It can all be traced back to 2008. The inaugural season of the Indian Premier League (IPL) Twenty20 cricket tournament managed to bring together two of India’s passions—cricket and entertainment. The first season proved to be a big hit with audiences and a giant money-spinner for the Board of Control for Cricket in India (BCCI), which organizes the extravaganza.
Its meteoric success spawned multiple leagues across sports, spanning football, tennis, badminton, hockey, wrestling and kabaddi, as investors looked to recreate the magic. And cheering on teams from the owners’ box weren’t just industrialists, known to have a penchant for sports, but celebrities, who were perceiving value in associating with sports.
Sports league: IPL team—The Kolkata Knight Riders
While bringing in celebrities as ambassadors to promote a brand or team for a fee isn’t new, the fact that a number of celebrities are seeing value in investing their own money, time, or both, into sports is. Franchise owners and tournament organizers too see the benefit of pulling in celebrities, by offering them equity in exchange for their time, to popularize the sport.
While IPL has its fair share of celebrity franchise owners with teams such as Kolkata Knight Riders and Kings XI Punjab being partially owned by Bollywood stars Shah Rukh Khan and Juhi Chawla and Preity Zinta, respectively, the Indian Super League, launched in 2013, has owners such as John Abraham (NorthEast United FC), Ranbir Kapoor (Mumbai City FC), Abhishek Bachchan and M.S. Dhoni (Chennaiyin FC).
Sports league: Pro Kabaddi—Jaipur Pink Panthers
Bachchan also owns the Jaipur Pink Panthers team in Pro Kabaddi League launched in 2014. Kohli owns a stake in the UAE Royals, part of the International Premier Tennis League launched in 2014, and the Bengaluru Yodhas, part of the Pro Wrestling League launched in 2015.
These associations reflect varying degrees of investment—of time or money. From an out-and-out investment of cash as in the case of Shah Rukh Khan’s Red Chillies Entertainment which owns a 55% stake in the Kolkata Knight Riders team, or John Abraham, who owns an 85% stake in NorthEast United FC, to purely sweat equity deals—where a celebrity is given a 5-15%, rarely more, equity or stake in the company in exchange for their time—as the UAE Royals have done in the case of Virat Kohli. In the case of Varun Dhawan, no equity is involved—he is being paid an endorsement fee to promote Goa FC.
Sports league: ISL team—NorthEast United FC
For the celebrity, especially Bollywood actors who have irregular streams of income from films, events and brand endorsements, these sports-related businesses complement their investment portfolios. It helps them keep in touch with fans, develop another income stream and gain visibility, say experts.
The reasons could be varied. “For instance, Ranbir (Kapoor), has invested in the Mumbai City FC because he is really passionate about the sport. For Abhishek (Bachchan) the objectives may different, he has invested in Chennaiyin FC as well as the Pro Kabaddi League. Apart from being considered good business opportunities, these investments also help him (Bachchan) stay relevant, considering that he doesn’t do many film projects in a year,” says Indranil Das Blah, chief operating officer at Kwan Entertainment and Marketing Solutions. “The association will also help him strike a chord with people in states such as Tamil Nadu where Bollywood isn’t such a big deal, but gets him recognition as the owner of a popular football club. Then celebrities, such as John (Abraham) and Virat (Kohli) view these opportunities as a natural brand extension of themselves. The fourth reason is, of course pure valuation, which is true of any business venture. You strive to have a first-mover advantage, enter the business when it is still reasonably priced and then wait till it starts making money,” he says.
Investing in sporting leagues works for celebrities, he says, as it allows them the flexibility of focusing on their core business, as most sports operate seasonally.
Sports league: ISL team—Kerala Blasters
Investments of time and money are certainly beginning to pay off. The IPL, for instance, has been a big money-spinner for official broadcaster Sony Pictures Networks India Pvt. Ltd and BCCI. Sony’s ad revenue has grown from an estimated Rs.300 crore to well in excess of Rs.1,000 crore over the past eight seasons, according to media buyer estimates. A 2015 report by American Appraisal, a valuation services company, puts the overall brand value of IPL as a business at an eye-popping $3.5 billion (around Rs.23,380 crore) in 2015, up 9% from 2014. For IPL franchise owners such as Shah Rukh Khan and Preity Zinta, their teams are pulling in small profits already, while others are still waiting to break even. “It makes a little money, which personally—I am not showing off—I could make in one day as an actor,” Khan had told Mint in an interview last year .
Even for Bachchan, owner of a Pro Kabaddi League team, the valuation of his team is going up. “The kabaddi teams were being sold for a lark, under Rs.1.5 crore. Today I doubt you can buy a kabaddi team for anything less than Rs.8-10 crore,” says a senior sports consultant, on condition of anonymity, pointing to the rise in television viewership and ad revenue for Pro Kabaddi. Official broadcaster Star India was expected to generate revenue of around Rs.70 crore from the recently concluded season of the league, 50% more than what it earned last year, according to industry estimates.
For those who opt for sweat equity, it works as a sweet deal—they have the option of either holding on to their stake or selling it once it reaches a certain valuation. For others, it’s work in progress, though the outlook is optimistic. Abraham, for instance, admits that there is a lot of cash outflow now, but eventually there will be massive value asset creation. He is expecting to break even in two seasons of the Indian Super League. While he made the investment purely out of his passion for soccer, it also made good business sense to have that first-mover advantage. “While it is tough to sustain, it is positive stress. We have faith in the way Nita (Ambani, who is chairperson and co-owner) is growing the league,” he said, adding that the potential for growth is phenomenal.