India: The Stick Has Got The Carrot

Last Updated: 27 June 2011
Article by Desh Gaurav Sekhri

Originally published in the Financial Express, August 11th 2009.

Last week, Hero Honda was announced as the title sponsor of the Hockey World Cup. This could be the beginning of a big change in India's sports industry. The separation between cricket and others may finally get reduced.

Hero Honda, a widely respected industry leader synonymous with sponsoring sporting events and athletes and doing this perhaps more consistently than any other corporate house, also didn't close the option of sponsoring the Indian hockey team open. So, the demonstration effect could be even bigger over the next few months. There are financial benefits for sponsors and, from a legal standpoint, it is simply easier to maneuver contract negotiations to one's favor when dealing with sports other than cricket.

True, Bharti's suspension of the Rs 1bn soccer project was a huge setback, especially for a sport that has languished for long. This bad news was tempered by reports that many soccer clubs from the European leagues were trying to make inroads into the Indian scenario. Plus, many Indian clubs are looking to collaborate with the AIFF-driven I-league, to make soccer a professional corporate sport in India. The World Series of Boxing, another first for India (one of the hosts), will be sponsored by Videocon and is expected to be successful. The Badminton World Championships in Hyderabad are also being held for the first time in India, and are sponsored by Yonex Sunrise in what is expected to be the biggest badminton event ever in India, never mind the fretful English who have withdrawn.

In what could one day be a launch for the ages, the NBA is set to enter India, although its short- term plans have not been discussed publicly as of now. As the world's third largest sports league, its presence could shake up the Indian sports industry in unprecedented ways. To add to this, India's bid for the 2019 Asian Games has been announced and an Olympics bid is most definitely on the cards, especially if the Commonwealth Games 2010 are a success. The broadcasting rights for the CWG 2010 have attracted bids from established players like Nimbus, Reliance Big and TWI, in what is likely to be a multi-million dollar deal.

Many Indian investors are looking at opportunities to sponsor teams, leagues, or events abroad, with Bharti being the first Indian entity to sponsor an EPL team (Man U), in a multi-year, multi-million dollar deal. This is a trend that is likely to grow and the reasons for this, at least in the short term, are simple. Sophisticated branding, signage, advertising, IPR allocation & enforcement, global exposure, widening the target audience and potential customer base, and media attention make this a lucrative investment forum. Over time of course, this trend will be reversed. But at present it seems a safer bet, although with the creation of more properties, and the attention being given to emerging, reincarnated, and existing sports, inward-looking strategies are likely to pay far greater dividends than just traditional or international avenues.

With the growth of emerging sports and the consequent investment in them, one might wonder if cricket and its stakeholders have reason to be perturbed. From a rational standpoint, there is definitely cause for concern. However, there are two things that must be considered when analysing the developments across sports in India today. First, while the economic downturn shifted the focus to the IPL and T20 World Cup, and how the two events would weather the storm, what it also did was temporarily stem the tide that was beginning to sweep the Indian sports landscape. In many ways, the investment in sports today is a continuation of what 10-12 months ago was a foregone conclusion. Therefore, today's developments are hardly a complete surprise for most industry insiders.

The second fundamental difference is that while for decades the sports pie would have been baked with a filling consisting almost entirely of cricket, today we have two pies that are vying for the attention of the sports-savvy investor, with emerging sports constituting the bulk of the competitor's substance. Slice it as one would, there are extremely limited opportunities within cricket today, for any would-be investor. Most contracts that any potential sponsors enter into with cricket's governing body, or with the IPL, are extremely skewed towards the latter. Due to the excess demand for cricket opportunities, with limited supply of such opportunities, this would have been somewhat expected. However, with viable, lucrative, and expanding opportunities in other sports, the sponsors are on much stronger footing both financially and legally. Investors in these sports are able to create, brand, leverage and enforce their ownership, IPRs, and licenses, and contractually take firm control of their projects.

While cricket will remain a coveted avenue, forays into other sports by investors like Hero Honda and Videocon are also here to stay. Sound business tactics are consistent across industries, and sport is nascent but dynamic enough to muster the support and enthusiasm that makes the industry one of the most lucrative globally. Competition is healthy and much-needed in the Indian sports context. Level the playing field, and open the floodgates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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