When you saw this episode pop up in your feed, you either jumped for joy and hit play immediately (in which case you’re not reading this), or you said “Huh. That’s a surprising episode.” Well, if you’re in group two, boy do we have a treat for you!IPL is the fastest-growing, most dynamic and most disruptive force in the sports industry today… and this may come as a shock to many Americans, but it might just be on track to surpass the NFL as the world’s most valuable sports league. The IPL is currently valued at $16B, with a TV rights deal that’s higher in per-match dollars than the NBA and the English Premier League. And all this for a league that’s right now just 10 teams who collectively only play 74 total games per season… and oh yeah, the whole thing is only 17 years old! Tune in for an absolutely amazing story, filled with genius, drama (Rupert Murdoch! Disney! Bollywood!) and a perfect encapsulation of the rise of modern India.Sponsors:Many thanks to our fantastic Spring ‘25 Season partners:J.P. Morgan PaymentsServiceNowFundriseCrusoeLinks:Save the date, July 15 in NYC!Ed Cowan’s Business Breakdowns of IPLWorldly Partners’ Multi-Decade IPL StudyEpisode sourcesCarve Outs:SeveranceStratecheryMore Acquired:Get email updates with hints on next episode and follow-ups from recent episodesJoin the SlackSubscribe to ACQ2Check out the latest swag in the ACQ Merch Store!Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.
Chapter 1: What is the main topic of this episode?
Cricket was newly extremely popular in India. It was 1983, eight years before, where India had won the Cricket World Cup for the first time. This is really a big deal. The nation comes together. They're all excited about it. Then 87 is the first time the World Cup is actually hosted outside of England. It's actually in India and Pakistan.
So the power of the cricket globally is starting to shift to India. And so this is only four years after India hosted the World Cup for the first time and cricket's kind of on the rise.
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.
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.
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.
And then it got really concretized into law a couple of years later. There's a legal battle between the BCCI and this legendary leader of the BCCI, Dalmaya, And he goes to war against the national state broadcaster, Dardarshan. And the outcome of this legal battle is, yes, even the Indian government, the state broadcaster, has to pay the BCCI for these rights.
The BCCI is the owner of the rights, and they can sell them to anyone they want.
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.
It's like, look, South Africa has to pay us, and then they come home, they get into a legal battle, and even the Indian government has to pay us. We really own these rights.
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Chapter 2: Why is the IPL considered a successful business model?
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?
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.
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.
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.
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.
These are worth hundreds of millions of dollars a year.
Right. Other than the latest slate of Bollywood movies, this is what the Indian population cares about. So why are we making $10 to $15 million on it?
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.
That is the important thing. Their remit was not make the most money. They were not acting as a capitalist enterprise with shareholders. It was to preserve and promote the game of cricket to make sure that our national team is good.
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Chapter 3: How did Lalit Modi revolutionize cricket in India?
Right. The capital calls are the way to do it. I mean, it's kind of an incredible way to get someone to bid $50 to $100 million for something that doesn't exist yet and say, well, in the first year, you're only out $5 million. And then there's a sweetener, which you're going to get to in the media rights with the way that they tear that down. But Lalit is a genius at structuring...
your own out-of-pocket money, I'm not sure how much risk you're actually going to be taking, even though all of these dollar signs are eye-wateringly large. Yes.
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.
Got it.
Okay.
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.
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.
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.
He's unbelievably charming, by the way. This Letterman interview, he's like butter.
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Chapter 4: What role did Bollywood play in the IPL's success?
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.
The NFL, by the way, has $255 million of salary cap available per team. So let's use this example. You're up to 245. You have two players left, and you want to sign them both for $8 million. What do you do? You don't have room in the cap. You only have $10 million. You don't have $16 million available.
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.
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.
Or look, you get to be an owner in a team at a low basis, and immediately you gained $3 million of on-paper wealth or something.
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.
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.
Does he really want to be seen as the heel who's turning his back on the Chiefs?
Ooh, that was a good pro wrestling reference there, the heel. Yeah.
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Chapter 5: How does the IPL's auction system work?
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.
Yeah, so if you believe that the team value should go up exactly commensurate with the annualized value of the TV contract, then this is the correct price. They just had a big payment that they owed the BCCI right out of the chute in year one.
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,
He has made a lot of enemies along the way.
Yeah, and everything was up and to the right. Everyone was making money together to this point. You know, there were some collateral damage from these other people who had lost auctions or people who lost out on the meteorites. But nobody had ever actually lost money yet.
Right. And now, for the first time, people are losing money. And this is when the knives come out for Modi.
Right. And so he's got all these enemies that were sort of dispersed, but never had any sort of real ability to come after him.
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.
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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