FICCI 2010 Knowledge Paper

8/3/2019 FICCI 2010 Knowledge Paper

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Executive Summary

India today is at a stage of take off in the field of sport business.Widely seen globally as the next boom market with immense

potential this decade could well be seen as the decade of IndianSport. With India emerging as a favorable host for various worldclass events including the Commonwealth games, ICC CricketWorld Cup and a F1 race there is a need for creating anatmosphere for active promotion of sports. There is a need forstructural changes in the way sport is governed in this country.Sporting structures like the IPL have redefined the way Sport isconsumed and provide a fine blueprint for other sports to follow.On the other hand lack of strong governance norms have createdbottlenecks.

This paper aims to identify opportunities in the sports sector andalso point out possible changes to ensure better growth. Thepaper is divided into 3 parts, The first part looks at thecommercial side of sport in India and provides an analysis of thevarious segments of revenue. The second part looks at the

structural changes with respect to the governance of sport in thiscountry. The third part is on sport law and why sport law isnecessary in India.

It is imperative to provide this sector with an atmosphere whichencourages innovations and promotes growth. Sport in additionto its commercial possibilities also provides a social platformwhich can be effectively used for various causes. This decadecould well be the changing face of Indian sport to being a vibrantsector contributing to yhe Indian economy.

Chapter 1


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The business of Sport

The concept of Sport has undergone a sea change in the pastcentury. The transition of sport from recreation to a professionalactivity and finally a commercial activity has been the hallmark of the past century.

The 20 th century also saw some key areas of sport revisited,fundamental models were improved, technology revamping theconsumption pattern of sport and finally globalization of sportand hence economic models which were drastically changedduring the course of the century.

The turn of the century has thrown in newer challenges both at amacroeconomic and microeconomic level at the way sport is run,consumed and regulated. At the end of the first decade there aresome patterns which define the landscape of sport and adoptionand quickly adapting to changes in the environment would be thekey to success for any sport or sporting body.

This knowledge paper wishes to engage in identifying key areasof sport business and attempt to look at possibilities with respectto India in the near future. Some trends affecting the globalmarket and hence the sport market are reflected below

There is a need for developing a strong local flavour tosport.

The consumption of sport especially in India and hence thebiggest revenue driver is the media; television and othermedia

There is a need to identify structural, legal and economicissues governing the business of sport, Chapter 2 looks atthe structural issues

Allied sport activites (sport apparel, merchandize etc) havea strong correlation with the growth of a sport.

Sport is a global industry.


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The basic economic theory in sport points towards some keyfactors which determine the demand and hence success of asport

1. Income of the average population

2. availability of alternate sources of entertainment

3. Team success

4. Level of competition

India has in the last decade proved to be a nation with high levelsof growth and hence a growing middle class with higher level of disposable income. Research across the world suggests that highlevels of disposable income is proportional to the amount of money spent on sporting activities and related businesses. Itsmiddle class is estimated at between 200 million and 300 millionpeople and is projected to double by 2025. Almost 350 million of India s citizens are under age 15, which equates to 32 percent of the population. By comparison, its 28 percent for Brazil , 20percent for the U.S. , 19 percent for China , 15 percent for Russiaand 13 percent for Japan . As reported widely in the media by2025 India could be the second largest economy globally.

The Indian Story

The economic trends surely indicate a robust future for the sportindustry, but this needs to be supplemented with high qualitycontent and infrastructure . A case in point is the metamorphosisof the film theatres over the past decade in the country. Thecinema viewing experience today has undergone a sea changewith multiplexes and malls. The urban movie buff of today has alot of choices with respect to viewing experience and the industryhas successfully modified itself in the changed economy of today.

The consumer looks for choice, comfort and a wonderfulambience and is willing to a pay a premium for the same. The

industry has also ensured smart pricing and marketing strategiesto ensure a viable economic model. The movie goer of todaydefinitely has a far superior experience than a decade ago. Thisnew economic model also ensured new content with specifictarget and segmentation strategies adopted by movies duringtheir making and publicity ensuring a viable model and hencegreater choice.


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Sport is also entertainment and unlike most developed sporteconomies in this country has a formidable rival in movies andother forms of entertainment. Sport today is mostly consumed ontelevision but a strong potential exists for this consumption atvenues. Developed sport economies have a strong economic gainthrough match day sales. Depicted alongside in fig 1 is therevenue distribution of Manchester United and Real Madrid and asignificant portion of the revenue is Match day revenue.

A similar change is required in the sports sector wherein there isa change in content and delivery patterns. In terms of contentthe league system is a globally successful model which has beenattempted successfully by the IPL in India. The IPL has been ableto create a sense of city based rivalry which is key to the successof any league. The second important element of the IPL has been

the packaging and structuring of the league with a mixture of sport and entertainment it is a fine example of sportainment.

The success of the IPL can be simply gauged by the immenseincrease in values of the 10 franchisees paid for the franchise fee,It is a clear indicator that a city with lower business potential likePune or Kochi paid nearly 3 times the cost for the MumbaiFranchise. In fact the total fee for the 9 th and 10 th franchise wasmore than the other 8 put together.

Team Owners Price paid (for 10years)

Mumbai IndiansMukesh Ambani (Owner of RelianceIndustries ) $ 112.9 m

Royal ChallengersBangalore

Vijay Mallya (UB Group ) $ 111.6 m

Deccan Chargers Deccan Chronicle (Gayatri Reddy) $ 107.0 m
http://en.wikipedia.org/wiki/Mumbai_Indianshttp://en.wikipedia.org/wiki/Mumbai_Indianshttp://en.wikipedia.org/wiki/Mukesh_Ambanihttp://en.wikipedia.org/wiki/Reliance_Industrieshttp://en.wikipedia.org/wiki/Reliance_Industrieshttp://en.wikipedia.org/wiki/Royal_Challengers_Bangalorehttp://en.wikipedia.org/wiki/Royal_Challengers_Bangalorehttp://en.wikipedia.org/wiki/Vijay_Mallyahttp://en.wikipedia.org/wiki/UB_Grouphttp://en.wikipedia.org/wiki/Deccan_Chargershttp://en.wikipedia.org/wiki/Deccan_Chargershttp://en.wikipedia.org/wiki/Deccan_Chroniclehttp://en.wikipedia.org/wiki/Deccan_Chargershttp://en.wikipedia.org/wiki/Royal_Challengers_Bangalorehttp://en.wikipedia.org/wiki/Mumbai_Indianshttp://en.wikipedia.org/wiki/Mukesh_Ambanihttp://en.wikipedia.org/wiki/Reliance_Industrieshttp://en.wikipedia.org/wiki/Reliance_Industrieshttp://en.wikipedia.org/wiki/Royal_Challengers_Bangalorehttp://en.wikipedia.org/wiki/Royal_Challengers_Bangalorehttp://en.wikipedia.org/wiki/Vijay_Mallyahttp://en.wikipedia.org/wiki/UB_Grouphttp://en.wikipedia.org/wiki/Deccan_Chargershttp://en.wikipedia.org/wiki/Deccan_Chroniclehttp://en.wikipedia.org/wiki/Mumbai_Indians


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Chennai Super Kings India Cements (N.Srinivasan) $ 91.90 m

Delhi Daredevils GMR Group $ 84.0 m

Kings XI Punjab Ness Wadia , Preity Zinta , Mohit Burman ,Gaurav Burman ( Dabur ), Karan Paul(Apeejay Surendera Group), Aditya andArvind Khanna

$ 76.0 m

Kolkata Knight Riders Red Chillies Entertainment (ShahrukhKhan , Gauri Khan , Juhi Chawla and JaiMehta )

$ 75.1 m

Rajasthan Royals Emerging Media ( Lachlan Murdoch , A.R Jhaand co.), Shilpa Shetty , Raj Kundra , Sureshand Kavita Chellaram

$ 67.0 m

Pune Warriors Sahara $ 370.0 m

Kochi Rendezvous Sports Limited $ 333.0 m

What the IPL has done is provided a route map for the future of sport in this country. The concept of the league has beenaccepted by the public at large and more team sports shall followthis structure. Although IPL has had its fair share of problems, aleague based on the best economic principles coupled withstructural prudence shall pave the way for sports growth in thenext decade. It is imperative for the Government to alsorecognize the power of sport both at the economic and social

level and promote and encourage these initiatives.Global Scenario

PWC estimates that the total spends on sport would increasefrom US $ 114 bn in 2009 to US$ 133bn in 2013. The slumpcaused due to the recessionary economic climate seems to havesubsided and the economy is coming back to normal.
http://en.wikipedia.org/wiki/Chennai_Super_Kingshttp://en.wikipedia.org/wiki/Chennai_Super_Kingshttp://en.wikipedia.org/wiki/India_Cementshttp://en.wikipedia.org/wiki/India_Cementshttp://en.wikipedia.org/wiki/Delhi_Daredevilshttp://en.wikipedia.org/wiki/Delhi_Daredevilshttp://en.wikipedia.org/wiki/GMR_Grouphttp://en.wikipedia.org/wiki/Kings_XI_Punjabhttp://en.wikipedia.org/wiki/Kings_XI_Punjabhttp://en.wikipedia.org/wiki/Ness_Wadiahttp://en.wikipedia.org/wiki/Preity_Zintahttp://en.wikipedia.org/wiki/Daburhttp://en.wikipedia.org/wiki/Kolkata_Knight_Ridershttp://en.wikipedia.org/wiki/Kolkata_Knight_Ridershttp://en.wikipedia.org/wiki/Red_Chillies_Entertainmenthttp://en.wikipedia.org/wiki/Shahrukh_Khanhttp://en.wikipedia.org/wiki/Shahrukh_Khanhttp://en.wikipedia.org/wiki/Gauri_Khanhttp://en.wikipedia.org/wiki/Gauri_Khanhttp://en.wikipedia.org/wiki/Juhi_Chawlahttp://en.wikipedia.org/wiki/Juhi_Chawlahttp://en.wikipedia.org/wiki/Jai_Mehtahttp://en.wikipedia.org/wiki/Jai_Mehtahttp://en.wikipedia.org/wiki/Rajasthan_Royalshttp://en.wikipedia.org/wiki/Rajasthan_Royalshttp://en.wikipedia.org/wiki/Lachlan_Murdochhttp://en.wikipedia.org/wiki/Lachlan_Murdochhttp://en.wikipedia.org/wiki/Shilpa_Shettyhttp://en.wikipedia.org/wiki/Shilpa_Shettyhttp://en.wikipedia.org/wiki/Raj_Kundrahttp://en.wikipedia.org/wiki/Raj_Kundrahttp://en.wikipedia.org/wiki/Raj_Kundrahttp://en.wikipedia.org/wiki/Sahara_Pune_Warriorshttp://en.wikipedia.org/wiki/Sahara_India_Pariwarhttp://en.wikipedia.org/wiki/Rajasthan_Royalshttp://en.wikipedia.org/wiki/Kolkata_Knight_Ridershttp://en.wikipedia.org/wiki/Kings_XI_Punjabhttp://en.wikipedia.org/wiki/Delhi_Daredevilshttp://en.wikipedia.org/wiki/Chennai_Super_Kingshttp://en.wikipedia.org/wiki/Chennai_Super_Kingshttp://en.wikipedia.org/wiki/India_Cementshttp://en.wikipedia.org/wiki/Delhi_Daredevilshttp://en.wikipedia.org/wiki/GMR_Grouphttp://en.wikipedia.org/wiki/Kings_XI_Punjabhttp://en.wikipedia.org/wiki/Ness_Wadiahttp://en.wikipedia.org/wiki/Preity_Zintahttp://en.wikipedia.org/wiki/Daburhttp://en.wikipedia.org/wiki/Kolkata_Knight_Ridershttp://en.wikipedia.org/wiki/Red_Chillies_Entertainmenthttp://en.wikipedia.org/wiki/Shahrukh_Khanhttp://en.wikipedia.org/wiki/Shahrukh_Khanhttp://en.wikipedia.org/wiki/Gauri_Khanhttp://en.wikipedia.org/wiki/Juhi_Chawlahttp://en.wikipedia.org/wiki/Jai_Mehtahttp://en.wikipedia.org/wiki/Jai_Mehtahttp://en.wikipedia.org/wiki/Rajasthan_Royalshttp://en.wikipedia.org/wiki/Lachlan_Murdochhttp://en.wikipedia.org/wiki/Shilpa_Shettyhttp://en.wikipedia.org/wiki/Raj_Kundrahttp://en.wikipedia.org/wiki/Sahara_Pune_Warriorshttp://en.wikipedia.org/wiki/Sahara_India_Pariwar


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The regionwise growth between 2010-2013 is projected below

The Asia pacific region is projected to grow at 3.9% , Theinteresting factor is that across regions of the world the CAGR isnot very different, an indicator of the globalized nature of sport.

The global scenario suggests an active growth pattern with sportsponsorship having the highest CAGR of 4.4% till 2013.

PWC in its report also projected sponsorship growth across


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regions given below. It is clear that a lot of brands and corporateslook at Sport as an effective medium to promote their interests.

In the case of India, the sponsorship growth rates should behigher than that of the Asian average for the following reasons

India becoming a major host for sporting competions withthe 2010 commonwealth games, 2011 ICC World Cup andFormula -1 Races from 2011. The addition of 2 IPL teams

and end of the period of the current title sponsor shouldaugur in significant revenues.

Corporates investing in newer sports, Mass mobilizingevents like the India Cyclothon and golf would see anupswing, Corporates today are engaging in highersponsorships and events in India.

Greater spending power for the average Indian

Today as product differentiation is minimal, Brands look at

opportunities to enhance their image and personality andalso appeal to the globalised aspirational Indian consumerat the emotional level who is aware and sensitized of issuesand stands by them. Campaigns like Aircel save the tigerand emergence of cause based sponsorships wouldaccentuate this trend

There is a need for brands to look beyond basic media


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advertising and avail possibilities through other activities.Sponsorship provides the platform in a cluttered market tostand out.

There would also be a need for regional and smaller brands

to get an opportunity to enter this space, The IPL providedan opportunity for the same. There have been regionalbrands supporting local and regional events as in the caseof the KPL.

Growth of regional sport, The emergence of the state levelcricket leagues across states is an example of this, Even inthe case of sports with regional strongholds brands arelooking at riding the bandwagon.

Sport as a global phenomenon

The last decade has globally seen expansion of regional sportsto global sports. The expansion of the English Premier Leaguehas been so profound that there was a proposal to add a 39 thgame to be played in Asia. The American sports have alsoexpanded and the NFL and NBA host regular games in the UK.

The IPL also successfully conducted an edition in South Africa. There is a need to accept this phenomenon and understand toexploit the economic benefits which occur as a part of globalization. There would be two key aspects of this

globalization, Indian sport in the International arena akin theIPL and entry of foreign sports in India like the EPL. It would benecessary for domestic sports to create a market forthemselves.

Television Industry and Sport in India

Sport also was a key driver in promoting the growth of television at the

household level with the telecast of events including the Los Angeles

Olympics in 1984, Wimbledon and the fourth ICC World Cup (called the

Reliance Cup) in 1987. The next phase on television in India was from

1991 with the advent of Satellite television, wherein global channels


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Star TV launched Prime Sports, the first sports channel covering India,

which exposed Indian audiences t o global sport television both with

respect to content as well as quality. Today the penetration of satellite

and terrestrial television has been unparalleled and television has

moved to being the prime entertainment option for the average Indian.

From one satellite channel in 1992, today there are 7 dedicated sports

channels and a couple of partial sports channels. Table1provides a

comparison of growth of TV broadcasting in India (Khandekar 2010)

and Table 2 provides a list of channels operating in India today.

Year Total number of TV homes

(million)

Total No of C & S homes (Cable

and Satellite) (million)1992 34.9 1.21995 52.3 151998 69.1 292000 40 332002 79 40

2004 100 552006 108 73.22008 135 98

Table 1: Growth in Indias TV subscriber base

It is estimated that the current size of the market is 112mn homes

which is expected to touch 200mn soon. (Naukri Web 2010)

S. No Channel Parent1 ESPN ESPN Star Sports2 Star Sports ESPN Star Sports3 Star Cricket ESPN Star Sports4 Ten Sports Taj Television and Zee Television5 Zee Sports Zee Television6 DD Sports Prasar Bharati7 Neo Cricket Nimbus Communications


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8 Neo Sports Nimbus Communications9 SET MAX Multi Screen Media10 Ten cricket Taj Television and Zee Television

Table 2: Channels with Sports content in India

The growth of television in India has also over the last decade fuelled

increase in Sport broadcast rights across sports. Table 3 illustrates the

growth in rights fee for the FIFA world Cup broadcast over India

(Fifaworldcup.in 2008)

S.No Year Value Channel1 2002 $ 3 million Ten Sports2 2006 $ 9 million ESPN Star 3 2010 $ 40 million ESPN Star

Table 3: Value of TV rights for the FIFA football world cup for India

Similarly the rights for broadcast for India Cricket has seen

phenomenal growth over the last decade. Cricket being the number 1

sport in India is the primary revenue driver for sports channels. Figure

1 indicates this growth pattern


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Fig 1: Growth in broadcast rights for cricket played in India

The period 2010-2014shows a lower value as the FTP (Future Tours

programme of the ICC) is not ready post 2013

It is clear that sports television is catching up in India. Like

International patterns the value for rights has been growing and even

events not centric to the Indian audience like the English Premier

League football have reported an increase in broadcast rights value.

The greatest innovation in the Indian sports scenario was the advent of

leagues, Although the Premier Hockey League and the Indian Cricket

League were launched earlier, The Indian Premier league launched in

2008 with the shorter t20 format has changed the landscape of Indian

sport. Based on the model of closed American Sports league the IPL

has in just 3 years reached valuations of Rs 18000 crore.

The reason the IPL is extremely important for sport television in India is

the fact that, the revenue model of the league was built squarely on

television rights revenue. Initially sold at $1.042 billion for 10 years it

was renegotiated to approximately $1.6 bn for 9 years an increase of

100% just after the first edition of the event. (Wikipedia 2009). A

significant event has been the telecast of the Karnataka Premier

League in 2010 by a local channel, This potentially is a step wherein

local channels would pick up and exploit events of regional importance.

This is made even more important by the vast potential held at the


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regional market which could propel the sport television economy into a

spiral of growth. India has more than 150 regional channels and hence

the opportunity seems huge.

The interest of advertisers on sports other than cricket has also been

rising with investments in football. Hockey, F1 and Tennis in the recent

years. Figure 2 provides a comparison between revenue distribution

across sports

Fig 2 Sports revenue distribution across Indian television

Figure 3 also provides a comparison on cricket and non cricket


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revenues in sports television in India. The Impact of the IPL is clearly

seen in the graph. (TAM 2010)

Fig 3: Revenue of Cricket vs Non cricket Sports (TAM)

The Indian economy is among the fastest growing in the world and is

already the worlds third largest economy in terms of purchasing power

parity. The number of TV households is forecast to grow at 16% and

touch 130 million by 2011 (Andy, et al. n.d.). Research reports suggest

that the Indian middle class would quadruple by 2025 and have

disposable income which would be spent partially on entertainment.

(Andy, et al. n.d.). Armed with the predicted economic success of India

along with global patterns of thought and demand for better

entertainment sport television could be deemed to be in an era of


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growth.

There are two major factors which could positively impact the growth

of the Industry in India. Lack of addressability and unstructured growth

of the Indian cable Industry has heavily affected subscription revenues.

It is expected that growth of distribution media like DTH and other

technological advances would definitely change the current scenario. It

is also pertinent to mention that technologies like Pay per View have

not caught on in India thus providing a potentially he market base. At

the second level is innovation in television technology including LCD

TVs and HDTV, The introduction of HD and 3D television technology

would impact the way sport is consumed and the growth of LCD TV

sales is a clear indicator to this trend

The other key areas of growth include broadband television (Already

introduced by a leading telecom operator) and mobile telephony on

third generation and fourth generation networks. India today is among

the fastest growing mobile telephony markets with the lowest price

points, Live Sport would be a key enabler in pushing data services over

a 3G network. It is expected that by the end of 2010 3G services would

be rolled out by multiple operators and the ICC world cup 2011 could

be a test for live television on mobile. Broadband penetration also

provides an alternate route for content distribution and rapid

investments by Indian organizations to provide broadband connectivity


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would simulate the Industry. Further global trends clearly point as

Sport being among the major content being consumed on the smaller

screen.

It can safely be predicted that Sport television and sports beyond

cricket would grow in the coming years and structural changes at the

distribution level and technological advances would provide sport

channels mechanisms to grow over the next decade

Sport Retail

One of the fastest growing sectors in the world, Sport retail presents a

fantastic opportunity in India due to the economic boom and the

market potential it holds. Majors like Nike and Reebok already see

India as a major market while specialized brands like Callway golf have

also entered the Indian market

In a working paper by ICRIER in June 2010, The authors have done anin depth analysis of the sector and provided.

The Report suggests that Peoples passion for sports, their level of participation and their willingness to pay for sports products influencesthe sports retail market. In each country, certain sports dominate.

These sports have huge fan followings and this drives the market forsports products and accessories. For instance, in India, cricket is themost popular sport; in the United States (US), it is American football,basketball and baseball; in Canada, it is ice hockey; in Germany, it issoccer; and in Italy, it is football and water polo. The retail of sportsproducts is closely related to the status and promotion of sports in a


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particular country. Developed country markets are large but they aregetting saturated, while developing country markets are small butgrowing. This has attracted sports retailers from developed countriesto the growing markets of India and China; they not only sourceproducts from these countries but are also trying to enter and establish

a presence in the domestic market. In fact, due to pressure fromforeign retailers, the Indian government announced partial FDIliberalisation in 2006 and after its accession to the World TradeOrganisation (WTO), China relaxed its FDI policy

Sports retail is a niche retail segment in India and at present, thesports retail market is small. There are no official estimates of the totalretail market and estimates given by different consultancyorganisations vary. According to one estimate, the total size of theIndian retail market was $372 billion in 2008, of which sports retail wasaround three per cent. However, its share in organised retail was

around 10 per cent.17 Estimates of the sports goods/equipmentmanufacturing industry is available from SGEPC, which shows that theindustry has been growing at an average annual rate of around 10-12per cent in the past five years. Over the years, India has developed asa sourcing hub for sports goods and the focus of the manufacturingsector has been on exports. The size of the domestic market is smallHowever, of late, Indians are spending more on sports goods. Althoughsports are still treated as a recreational activity, recreationalconsumption in India is growing. It is projected to grow at the rate of 8.9 per cent per annum from $1 billion in 2005 to $6 billion in 2025


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The figure above demonstrates the potential of the market onspending on recreational activities.

A large number of sports are now being played in India and this has

increased retailopportunities. In the past, royalty and wealthy Indians played sportslike golf andcricket, but the involvement of the general public in these sports waslimited. Atpresent, cricket is a common mans game and a large number of people working in the corporate sector play golf. This has increased themarket for sports retail in these segments.India is among the largest sports goods manufacturers in Asia aftercountries like China and Japan. Although its share in global trade isonly around one per cent, it is a niche player in manufacturing. For

instance, inflated balls produced in India are largely handstitched and,therefore, have better bounce than the machine-stitched balls fromChina; this gives them an advantage over China in European marketswhere hand-stitched balls are preferred.

The country has a comparative advantage in low-cost, skilledmanpower vis--visdeveloped countries like the US and Italy, which enables it to producesports goods of international standards at a lower cost. Global brandssuch as Reebok, Adidas, Puma, Wilson and Yonex are sourcing theirproducts from India. Retailers entering the sports segment can sourcemany products from the domestic market.

The Indian retail sector is undergoing liberalisation and the sports retailsector has been a part of this change. The retail formats in sports havechanged in the post-1991 period.Earlier, sports equipment and toys were sold through family-owned,single-shopoutlets, sports apparel was sold by apparel retailers and shoes byfootwear retailers.Hardly any outlets provided sports apparel, shoes, equipment andaccessories under one roof. After 1995, the retail industry in Indiaunderwent massive changes, moving from family-owned, one-shopbusinesses to corporate retail. This has affected sports retail. A largenumber of Indian corporates such as the Future Group and RelianceRetail Limited have entered sports retail and some family-ownedbusinesses have grown from a single shop to multiple outlets.With the growth of modern retail, foreign brands have entered theIndian market. The proliferation of brands has increased brand-consciousness and Indian consumers are now more inclined to buybranded products. This has given further impetus to modern stores.Although FDI is not allowed in multi brand retailing, foreign players


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have entered the market through different routes such as wholesalecash-and-carry, local manufacturing, test marketing, single-brand retailand franchising. A number of foreign brands can be seen in India inexclusive branded outlets, department stores, multi-brand sportsoutlets and factory outlets among others.

Although currently Sport shoes form the bulk of the investment, thereare possibilities for sports equipment and sport lifestyle categories.

There are a few pitfalls including non availability of infrastructurewhich is hampering the sport business in general and retail inparticular.

There is immense potential for the sport retail sector. There is a strongneed for federations and other sport promotion bodies to tap thissector for opportunities. It is imperative that India grows from being astrong exporter to a strong consumer market.

The complete paper is an excellent thesis on sports retail in India andcan be downloaded fromhttp://www.icrier.org/pdf/Working_Paper_250.pdf

Chap 2: Structural reformations

The year 2010 so far has been a strange year for Indian sport.

We are at the anvil of proving our mettle and finesse inorganizing the Commonwealth Games, the biggest sporting eventto have ever touched India, In addition sports like hockey ad itsworld cup in India after 35 years. In addition we are lookingforward to hosting other Mega events including the ICC CricketWorld Cup and a F1 race in 2011. All these major events point atthe direction of growth of Indian sport and more importantly theemergence of India as an economic superpower which canundertake the organization of such mega events.

On the other hand 2010 has also seen massive shake ups inthe way sport is administered. The Government and the Sportsfederations have been in a deadlock in terms of how sport is
http://www.icrier.org/pdf/Working_Paper_250.pdfhttp://www.icrier.org/pdf/Working_Paper_250.pdf


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managed and run in this country. It all began with IPL the flagbearer for the new model of sport in India having corruptioncharges, mismanagement, dubious deals and allegations of match fixing. It is pertinent to note that although leagues have

been tried before the concept of a pure league based on strongglobally accepted economic principles was a first from IPL and itssuccess more as an acceptance at the consumer level hascreated a strong model for other sports for follow. The secondissue was the federations being brought under the RTI act.Although this is a welcome step greater amount of transparencyis required for the growth of the sport.The third issue was thegovernments diktat on the tenure and age of office bearers infederations which was seen as an attack on the autonomy of thefederations and hence was severely opposed to the move. Thefinal and probably the biggest expose was the lack of preparedness of the country for the Commonwealth games andthe deep rooted allegations of mismanagement and corruption. Acommon factor between all the above mentioned issues has beenthe legal structuring and governance issues across sports bodiesto develop sport in India.

The IPL was based on the hugely popular and successfulleagues of the USA namely the NBA and NFL. The economics of Sport has a peculiar nature, the fundamental unit of production isa team or a club (for team sports) and an individual (for individualsport). Monopoly is a state which would be the dream of mostindustries but in sport monopoly leads to disaster as to create acost and hence revenue we need competition between a couple

of teams at least.

The advent of modern sports was in the mid 1850s wherein rulesfor most games was formed and people took to Sport. A fewbudding entrepreneurs realized that there was scope to conductsporting contests and people were willing to pay to watch them.

Thus took root two concepts, professional sports and revenue


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generation through team ownership.

The industrial revolution and the advent of quick means of transport helped the sports industry to expand and createcontests between towns and cities. This revolution also gave birthto the concept of leagues. A league is a joint venture betweenvarious clubs in order to create contests which followed similarrules and had a calendar. A league is an association of clubswherein the overall revenue and health of the league isparamount. The league is similar to an economic cartel and themajor sporting leagues in the USA enjoy anti trust exemption.

The leagues of the USA and Europe paved way for the creation of IPL. The IPL preferred the US system of closed leagues akin theNFL and MLB. Although the basic structure of league operations

were similar to the leagues in the USA there were some majordifferences which have cropped up in the latest crisis. One keyhistorical factor here was the teams led to leagues and henceensured private ownership whereas in India an artificial leaguewas created sensing the economic value that lay within. The IPLwas created by the BCCI which offered franchisees rights andterritorial protection whereas this evolved in the Americanleagues and the parent body has representations from all clubs.

The NFL was formed in 1922 and is an unincorporated associationwith league members getting into joint ventures to ensure thatthe leagues interests are paramount. There is no governmentbody or a sports association which is directly involved with therunning of the NFL. The NFL can be very clearly seen as anassociation (with Anti-trust protection) with profit maximizationas the main objective.

The EPL was formed in 1992 with the first division teamsresigning from the football league to form the FA Premier leaguewhich was incorporated as a limited company. The FA PremierLeague is independent of the FA in England and negotiates itsown sponsorship and broadcasting deals.

In both the cases it is evident that the bodies were formed withthe idea to ensure maximum profit for its constituents and werelegally incorporated as companies following norms as companiesin other sectors.

The IPL was floated as the arm of the BCCI. The BCCI sold the


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franchisees to bidders and ensured private funding but unlike thedeveloped leagues of the west, the ownership of the leagueremained with the BCCI. Economically, this would surmount tohaving a return without any kind of investment, as BCCI chargedthe owners for its services in the form of rent and shares fromrevenues. Moreover, the franchisees had no say in the running of the league which fundamentally goes against the nature of leagues. The IPL is a part of the BCCI, which is a registeredsociety and hence falls under the societies registration act whichprovides tax exemptions and is for non-profit organizations.Further the franchisees are registered as for profit organizationswhose sole interest in the league is profit maximization. The BCCIregistered as a society is for regulating and growing the sport of cricket in India, while IPL is a pure commercial venture withfranchisees providing the funding to run the event. If the ideawas to promote Cricket at the lower level, The BCCI could haveused its existing domestic competitions which over the yearshave never experienced domestic structures. It is questionablewhy BCCI would not promote its own event but rather seekprivate investment for the league? As for its own league all therevenues would have been owned by BCCI itself and could havebeen used to promote cricket. The fact that BCCI claims thatmoney from the IPL would be used to improve infrastructure anddevelopment of cricket raises the fundamental question as towhy are they not using existing tournaments?

The governing council of the IPL has people from the BCCI and 3ex-cricketers as members. Economic sense suggests that the IPLgoverning council would act more for the needs of the BCCIrather than the objectives of the franchisees. There is a clear gapand an economic paradox in this situation wherein the mainfunders of this event have limited decision making capabilities inthe governing council and hence have limited say in the way theevent would progress and in the long run the economic return oninvestment for the franchisees. Generally leagues collectively sell

broadcast rights and sponsorships to ensure benefit for theleague as a whole. In the current case the IPL governing council isresponsible for collective deals and even merchandizing rightsand also owns all marks of the franchisees making thefranchisees incumbent on the IPL to provide the returns.

The second element in this situation is the role of theCommissioner. The Commissioner similar to the MLB or the NBA


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is the CEO and is responsible for protecting the interest of thestakeholders and the sport at large. In the case of the IPL, theCommissioner (rumored to have indirect stakes in franchisees) isactually a representative of the BCCI and hence is in adichotomous position wherein the interests of the board as wellas the franchisees is to be protected. The presence of a BCCImember as a commissioner would not be the ideal scenario forfranchisees and the Bocas central revenue is the majorcomponent of funds for the IPL owners. In this position thecommissioner needs to act on the behalf of the franchisees andprotect their interests which in the current status does not seemfeasible. The fact that Modi may own stakes in franchisees mayactually be favorable to the franchise owners as rational thinkingsuggests he would work on profit maximization ensuring ROI forthe franchisees rather than somebody from the BCCI whoseobjectives may not align with the franchisees. The presence of BCCI functionaries especially N. Srinivasan in the operations of afranchise has raised the issue of conflicting interests wherein thefranchise owner has presence on both sides. Although prima facieit appears as a conflict of interest, the basic concept of thefundraisers running the league is further validated as a fewfranchise owners have not proposed his name to be theCommissioner.

The third element is the lack of transparency in the functioning of

the IPL. Although transparency has always been an issue withIndian sport the presence of huge monies coupled with thesuccess of the league accentuates the importance of thiselement.

The idea of presenting this case has been a need to create astructure which is transparent and can run the sport successfully.Like any other business sport leagues need to have clarity interms of operations. The IPL is a role model in terms of a systemto promote sport, and other sports need to implement withintheir structures key checks and processes to ensure operationalefficiencies.

The second issue which was raked in 2010 was the functioningand governance practices of the National Sports Federations(NSFs) and the Indian Olympic Association (IOA). The governmentbrought the NSFs under the RTI act forcing them to makemandatory disclosures, for federations exceeding Rs 10 Lakh


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grant from the Government. The NSFs saw this as a step toundermine their authority and rejected it. This was unfortunate asany organization which gets support from public funds or is arepresentative of the country at international levels should beaccountable at the very basic level i.e. to the people who are itsprimary stakeholders. The Government also issued a diktat whichsought to monitor the functioning of the NSFs by limiting terms of office bearers and putting a upper limit for age of the officebearers. This was also seen as a step to curtail the autonomy of the IOA and NSFs and event the IOC was against this step of theGovernment.

In this sphere it would be necessary to appreciate what autonomymeans and how it is practiced worldwide.

It is necessary for us to understand historical principles which ledto the concept of autonomy. The Olympic movement founded byPierre De Coubertin in the last decade of the 19 th century theprimary concept was that the members of the IOC wereindependent of the country they represented and unlike theybeing the countrys representative to the IOC, they were IOCsrepresentatives in their country. This autonomy was furtherreinforced by their financial independence, The members of IOCwere wealthy individuals who could use their personal financialmuscle to fund the movement and hence receive no subsidies.

Thus autonomy was sacrosanct. The word autonomy featured in the Olympic charter in 1949under rule 25 where the words independent and autonomouswere used with respect to NOCs. This rule was amended anumber of times keeping in line with the changing globalenvironment. In 1989 the IOC permitted NOCs to raise their ownfunds maintaining the Olympic dignity and spirit. This change wasin response to the commercial opportunities like TV broadcastand sponsorships which existed with the IOCs.

Please find below list of entries in the Olympic charter withrespect to autonomy.


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Thus it can be assumed that the Olympic charterpromotes the autonomy of the NSFs and NOCs. Although thecharter promotes the concept of autonomy it would need to belooked in depth on the spirit of autonomy and its efficacy inpromoting sport. As suggested in the 195 th report of thestanding committee on promotion of sport in India there arequestions on the accountability of NSFs.

The absence of a sports law in this country makes it difficult toregulate sport.

There are countries in the world where there is a sport law or alaw for sport. In India Sport is a part of the state list and it is theprerogative of the state to promote sport. There is a need toevolve a sports law in this country to better understand thissector and create guidelines for all stakeholders to ensure aconducive atmosphere for the growth of sport. Sport as a sectoris the 13 th largest contributor to the GDP of the USA and thepotential of sport is immense. As in other sectors it is necessaryfor the stakeholders to unlock the potential of sport both at the

business as well as the social level

There is a need to integrate the various sporting bodies in thecountry and create an ambience for efficient promotion of sport.It is suggested that self regulatory guidelines be incorporated atthe top level which be followed by every governing body. All


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federations are accountable to the people of this country as wellas the sports persons and the citizens of the country. Corporategovernance norms should be implemented within all sportingorganizations to ensure a certain level of clarity andaccountability. At the second level there needs to be certain levelof professionalism and trained sports management graduateswell versed academically with the business of sport to be put intothe syatem.

TOUGH TURF WARS

INDIA ROCKS:

The US National Intelligence Council (NIC) and the European Union'sInstitute for Security Studies (EUISS) joint report Global Governance

2025 states that India will be the third most powerful nation in the

world. Statistics such as these would gladden the heart of any Indian.

For a nation of a billion plus people one would normally assume world

champions galore across multiple sports, but the ground reality is very

different. What we need to do is collectively put our minds together

and logically think so that we can get Indian sports out of the quagmire

it currently finds itself in. What has been attempted in this knowledge

paper is to highlight certain key legal and regulatory concern areas

without getting cynical, condescending or self sympathetic.

SPORTS THE ANCIENT WORLD:

From the earliest days of human civilization to the more advanced civilizations of ancientRome, Greece etc., sports has developed from a mere source of personal entertainment to

a global industry. Sparta for example emphasized sports and even allowed women to

participate. Incidentally, the first Olympic women athletes were from Sparta. The sports

the Spartans participated in included the Olympic events.


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SPORTS IN THE MODERN WORLD:

Global sports today is a multi-billion dollar industry covering multiple disciplines and is

no more a form of exercise and/or national pride. Traditionally, a sport when mixed with

both national pride and entertainment makes for a heady mix. An Ashes match between

England and Australia, or a recently concluded soccer world cup match say between

Germany and Argentina are prime examples. Sports are also a greater enabler of better

relations between countries; the Olympics is a case in point.

Its necessary for us to appreciate the two major models of sports in

the world today namely, the American Model of Sport and the

European Model of Sport. The key ingredients of the American Model of

Sport are:-

1. It is organized on an out and out commercial basis;

2. Profit maximization is the name of the game;

3. Strong flavour of entertainment;

4. Strict division between amateur and professional sports;

5. Closed competition structures based primarily on economicconsiderations rather than any entry barriers;

6. Multiple measures to ensure competitive balance between

competing clubs.

The key ingredients of the European Model of Sport are:

1. Whilst profits are important profit maximization is not the name

of the game;

2. The strong entertainment flavour is clearly missing;

3. Maintaining competitive balance until recently was never an


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important issue;

4. Some measures were installed to limit the powers of affluent

clubs (For e.g. - cap on the number of foreign players);

5. The open structure ensures that each year some clubs exit and

an equal number of other clubs join the competition;

6. The notion that revenues should be divided equally for the good

of the sport was never really part of the European ethos.

SPORTS SCENARIO IN INDIA TODAY:

During the days of the British Raj there were Nawabs, Rajas, etc. - today there are

persons heading various sporting federations in India who treat the federation as their

personal jagir or fiefdom. Many of the persons at the helm of some of the sports

federations in India have never been sportsmen or sports administrators; therefore its

hardly surprising to see the present dismal state of affairs in these individual sports in

India. Its about time the awareness of the Indian citizens is raised and our collective

action compels these jagirdars to be evicted from their cosy positions and replaced with

competent sports administrators.

Most of the leading sports leagues in the world operate independent of the respective sports governing bodies. Sports league in India has

been generally organized either directly by; or in combination with the

governing body of that respective sport the famed exception being the

Indian Cricket League ( ICL ). Since the ICL attempted to operate

outside the BCCI structure - it met with an instant death.

SPORTS AND BUSINESS SCENARIO IN INDIA TODAY:

The legal contracts governing various business verticals of sport are

becoming slowly and gradually more complex. The monies expended


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are increasing by the day and so are the rights, titles, interests,

privileges and licenses that are granted. It is therefore imperative that

contracts must clearly spell out the rights, obligations, milestones etc.,

so as to protect the interests of all the stake holders including inter alia

the athletes, sponsors, broadcasters etc.

India today hosts very large mass participation events such as

marathons, cyclothons etc. Whilst one is happy to see little children

participate in a kids cycle ride; one is also overwhelmed by the

potential risks. Having closely watched Sport18 organize these large

mass participation events one realizes the need for risk mapping andrisk mitigation - not only by means of an insurance cover, Indemnity

cum Undertaking etc., but by putting in systems and processes to

protect precious human life.

With the humungous amounts of monies being spent the short and

long term investments made into sporting events and sportsrespectively need to be protected at all costs including the risks arising

from - cancellation of an event, terrorist attacks, 3 rd party liability etc.

SPORTS SCENARIO IN INDIA - IN THE FUTURE:

If the success of the IPL is anything to go by it appears that sports

leagues in India will most likely be governed by an operating model

involving sports federations and private investors. In this scenario, the

operation of sporting leagues on a franchise based model, involving big

ticket investments by entrepreneurs brings into play the delicate


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balancing act of maintaining credibility, equity and equal opportunity.

Its quite possible that an alternative devised would be to shut out the

government completely and devise these leagues as independent

properties, as vainly attempted by the ICL. The real risk in doing so is

that if the sporting federations are allowed to get away with what

appears to be a restrictive and anti-competitive tactic as deployed

by the BCCI to shut the ICL down, private leagues independent of

federations, do not appear to be possible in the near future. The U.S.

position on the application of antitrust laws to sports is well settled. To

add fuel to the fire there is always the allegation of sports leagues as

fronts for high class organized betting and conduits for slush money

laundering.

Even today there are no stadium rules in India. Unruly mob behaviour

is a common phenomenon world over and is no more limited to soccer

hooliganism. A match between Novak Djokovic and Phillip Petzschner

had to stop at the Arthur Ashe Stadium (Flushing Meadows, New York)

at the U.S. Open this year because a male fan insisted on being able tosay the F letter word because he paid for a ticket and because he

had a lot of money on the game, while a female fan told him to Shut

Up and threatened to have him thrown out of the stadium because of

his language, which she deemed inappropriate or abusive. Had this

happened in India how would we have dealt with it?

The impact of the Tiger Woods scandal brings into focus the almost

forgotten morals clauses in Endorsement contracts. It would do well to

remember this especially with the kind of money riding on our

cricketers. Also, what is the recourse say for a contractual dispute

over a breached pre-scheduled soccer match say between the home


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team and the tournament favourite? All these and several other

questions need to be adequately addressed so as to ensure a robust

sporting system that fosters the spirit of sportsmanship in the country.

PRESENT FRAMEWORK OF SPORTS LAW IN INDIA:

There is no sports law in India but there are multiple laws governing

various facets of a given sport. Depending on a case to case basis

there could be interplay of one or more of the under mentioned

statutes in India for e.g.:-

1. Indian Contract Act, 1872;

2. The Copyright Act, 1957;

3. Specific Relief Act, 1963;

4. Arbitration and Conciliation Act, 1996;

5. Trademarks Act, 1999;6. Information Technology Act, 2000;

7. Competition Act, 2002;

The above list is merely illustrative and not exhaustive. In addition

there are remedies under criminal laws such as the Indian Penal Code,

1860, Narcotic Drugs and Psychotropic Substances Act, 1985; in

addition there is the law of torts, anti-doping laws etc.

In case there involves broadcast of a sporting event one needs to

remember the provisions of the Cable Television Networks (Regulation)


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Act, 1995, The Cable Television Networks Rules, 1994, Sports

Broadcasting Signals (Mandatory Sharing with Prasar Bharti) Act, 2007

and not to forget the numerous notifications and directives issued by

the Ministry of Information & Broadcasting, Govt. of India. Especially in

the sports business there is no one size fits all kind of a contract and

great care and caution is recommended in drawing up these contracts;

especially considering the long and arduous litigation framework in

India.

IS THERE A NEED FOR A SPORTS LAW IN INDIA?

The recent controversies in various sporting federations (especially

those concerning elections to Hockey India, Badminton Association of

India and the Swimming Federation of India) has put the Union

Government in a spot of bother. The Governments response was on

expected lines - the threat of de-recognition and stopping the

monetary aid. The Federations response was that they wereindependent trusts/societies registered under separate legislation and

that they did not want government money; further they argued that

they were already recognized by their respective international

bodies/federations. The moot question then is how can they still retain

the countrys name if they no longer represent India? All this great

Indian tamasha is something that is detrimental to the interests of both

sports persons and sports aficionados in India.

Sports law in India in view of the foregoing appears to be the need of

the hour; so as:-


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1. To regulate the sports and the governing body regulating that

sport;

2. To ensure transparency and accountability;3. To check malpractices and rampant corruption;

4. To spell out the role for Players Representative/ Agent, if any;

5. To ensure a minimum qualification criteria, cap on the tenure of

office-bearers of sporting federations, age restrictions etc.;

6. To ensure that there is meritocracy and equal opportunity in

selection devoid of bias on account of gender, religion etc.;

7. To ensure a mechanism for quick (Indias legal system isinfamous for being slow) redressal of grievances of various

stake holders viz. players, teams, federations, sponsors etc.;

8. To ensure uniformity and lack of special status on issues such as

doping;

9. To ensure collective bargaining agreements for team sports and

corresponding changes to the prevalent labour laws;

10. To ensure that sexual harassment issues are firmly and

expeditiously dealt with;

11. To ensure just and fair league regulations governing various

sports;

12. To consider a cap on players fees so that there is more equitable

distribution among competing teams;

13. To consider having a Court of Arbitration for various sports in

India may be on the lines similar to the one based in Laussane,

Switzerland.

The more the above issues get covered in the future sports law the

better it will be for the health of sports in India.


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THE ROAD MAP AHEAD:

It appears that the time is now ripe to put in place structural reforms in

the field of sports. Never have Indians been more disillusioned with the

sporting bodies than now. If the reports appearing in the media are to

be believed it appears that the Government of India appears to be

keen that a sports law is in place by December and towards that end

the ministry has already informed the IOC of its intent.

With the proposed sports law round the corner, hopefully the face of

Indian sports is set to change for the better. There is already a great

sense of anticipation and excitement amongst all stake holders;

including the legal fraternity.

Do you the reader sense a feeling of Dj vu?

It is proposed that

All NSFs and sporting organizations are accountable to thepeople of India.

Suitable modifications be made under the registration acts

for sporting bodies to ensure certain level of accountability.A separate form of registration of these bodies may also beconsidered to ensure the autonomy and tax benefits tothese organizations.

The IOA should create self regulatory guidelines which befollowed by all federations


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Sport needs a strong structural foundation and this can onlyhappen with professionals within the system. Sportmanagement graduates should be a part of these NSFs.


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Final Recommendations The sports bodies are accountable to the people of this country. The sports bodies and NSFs should look at creating self

regulatory guidelines to ensure transparency The Government could look at creating a new form of entity for

sporting organizations which ensure autonomy but also createaccountability.

Professional management of sports would be required to ensurethis sector reaches its potential

India with its huge youth population and increasing spendingpower is a market waiting to be tapped, The Government shouldcreate an atmosphere both at an administrative level as well asthe commercial level.

New sporting competition structures like leagues with privateparticipation needs to be encouraged

The media especially the TV distribution business provides amplescope for promotion of sports, Cleansing and transparency in thissector shall improve business opportunities for Sport

Sport retail and Sport hospitality are sectors ready to boom,Sporting events need to be packaged effectively to maximize

outputs There is a strong need for laws dedicated to Sport, It is alsorecommended Sport be moved to the concurrent list from thestate list

Documents

FICCI 2010 Knowledge Paper