The success of the two new bids for the Indian Premier League (IPL) has astonished everyone. To be bid Rs 3,000 crore for two locations?a multiple of the total bid of all existing team bids?is stunning. The growth in revenue is also very high. It looks like the IPL just keeps growing. If it grows at 40% per annum, its size will soon occupy the World, if not the Universe.
This is exactly how bubbles form. There is initial surprise that a venture succeeded beyond expectations. Suddenly the world (that is, the potential investors) realise that an entrepreneur has seen a gap in the market where no one else was able to. Lalit Modi saw the gap and fought off all sorts of obstacles put in his way by the Board of Control for Cricket in India and others. Now everyone wants a piece of the action.
The genius has been that having spotted the gap, the product has been so devised as to appeal to a very large audience. The cricket element is the least innovative. Once Kerry Packer had broken the mould with 50-over cricket, the One Day International (ODI) followed and the Twenty 20 is just a simple extension. Yet, these games were peripatetic and took their time, even the ODI. The IPL began with a single country location?India. This allowed the unique combination of cricket and Bollywood with the third essential ingredient in all money-making schemes in India?politics. (It could be called the Indian Political League!). The diaspora is now widespread and rich enough that the TV rights can be sold widely. IPL also adds to cricket the cheerleaders and the razzmatazz of American football. This enhances the appeal beyond people who just love cricket. Sexually repressed societies?the majority of the world?love this sort of thing.
But the value of the product was proved last year when the prospect of hosting the IPL led to frenzy across the main cricketing nations, who saw the potential revenues dangling at the end of any such chance. South Africa got it and this again proved another thing about the IPL. It has confirmed that the global geography of economic power has turned on its head. It is the South?the once so-called byword for misery, and not the North?powerful and domineering?which now calls the shots.
The appeal of IPL, therefore, goes beyond just India. Bollywood has emerged as a much more universal form, luckily for IPL, so that even with non-Indian, non-diaspora audiences, it has an appeal. This is even more so because IPL offers Bollywood in small bites rather than the full 150 minutes extravaganza.
Still, one has to ask where will the next stage be? What the bidding showed that any and every large- and medium-sized town wants a franchise. Of course, the location does not really matter. English soccer grew up on local loyalty when the main spectators were the local working class residents. This local loyalty survives, but just about. A team like Arsenal seldom has English-born players in it. This has not affected their revenues, because once you have TV and Internet, location is not relevant. What matters are the facilities available to stage the show.
But you cannot have 40 sides in IPL. So, the inevitable will happen. There will be divisions as there are in European soccer. There could be a maximum of 12 or 15 sides in each division and there could be promotions and relegations each season. This is preferable to the model of American baseball with two rival leagues and a face-off in a World Series. (Trust the Americans to call an internal tournament a World Series.)
That is a healthy scenario, whereby a bubble settles down to a slower, healthy growth. But as I have no money at stake, I think I should point out the possible drawbacks. Bubbles do burst if they fail to slow down, or if they are suddenly pricked. The IPL faces several dangers from these two angles. The biggest threat is its association with politics.
Thus far, IPL has managed to keep politicians on its side. But the failure of many smaller towns to get a franchise may lead to a Mandal-type attack. There would be cries for reservations by regions or languages. If this gets ugly there could be demonstrations against IPL, with demonstrators digging up pitches. But there are also internal problems. Drug scandals are one and sex scandals are another. I speak from the knowledge of soccer. The brand can be adversely affected by such image problems. Last but not least is the possibility that there could be too much cricket. It does not seem plausible now, but I expect two more teams are going to strain the patience by next year. The remote is the biggest threat to the IPL.
The author is a prominent economist and Labour peer