"I’m passionate about sport, but I’m also a businessman. I will not invest in anything unless I get a profit out of it. —Venugopal Dhoot, Chairman, Videocon Industries
Cricket can have a business case, but can other sports in India? Yes, say a handful of corporates, and they are putting their money where their mouth is.
- Stake Bought rights to Indian franchise of World Series of Boxing for Rs 20 crore.
- Objective Reach the rural audience for his consumer durable and DTH businesses.
- Plans Create a buzz around the country-wise, five-boxer, made-for-TV format.
- Payback Hopes to recover his Rs 20 crore through advertising.
At its purest, there’s something raw and primitive about the sport of boxing. Prize-fighters playing a violent game of last man standing. A frenzied crowd of adults taking leave of their senses. The sickening thud of punches and the shuffle of feet. The musty smell of sweat hanging in the air. It’s easy for some to be swept into the moment. Back in March, Shailendra Singh, Joint Managing Director of Percept Holdings, the media conglomerate, found himself in such a place.
Ringside at the Talkatora stadium in New Delhi, Singh was on his seat edge. It was the gold medal bout in the 75 kg class of the 2010 Commonwealth Boxing Championship, and Vijender Singh, the Olympic gold medallist and poster boy of Indian boxing, was up against Britain’s Frank Buglioni. Except rather than trading punches, in the first round itself, Vijender was getting a nose job—the bleeding just wouldn’t stop. When it did, Vijender got the job done. “The last few minutes of the bout gave me a stomachache,” chuckles Singh.
For that moment, Singh was a fan. But when the lights go out and the boxers go home, Singh is a businessman, wondering how to get some of the millions who tune into the annual cricketing—and now, political—carnival called the Indian Premier League (IPL) to sit ringside or change the channel on their TV sets.
|The centrepiece of this sports-cum-real estate business model is the humungous initial investment and the gestation period.|
His company, Percept, recently bought the marketing rights for all boxing events in India for the next five years. It’s the first time that the Indian Boxing Federation (IBF) has entered into such a deal. Singh refuses to share the sum of money he’s paying to the IBF, or the terms of the revenue-sharing and spending. All he says is that Percept has invested Rs 20 crore so far and will invest another Rs 20 crore this year to basically manage Indian boxing for the next five years. “Boxing will be the next big sport in India, after cricket,” says Singh, who plans to create an IPL-like frenzy around boxing in the next few months.
Venugopal Dhoot, Chairman of Videocon Industries, the consumer durables manufacturer, isn’t sure about boxing following cricket as the next big thing, but he does see a sport that can be monetised. In July 2009, his company paid Rs 20 crore to buy the rights for the Indian franchise for 2010 in the World Series of Boxing—a country-based tournament that kicks off in September, with teams from 12 nations across three continents. “I’m passionate about sport, but I’m also a businessman. I will not invest in anything unless I get a profit out of it,” says Dhoot. “I will recover my investment (in boxing) through advertising.”
It’s the IPL effect. “The IPL has opened up sports as an industry,” says Rishi Narain, Owner, Rishi Narain Golf Management. “It has shown that if a sport is well-packaged it can be turned around into a successful business.” In just three years, the value of the IPL has rocketed from $2.1 billion to $4.1 billion; the owners of the eight teams, whether real or fictitious, have seen the value of their holdings multiply several times. Business folks are wondering, why just cricket?
Increasingly, they are willing to risk a modest part of their riches to see if they can take sports other than cricket—and by extension, their investment in those sports—to another level. And increasingly, the motivation is less emotional or philanthropic, but more business, elaborated in a plan and defined on spreadsheets. Rather than moan about sunk investments, as once was the inevitability in sports other than cricket in India, they talk excitedly about RoI (return on investment). “We will break even by October 2011,” says Percept’s Singh about his bout with marketing of boxing.
The basis of the RoI, they emphasise, is a bouquet of business models that demonstrate an imagination and risk-taking not usually seen in Indian sport. At the heart of the business model is an association that promises to be long, adoptive and engaging. If Percept and Videocon are looking to market boxing as evening entertainment in malls and on prime-time, the JP Group is looking at Formula 1 as the wrapper in which to package real estate. Elsewhere, Hero Honda and JK Tyres are deepening their association with hockey and motor racing.
Strength And Stamina
Even so, it’s not going to be easy building a sustainable business model in these fringe sports, says Balu Nayar, Managing Director, Morpheus Media Fund, and former Managing Director of sports and entertainment management company, IMG. “The payback in fringe sports is quite low and requires huge investment,” he says.
|It’s not easy building a sustainable business in fringe sports. The investment is huge and payback low.—Balu Nayar, Managing Director, Morpheus Media Fund|
So far, the commitment to give it a fair shot was missing. Till the IPL came into being, the association of corporates with sports in India was mostly limited to sponsorships. According to Narain, sponsorships outside of the game of cricket have not been very scientific. “Most corporates have not understood how RoI works in sponsorships,” he says. “They are only interested in getting bang for their buck, not in developing the property they are sponsoring.”
Narain cites the example of the HSBC Golf Championships in China, where HSBC, the principal sponsor, spends around $5 million. It also spends an additional $10 million to promote the event across the world and fly top CEOs from across the world to attend it. “By doing so, they triple their RoI,” says Narain. “If you are spending Rs 1 crore as a sponsor, you need to spend an additional Rs 1-2 crore in associating with that property. Only then will your returns multiply.”
Sponsorship is not advertising, but a business commitment, adds Ravi Krishnan, Managing Director, IMG. According to Krishnan, when corporates invest in a sport, they also have to commit to nurturing talent and developing infrastructure, among other things. They have to commit for the long-term. “Sponsorship is like a dialogue, and the sponsor has to speak and interact continuously.”
Some of the big corporates have engaged with this concept well, especially in cricket. As some of the other corporates down the line step outside the crease, they are showing a change in mindset. Ashok Rajgopal, Partner, Media and Entertainment Practice, Ernst & Young, narrates the change through the example of an industrial house in Goa whose local football team earns revenues of Rs 1 crore, but incurs a loss of Rs 6 crore. “The owner has always supported the team just because he is passionate about the sport. He never wanted to monetise it,” says Rajgopal. “But now, he has started exploring platforms to make money.”
As are several corporates who are taking up a sport or a property with the idea of adopting it. They are talking long-term. They are talking innovation. They are talking serious money. They are talking paybacks.
The Entertainment Play
When he was studying at Fergusson College in Pune, Venugopal Dhoot of Videocon Industries was the captain of the cricket team. An all-rounder, he has fond memories of playing against national cricketers such as Anshuman Gaekwad. However, his introduction to sports was not through cricket, but through kushti (wrestling), at an akhada (ring) in Kolhapur as a child. “I remember people betting on their favourite wrestler, just as we bet on our favourite IPL team,” he says.
|The IPL has shown that if a sport is well-packaged, it can be turned around into a successful business.—Rishi Narain, Owner, Rishi Narain Golf Management|
According to Dhoot, in the rural heartlands of India, boxing is as big as cricket. “Since Videocon is entering rural markets in a big way, an association with the World Series of Boxing makes immense sense.” The World Series of Boxing brings the team format to boxing for the first time, that too at a global level, that too in a franchise set up.
Dhoot is confident of recovering his investment of Rs 20 crore in the New Delhi franchise through sponsorship. He says he wouldn’t have invested if that wasn’t the case, a line of thought he extends to cricket too. “I will never over-invest to buy an iPL team,” says Dhoot, who lost the bid for the Pune franchise and is now said to be in advanced talks with some of the owners of Kings XI Punjab.
Under the World Series of Boxing, there will be three conferences—Asia, Europe and the Americas. Each conference will have four franchises. In Asia, for example, besides New Delhi (India), there’s Astana (Kazakhstan), Beijing (China) and Baku (Azerbaijan). Each match will consist of five bouts across five weight categories: bantamweight, lightweight, middleweight, light heavyweight and heavyweight.
It’s a made-for-TV format. Every franchise is guaranteed six home fixtures, which is sure to infuse the matches with nationalistic overtones. Each bout lasts about 20 minutes, which means the entire fixture can be over in about 3 hours. And given the amount of money involved, franchises are likely to be represented by the top amateur boxers of the country. In the way Dhoot talks about it, there’s a strong element of entertainment. “People in interior India are extremely passionate about boxing or kushti,” he says. “They are even into the betting game.”
"I want to pick up sports that entertain, create a loyal fan-base and build entertaining properties around the sport." —Shailendra Singh, Joint Managing Director, Percept Holdings
- Stake Owns marketing rights of Indian boxing for the next five years.
- Objective Make “boxing the next big sport in India, after cricket.”
- Plans Boxing as entertainment: bouts in malls, reality show.
- Payback Expects to recover investment by October 2011.
Percept’s Shailendra Singh, who has his own patch of Indian boxing to tend to, is trying very hard to find boxing a larger audience by creating new properties around the sport. And much of it is packaged as entertainment. The first such property is Fight Nights, or bouts on weekends between top Indian and international boxers, either on a bilateral or trilateral format. While top Indian boxers like Vijender Singh and Suranjoy Singh have agreed to participate, Percept is in the process of signing international stars. “This is our effort to make boxing a common man’s sport,” says Shailendra Singh. “Since the sport doesn’t need elaborate infrastructure, we will have it in commonly frequented places such as malls and atriums.”
|Sponsorship is not advertising, but a business. It is like a dialogue, and the sponsor has to speak continuously.—Ravi Krishnan, Managing Director, IMG|
Singh has also got the license for the popular US boxing reality show, The Contender, which weaves an elimination-type boxing context with the personal lives of the participants. Singh, who plans to tell real-life stories of boxers from rural India, is talking to a leading Hindi general entertainment channel to air the show. “The show will feature the likes of a struggling boxer from Bhiwani in Harayana fighting to make money for his daughter’s surgery,” he says.
Singh, who refers to himself as a “desperate athlete who will play any sport that comes his way”, says he is trying to realise the “true value of the immense potential that the sport of boxing has in India”. His belief stems from the fact that, after cricket, this is one sport where Indians are doing well. “Champion athletes are core to any sport becoming popular,” he says. “Plus, it’s a short format sport that doesn’t need much infrastructure and is low investment.”
The Commonwealth Boxing Championship, which was the first tournament that Percept marketed, in March offered a glimpse of things to come. In just 15 days, Percept got a lead sponsor. “For the first time, we had print, online, radio and multiplex partners to promote the tournament, profile the Indian boxers. We had online ticket sales through bookmyshow.com.” The tournament was shown on Doordarshan, but now Percept is talking to other broadcasters for a deal.
For amateur boxers like Vijender, who mostly live by the grant of boxing federations, tourneys like the World Series of Boxing or Fight Nights are a chance to earn paydays of a professional— without losing their amateur status. And when Vijender does a jig with Priyanka Chopra in a chat show or struts down a ramp at a fashion show, he gets more kids to pick up the gloves and more people to tune into his next bout.
"First, we create the sports infrastructure. Monetisation, through sale of real estate properties, comes later."
—Samir Gaur, Managing Director, Jaypee Greens
Sport: infrastructure (F1, cricket, hockey)
- Stake Investing Rs 4,000 crore to build a sports city in Greater Noida.
- Objective Use the hook of sports infrastructure to sell houses, malls, offices and resorts.
- Plans Build a F1 racing track, stadiums and academies. Sell houses worth Rs 20 lakh to Rs 1 crore around them.
- Payback Expects to make profits in time.
The Real Estate Play
While Percept and Videocon are creating sporting properties in boxing, the Rs 7,000 crore Noida-based Jaypee Group is literally building properties whose central pull is sports. Back in 2001, the group’s real estate arm, Jaypee Greens, built the Greg Norman Signature Golf Course in Noida. It also built 3,000 apartments and villas around the golf course. The selling point of the real estate was the golf course. “Back in 2004, we sold the villas for Rs 3 crore,” says Samir Gaur, Managing Director, Jaypee Greens. In addition, the gold course also pays for itself. The golf course, which has a lifetime membership fee of Rs 15 lakh, currently has around 2,000 members.
The centrepiece—and also, the greatest challenge—of this sports-cum-real estate business model is the humungous initial investment and the gestation period. People need to see the sports property in some intended form to start buying houses around it. “We first create sports infrastructure,” says Gaur. “Monetisation comes later.”
After a golf course in Noida (spread over 1,162 acres) and Greater Noida (452 acres), Jaypee is currently executing its most ambitious venture yet: a sports city in Greater Noida spread over 2,500 acres at an investment of Rs 4,000 crore. Jaypee’s sports city will have a Formula 1 race track, a golf course, a cricket stadium and a hockey stadium; in addition, there will be training academies for soccer, tennis, boxing, wrestling and archery.
The showpiece of the venture is the race track, which is tipped to become a permanent fixture on the F1 calendar and is likely to host its first F1 race in October 2011. The race track will cost Jaypee about Rs 1,000 crore; plus, the company will have to pay Rs $30-40 million in license fee per year to the owners of F1 to hold a race.
There’s a strong business case, says Gaur. Jaypee will earn revenues by selling tickets for the F1 race (150,000 seats, with the provision to increases to 200,000) and sponsorship deals. Besides the annual F1 race, Jaypee plans to rent out the circuit for other races. “We have got a lot of serious queries to hire the track for most weekends from corporates, event organisers and some major international races,” claims Gaur. Adjacent to the race track will be a hockey stadium and cricket stadium, each costing Rs 300 crore. While the facilities will earn revenues by hosting matches—Jaypee has a 15-year deal with the Uttar Pradesh government to host all its T20 matches—it’s not what Jaypee is counting on to make a profit.
Jaypee is leaning on selling real estate projects like houses, office complexes and malls around these sporting structures. Gaur hopes to sell flats overlooking these properties from anywhere between Rs 20 lakh and Rs 1 crore. “The real estate and sports combo can never be a losing proposition,” he says. “We are creating sports infrastructure and getting value in real estate.”
"We evaluated sports such as cricket and hockey, but motor sports blended perfectly with our core business." —Raghupati Singhania, Chairman, JK Tyres
Sport: Motor Racing
- Stake Has spent Rs 80 crore in the last 2 years to promote ecosystem and support drivers.
- Objective Promote motor sport, while building the JK brand.
- Plans More of the same. Teamed up with Volkswagen to bring the famed Polo Cup to India.
- Payback Has helped grow the brand’s awareness. “Today, the brand breathes motor sports.”
The Branding Play
Raghupati Singhania also seeks value from his investment in motor racing, but he is not as precise and calculating as Gaur in this regard. Singhania’s fascination with racing cars goes back a long way. As a child, he had a collection of 500 toy cars; he still has 150 of them. “I grew up in Kolkata and I remember going to places like Behala or to Barackpore every weekend to watch motor racing,” reminisces the Chairman of the Rs 3,500-odd crore tyre manufacturer JK Tyres. “Motor sports has been my passion ever since.”
It’s a passion his company, along with MRF, has nurtured in India through the years. About 20% of the company’s marketing and advertising budget goes into motor sport. “We’ve spent Rs 80 crore in the last two years,” he says. Most of it has gone towards nurturing driver talent and supporting the various series of motor racing competitions in the country.
When JK Tyres first started its association with motor sport, consumer surveys conducted by the company showed that it helped the JK brand increase its acceptance among the younger crowd—and boosted sales. “It is difficult to quantify, but it has contributed significantly in the growth of the brand’s awareness. Today, the brand breathes motor sports,” says Singhania. “We evaluated sports such as cricket and hockey, but motor sports blended perfectly with our core business.”
Singhania also sees motoring sports as a testing ground for JK Tyres. The company’s first association with motor sports was in the late-eighties, through the Himalayan Car Rally. “The rally, which went from the deserts of Rajasthan to the terrain of the Himalayas, became an ideal testing ground for our product.” Subsequently, in 1992, the company formed its rally team and launched go-kart tracks in 1998.
The latter, according to Singhania, is the best thing the company did: they were making motor sports accessible and catch talent young. India’s both F1 racing drivers, Narain Karthikeyan and Karun Chandhok, have come through the JK ranks. Although JK invests in drivers, Singhania doesn’t aspire to own a F1 team. “Owning a team is like investing in a building, which will give rentals,” he says. “We have opted to invest in the infrastructure.”
- Stake Looking to increase spending on hockey from annual Rs 100 crore sports budget.
- Objective Rekindle interest among masses in hockey, strengthen association with the sport.
- Plans Promote hockey at the school level.
- Payback Revenues is not the measure, brand recall among the youth is.
Hero Honda, similarly, plans to occupy a defined segment in hockey. The motorcycle manufacturer, which has earmarked about Rs 100 crore a year to spend on sports (primarily in advertising and cricket), is looking at hockey in a new way. “It’s passion and business,” says Anil Dua, Vice-President, Marketing, Hero Honda. “Our passion was to rekindle an interest in hockey among the masses, while our business objective was to strengthen our association with sports.”
Dua feels Hero Honda’s association with the IPL and the 2010 Hockey World Cup, held earlier this year in New Delhi, was a key contributor to the 24% sales growth clocked by the company last fiscal. In hockey, the company also organised an inter-school hockey tournament across 20 cities and got 300 schools to participate in it. The company plans to make it an annual event and use it as a platform to nurture new talent. “Our target audience is youth. Therefore, our strategy is to identify platforms to reach out to the youth,” he says “We don’t want to generate revenues from it.”
"We need a more inclusive environment for sports. We can do that by supporting a sport like basketball at the grassroots level." —Anand Mahindra, ViceChairman and Managing Director, Mahindra Group
- Stake Partnered NBA of the US to launch a multi-city recreational basketball league.
- Objective “Make basketball the clear number two, after cricket.”
- Plan Nurture and train young talent at the grassroots level.
- Payback No plan to monetise the association immediately.
The CSR Play
For the Mahindra Group, its newly-formed association with basketball is aimed at raising the stock of the sport among the youth of the country, but it’s all passion and no business. The Mahindra Group has partnered the National Basketball Association (NBA) of the US to launch a multi-city recreational basketball league, with the objective of taking the game to the grassroots and unearthing talent.
Anand Mahindra, Vice-Chairman and Managing Director, Mahindra Group, feels that in a cricket-crazy nation, other sports should get their due. “The launch of the Mahindra NBA Challenge marks a shift in the way we look at sponsorship of sports,” he says. “It is necessary to nurture and develop the talent and interest at the grassroots level. This is a long-term commitment by Mahindra and the NBA to develop basketball in India. We want to make basketball the clear number two, after cricket.”
The investment by Mahindra doesn’t include building basketball courts. Balu Nayar of Morpheus Media Fund says that is the problem in most sports. “Investing in sports infrastructure is a more long-term business perspective than investing in a team,” he says. “I would like to see corporates investing more in sports infrastructure, talent nurturing and cutting out career risks.” That means a company should have deep pockets so that it can do it as a CSR-kind of activity to start with without being needled by shareholders.
But CSR can do so much. Eventually, a sport has to build an ecosystem of talent, infrastructure, competition and rewards, and stand on its own. The way cricket is today. Several of the above-mentioned initiatives are steps in that direction. “Sports, if run properly, will always make money,” says Dhoot. Let’s see if, come September, he does so in boxing.