PSL Undersold?

By: Umer Bin Ajmal
Published: October 1, 2017
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Two years ago when the Pakistan Super League began its operations, the Pakistan Cricket Board’s (PCB) operative mantra was: get it done, or keep trying.

The big challenge that league officials faced in 2015 was convincing the corporate sector to come on board – instead of finding a horde of investors, as was the case with the first edition of IPL, cricket administrators in Pakistan were hard-pressed to find any.

“Investors were reluctant as it [PSL] was happening for the first time and naturally they didn’t want to take a risk,” recalls Salman Sarwar Butt, the league’s then managing director, “squarely responsible” for attracting private sector investment.

However, there were reasons for the scepticism about PSL’s success, one being the ham-handed manner in which officials of the PCB went about shopping for a venue.

On the eve of the inaugural edition, they were seen frantically negotiating with Qatar, and then when that did not work out, with the UAE. Even then, they left room for the UAE authorities to sanction a rival league simultaneously: the Masters Champions League.

Could the administration have robbed the PSL of revenues by not playing it smarter, despite the league’s money-making potential?

In other words, investors were being asked to part with their money for a city-based league that was not only being played abroad, but that would also share the venue with a rival league – in the same time bracket.

No wonder that Butt found the list of investors constantly “changing – from eight bidders to 20 to 10 and then to five, back to zero and then again 10” – until finally, firm deals were signed with five corporate entities.

Butt, who is no longer associated with the PSL, is a satisfied man today, arguing that the league had 30 bidders for just the Multan team this year.

Yet, one nagging question remains: could the administration have robbed the PSL of revenues by not playing it smarter, despite the league’s money-making potential?

The age of leagues

It has been almost a decade since the dynamics of the gentlemen’s game changed forever with the advent of the Indian Premier League (IPL). The brainchild of Indian businessman-cricket administrator Lalit Modi, it is inarguably the most-successful business venture in the history of cricket.

A year after IPL started, terrorists attacked the team bus of a visiting Sri Lankan squad in Lahore, leading to a boycott of international cricket on Pakistani soil for eight long years.

And while other leagues came into being on the footprints of IPL– the Big Bash (Australia), the Bangladesh Premier League (Bangladesh), and the Caribbean Premier League (West Indies) – Pakistan cricket struggled to keep its commitments alive in the deserts of UAE. A professional league was far from its mind.

Ironically, it was as far back as 2008 that the PCB – under Nasim Ashraf’s reign – had begun toying with the idea of a commercial cricket league. But it remained just that – an idea in the PCB files – for seven more years, until 2013, when it was resurrected under Zaka Ashraf’s chairmanship.

However, plans were shelved once again after the PCB decided to pull the plug a couple of days before the bids for broadcasters were to be opened.

In 2015, when Najam Sethi, then the chairman executive committee at PCB, revived the proposal for Pakistan’s very own league, it felt all too familiar. But the aim of the new dispensation was clear: PSL had to become a reality, and Pakistan cricket had to stand on its own feet.

The argument that PSL’s revenue earning capacity is constrained by Pakistan’s smaller population is true. But what cricket administrators missed out on was a chance to show their innovative skills

Looking at the League’s numbers, two seasons later, its financial viability for the goals set by the PCB seem on track and the claims of success will be hard to contest.

But it is so only if the stated objectives are taken into consideration. What is lacking today is a business vision and there are questions that the administration has not been able to respond to satisfactorily, yet.

IPL’s magic numbers

The idea behind starting the IPL was to make money for all stakeholders, the revenue earned by the Indian board being ploughed back into the development of the game. The honing of local talent was a by-product.

Today, according to American business consultancy Duff & Phelps, IPL is worth over $5.3 billion just by following this approach – and that was before their latest $2.55 billion media rights sale. In comparison, Sethi was elated with a paltry $2.6 million profit in PSL’s first edition.

PSL seems to be run more like a talent-hunt exercise and less as a business. Butt, who is regarded as the brains behind the League, justifies this saying PSL had a two-pronged approach: “It is a business and it provides exposure to new talent.”

Butt also says a comparison with India may not be entirely justified as Pakistan is one-tenth the size of its neighbour’s population.

“Indian economy is much more vibrant because it has a much bigger middle class. The demand for sport by their some 450 million middle class population is driving a lot of things.”

At the same time, Butt argues, PSL did turn out to be a commercial landmark in Pakistan’s sports history. According to him, in year one, the League brought in $9.3 million per year in franchise fee, about $3 million of sponsorship money and a gross figure of about $4.5 million from broadcasting fees. “Roughly $20 million of commercial interest came in year one, in a 21-day event,” he says.

On the other hand, Butt argues that the next highest commercial dollar puller in Pakistan sport, international cricket, has two main revenue streams other than the ICC money – sponsorship and broadcasting – which pull in anything between $10 million to $15 million in a year.

“So, here we have a full-year international calendar pulling in $15 million and a 21-day domestic event that pulls in $20 million,” says Butt, sounding optimistic that the numbers will rise with the addition of more franchises.

Where are the innovations?

The argument that PSL’s revenue earning capacity is constrained by Pakistan’s smaller population is true. But what cricket administrators missed out on was a chance to show their innovative skills. It is here that IPL, which also has a franchise-based model, scores big.

For instance, BCCI telecasts players’ auctions, which has opened an avenue for the broadcaster to earn extra revenue through ads. This serves as an additional incentive for them to raise their bids.

In 2015, the PSL telecast rights were sold for $15 million for a three-year period (i.e. $5 million a year), but there was no bidding war. Compare this with IPL: television rights were auctioned off for 10 years to a Sony-led consortium for $1.026 billion (i.e. $100 million a year).

‘The reason that most owners aren’t been able to make a difference in terms of revenue generation with their teams is because they haven’t invested in quality resources’

What led to the PCB to undersell the rights? Butt explains PCB’s move saying it had two main objectives: make PSL happen and to give assurance of profit to investors – one of the reasons that the board shares a part of its central pool earnings with the franchises.

What does worry Butt is the attitude of the teams in understanding the franchise business. “PCB has sold markets to the franchises, and it must now teach team owners how to do business.”

According to Butt, the reason that most owners haven’t been able to make a difference in terms of revenue generation with their teams is because they haven’t invested in quality resources. “The franchises need to become business houses like Chelsea, Manchester United, or Arsenal.”

Speaking of a professional approach, IPL’s CEO Rahul Johri previously served as Discovery Networks Asia-Pacific’s executive vice-president. Before him it was the former CEO of one of India’s top media planners – Sundar Raman from Mindshare whose clients included one of the biggest ad spenders in the world, Pepsi. PSL, on the other hand, lacks professional leadership.

“The PSL is a division of the PCB, so whoever is its executive will report to the parent body, but it has to operate independently,” says Butt. “This is an area where the PCB really needs to think about. This is a product which must be handled by the highest quality of professional vision.”

About the Author
Umer Bin Ajmal
is a sub-editor who has studied film and journalism from the Institute of Business Management. He has worked with Dawn and Geo News before joining BOL Media Group.