37% or something like that. It is less than 50%. Cricket in India is 93%. Yeah, it's a one-sport country.
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And the middle class is rapidly expanding. So, like, this is exactly as, you know, if you're Pepsi or you're Tata.
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Oh, my God. Oh, my God. Unbelievable. Now, you might think, oh, okay, well, you just told me that this sport is sort of in the model of 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. Nope.
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No, they're playing 105 days of competition per year, all nationally televised.
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You say day. At this point in time, there are two forms of cricket. There are one-day internationals.
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And that really was to enable tournaments to happen. Like, you can play a match in one day. It takes all day. These are eight-hour games. So it's all day. 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, lasts five days.
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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 10-country tournament where every match takes five days. Right.
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I believe it's because it's a test of the strength, will, you know, the team.
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Totally. I have to bring in some personal history here. So I am a quarter British. I'm genetically predisposed to already be into cricket. But when I was growing up, my grandmother was British. 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.
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And as a little kid, what would be on TV in the summertime in England? It was this test cricket. And so I grew up, even though I played baseball and I loved baseball at home, in the summers when I would go to England, I'd turn on the TV, I'd watch this test cricket. Like, oh, this is super cool. But yes, exactly like you say, Ben, this is the gentleman's game of gentleman's games.
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To give you a little sense of this, test cricket, and I believe one day internationals as well, there are four possible outcomes of the game. You can win. You can lose. You can tie. Wait, so what's the fourth? The fourth outcome is a draw. Which is different than a tie?
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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. The scores are in the hundreds here. So the odds that they're going to be tied are very, very low. I see. A draw happens when one team is not able to finish their innings in the time of the match.
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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 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.
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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.
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All of this amazing and delicious sidebar is just to point out that there's a lot of inventory here. The Indian national team is playing 105 days per year. And the Sahara group is getting their logo on their white cable knit vests for $100,000 a year.
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Indeed. So Lollett, here now in 2005, when he finally gets on the BCCI, first thing he does is he goes to Sahara and he says, the price is going up. It is now $1 million, Ben, as you were saying, per day of competition. So you are going to go from spending $100,000 a year to spending $105 million per year. And oh, by the way, if you don't want to do that, that's fine.
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I'm happy for you not to do that. I'm then going to go put this out to auction and we'll see who is willing to pay that. 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.
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I mean, if you want to reach the nation of India, there are two ways to do it. Bollywood and cricket. That's it. Yep. So, when this massive escalation happens in 2005... I believe this is correct. Overnight, this becomes the highest paid jersey logo deal of any sport on the entire planet.
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So basically not even commercial to now the single largest logo sponsorship in the world. And now why is Lalit able to all of a sudden extract this huge record-breaking amount of value for this 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 it. Everything here.
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So one stat I saw was that in the early 90s, 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 2 million households in India that had a disposable income of $10,000 or greater. Wow. By the time here we are now that Lalit gets on the BCCI and is wrecking all these deals, it's 10x that.
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So there's, call it, 20, 30 million households now in India that are, by that definition, at least middle class. Fast forward to today, it's another 10x plus that number. You know, there's 400, close to 500 million people, households in India that have that level of spending.
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Right. Yeah, you just said it was 550 million people. Yes. I mean, full stop, pause, let this sink in. The middle class in India, 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.
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To all of a sudden buying Pepsi, buying cell phones, buying mobile data plans, buying, oh, I don't know, Nikes and Reeboks. So what's the next thing that Lalit 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 some super cheap early deals with Nike or Reebok or whatever.
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Lalit goes to the three big companies, Nike, Adidas, Reebok, and says, hey, I'm putting out for bid for auction being the kit provider, the gear provider, kit being the British term for athletic gear. Or cycling. Or cycling, yes, to the Indian national team. And yeah, if you want to win this, I'm expecting minimum $50 million a year.
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So Nike comes in and wins at $52 million a year. Oh, and by the way, since Lollett knows that there's going to be competitive bidding between these 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 LeBron's The Decision.
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So this is enormous. Lala, he's two months in to his tenure on the BCCI board, and he just found $150 million a year, whereas previously sponsorships were nothing. They were making, call it, $10, $15 million a year in TV rights. He just 10x'd that from something that's worth far less than the TV rights. Yep. So then he sets up a personal meeting
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with Rupert Murdoch, who, at this point in time, via Star, has all the TV rights to Indian international cricket.
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So let's stick with sports here for a minute. As you all know, we did Acquired Live at Chase Center last year. The arena itself is known for being incredibly innovative. And what's behind that is a simple approach centered on creating a world-class fan experience, prioritizing both convenience and security. So enter biometric payments.
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Last year, they introduced pay-by-face biometric kiosks at concessions that are powered by J.P. Morgan Payments. We actually tried it at Chase Center ourselves when we were there. The technology is wild. It completely streamlines the checkout process. You just add payment details and take a quick selfie to easily set it up.
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Businesses love it, too, since JP Morgan's technology means you can trust the secure checkout experience with biometric data that's totally unique to each person, ultimately reducing fraud. And actually, our show at Chase Center was one of the first events there to offer this experience. Yes, it was.
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Woo! Acquired listeners can check out jpmorgan.com slash acquired to learn more about the innovative payment solutions elevating fan experiences and how payments can drive growth for your business.
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Well, while it probably thinks here that it's coming full circle, we're only just getting started. He sets up a personal meeting with Rupert Murdoch, and he sets the meeting for a friendly Friday afternoon tea. How very cricket. And remember, at this point, I think Star is paying $10, $15 million a year for these TV rights.
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Lollet walks in, sits down and says, Mr. Murdoch, I am informing you that your contract is terminated right now. We are going to re-bid the contract, and you are welcome to submit a bid. We are mandating that the minimum bid is $500 million for four years. And Murdoch basically spits his tea out. He's like, you're crazy. That's what, 10x the current value? Totally.
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So obviously he's offended by that, but he's like... Who are you and why do you think this is going to 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 going to bid on this? You're all hot air here. There's no way that this is going to work. I'm the only game in town.
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You're basically trying to extort me and, oh, yeah, rip up my contract that I have with the BCCI. You're two months into the job. Like, get lost. Right. You need me. You need me. Yeah. But of course, while it has a plan for this, he's going to do just what he did back with ESPN in the first place back in the day. It's not that hard to set up a new network. to come in and bid on these rights.
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It's funny, on our NFL episode, we came to the conclusion that the NFL is this 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.
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And by the way, it is now clearly, demonstrably, and provably so much more valuable than back in the day. We're now 15 years into the 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.
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You make ABC Sports, NBC Sports, CBS Sports, Fox Sports. Anybody can do this. So Lalit goes to Sony, who's the number two broadcaster in 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.
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And he says to all of them, these rights are now available. Minimum bid is $500 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. You are welcome to bid. Nimbus ends up winning the auction with a $620 million bid for four years. They set up the Nimbus Sports Channel.
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It, 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 Starr and Rupert are out in the cold.
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Yep. They've got $150 million from sponsorships. And then they've got, yeah, what's that?
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Totally unbelievable. With more potential to monetize beyond that. I mean, he got $150 million from two sponsorships. You can have more than two sponsors here. Yeah, he completely commercialized the BCCI. Transformative.
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You know, he would say when he later gets kicked out of the BCCI and there's tons of controversy and everything we'll get into later, 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. Yep. Absolutely right.
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And by the way, he shut Rupert Burdock out of all of it. So here we are now. He's won. 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 way more money that we're talking about here than England or Australia or...
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the West Indies or Sri Lanka, New Zealand, the other cricket-playing nations. England and Australia are big media markets, but they're not this big.
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This guy is a force. But, as you might expect, he's not quite satisfied.
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Totally. He's, I got to assume, thinking about this 105 days of competitive play that the team is playing. That's 105 cricket matches. That's not a lot of inventory. On the one hand, it's a lot. But it's only one team that you're talking about here. Playing 105 matches, the NFL plays, what, I think... 285 games, including the postseason. So more than double that.
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And that's the scarcest sports media in the world. Yes. And the only reason that the NFL plays that few games is because the bodies of the players just can't take anymore.
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Cricket is not like American football. This sport was designed to be played five days in a row. Yes. The cricketers' bodies are not falling apart. There is a lot more juice to squeeze here. So thus sparks, unquestionably, truly unquestionably, this is in zero way a controversial statement, the most brilliant, most successful sports entrepreneurial business plan of all time.
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the Indian Premier League, a domestic city-based cricket league in India that Lalit is going to set up in the model of the very best elements of the NFL, of the English Premier League, of the NBA. Of international cricket. Yep, of international cricket.
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To me, this is not a controversial statement. The IPL is better set up structurally than the NFL. It is the most perfect sports league that exists. All right. So how does he do it?
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So besides Lalit seeing that there's an inventory opportunity to expand cricket in India here beyond the 105 or so days of competition that the international team is playing, there's also Lalit perfect opportunity at this moment within the cricketing world, which is that the whole game itself is undergoing a major revolution. England had just introduced a brand new version of the game.
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Up until this point, there were only two versions of cricket that were played professionally. There's the test match cricket, the five-day gentlemanly event with the cable knit sweaters that we talked about. And then there's the one-day, eight-hour matches that are for international tournaments and competitions, one-day internationals. Yep.
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Back home in England, cricket was basically starting to become a dying sport. The nation that invented the game, that was the home of everything sacred in this sport, in this industry.
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Empty sections everywhere. And the only people still left watching it are old men, basically.
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Women have never really cared. And kids are like, I'm interested in football, European football. Like, I don't care about this.
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Yeah, this is happening during the day or even one day during the international tournaments.
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It was for the nobility. Yes. Exactly. But not going to work in the modern world. Yeah. So in 2003, the English cricket board finally realizes like, hey, we're desperate. We got to do something. So there was another form of cricket that was mostly played recreationally and by school teams that was 20 over cricket.
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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 20 overs, and over is six balls.
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So all of a sudden, you're going from test cricket, which is thousands of balls bowled, pitches equivalent in the baseball world, over five days. Then you've got the one-day international, one-day version of the game, hundreds of you're going down to 240 total balls bowled, 120 for each side.
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We can't wait to see you there. And we can't wait to be there. Yep.
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Compare that to a Major League Baseball game, for instance, has an average of about 300 pitches per game, about 150 each side. So now all of a sudden, cricket went from the boring version of baseball to the more exciting version of baseball.
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Right. A baseball game can go on forever. Pitches could go on forever, extra innings, etc., etc. Nope, these T20 games, it is a strict, balls-bowled count. Yep, it's tight. And that means games take two and a half to three hours. That means games can be played in primetime, in the evening, for the very first time in the sport.
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Yeah. So all of a sudden you start seeing these green shoots in England, 2003, 2004, 2005. Domestically, they start playing T20. They start televising the matches. Younger people start paying attention again. There's a revitalization. So obviously the international game sees this. Lalit sees this. He's thinking about starting up a domestic league in India. Yeah. This is the perfect opportunity.
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What an amazing gift of a new format of the game. Perfect for primetime. An incredible opportunity.
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Which we'll talk about the Savannah Bananas later. For folks who don't know or who are not in the U.S., Savannah Banana is like the Harlem Globetrotters of baseball. It's a purely entertainment spectacle. It's a spectacle for sure.
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Totally. So the Australian domestic T20 league that gets started right around this same time, to give you a sense of this, is called the Big Bash League. 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 T20 cricket league in the world behind the IPL.
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But this is not targeted at the test cricket loving audience. Right.
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Yes. 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 120 balls and you need to maximize your score. So rather than trying to run out balls or whatnot, like sixes become way more important. Yep.
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So, Lollett knows this is 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. We're going to set up a whole new league.
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And Andrew Wildblood, who runs IMG's India operations, becomes essentially Lalit's partner in setting up, how are we going to structure this? What are we going to create as the business plan of this new league? We've got some time. We've just done these major rights deals and sponsorship deals for BCCI. Let's be really thoughtful about this. We'll plan to start it in 2009. So here we are.
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We're now in end of 2006, beginning of 2007. We got two to three years to set this up. And then in the spring of 2007, a rebel league starts up under their nose in India. Another domestic T20 league with city-based franchises announces that they're going to launch T20. And they're going to call it the Indian Cricket League. And it's backed by the broadcaster ZTV.
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Yeah, it's a good point. This opportunity for a domestic cricket league was not some, like, aha brainstorm that Lalit had once he took over BCCI. Everybody knew that this would be a huge opportunity. Right.
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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.
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Oh, interesting. So this must have been right before Lalit joined the board and then restructured the whole thing.
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Because at this point in time, Lollet is starting to work on setting up IPL.
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Yeah, so they do play actually two seasons, 2007, 2008, into 2009, and then they fold.
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Well, I mean, this brings up probably the most important power and playbook theme that I was going to save to talk about later, but we should talk about now. The cornered resource of the players. 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, you're toast.
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Yes, just like how we say every company has a story, every company's story is powered by payments, and JPMorgan Payments is a part of so many of their journeys from seed to IPO and beyond.
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Nobody wants to watch the second best players in the world play each other.
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Yes, that is absolutely true. The players are the primary thing, though. The broadcasters will follow the players. Star is desperate to rebroadcast 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 BCCI, but it just wasn't a compelling product.
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And the BCCI is basically using the mafia tactics of like, 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 IMG are like, okay, we got to accelerate this. We were planning to launch what becomes the IPL in 2009.
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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, which is that unexpectedly, India ends up winning the first T20 World Cup that summer.
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Oh man, we've got like a construction crew. Too hot, too cool.
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So what happened was T20 was introduced by England in 2003. Yes. 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. 2007 is when the ICC finally starts to recognize, ah, maybe there's something to this. And this is the first T20 World Cup that they organized.
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So they've been doing the One Day International World Cup for years, all the way back to before 1983 when India won it. But 2007 is the first T20 version of this that they're putting on. Well, the sort of first team of the Indian national team, they'd already just played the one-day international version, so they were tired. The best players, you know, look, tired.
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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, the young guys end up winning the tournament in incredibly dramatic fashion.
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Well, we start in the early 1990s with a colorful character, shall we say, named Lalit Modi. No relation to Nahendra Modi, the Prime Minister of India, but he is from another famous Modi family. Lalit is the son of the renowned Indian industrialist K.K. Modi. who had built a fairly large conglomerate in India, you know, in the vein of Reliance or Tata or whatnot.
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Pakistan. Yes. So during the group play stage, the early stages of the tournament... The Indian team is playing the England team. England, home of cricket. Yes. Massive underdogs here. You've got the young Indian players. Lalit has come over, of course, to South Africa to watch the World Cup. He's working on the IPL accelerated launch in the meantime. He's like, okay, great.
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We're playing in T20 World Cup. This is an opportunity. I want to create some exciting moments here. 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 T20, 20 overs.
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The bowlers 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 going to 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.
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So Lalit tells these kids, remember they're kids from India, not from wealthy families here, if any of you can hit six sixes in an over, this is going to be such a dramatic event. I know this is going to capture the public's imagination here. I will personally give you a Porsche 911. I swear to God this is true. Wow, the acquired universe crossover. The crossovers are amazing.
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And I believe, in fact, that when they were talking about this in the locker room, he might have first offered a Rolex, and then the players were like, no, that's not enough for doing, like, I need a Porsche 911. Oh, that's amazing. I think that might be the story. Either way, to drive a Porsche 911 in India, period, is like, that's a big statement.
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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, Yuvraj Singh, is up at bat. He hits one six. He hits two sixes. Three sixes. Four sixes. By God, he hits six sixes in and over. Crowd's going insane. Against England in South Africa. The crowd's going insane.
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I believe something like less than 20 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. And so he comes running over to Lalit. Lalit's there in the stands, jingling his hand back and forth, feeling like, I want the keys, my Porsche, my Porsche. Amazing. And he gets his Porsche.
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And Lalit would tell you that he paid for it out of his own money. I'm sure. Lalit'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. Next thing you know, they find themselves in the final against Pakistan.
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Now, the Indian national team, the first team at this point in time, despite India being the biggest market for cricket in the world, was not that good. I believe they had not won an ODI, a one-day international world cup in quite a while. Here now, these young guys, the T20 team is in the finals against Pakistan. They win on the last over. An incredibly exciting, dramatic finish.
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The television audience back home in India for this was 400 million people.
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That game, that match, was the 10th most watched TV event of the year, period, around the whole globe.
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The young team comes home. Lala calls up Nike before they leave South Africa, and he's like, I need open-air tour buses. For the team, for the whole retinue, you can meet us at the airport. We are going to do a parade to the stadium in Mumbai, and we're going to have a big, huge victory celebration, just like they do in Western sports after they win a World Cup. They come home.
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The team arrives at the Mumbai airport at 6 a.m. The crowds are packed. There are 4 million people on the streets. It takes them 11 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 imminently about to launch IPL.
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But there's one key thing underlying all this, and that's the data that makes it all useful. After all, AI is only as powerful as the platform it's built into and the data it has access to. So a couple of years ago, ServiceNow realized that having a coherent set of data was going to be essential as the world got more complicated with AI.
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In the old world, each department ran applications that were creating their own data in their own silos. And when AI agents came around and needed to communicate across all that data and across departments, that was going to be untenable. So ServiceNow introduced Workflow Data Fabric,
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their way to unify all that data across the enterprise and let workflows and AI agents have real-time secure access to data from any source.
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Yeah, the industrial structure in India, at least to date, seems to be more like South Korea or Japan with the big conglomerates. Yep. But in this case, Modi's conglomerate primarily is based around the tobacco industry. And they have a JV partnership with Philip Morris and are one of India's leading tobacco and cigarette companies.
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This is just one way that ServiceNow unifies silos across your business so your employees can stop swivel-chairing between apps to enter the same data in different places and just make better decisions faster. If you want to learn more, go to servicenow.com slash acquired and just tell them that Ben and David sent you.
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Yep, we have finally arrived at what we've been hinting at the whole episode, 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, there are two things that you need to really try and maximize to make it appealing to an audience.
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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. Two, though—and this is where a lot of sports leagues go wrong— You need uncertainty about the outcome. You need competitive parity amongst the teams in the league.
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This is the any given Sunday element of the NFL that has been the key critical ingredient to making the NFL the most valuable sports property in the world.
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Yes, I was taking it as tautological that that is what you are trying to achieve.
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Now, importantly, this does not mean you are simply creating spectacle and controversy and entertainment without quality sport. You know, that would be the Harlem Globetrotters. That would be the Savannah Bananas. Amazing, incredible businesses and products. Never going to be the biggest thing in the world in their sports.
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Yep. 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, that was actually pretty easy for the IPL. That's what created the opportunity.
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Correct. The BCCI has quartered resource access to the best talent in the world. Yep. 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, competitive parity. This is where so many leagues go wrong.
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Okay, I'm going to pause. We're not even going to record an episode. I'm going to watch this over.
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So Lalit, as the heir apparent son in this family to this business, he gets sent to college in the U.S. 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 back, inspired by his time at Duke and how basketball crazy Duke is, he's like...
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To get competitive parity among 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.
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Yep. And we'll get into this later in the episode. But here in the U.S., I think this is where Major League Baseball has gotten really, really, really wrong over the last set of decades. It's the Yankees. It's the Dodgers.
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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.
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Yep. So now think about setting up this new league in India. For reasons I'll get into in a sec, you need to have a diverse ownership group. As in, you can't just have super wealthy industrialists owning all of these teams, right?
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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 going to have nowhere near the same amount of godlike resources that these other people have.
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Yep. So as you're setting up these franchises, 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 of business, which is the easiest one, is stadiums. So, Ben, you were mentioning teams running in the red in the English Premier League.
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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, and then the debt payments that you got to make on these stadiums are just crippling.
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Yeah, exactly. These are hundreds of millions, if not billion dollar edifices that you have these teams funding and owning through debt. And then the debt payments are just astronomical on top of astronomical player salaries that they're playing. So first thing that Lollett and Andrew Wildblood and IMG decide as they're setting up the league is, No debt. No team is allowed to have debt.
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Yep. Well, 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? The BCCI. The state cricket associations, which all roll up to the BCCI. Problem solved. Problem solved. Awesome.
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So next and most important is what happens to media 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 going to be negotiated centrally and split evenly amongst the teams like they are in the NFL? Obviously, there is a superior model here.
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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 how big the sports media business is around it. Yes. We should get into that.
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And, hey, guess what? The BCCI and Lollet 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 Lollet has just hugely successfully done this $620 million deal for. Yep.
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So, okay, we're going central rights, and then we're going to distribute that central revenue from both sponsorships and TV rights equally to all the teams.
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But as Lollett and IMG are thinking about how are we going to maximize the TV rights deal that we'll do for this new IPL, this new domestic cricket league, they kind of have a problem from the success that they just had selling the international rights. And that problem is they already saturated the entire market of buyers for this form of entertainment being cricket broadcast in India.
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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 $620 million rights deal was so big that they just absorbed the entire market of cricket advertisers.
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So assuming it's a $2 billion ad market, they need to go sell and take up 5% of the entire advertising market per year just...
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So Lalit actually has a great, amazing quote about this dynamic. In the way only Lalit can speak, here's the quote. Being the big daddy for all sporting events in India, already with the BCCI bilaterals, which 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.
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We had sucked it all out by taking the price of BCCI 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 going to get the money to make IPL work, I needed women and children.
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He's spot on. It's exactly what the dynamic is. And again, back to the now league dynamics of setting up this league versus BCCI just running the one international team. Again, look at the NFL.
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Yep. And this is kind of the perfect time for it because here in the early 90s, 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 Lalit goes to the Walt Disney Company. Disney, of course, owns 80% of ESPN at this point in time.
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It is super important that your central revenue stream of your TV rights deals and your central sponsorships, that that be very, very large and that that be the most important revenue stream for your teams because that's what keeps competitive parity. The risk to the NFL's model is that the Dallas Cowboys or the San Francisco 49ers start making too much local revenue.
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And then they're making more money than the other teams and all of a sudden the balance is out of whack.
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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. This is where Lalit and IMG's just incredible entrepreneurial genius comes in. They say, we are going to make the IPL into an entirely different product with a different target advertiser and sponsor than our international cricket.
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Yes. They need to attract women to view the game and then advertisers who are going to advertise products at women for IPL. So totally different market segments in terms of advertisers.
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Yes. And whatever else she was going to put on were soap operas. So I'm going to read a quote here from Andrew Wildwood at IMG, who was Lalit's partner. There were a number of guiding principles behind how we put IPL together. One was that it should reflect the characteristics of modern India. So energetic, colorful, noisy, exciting.
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Two, it should not compete with the other forms of cricket, but rather it should compete with other forms of entertainment. 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, Lalit and I agreed that we didn't want to compete with other cricket.
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We wanted to compete with the soap operas. We therefore needed to create IPL in the image 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 were single television homes, and women controlled the remote control watching soap operas at night.
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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.
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No other sports league in the world has done what IPL has done here. Today, IPL viewership is entirely 50-50 gender parity between men and women. 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.
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It's Bollywood and cricket. And when it comes to Bollywood, there is one star that shines 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.
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He writes, "...within Bollywood, there are B-listers, A-listers, double A-listers, and way above them all is Shah Rukh Khan, richer and more famous than Tom Cruise or Clint Eastwood and adored by the entire country." Turns out, he and Lollett had known each other since childhood.
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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 incalculable. So Lalit knows Shah Rukh Khan, biggest star in India. There's one problem, though. Shah Rukh is not a cricket fan. He's into soccer. Really?
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And says, hey, my family has this JV with Philip Morris, you know, help them enter the Indian market. 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, Lollet uses the sales force that the Modi company has for their tobacco products.
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So Lalit goes to him and is like, I need you to be part of the ownership group.
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All post-facto retconned. Yes, yes, yes. Here's the real story. This is amazing. We should say all the quotes from Lawlett and the direct firsthand information from Lawlett comes 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 Rukh. This is the perfect, you know, get him in on the ownership group.
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He's the brightest star in India. Have him at the matches. Whoa, 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 Lalit tells the story. Shah Rukh said, Lalit, I don't know how to do this. My passion is football.
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I have no idea how to run a team or do anything. I, being Lollet, said, Sharukh, let me handle it. I'll put a consortium for you together. You just need to write a check. He says, you're going to take my life savings. And it was his life savings in those days. I said, just write the check and we'll talk about it if you end up winning the team at the auction.
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This is the most incredible gangster type stuff. So here's what Lala did. Because he's friends with Shah Rukh, he knows that Nokia, the big handset manufacturer at the time, remember, we're still slightly pre-smartphone era here. We're in 2007. Yep.
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Oh, way pre-smartphone in India. Nokia is desperate to get Shah Rukh as their celebrity spokesperson in India. And for whatever reason, Shah Rukh is not engaging with them on it. So Lalit says, Shah Rukh, just trust me. Do I have your word that if I put a consortium together for you, you're in? He says, sure. Lalit turns around and he goes to Nokia and he says, I know you want Shah Rukh.
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He's not going to do it. But you can become the jersey sponsor of his new team that he's about to have in this new cricket league that is going to be the biggest cricket league the world has ever seen.
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Would it be? Would it be? Yeah. Yeah. Well, if he were to have this new team, he's going to be in the stands. He's going to be on the field. He's going to be wearing it. He's going to be singing. He's going to be dancing. He's going to be doing the music video introduction to the team in the league. TV cameras are going to be all over him.
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And he's going to be wearing the shirt with Nokia right there in the front on the chest. And you can have all of that for the low, low price of $5 million per year in cash up front.
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Jersey sponsor, one team, $5 million in cash. One team that doesn't exist that theoretically might be won at the auction by Shah Rukh.
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India, baby. And Lalit. And Lalit. I mean, he's an incredible entrepreneur. So Lalit goes back to Shah Rukh and he's like, all right, I got you your team. So I'm going to set the minimum reserve price in the franchise auction at $50 million. But it's going to be payable over 10 years. And... No matter what you bid and what you win, the first year's payment is going to be $5 million.
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So if you bid $50, it's $5 million a year for 10 years. You bid $100, it's $10 million a year over 10 years on average, but I'm only going to charge you $5 in the first. I believe that's how it was set up.
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They have 80,000, 100,000 sales reps that are going to convenience stores, corner stores, 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.
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Well, again, meteorites. Importantly, we can't get to the meteorites yet because, like we said, there's the problem of to sell the meteorites, you got to bring a female audience in. And you got to prove that. And you got to 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. First year payment's going to be $5 million.
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This is, you know, I've got you, your team, in quotes here. I see. Got it. So Shah Rukh's like, oh, wow. Okay, great. I'm in. That is an offer I can't refuse. Well, a free cricket team, sure. So we're now fast-forwarding slightly to when the auction actually happens in January 2008. The auction happened. Shah Rukh won the team at 12 o'clock.
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At 3 o'clock, he had a signed agreement with Nokia to pay the $5 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. Lalit can now go around to everybody and say... Shah Rukh is in. We got Bollywood and, oh yeah, Nokia's in.
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And they're in for $5 million for Jersey sponsorship of a single team. So now they've set the price. This thing is for real. They have set the market. Exactly. Okay. So now that Shah Rukh's in, all the rest of Bollywood wants to come in because wherever Shah Rukh goes, you know, he's the leader of the pack. The whole rest of the community wants to come along too.
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Unbelievably charming. Yeah. I'm trying to think of an analogy in like Hollywood. There is no analogy. So one of the top AAA list actresses, an actress named Preeti Zinta, she ends up 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 actresses who's coming in as the principal owner of a team.
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So now you've got not just Shah Rukh, who even alone that would have been enough to draw in the women in the general entertainment audience and beat the soap operas.
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Now you've got AAA top list, one of the best actresses in Bollywood, who's also going to be a principal owner of one of the teams, who's also going to be at all the games, also in the stands, also going to have TV cameras all over her. And then it's just going to bring the whole circus. So while it says in one way, they are 90% of the market, they being Bollywood.
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So Lalit says, hey, we can leverage this sales force and use those people 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.
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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 talking about them attending a match, it changed the whole thing around.
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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, or they can tune in on TV, and they can come see the stars there out even far away every night of the week.
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And then the pièce de résistance, at least when designing this product for a general TV audience and competing with soap operas, Wildwood meant the quote about competing with them quite literally. So when IMG and Lollet go out to bring the bidding to the TV networks for this, they say, here's our schedule and time slot. We are going to have matches every night of the week, seven days a week,
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One match at a time at 8 p.m. We're going to go directly up against the soap operas, which also run every night of the week at 8 p.m. These are going to be three-hour matches, 8 p.m. to 11 p.m. And it's going to be like Monday Night Football every single night of the week. Only one match at a time. For two months.
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And you're going to have all the biggest Bollywood stars there, all the AAA listers who, by the way, will never act in soap operas because they're only acting in the big time movies. Right. We're going to have them in our soap opera. We've got them coming captive in the stadium with the cameras on them.
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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 going to come here too. The whole family is going to watch.
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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. I think the Super Bowl is like this in the U.S., where it's a family event. Everybody watches. I mean, Jenny watches. My wife, she has no interest in football.
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She hates Sundays and Monday nights during the season when I want to watch football. 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 because it's an event. She wants to see the commercials. She wants to see who's there, etc. This is what IPL is every single night of the week.
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Yep. You've got first the stadiums and no debt, not owning stadiums, asset light business model. Second, you've got a diverse ownership group, which is necessary both to ensure that 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.
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So then now three falling into place here is the media budgets and being able to get a huge central broadcasting rights deal. Yep.
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Yep, exactly. So here we are now by January 2008. All the pieces are in place to get that deal. Lalit and IMG are ready to take it out to the markets for bidding. Of course, per usual, there's just one problem, which is that Nimbus, remember, which had spent $620 million to buy the international cricket rights from BCCI, they're like, wait a minute. We already own this.
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We paid you $620 million over four or five years or whatever it was for the rights to all of BCCI cricket. This is what we're paying you for. IPL is a BCCI product. We should have this already. It makes sense to me. I see the argument. And of course, what do you think Lalit says? Nope. IPL was not specifically laid out in the contract.
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And if you would like to sue me, you are welcome to go ahead and sue me. Good luck here winning.
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And I mean, look, Nimbus is already making out great. They went from being like a 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. Yeah.
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And this just is how business in India gets done, or at least was how business in India gets done in this timeframe, you know, call it 2008. Sure, from our U.S., American, and Western perspectives, we can look at this and be like, well, what was actually the letter of the contract? And shouldn't there be a process here? And does Nimbus have these rights?
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Yep. There is a national over-the-air broadcast network in India, a national network called DoorDarshan. But just like happened decades earlier in the U.S., 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.
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Star is still out because... Another amazing Lollick quote. He just doesn't let bygones be bygones. He's talking about how he sets up the broadcasting rights auction. Rupert Murdoch, I had blacklisted. I would never allow him in due to what had already happened. So I blacklisted Rupert Murdoch. Amazing. I mean, this was 10 years ago that that happened.
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ESPN and Disney corporate says that they are interested in bidding on these rights separately from Star, which they're already a JV 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.
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They say, we will broadcast it over the top as Disney, soon to be Disney Plus in the coming years, but we're only going to do it on a rev share basis. We won't give you cash up front. We'll just share advertising revenue with you. Yeah. Obviously, that's not what Lala wants because he needs the cash to have the central sponsorship guarantees, central media guarantees out to the franchises.
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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. 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 he says, I will make you a sports channel.
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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 $600 million for 10 years. But I am expecting a billion over 10 years, which would put it roughly on parity with the India international cricket rights that Nimbus had bought the year before. So Sony's like...
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Okay. We're interested. We see the value here. But 10 years is a big commitment for what is essentially a startup.
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Exactly. Not a ball has been bowled. 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, Lalit and IMG, but... No domestic cricket league has ever proven valuable anywhere in the world. You know, there are domestic leagues in Australia, in England, in New Zealand, et cetera, but they're peanuts.
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We're pulling down signal from CNN or what have you, and we'll rebroadcast those channels out to you via a wire into your home.
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You know, they're the minor leagues. They're fine. They're not going to justify a $100 million a year, billion dollar over 10 year meteorite 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 $600 million minimum bid for 10. We'll pay you $60 million for year one. So, you know, it's something.
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It's money on the table, but it's not really going to send the signal of strength to franchise bidders that Lollett wants for the auction coming up. He really wants the 10-year deal to project stability and cash flow certainty that also, by the way, is going to match up the 10-year payable period of the franchise fees. That's why he wants 10 years.
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So he and IMG say to Sony, 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. And it's basically just like the Nokia and Shah Rukh Khan deal. They say to WSG, World Sports Group, here's what we need you to do. We need you to bid and buy the 10-year media rights deal at the billion-dollar price that we want.
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But we'll only charge you $60 million in year one. So then they would owe the remaining 940 over nine years? Exactly. And so you're going to put up $60 million in year one. And this is for the global rights, by the way, to IPL broadcasting.
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And what you're going to do is you are going to turn around and immediately sub-license the Indian domestic broadcast rights back to Sony, who is good for that $60 million 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 at your pleasure.
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Yes. Well, so here's the Lollet quote. I knew that once we had the TV deal signed, all the rest would follow. Remember, he's already set all this up with Shah Rukh Khan. You know, he's got the players. He's got Shah Rukh Khan. He's got the stadiums. He knows this is going to work if they can secure the bag on the TV money.
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So he says, although the deal was for $1 billion, I told the broadcasters I only needed $60 million in year one. Let's get the first year done. We'll worry about the rest later. I promise if we don't achieve what we set out to achieve, I won't carry on the IPL after year one.
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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, WSG, for $940 million in years 2 through 10.
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Yep. He is the JV partner that Disney is entering India with. Got it. So now here we are in the early 90s. Disney isn't the only major global media conglomerate that sees the potential of this newly television-hooked-up Indian consumer market, there's News Corp out there and Rupert Murdoch. And Rupert, of course, really built the television side of News Corp with Fox on the back of two things.
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Like I said, it's the same Shah Rukh 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.
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Which, again, legality or to the Western view ethics aside, actually is brilliant. What an amazing way to start something from nothing.
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Totally. And what Lalit is architecting here is not just saying transactions. He's saying no risk transactions. I'm going to create no risk transactions where you have no downside and all upside. And he actually genuinely is able to align all the players here such that like nobody is really holding the bag.
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Yeah, exactly. You need to have some level of trust here. Actually, a pretty high degree of trust.
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Yep. Well, you could argue if you're WSG whether you should have or should not have valued Lalit's trustworthiness because what he offers does end up coming to pass, just not in the spirit in which he offered it.
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Okay, so they announced the billion-dollar deal with WSG and Sony. This is like an earthquake that hits the cricket world. No domestic league had ever remotely been valued on a media rights basis like this before. Not to mention, the league doesn't exist yet. There are no franchise owners, you know, etc. It's just a business plan.
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Then, on the back of that momentum, 10 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 is $50 million for the ownership groups. But the TV money is now in place. This is why it was so important.
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So here is the prospectus that gets distributed out to potential bidders on these franchises. Of the central media rights revenue, the broadcast deals like they've just done with WSG and Sony, and also the central sponsorship deals, 50%, one half of that, will get distributed out to the collective eight franchises to be distributed equally. But here's the kicker.
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Wallet 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 80%. 8-0. So 8 out of every $10 that are coming in centrally to IPL. will get distributed out, just happens to be eight teams. So each of the eight teams is going to get 10% of the total central money that's coming into the league.
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And then it's going to be a sliding scale over the next 10 years that's going to take it down to 50%. And so how does the math work out now? Okay, you already know what the TV rights deal is. It's $60 million in the first year, hard cash that's coming in.
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And then there's upside from sponsorships that Lalit might go sell, but he needed to get the franchises in place before he sells the sponsorships.
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Bingo. TV rights alone, $5 million in cash coming in each year. And remember what he told Shah Rukh Khan, what's the deal on the franchise fees? Paid over 10 years, but I'm going to let you pay the effective minimum price in year one, only $5 million in year one. magically, it works out. You get a free franchise for the first year. Amazing. Amazing. No matter what you bid.
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And guess what? Magically, once all the central sponsorships are sold, it ends up being... $10 million per team distributed from the central revenue pool. Exactly the straw man that you are setting up, Ben.
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It was news at first, but then it was really sports that helped Fox totally take off. I mean, the NFL Sunday deal here in the U.S. is what put them on the map. This is the blueprint for bringing Fox and News Corp into a new country.
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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, etc., Well, if you are a smart sports investor, the first most important question you would ask next is... What's the salary cap? What's the salary cap? What about the players?
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Yes. And what makes the IPL unique relative to every other sports league in the world, what they uniquely innovate on this is the auction system. Players in the IPL are auctioned off just like a Sotheby's auction, like a piece of fine art, or 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.
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And it is absolutely freaking brilliant. But before we tell the story of the IPL auction, now is a great time to thank a friend of the show, Fundrise.
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Totally. This had been tried in the past, but never really worked. Fast forward to today, Fundrise has invested in great companies like Databricks, Canva, Anduril, Ramp, fellow friends of the show Vanta and Anthropic, and also Service Titan, which just went public in December.
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Yep. When the service titan IPO happened, thanks to Fundrise, tens of thousands of regular investors got to celebrate alongside VCs, LPs, and employees. And timing really is everything. Fundrise is doing this at a moment where, thanks to AI, there's more value being created than ever in the technology sector of the economy.
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Exactly. So News Corp had just launched a new brand and channel in India called Star. And Rupert's going around looking for how he's going to run this playbook in India. What sports is he going to broadcast? And pretty quickly, he figures out that there's really only one sport that matters in India, and that's cricket.
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It is tied as top priority for 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 capital expenditures and potential debt payments for stadiums. That's not part of this league.
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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. Yep. So different leagues have different ways of dealing with this in different sports. And we talked about this a little already, but I would say until the IPL auction innovation,
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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. And how high that dollar amount is, is the result of collective bargaining between the players union and the ownership group.
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Just taking the three big U.S. sports leagues. NFL, clearly the gold standard, has the best way to manage competitive parity, which is the hard salary cap. Next is the NBA. They're somewhere in the middle. The NBA has a soft salary cap, which means, yes, there's a salary cap, but under some exceptions, you can go beyond it, and then there's an associated luxury tax with going beyond it.
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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.
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now starts to play a factor in how much you can spend for players and starts to affect the competitive balance of the league.
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And it just so happens that he thinks he can actually get the rights to broadcast Indian national cricket pretty darn cheaply. We're going to come back to that in a little bit.
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Now, in theory, the luxury tax should address this because you're then now redistributing some of that 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.
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So if you look at 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 because they're not in
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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.
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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, which sort of operates like a soft salary cap like the NBA. But in practice, it's a total sham. Because in the NBA, there are at least strict rules about when and how and how much you can exceed the salary cap by.
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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 2024, nine teams in Major League Baseball exceeded the competitive balance tax threshold.
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By far, the worst offender were the Los Angeles Dodgers, who exceeded it by $100 million. 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 $100 million and paying such a huge luxury tax? Oh, guess what? They're in Los Angeles, the biggest media market in the U.S.
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And oh, guess what? Major League Baseball does not have central media rights. The Dodgers have their own TV deal in Los Angeles, which is by far the most valuable thing.
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in the sport so they've got the funding as you said the access to capital to do this and of course they're going to win the world series it's a big problem yep why would anyone tune in to watch that totally i mean sure then you've got also the separate problem with baseball of 162 games like who cares about a game on a wednesday night in the middle of the summer
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Right. I mean, that's just such a stark example. You've got one team that has 3x the annual salary payroll of the other team. Like, there's just no way. Yep. Spring training 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, so that's at least state-of-the-art in the big North American sports leagues.
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As I said, before the IPL comes along, NFL is the gold standard. I mean, they are the true any-given Sunday league. 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 soccer.
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Right. That is the ultimate disincentive to investment and ownership in a league. You definitely don't want that. Yes. Okay. So Lollet 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.
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All these auctions that 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 one time in the moment transaction. And I can set the guardrails for minimum maximum.
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Yeah. There's no English Premier League of cricket. At this point in time, cricket is just this international game.
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I'm trying to remember. There's some episode we did recently where we referred to either the company or the founder as a value maximization pioneer.
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Value capture pioneer, yeah. Lalit Modi is a value maximization pioneer.
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Ah, Qualcomm. So here's Lalit's quote on how the auction comes about. I got the idea of the player auction because our family company had a partnership with Sotheby's Auction House in India, where you offer the item to the highest bidder. What's wrong with that? Great transparency. I also knew it would be the talk of the town. Extremely controversial. That was a central part of my strategy.
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And then he says in a different quote, 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, good or bad, doesn't matter. As long as people talk about us, they hate us. They like us. Great. No problem. They want to talk about us. Let them talk about us.
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And we don't clarify anything. I love it. Amazing. OK, so back to the auction. Of course, this is going to be controversial. Like I said earlier, you know, the media is writing about this. The world's best cricketers auctioned off like cattle and sheep.
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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. 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. Let's say you're a player.
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Right. Now 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 the low trust environment thing you would do would say, oh, great. Sign both players for half and then go to them on the side and say like, oh, hey, by the way, these other companies that I control, they're going to do a sponsorship deal with you.
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Yeah, it's Monday Night Football. It's the playoffs. It's probably every Indian male who has access to a TV station. And I say male because at this point in time, cricket is a male game.
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Like you're going to become a celebrity endorser for them. And that's going to be another $3 million contract that you're going to get on the side.
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Point being, you can't police what happens outside of the sort of artificial construct of like a direct salary contract negotiation. 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.
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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 and arguably could have signed for more money than the Chiefs were willing to pay him. However, he has other business interests, especially now that he's got his podcast, you know, etc.
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Does he really want to be seen as the heel who's turning his back on the Chiefs?
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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, etc., Auctions eliminate all of that.
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Is watching when the Indian national team is playing. Yep. So Rupert hoovers up these rights pretty cheaply. And all of a sudden, Star is now the place to watch cricket in India. Lalit sees this. He's got the partnership with Disney. He's always been interested in sports. He's like, well, hey, guys, you have ESPN. We got to get in this game. We got to be getting cricket, too. Yep.
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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.
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Quarterback deals, the biggest deals in the NFL. So obviously they're going to want to make a lot of money and that's going to have the biggest impact on your cap because they're by far the highest paid player on your team. At the same time, they also want to win a Super Bowl.
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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.
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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, be a team player here, right? Yeah. This stuff happens all the time.
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So the great beauty of the auction that Lollett 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 75% of cap, right? 75% 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 rate and sponsorship dollars are that are coming in.
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He knows what the franchise fees that all the owners are going to be paying are. So he can basically mastermind all of their P&Ls. And he sets... the maximum that you can spend in the auction such that every team is still going to be profitable.
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And then he also sets the minimum spend so that one team doesn't say like, oh, hey, I want to be super profitable and I'm only going to buy scrubs at the auction and have a really low salary base.
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Now, you might think, wait a minute, an auction, that seems like it's going to 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 of that because it collapses everything down to a single point in time, everybody in the same room with the same finite resources.
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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 going to give you an endorsement deal worth millions of dollars. Sure. No problem. That doesn't get you any more resources to spend at the auction.
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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 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.
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And it is all architected in a way such that the only way for a team to gain an advantage over any other team in the auction is to have superior market intelligence, which has come to mean have superior analytics and superior player evaluation. So in the first year of the league...
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The Rajasthan Royals, who have the lowest salary, they actually don't hit the minimum salary and they get fined by Lollet. So the maximum salary that he sets for year one is $5 million, or maximum purse for the auction. And then that means the minimum purse is, I think, $3.3 million. The Royals don't even hit $3.3 million. They're so cheap.
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So Lollet and ESPN and Disney, they go to IMG, 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 Nicklaus and Arnold Palmer and then ultimately Roger Federer and all of the athletes who partnered with Rolex over the years. Yep.
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They were the cheapest franchise that was sold at the franchise auction, too. So they get penalized by the league. They end up winning the championship because they come into the auction with better analytics than everyone else.
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Well, I think there's two important impacts of that. 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 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 going to bid on you.
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You will go to another team and then I will pay you money to play worse for that team, like to throw matches. Which, by the way, kind of might start to happen in the next couple of years here, as we'll see. Yikes! 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, is...
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Because all of this collapses to a single point in time, it means the IPL and Lolic can say all player contracts are standard contracts. There's no terms. There's no negotiations. Every player will be at 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.
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I'm going to send you back to the auction pool. Likewise, player could pull out. 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.
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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 make in the IPL versus in the NFL, players are essentially getting 50% of revenue. the league's revenues.
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Yep. In IPL, even today, I think players are getting 12 to 15% of the revenue of the league.
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But... They're thrilled. This is great for the players for two reasons. There's a carrot and a stick here. The carrot is before the IPL, they weren't making any money.
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Yeah. 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. Now, all of a sudden, you have eight teams within India. So it increases the pool of players.
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Two, there's just way more money to go around. Yeah, you're only getting 12%, 15% 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. So it's like, oh yeah, you can come play in the IPL for the two-month window that is their season.
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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.
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So Lalit and ESPN and IMG, 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. we'll pay you more. We'll take them.
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Of course they do. 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 going to be happy with this or we're not going to let you play on the international team in India. Yep, that's exactly right.
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But all that said, even if you were to have a better collective bargaining system, players were to make more 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.
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But this is the new optimal system for running a sports league. 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.
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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, etc. But for the most part, It really is an incredibly elegant system here.
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Yep. Here's the rationale. I will give you the argument. The role of the BCCI 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 are the stewards of the game around the world. So what that money is intended to go to is two things. One, infrastructure, like you said, improving the stadiums, et cetera, et cetera.
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Spoiler alert for later in the episode, doesn't really go there right now. And then the second and arguably more important thing that the BCCI does with that money is player development.
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So still today, because the IPL is in its infancy relative to other established sports leagues, the teams and franchises themselves aren't set up to develop talent in the way that, say, Major League Baseball is the most developed on this front.
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If you're a Major League Baseball organization, you have minor league baseball teams around the country and academies around the world where you are signing and developing players.
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And not just that, but it is a 365-day around-the-world global operation where you are identifying, developing, preparing talent to play at the highest levels of the game. Right now, none of the individual teams, franchises themselves, and the IPL are doing that. They are starting, but mostly that work falls on the BCCI.
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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.
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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. 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.
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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.
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Yes. Lalit and the BCCI would say, oh, no, no, no. Of course it was open and transparent.
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Sure. In practice, on the ground, almost assuredly, what you just said there is 100% true. So minimum reserve auction price for the franchise auction is $50 million per franchise, which would be paid over 10 years, $400 million for the collective eight franchises. They end up selling for $724 million collectively. So there's a lot of bidding that happens.
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So what, 90-ish million a team is the average? Yes. The most expensive franchise is the Mumbai franchise, unsurprisingly, being the biggest city where Bollywood is located, etc. That, gosh, really, you couldn't script this any better, duh, is bought by Mukesh Ambani, the wealthiest person in India and the CEO of Reliance, for $112 million. Highest bid in the auction, but not like that much more.
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The spread here is not that big between the highest and the lowest.
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Totally. The central revenue stream, this is an incredibly well-architected league. Yep. The cheapest franchise, as we said, is the Rajasthan Royals, which is bought by a UK investor consortium led by Manoj Badali, who actually lives in the UK, in London, for $67 million, so roughly half the price of the Mumbai franchise. Shah Rukh Khan's group gets the Kolkata Knight Riders for $75 million.
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Preeti Zinta's group gets the King's Eleven Punjab for $76 million, suspiciously close in price to the $75 million Shah Rukh Khan bid, but only $1 million more. Anyway, this, I think, is known at the time.
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One of the other board members of the BCCI, who would soon become the chairman of the BCCI, a gentleman named N. Srinivasan, who also is an industrialist who owns the Indian Cements Company, he buys the Chennai Super Kings for $91 million, despite also being a board member of the BCCI. Hey! Hey! What do you know?
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Exactly. Very interested. This is a huge, resounding success. And then on the back of the franchise auction, a couple of weeks later, now the player auction actually happens. And it goes exactly as predicted. Interestingly, MS Dhoni, who's a legendary Indian cricket player, he goes for a million and a half dollars in the auction, which was a huge spend.
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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.
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I mean, remember, the cap on the purse is $5 million. So you're spending one and a half of your five on one player. And how many players per team? There are 11 players that play on the field at a given time. So, you know, one of your 11 playing players, you're spending 30% of your cap on. So anyway, all this, just like Lollet prophesied, huge headlines, just adds to the media buzz.
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And then, at least from a competitive parody standpoint... It actually works. So the Rajasthan Royals, despite being the cheapos, they bring better analytics than anyone else to the auction. They win the championship in the first year. Now, we should also point out that they have not won a championship since then in the subsequent 16 iterations of the IPL season.
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But today there are 10 teams in the league and seven of the 10 teams have won the championship. in the, what is it, call it, 17 seasons that have been played so far. And every single team has at least been runner-up, second place lost in the championship game. Sounds well-balanced. So if you're trying to design a competitive parity league, this is a A+++.
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I would say explosive right away is an understatement. As you might expect, given the incredible architecture of it and Lollet's force of will personality, this thing is a sensation, is... All of the predictions that they made, the business plan, the soap opera, the every night that this is going to be the biggest thing ever to happen to media in India. It's true. And it's true right away.
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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 going to work like we all think in year one. And if it doesn't, I'll shut it all down.
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So we don't cover the ones that this was like a one shot opportunity.
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Yes. To use a cricket analogy here, this would be like you are 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. IPL hits a six.
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If it hasn't been obvious enough from what we've been implying throughout the episode, the underworld of India and the mafia is definitely involved in all of this. And that is going to come up in a minute. So it might not be an exaggeration to say lives are being bet on this to some extent. So, April 18th, 2008. First game, first match happens.
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The Royal Challengers Bangalore has the visiting team versus the home Kolkata Knight Riders, owned, of course, by the one and only Shah Rukh Khan. He's there. He's leading the parade into the stadium, doing the big opening event broadcast around the country. Every TV is watching.
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And in the game, one of the star players for the Knight Riders, the home Knight Riders, Brendan McCollum, interestingly here, international player, obviously not an Indian, but bought at auction by the Knight Riders, hits 158 in that first game for the Kolkata Knight Riders to win. That number probably means nothing to many of you who are not cricket fans yet.
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Yes, it is the British Commonwealth countries that are historically the cricket-playing nations that are part of the ICC. Yep. So we've been talking about how these early cricket rights here in the 90s, Starr and Murdoch, they're able to get them super cheap. It actually wasn't until right before all this goes down that India even realized they had the broadcast rights to cricket at all.
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I say yet 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.
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To hit 158, which means be responsible for 158 runs in a T20 game where your entire team is only facing 120 balls, pitches, opportunities to score, and you personally score 158 runs on the balls that you face, that is an epic performance.
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There's a lot that would need to go into that. From the IPL's perspective, this could not be a better storyline. So the whole season basically goes amazingly. The average... TV share viewership for the entire season is 4.9% of all active televisions in India are watching IPL, like on average. And the first season? First season, yes. A lot of TVs. There is no single soap opera between 8 and 11 p.m.
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that is getting that kind of viewer share in India. It works. The final match, the championship match, is won in the last ball by the underdog, Rajasthan Royals, the cheapos, in dramatic fashion. That final gets 10% viewership share of all TVs in India are tuned in to that final match.
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5% of the central meteorites deal. And then that prize pool is shared among the teams that make the playoffs with the winner obviously getting the most.
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Yes, this is the great irony of the NFL that we learned after doing our episode and we talked about when we reprised it on the Armchair 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.
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But for the actual fiscal year that you are operating when you win the Super Bowl, it's massively net negative.
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Jerry Jones, baby. Just to tie the bow on that, the reason why winning the Super Bowl costs you money is you got to 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 de facto away game for everybody.
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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... then the city makes you pay for the parade yourself. But in all seriousness, back to the point in the IPL, this is so well architected.
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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, viewership was about 30 to 35% women. So not 50-50, although today it is truly 50-50. But that's up from zero. No women were watching international cricket before. I mean, no, I'm sure there were some.
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They didn't even know. And this is crazy. You can't make this up. How do they find it out? In 1991, the South African national cricket team comes on a tour to India. It's international cricket. They're playing in India. And the South African cricket board is like, hey, we want to broadcast this. How much do we owe you for the rights?
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So 30 to 35% is a huge win. Like I said, today it's 50-50. Not only does this mean that brand sponsors of commercials during the broadcast can be both general interest brands and brands focused at women. In 2019, the King's Eleven franchise, they actually, as one of their shirt sponsor logos, bring on a beauty brand. So this is the first...
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women's focused brand advertising directly as a sponsor and as a jersey sponsor of a male sports team anywhere in the world. Fascinating. And I think that's continued and probably a bunch more have come from it. There's a great passage in Manoj Badali, the principal and or the Royals book, where he talks about this.
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He says, the site of Chris Gale, monster hitter, Chris Gale is one of the West Indies player, one of the legendary players. Big, huge, think like Barry Bonds of cricket, essentially. The sight of Chris Gayle, monster hitter, sporting a woman's beauty brand across his right pectoral is quite something to behold. This is the definition of disruptive advertising.
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Or, as one ad executive put it, a hardcore female brand on an alpha male chest. 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.
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Yes, monotonically, up into the right straight line from there to today. Year one, incredible. Today, even more incredible times 20. In the interim, a whole lot of zigs and zags because the very next year, the whole thing almost blows up.
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In the past, we've talked about Crusoe's climate-aligned approach, powering their GPU data centers with stranded energy. But what's truly unique about Crusoe is that they're a fully vertically integrated AI infrastructure business.
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CEO Chase Lockmiller realized early on that in order to become the best AI cloud platform, you actually need to build the entire stack, from sourcing the energy to building the data centers and ultimately to providing the end AI cloud service layer.
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And to put that 1.2 gigawatts in perspective, if you take the entire data center capacity located in Northern Virginia today, where like 70% of the world's internet traffic flows through, all of that is only 4.5 gigawatts. So Crusoe's single AI factory in Abilene will be more than a quarter the size of what powers a huge portion of the internet today. And that's just one of Crusoe's locations.
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Yep. So when you're thinking about where to run your AI workloads, make sure you consider Crusoe. Because they operate and innovate at every single layer of the physical stack, Crusoe delivers unmatched price-to-performance, speed-to-market, and a platform that customers can rely on for years to come.
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It's an incredible company, and Ben and I are excited to be investors in their recent funding round alongside NVIDIA, Founders Fund, and a whole slate of other great investors too.
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Well, before it all almost falls apart in year two, in the off-season after year one, Lollett, the BCCI, all the teams, all the owners, they're all riding high. This was an enormous success beyond anyone's wildest dreams.
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So I foreshadowed a little bit ago in the TV rights deal with World Sports Group and Sony that Lalit had given him his word as a gentleman that if this whole thing doesn't work, I'll rip up the deal and I won't carry IPL forward. You won't be on the hook for the $940 million for the next nine years.
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Well, this thing was such a success that all of a sudden $940 million for the next nine years is looking like a hell of a steal.
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Specifically, he engineers an excuse and says that Sony had been allowing Reliance's telecom division to advertise during their commercial breaks and that that violated Vodafone's exclusivity over everything IPL because Vodafone was a central corporate IPL telecom sponsor.
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He also alleges that he has evidence that Sony had been, 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 and over. Who knows if that's true or not? I don't know.
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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. On the back of this, he strong arms Sony and World Sports Group into renegotiating a new deal that is going to be direct with Sony.
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They throw World Sports Group a bit of a bone. I think maybe they let them keep the international rights. But Sony is now going to directly do a 10-year deal with the IPL for $2.4 billion. So $240 million a year. Quite a bit more than the $60 million that they had paid for year one.
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Yep. 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, okay, fine, I'll let you rip up the contract and I'll pay you roughly 4x.
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As Lalit would point out, I made a lot of money for everyone. Yep. So things start off well, I guess you would call that well, from IPL's perspective during the offseason. But then as we're getting closer to the season launching in 2009, general elections are happening in India and elections are contentious. There are security issues and the government and various state police organizations are
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Yep. 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 events. So here, South Africa is just coming for a tour, national team, and the board is like, well, how much do we owe you for this? They don't know how to respond.
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start coming to the BCCI and the IPL and saying, hey, I'm not sure that we can promise security at the matches this season. And so they go back and forth. They're like, oh, are we going to move some of the matches in some of the states and can some of the states provide security and not others? Ultimately, they decide, shoot, we can't hold this thing in India at all.
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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 all the teams in South Africa. I mean, they're the same team, same ownership, same player, but they just assign like, oh, Mumbai, you're now in Cape Town or wherever. Reassign teams to all the cities. Wow.
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And they restart the IPL and they play it in South Africa. Amazingly, 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. 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.
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So you're actually not sacrificing much revenue by doing this?
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Yes. And satellite signals work just fine from South Africa to India.
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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, put it in another cricket playing country, have it be just as successful, have everybody be happy, you're only growing the game by doing this. Yep.
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On the back of that, heading into season three, they decide, all right, time to expand. We're going to add two teams to the league. We're going to do a two-team franchise auction in the same model as the first one, except now we expect the prices are going to be much higher.
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Yep. They do only do two. That does show some restraint. The two franchises that they auction off are Pune and Kochi, and those go for $333 million and $370 million. A little bit higher than $90 million. Now, central revenue is higher from the new broadcast deal that got renegotiated, quote-unquote, with Sony. But they are on the hook for paying $33 million a year and $37 million a year.
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Hey, there are 20 million hardcore cricket fans in the US today. Great point. As we will get into later in the episode.
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So there's this great history of they're sort of like talking amongst each other. Well, what do we think we should say? We should say $10,000? Is that crazy? Let's start with 20. See what they say, $20,000. And then, you know, they can bargain us down from there. So they go to the meeting or phone call with one representative of the BCCI with the South African board.
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Yep. 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. The Pune franchise makes it two seasons and then also withdraws from the league, citing financial difficulties. And this is the first time, really, where the music stops playing for Lollet. And despite his incredible entrepreneurial success,
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Right. And now, for the first time, people are losing money. And this is when the knives come out for Modi.
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Yep. This is their moment. So after the 2010 season, the BCCI suspends Modi from the BCCI board on 22 charges, including bypassing the governing council when making decisions, not following proper processes, and bid rigging in auctions. That's a big one. Who's going to get teams? Yeah. Pretty hard to say that didn't happen.
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Awarding contracts to his friends, accepting kickbacks on the broadcast deals. Oof. 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 IPL teams. Now...
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Another BCCI board member, N. Srinivasan, who I think by this time had become the chair of the board and was Lalit's sort of main nemesis on the BCCI board, he directly owned the Chennai Super Kings through Indian Cements. So like, hey, pot calling the kettle black here. And then the last two are big ones that he's accused of, betting on the league and money laundering.
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So 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. However, as you might expect, much like the movie Casablanca, you would be shocked, shocked to find gambling going on in this institution.
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There is a lot of money gambled on cricket in India broadly and on IPL specifically after it gets going.
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Yeah, so much so, the statistic is that just trackable bets placed 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 $750 million per match. It's a big business. Huge. And that's just what is trackable legally in foreign countries. Clearly, there is also a big domestic bookmaking market happening there.