NEW YORK – In the decade since he founded the private investment firm RedBird Capital Partners, Gerry Cardinale has acquired stakes in sports properties as varied as Fenway Sports Group, the New York Yankees’ YES Network and the Italian football team AC Milan. One of his partners at RedBird, Alec Scheiner, previously worked as a vice-president of the National Football League’s Dallas Cowboys, and later ran the Cleveland Browns.
Both men, then, are quite familiar with what a billion-dollar business looks like. The sport where they see the biggest upside these days, though, might be a surprise.
“When we first started looking at cricket, we were by no means experts. But the more we studied it, the more we realised it felt like the NFL did 20 years ago,” Scheiner said.
That was why, in June 2021, RedBird bought a 15 per cent stake in Rajasthan Royals, a team who compete in the Indian Premier League, for US$37.5 million (S$53.4 million). The money that has poured into the league over the past 15 months suggests that RedBird got a bargain.
Four months after that deal closed, an IPL expansion team sold for US$940 million. Eight months after that, the league negotiated new television and digital broadcasting rights agreements worth US$6.2 billion.
At more than US$1 billion a year, that means India’s top cricket competition – a closed league with only 10 teams – now generates annual broadcast revenues on a par with top leagues such as the NFL (US$10 billion a year), England’s Premier League (about US$6.9 billion) and the National Basketball Association (US$2.7 billion).
And suddenly a lot of people want in.
Disney and Sony were among the bidders in the broadcast rights tender in 2021. CVC Capital Partners, the private equity firm that used to own the Formula One auto racing series, just added an IPL team to its portfolio.
RedBird’s US$37.5 million investment has most likely quadrupled in value in just a year. And with new investors circling, most experts agree that every IPL franchise is now worth at least US$1 billion or more.
That there is money to be made in cricket in India is a new phenomenon. As recently as the 1990s, the sport’s national governing body – the Board of Control for Cricket in India (BCCI) – had to pay the state-owned broadcaster, Doordarshan, to show the national team’s matches. The start of the IPL in 2008 changed all that. Teams in the league play Twenty20, a TV-friendly, three-hour version of the game that has eclipsed the multiple-day Test match format. IPL matches now draw domestic TV audiences of more than 200 million.
The league’s ascent has been rapid. Its architect, Lalit Modi, was a mid-ranking BCCI executive. He correctly spotted that Twenty20 could marry India’s love of cricket to a host of commercial opportunities and, in late 2007, he pulled off a series of unlikely negotiations to assemble a sports league from scratch.
He promised a group of the world’s best cricketers salaries they would not be able to get elsewhere. He held an auction to sell the teams to members of India’s business and media elite. And then he persuaded Sony to pay US$900 million for the broadcasting rights to the first 10 editions of the tournament.
“It ticked many boxes from an investment perspective,” said Mustafa Ghouse, a director of one of the league’s founding teams, Delhi Capitals.
“It is a closed league with no relegation, so your revenue is secure... while costs are limited by a player salary cap.”
With these safeguards in place for prospective team owners, Modi sold his eight teams for a combined US$723 million.
Nevertheless, the league’s early existence was often precarious. The second season had to be moved to South Africa for security reasons. After a power struggle, Modi was fired by the BCCI in 2010. Three teams were terminated after getting into financial difficulties, and two others received multi-year suspensions after officials were implicated in cases of match-fixing and illegal betting.
It was only after India’s Supreme Court intervened to tighten governance rules and rule on conflicts of interest, that the IPL really took off as an investment vehicle. A US$2.5 billion broadcast rights agreement was clinched for the 2017 to 2022 seasons – a five-fold increase on the previous deal.
In August 2021, the BCCI announced it would expand the IPL to 10 teams from eight. The bidding was on. An Indian conglomerate, RPSG Group, bought a franchise based in Lucknow for US$940 million, while CVC purchased the Ahmedabad team for US$750 million.
The bids dwarfed both the BCCI’s minimum price, which it had set at US$270 million, and RedBird’s US$250 million valuation of the Royals. It also meant the value of a single franchise in 2022 now exceeded the total price paid for all eight original teams in the first auction in 2008.
The timing of the league’s expansion was deliberate. A bigger league meant an increase in the number of matches it could sell in its new TV rights deal. The agreement that was reached stunned even veterans of the sports industry: US$6.2 billion for the next five years, roughly split between domestic broadcasting rights and digital rights.
Adam Sommerfeld, a sports investment specialist at Certus Capital, said he now believes buying into the IPL is “a no-brainer”. “They would be investing in by far the most popular sport in the second-most populous country in the world. Even if you just buy and hold, the value of IPL teams is clearly going to accrue considerable value,” he said. NYTIMES