Indian Premier League Cricket (Audio)

Ben Gilbert 0:00 I am listening to the Kolkata Knight Riders anthem as my pump-up song.

David Rosenthal 0:05 Oh, nice!

Ben Gilbert 0:06 It is so awesome. Have you seen the music video with Shah Rukh Khan, the owner of the Kolkata Knight Riders?

David Rosenthal 0:13 No.

Ben Gilbert 0:14 He is the main character with the Bollywood dance around him.

David Rosenthal 0:17 Okay, I'm gonna go watch it right now.

Ben Gilbert 0:19 And it's a little cheesy 'cause I think it's from 2008 era, but it is perfect pump-up music.

David Rosenthal 0:25 Oh, yes. We've got the player silhouettes in fire. [chuckles]

Ben Gilbert 0:29 Yes, that's exactly the one.

David Rosenthal 0:31 This is incredible. [laughing] How have I not seen this before?

Ben Gilbert 0:36 This is something that American sports definitely need to adopt.

David Rosenthal 0:39 Oh, man, we've got, like, a construction crew.

Ben Gilbert 0:42 Yes. [laughing]

David Rosenthal 0:42 Too hot, too cool.

Ben Gilbert 0:44 That is exactly the right reaction.

David Rosenthal 0:46 Okay, I'm gonna pause it. We're not even gonna record an episode until I watch this film. [laughing]

Ben Gilbert 0:50 [laughing] All right, let's do it.

David Rosenthal 0:53 Let's do it.

Speaker 0:54 Who got the truth? Is it you, is it you, is it you? Who got the truth now? Is it you, is it you, is it you? Sit me down, say it straight, another story on the way. Who got the truth?

Ben Gilbert 1:11 Welcome to the Spring 2025 season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.

David Rosenthal 1:18 I'm David Rosenthal.

Ben Gilbert 1:19 And we are your hosts. Today, we cover the most interesting story in sports: cricket. Now, when David pitched me this idea a few months ago, I thought, "Eh, I'm not that interested in cricket." And to all of our US listeners out there, I am guessing you feel the same way, but I was very wrong.

David Rosenthal 1:38 Hey, there are twenty million hardcore cricket fans in the US today-

Ben Gilbert 1:43 Great point

David Rosenthal 1:43 ... as we will get into later in the episode.

Ben Gilbert 1:45 Great point. And listeners, this story really isn't about the game of cricket anyways. It's about how to create a massively successful sports league from scratch, something that I thought was impossible after doing our NFL and NBA episodes, which each took a hundred years to get to where they are today. Indian Premier League cricket started a mere seventeen years ago in 2008. And even more than a sports league, the IPL is a case study in how to create the perfect entertainment product. They took this sleepy, polite British sport with matches that lasted five days, and they completely transformed it. It is compressed down to three hours. It's a high-octane slugfest that is all about power hitting and hitting sixes, the sort of cricket equivalent of a home run. It's got Bollywood glamour and on-field dance performances, cheerleaders, fireworks, and the way they started the league itself was a high-stakes auction to a group of billionaires and movie stars. And of course, they carefully studied all the mechanics that made the NBA and the NFL as successful as they are today and then applied them on steroids.

David Rosenthal 2:52 It's an amazing story.

Ben Gilbert 2:53 On top of all of this, the story itself has just about the most palace intrigue of any company we've ever studied. You've got Disney, Philip Morris, Rupert Murdoch, Reliance, Tata, and even Google. There's a very, very complicated founder figure. There's corruption, there's potential self-dealing, betting, rigging, and miraculously, the league has been successful despite all that. So successful, in fact, that it is the fastest-growing major sports league in the world, growing twenty x in value since 2008 to be worth more than sixteen billion dollars today. Insanely, the media rights to each match are so valuable that they're second only to the NFL. The TV broadcast rights, let me just say this again, for each match are worth more than an English Premier League soccer match.

David Rosenthal 3:46 Or an NBA game or a Major League Baseball game.

Ben Gilbert 3:49 Yes. There's one angle where IPL cricket looks like pure, unadulterated capitalism applied to the world of sports, but there's another angle where it looks a lot more like a religion-

David Rosenthal 4:00 [laughing]

Ben Gilbert 4:00 ... or a unifying cultural force, or even a mechanism of diplomacy, as we shall see. And David, I don't want to spoil too much, but last night, before we were recording, you were pitching me that twenty years from now, the IPL will be the largest sports league on the planet, period, bigger than the NFL.

David Rosenthal 4:18 That is the case I'm going to make on this episode.

Ben Gilbert 4:20 Ooh!

David Rosenthal 4:21 It's funny, on our NFL episode, we came to the conclusion that the NFL is this perfect blend of communism and capitalism, and I was thinking, "Oh, maybe the IPL will be an even more perfect blend." No, it's the perfect blend of capitalism and religion.

Ben Gilbert 4:35 Yes. Ooh, that's a great way to put it.

David Rosenthal 4:37 Even more lucrative.

Ben Gilbert 4:39 Yep. So listeners, is this a bubble waiting to pop or the future of entertainment? Today, we dive in. Well, we have one huge announcement to share with you today, a save the date. We can't say much yet, but after incredible listener demand over the years, we are finally coming to New York City.

David Rosenthal 5:00 Yeah!

Ben Gilbert 5:01 July 15th, save the date, mark your calendars with our good friends at J.P. Morgan Payments. And if you want to be the first to know when we have any details to announce, acquired.fm/nyc. We can't wait to see you there.

David Rosenthal 5:15 We can't wait to see you there, and we can't wait to be there.

Ben Gilbert 5:18 Yep. If you want to know every time an episode drops, check out our email list. It's the only place where we share a hint at what our next episode will be and share episode corrections, updates, and little tidbits that we learned from previous episodes. And we actually had quite a few little ones from all the Rolex enthusiasts, so thank you to the deluge of people who wrote in with little corrections to particular reference numbers about the Rolex episode. That's acquired.fm/email to join the list. Join the Slack and talk about this with us afterwards with the whole Acquired community: acquired.fm/slack. And if you want more Acquired between each episode, check out ACQ2, our interview show, where we talk with founders and CEOs building their businesses in real time. This most recent one was with Bill McDermott, the CEO of ServiceNow, talking about the art of enterprise sales that he used to grow ServiceNow to over ten billion dollars in revenue.... Before we dive in, we wanna thank our presenting partner, J.P. Morgan Payments.

David Rosenthal 6:18 Yes, just like how we say every company has a story, every company's story is powered by payments, and J.P. Morgan Payments is a part of so many of their journeys from seed to IPO and beyond.

Ben Gilbert 6:28 So with that, this show is not investment advice. David and I may have investments in the companies we discuss, and this show is for informational and entertainment purposes only. David, take us in.

David Rosenthal 6:38 Well, we start in the early 1990s with a colorful character, shall we say, named Lalit Modi. No relation to Narendra Modi, the prime minister of India, but he is from another famous Modi family. Lalit is the son of the renowned Indian industrialist K.K. Modi, who had built a fairly large conglomerate in India, you know, in the vein of Reliance or Tata or whatnot.

Ben Gilbert 7:09 It seems like all these big Indian companies are conglomerates. Like, it was actually kinda hard to find a scaled Indian company that did one thing.

David Rosenthal 7:18 Yeah, the industrial structure in India, at least to date, seems to be more like South Korea or Japan with the big conglomerates.

Ben Gilbert 7:25 Yep.

David Rosenthal 7:26 But in this case, Modi's conglomerate primarily is based around the tobacco industry, and they have a JV partnership with Philip Morris and are one of India's leading tobacco and cigarette companies. So Lalit, as the heir apparent son in this family to this business, he gets sent to college in the US for his education. First, he goes to Pace University, and then he transfers to Duke University. He ends up not finishing and coming back home and rejoining the family business, but when he comes back, inspired by his time at Duke and how basketball-crazy Duke is, he's like: "Man, the thing that really struck me about America is how sports-crazy everyone is there, and how big a business sports is in America, and how big the sports media business is around it."

Ben Gilbert 8:16 Yes.

David Rosenthal 8:16 We should get into that.

Ben Gilbert 8:17 Specifically, I saw him reference Monday Night Football as this appointment viewing, my friends all would gather around it. We couldn't do anything Monday nights at that time 'cause they're all glued to the TV, watching Monday Night Football.

David Rosenthal 8:29 Yep, and this is kind of the perfect time for it because here in the early '90s, Indian households are, for the first time, starting to get television. And so there hadn't been a sports culture, there certainly hadn't been a sports media culture in India up until this point, but it's fertile ground. So Lalit goes to the Walt Disney Company, and Disney, of course, owns 80% of ESPN at this point in time, and says, "Hey, my family has this JV with Philip Morris, you know, helped them enter the Indian market. We can help you, Disney, do the same thing." And at first, it's not sports. It's not ESPN yet. It's Disney Disney, kids' movies, merchandise, entering the market that way.

Ben Gilbert 9:10 Yes.

David Rosenthal 9:11 So in kind of a genius fashion, Lalit uses the sales force that the Modi company has for their tobacco products. They have eighty thousand, a hundred thousand sales reps that are going to convenience stores, corner stores, you know, in every part of the country in India, this vast, vast country where the majority of people do not live in large cities. They've got a sales channel relationship into these stores [laughing] distributing cigarettes.

Ben Gilbert 9:36 Huh.

David Rosenthal 9:37 So Lalit says, "Hey, we can leverage this sales force and use those people to go hook up with these early Wild West proto-cable operators out there in these towns and villages in India and bring them Disney content."

Ben Gilbert 9:51 It's amazing. And so this isn't, like, distributing home video, right? This is finding the local person who has set up all the wires to go out to the other homes in the neighborhood and going to that person and saying, "Hey, I know you have hundreds or thousands of homes that you're sending content to. Can you send this content there?"

David Rosenthal 10:10 Yep. There is a national over-the-air broadcast network in India, a national network called Doordarshan, but just like happened decades earlier in the US, little mom-and-pop cable operators are starting to pop up and saying, "Oh yeah, we'll run a wire. You know, we've got a satellite dish. We're pulling down signal from CNN-

Ben Gilbert 10:28 Mm

David Rosenthal 10:28 ... or what have you, and we'll rebroadcast those channels out to you via a wire into your home."

Ben Gilbert 10:34 Makes sense. So at this point, Modi is sort of acting as a middleman between the content creation business and the distribution business. He neither has to create the Disney movies and the Disney content, but he also doesn't have to lay wires.

David Rosenthal 10:47 Yep, he is the JV partner that Disney is entering India with.

Ben Gilbert 10:51 Got it.

David Rosenthal 10:52 So now, here we are in the early '90s. Disney isn't the only major global media conglomerate that sees the potential of this newly television-hooked-up Indian consumer market. There's News Corp out there and Rupert Murdoch, and Rupert, of course, really built the television side of News Corp, with Fox, on the back of two things. It was news at first, but then it was really sports that helped Fox totally take off. I mean, the NFL Sunday deal here in the US is what put them on the map. This is the blueprint for bringing Fox into, and News Corp into a new country.

Ben Gilbert 11:30 And Fox Sports, and eventually all the regional sports networks in the US.

David Rosenthal 11:34 Exactly. So News Corp had just launched a new brand and channel in India called Star, and Rupert's going around looking for how he's gonna run this playbook in India, what sports is he gonna broadcast? And pretty quickly, he figures out that there's really only one sport that matters in India, and that's cricket. And it just so happens that he thinks he can actually get the rights to broadcast Indian national cricket pretty darn cheaply. We're gonna come back to that in a little bit.

Ben Gilbert 12:04 And the question is, what is cricket at this point? You know, this is the Indian national cricket team playing other countries in these international matches, and then there's a big World Cup, but it's not like each city has a team or something like that.

David Rosenthal 12:19 Yeah.... There's no English Premier League of cricket. At this point in time, cricket is just this international game.

Ben Gilbert 12:26 And now that the Indians are getting televisions, the Indian national team playing cricket is becoming must-see television.

David Rosenthal 12:34 Yeah. It's Monday Night Football, it's the playoffs, it's probably every Indian male who has access to a TV, and I say male, because at this point in time, cricket is a male game-- [chuckles]

Ben Gilbert 12:44 Yep

David Rosenthal 12:45 ... is watching when the Indian national team is playing.

Ben Gilbert 12:47 Yep.

David Rosenthal 12:48 So Rupert Hoovers up these rights pretty cheaply, and all of a sudden, Star is now the place to watch cricket in India. Lalit sees this. He's got the partnership with Disney. He's always been interested in sports, and he's like, "Well, hey, guys, you have ESPN. We gotta get in this game. We gotta be getting cricket, too."

Ben Gilbert 13:06 Yep.

David Rosenthal 13:07 So Lalit, and ESPN, and Disney, they go to IMG, the big international sports agency, which we didn't plan this at all, amazing crossover with our Rolex episode, the same IMG. IMG, of course, helped Rolex design the Testimonee program that brought in Jack Nicklaus, and Arnold Palmer, and then ultimately Roger Federer, and all of the athletes who partnered with Rolex over the years.

Ben Gilbert 13:31 Yep.

David Rosenthal 13:32 So Lalit, and ESPN, and IMG, they go to the national cricket board in India that controls these broadcast rights. The national cricket board is called the BCCI, the Board for the Control of Cricket in India, and they say, "Hey, you've sold these pretty cheaply to Rupert. We'll pay you more. We'll take 'em. [chuckles] We should run an auction process here."

Ben Gilbert 13:56 And it's worth knowing, the BCCI's responsibility is not really a profit-maximizing organization. It's kind of a regulatory body. It's not the government, but they're tasked with developing the sport of cricket, and in particular, cricket in India, ensuring that the sport has longevity, and it has all the infrastructure that it needs. They're like the stewards of making sure that Indian cricket has a long and successful future.

David Rosenthal 14:25 And all of the other cricket-playing countries, from England, to Australia, to Sri Lanka, to the West Indies, they all have the same type of structure in their countries.

Ben Gilbert 14:34 And they all actually roll up to the ICC, which today is called the International Cricket Council. But interesting to know, when it started in 1909, it was the Imperial Cricket Conference, so that gives you a sense of the way that cricket was spread around the world by the British.

David Rosenthal 14:49 Yes, it is the British Commonwealth countries that are historically the cricket-playing nations that are part of the ICC.

Ben Gilbert 14:55 Yep.

David Rosenthal 14:56 So we've been talking about how these early cricket rights here in the '90s, Star and Murdoch, they're able to get them super cheap. It actually wasn't until right before all this goes down that India even realized they had the broadcast rights to cricket at all. [chuckles]

Ben Gilbert 15:12 Yes.

David Rosenthal 15:12 They didn't even know, and this is crazy. You can't make this up. How do they find it out? In 1991, the South African national cricket team comes on a tour to India. It's international cricket. They're playing in India, and the South African Cricket Board is like, "Hey, we wanna broadcast this. Uh, how much do we owe you for the rights?"

Ben Gilbert 15:35 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 a really 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.

David Rosenthal 16:02 Yep, and it's all tied up with the television penetration of India.

Ben Gilbert 16:06 Yes.

David Rosenthal 16:07 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, the national team, and the board is like, "Well, how much do we owe you for this?" [laughing] They don't know how to respond, so there's this great history of they're sorta, 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?" [laughing]

Ben Gilbert 16:51 [laughing]

David Rosenthal 16:51 And the India guy's like, "Uh, yeah, yeah, that sounds great. Let's do that." So they'd only just discovered that this thing had value, they even had these rights, and that they could sell them.

Ben Gilbert 17:03 And then it got really concretized into law a couple years later. There's a legal battle between the BCCI and this legendary leader of the BCCI, Dalmiya, and he goes to war against the national state broadcaster, Doordarshan, 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.

David Rosenthal 17:33 Yep, and that guy, Dalmiya, he was the BCCI board member who was negotiating with South Africa.

Ben Gilbert 17:38 Ah.

David Rosenthal 17:39 He was the guy on the call who heard $200,000 and was like, "Well, okay. Yeah."

Ben Gilbert 17:43 It's like, "Look, South Africa has to pay us," and then they come home, they get into a legal battle, and that, "Even the Indian government has to pay us. We really own these rights."

David Rosenthal 17:50 Yep. He was like the proto Lalit Modi, Lalit before Lalit.

Ben Gilbert 17:55 Yes. [laughing]

David Rosenthal 17:56 There's one other really fun sorta history turns on a knife point element to cricket in India. So like you said, Ben, cricket was the most popular sport in India before 1983, but that didn't mean that much, and it hadn't captured the country's imagination that much yet.

Ben Gilbert 18:15 Also, England always hosted the World Cup. The center of gravity was England, and so it wasn't India's thing. It was just a thing they participated in.

David Rosenthal 18:22 It was a British thing. There's an amazing line about this by an author named Ashis Nandy, who wrote a book called The Tao of Cricket.... and he says, "Cricket is an Indian game accidentally discovered by the English." [chuckles]

Ben Gilbert 18:34 While we're on this topic of things the BCCI realizes they own, and in particular, Dalmiya, and I hope I'm pronouncing that correctly, is the one who gains these rights the same way that he solidifies the broadcast rights. In 2001, Dalmiya introduces central contracts for Indian players and pensions for retired cricketers as a part of the BCCI's remit. The BCCI is the one who pays the players. This is so critical, and at the time it's almost like, oh, of course, the BCCI pays the national team. But it sort of sets up this umbrella that no matter how an Indian cricketer is playing cricket, we are the one who pays them, or at least who sort of has a contract with them. And that, along with the BCCI's ownership of media rights, is this killer combo that would eventually lead later to the IPL as we have it today.

David Rosenthal 19:30 Yep. So all this launches ESPN in India, and there's back and forth for a couple years between Star and ESPN. They're bidding over these cricket rights with the BCCI. Eventually, in 1996, they decide, "Hey, let's stop fighting each other. Let's just merge." Uh, antitrust, uh, regulation in India is not quite what it is in the US at this point in time.

Ben Gilbert 19:52 No.

David Rosenthal 19:53 So Star and ESPN merge, and to hear Lalit tell the story, Rupert Murdoch is kind of a, you know, sore loser here, that Lalit came in and increased the money that he had to spend for these cricket rights, ultimately had to merge with ESPN. He decides that he's gonna kick Lalit out of his baby, out of this company, post-merger.

Ben Gilbert 20:14 Hmm.

David Rosenthal 20:14 Now... [chuckles] Is that really what happened? That's Lalit's side of the story. Um, Star Disney, the merged entity, would allege that Lalit underreported revenues that they were collecting and was accepting kickbacks from the cable operators, all sorts of stuff. There's a big lawsuit about it, goes on for a couple years, and at the end of it, Lalit gets booted out of the business, and despite his family's fifty percent ownership in that original ESPN-Disney joint venture, he gets nothing. He's out in the cold.

Ben Gilbert 20:46 Brutal.

David Rosenthal 20:47 So from his perspective, he's like: Hey, I started Disney India. I modernized cable in India. I brought sports to India! I did this, and now all of a sudden, I'm out in the cold, and I get nothing. And in his mind, Rupert Murdoch is the reason that this happened.

Ben Gilbert 21:06 He's the villain. Rupert stole it away from the Modi family.

David Rosenthal 21:09 My sworn enemy from here onwards. [chuckles] And thus begins a ten to fifteen-year journey that is not just the ultimate revenge play by Lalit on Rupert, but accidentally, along the way, starts the biggest sports entrepreneurial story phenomenon that has ever existed. [chuckles]

Ben Gilbert 21:32 Yep. Crazy, out of this feud. And I will say, more than any other episode that we've done, it seems like every element of this has two completely different sides to the story, both of which the leaders of that side dig in and maintain their side. In most companies we study, there kind of becomes one canonical truth, and it's mostly written by the victors. But in the history of the IPL, and especially with Lalit Modi, there's always two completely different stories representing how it went, and nobody ever gives an inch on either side of them. They just say, "Oh, that's all lies. That never happened. No way did that ever happen. Zero truth to that." And so it is a little bit difficult to tease out what actually did happen, given there is no convergence of story.

David Rosenthal 22:23 Yep, and this is probably the right moment to say a word about the nature of doing business in India, at least at this point in time.

Ben Gilbert 22:29 The '80s, early '90s.

David Rosenthal 22:31 The euphemism, I believe, that the Indian business environment is referred to as a low-trust environment, i.e., this is par for the course.

Ben Gilbert 22:40 Yes. If you make an investment, you should be babysitting it very carefully, very actively, making sure that your interests are protected.

David Rosenthal 22:49 A lot of corruption, a lot of kickbacks, and particularly doing business in India as a foreign company at this point in time is at your own risk, shall we say.

Ben Gilbert 22:59 And I will say, these phrases, corruption, kickbacks, that is a Westerner's way or an American way of describing it. I think another way to look at it is just, these are just the norms. This is the way you do business. I don't know what you expected.

David Rosenthal 23:14 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, [chuckles] specifically. And what's the way to hit him where it hurts the most? Well, it's the biggest piece on his chessboard, pillar

David Rosenthal 23:44 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 gonna 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- [chuckles] ... 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 [chuckles] 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, like, directly involved in buying them for cheap when he was back at ESPN, but now he's like, "I know how valuable these are."

Ben Gilbert 25:05 Mm.

David Rosenthal 25:06 "I know how many eyeballs these are getting, and, like, you guys, now you're selling them for 10, $15 million a year. These are worth hundreds of millions of dollars a year."

Ben Gilbert 25:15 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?

David Rosenthal 25:25 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 quasi-governmental entity.

Ben Gilbert 25:42 Right, 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.

David Rosenthal 25:56 Yep, but most of the members are industrialists from the industrialist families, just like Modi. You know, their interests are Disney, News Corp, these big multinational corporations. "Hmm, I would really like to have a relationship with you all."

Ben Gilbert 26:10 Mm.

David Rosenthal 26:10 "Oh, maybe there's stuff we can do together. Maybe we, we should advertise our company's products on these cricket events," and, "Oh, maybe we can get to know you and advertise on other programming that you're doing." So it's rife with conflicts of interest, shall we say, and the only reason that Lalit doesn't have this conflict of interest-

Ben Gilbert 26:26 Is 'cause he got ousted. [chuckles]

David Rosenthal 26:27 He's ousted, exactly, [chuckles] and his life mission is to extract revenge here. So this campaign succeeds, and in 2005, he finally gets appointed to the BCCI, and this is wild. Within a span of, like, two months, he completely upends everything. He's not the chairperson of the BCCI. He's just a newly elected board member, one of, you know, I don't know, five or seven board members. He comes in like a wrecking ball. So the first thing he

David Rosenthal 26:57 does, he goes to the main sponsor of the team, like, the title presenting sponsor of the Indian national cricket team. I think at this point, probably already the logo is on the jersey. That's, like, one of the main things you're gonna get as the title sponsor, and maybe at this point in time, you're also getting the logo on the broadcast.

Ben Gilbert 27:21 But pathetically commercial versus cricket today.

David Rosenthal 27:25 Well, let me give you a sense of how commercial it is at the time. So the presenting team sponsor is the Sahara Group, which is another one of these big Indian family conglomerates. How much do you think they are paying the BCCI-

Ben Gilbert 27:40 Mm

David Rosenthal 27:40 ... for this sponsorship?

Ben Gilbert 27:42 I don't know, a million bucks.

David Rosenthal 27:44 $100,000 per year. [laughs]

Ben Gilbert 27:46 I thought a million was low! Wow.

David Rosenthal 27:49 [laughs] Well, just you wait. A million is low. Mind you, when we've said that cricket is the biggest sport in India, nothing else matters, it borders on religion... It has 93% mind share of sports in India.

Ben Gilbert 28:05 And I think that calculation is done by viewer hours.

David Rosenthal 28:08 Yeah.

Ben Gilbert 28:09 If you look at all sports watched, cricket is 93% of the hours people paid attention.

David Rosenthal 28:14 If you look at American football, at the NFL in America, it's like, I don't know, 37% or something like that. It is less than 50%. Cricket in India is 93%.

Ben Gilbert 28:25 Yeah, it's a one-sport country, and it happens to be a one-sport country with one of the two largest populations in the world that is growing the fastest in the world.

David Rosenthal 28:34 And the middle class is rapidly expanding, so, like, this is exactly as... You know, if you're Pepsi or you're Tata or you're-

Ben Gilbert 28:41 $100,000 to sponsor. [chuckles]

David Rosenthal 28:43 Yeah. Oh, my God. Oh, my God, unbelievable. Now, you might think, "Oh, okay, well, you just told me that this sport is sort of in the model of the Olympics right now. It's international competition. Maybe they're not playing that much. You know, is this team only playing for two weeks in the summer? Maybe there's just not that much inventory."

Ben Gilbert 28:59 Nope.

David Rosenthal 29:00 No, they are playing 105 days of competition per year, all nationally televised.

Ben Gilbert 29:07 And not to mention, one of those days is when they play Pakistan, or more than one of those days, and the whole country stops to pay attention on that day. That game alone, you would think, would be millions of dollars.

David Rosenthal 29:17 [chuckles] You say day. At this point in time, there are two forms of cricket. There are one-day internationals-

Ben Gilbert 29:24 Which is the new, fancy version of cricket that came about, what, in the '70s, '80s?

David Rosenthal 29:29 '70s, '80s, and that really was to enable tournaments to happen to, like... You can play a match in one day. Takes all day. These are eight-hour games, so it's all day. The country's eyes are glued on this. The other form of cricket, the classical form of cricket, is test cricket. Test cricket, a match lasts five days. So one-day internationals were invented so that you could have kind of a round-robin tournament with different teams.

Ben Gilbert 29:52 Mm.

David Rosenthal 29:52 Otherwise, there's no way you can have a 10-country tournament where every match takes five days.

Ben Gilbert 29:57 Right. The vibes are very different, shall we say? The, uh, test cricket is very... Do you know why it's called test, by the way?

David Rosenthal 30:04 Uh, I believe it's 'cause it's a test of the strength, will, you know, the team.

Ben Gilbert 30:09 And in particular, to test the English team. When they first brought cricket out to the rest of the Commonwealth, it was that those teams could then come and test against the English team. When they came to Lord's-

David Rosenthal 30:22 Lord's is the hallowed cricket ground in England.

Ben Gilbert 30:25 Yes, to play this five-day, thoughtful, quiet, strategic... The vibe is like golf, even though you're playing something that looks like baseball.

David Rosenthal 30:34 Totally. I have to bring in some personal history here. So I am a quarter British.... I'm genetically predisposed to, [laughing] you know, already be into cricket. But when I was growing up, my- so my grandmother was British, probably every other summer, I would go spend two, three, four weeks with my family in the Midlands, in the countryside in England, visiting my grandmother's family. And, you know, as a little kid, you're like, "What would be on TV in the summertime in England?" It was this test cricket. And so I grew up, even though I played baseball and I loved baseball at home, in the summers when I would go to England, I'd turn on the TV, I'd watch this test cricket, like, "Oh, this is super cool!" But yes, exactly like you say, Ben, this is the gentleman's game of gentleman's games.

Ben Gilbert 31:14 You play it in, like, a white V-neck cable knit sweater.

David Rosenthal 31:18 Right. In the middle of the summer, by the way.

Ben Gilbert 31:20 Yes. And the incentives are all funny, too. It's not about swinging these big home runs. Your goal is basically to hit little line drives, and keep it on the ground, and make sure that you're able to score one run at a time, not six runs. You have a lot of time over the course of five days to let your strategy play out, and so you're not trying to make the absolute most use of every ball bowled the way that you are in modern versions of cricket.

David Rosenthal 31:47 To give you a little sense of this, test cricket, and I believe one-day internationals as well, there are four possible outcomes of the game. You can win, you can lose, you can tie.

Ben Gilbert 32:01 Wait, so what's the fourth?

David Rosenthal 32:02 The fourth outcome is a draw.

Ben Gilbert 32:04 Which is different than a tie?

David Rosenthal 32:06 A tie is if the score is tied at the end of the match, which almost never happens, 'cause you're playing for at least eight hours, if not five days.

Ben Gilbert 32:13 [laughing]

David Rosenthal 32:13 You know, the scores are in the hundreds here, so the odds that they're gonna be tied are very, very low.

Ben Gilbert 32:18 I see.

David Rosenthal 32:18 A draw happens when one team is not able to finish their innings in the time of the match.

Ben Gilbert 32:28 [chuckles]

David Rosenthal 32:28 So if you get to the end of the day, like, "Oh, sun goes down, it's time for dinner," and all of your batsmen have not yet gotten out in your innings... Oh, well, then you could be behind, ahead, whatever. Like, oh, just didn't finish. It's like a DNF, did not finish.

Ben Gilbert 32:42 What?

David Rosenthal 32:42 Just a draw. [laughing]

Ben Gilbert 32:44 And so then you have this funny strategy where you're trying to drag the game out if you're losing.

David Rosenthal 32:49 If you're behind and you're batting second, or in a test match in your second innings if you're batting second and you're behind, yeah, you're just trying to draw the game out.

Ben Gilbert 32:56 Amazing. All right, so we're gonna leave the world of test cricket behind in the '70s. There's a lot of test cricket still played today, but-

David Rosenthal 33:03 Oh, yeah, it's still a big thing.

Ben Gilbert 33:04 For these big international tournaments, the World Cup, all that, that's one-day internationals, this ODI format.

David Rosenthal 33:10 All of this amazing and delicious sidebar is just to point out that there's a lot of inventory here. The Indian national team is playing 105 days per year, and the Sahara Group is getting their logo on their white cable knit vests for $100,000 a year.

Ben Gilbert 33:28 I think one-day internationals, they actually did start wearing more athletic clothing.

David Rosenthal 33:33 That's right. That's correct.

Ben Gilbert 33:34 That's not the white sweaters.

David Rosenthal 33:35 Indeed. So Lalit, here now in 2005, when he finally gets on the BCCI, first thing he does is he goes to Sahara and he says, "The price is going up. It is now $1 million," Ben, as you were saying, "per day of competition." [chuckles]

Ben Gilbert 33:51 Oof!

David Rosenthal 33:52 "So you are gonna go from spending $100,000 a year to spending $105 million per year. And oh, by the way, if you don't wanna do that, that's fine. I'm happy for you not to do that. I'm then gonna go put this out to auction, and we'll see who is willing to pay that."

Ben Gilbert 34:08 Wow!

David Rosenthal 34:10 To give you a sense of just how much latent value there is here, I don't think it goes to auction. I think Sahara just says, "Okay."

Ben Gilbert 34:15 Yeah, they're very aware that this is a very good deal, even at this price.

David Rosenthal 34:20 I mean, if you wanna reach the nation of India, there are two ways to do it: Bollywood and cricket. That's it.

Ben Gilbert 34:27 Yep.

David Rosenthal 34:28 So when this massive escalation happens in 2005, I believe this is correct, overnight, this becomes the highest-paid jersey logo deal of any sport on the entire planet.

Ben Gilbert 34:44 Oh, interesting.

David Rosenthal 34:45 So basically not even commercial to now the single largest logo sponsorship in the world. And now why is Lalit able to all of a sudden extract this huge record-breaking amount of value for this sponsorship, whereas before it was really not even commercial? We alluded to it before, but the rise of the Indian middle class is what's driving everything here. So one stat I saw was that in the early '90s, when we started our story a little bit ago, Lalit was first getting involved, Disney and Star were entering the Indian market, there were only about two million households in India that had a disposable income of $10,000 or greater.

Ben Gilbert 35:24 Wow.

David Rosenthal 35:25 By the time here we are now, that Lalit gets on the BCCI and is wrecking all these deals, it's 10X that. So there's, call it 20, 30 million households now in India that are, by that definition, at least middle class. Fast-forward to today, it's another 10X plus that number. You know, there's 400, close to 500 million people, households in India that have that level of spending.

Ben Gilbert 35:52 It's actually even more. It's 550 million people who are a part of India's middle class. Now, that middle class is defined differently than the American middle class. It's $7,000 to $45,000 in annual income, but that really gives you a sense. You said that in the early '90s, there were two million people that made more than 10K, and now half a billion people make more than 7K.

David Rosenthal 36:17 Yeah.

Ben Gilbert 36:18 Those numbers are pretty close, so we went from two million to 500-plus million. That is an emergence of a middle class in unbelievably rapid succession there. And I think the thing to keep in mind about India is, anytime you're saying a percent of the population-

David Rosenthal 36:33 [chuckles] You're still talking about a large number of people.

Ben Gilbert 36:36 Right, the absolute amount of people is huge.... the middle class in India today is 31% of the population, but 31% of India is more than all of America.

David Rosenthal 36:46 Right. Yeah, you just said it was 550 million people. [laughing] Yes, I mean, full stop, pause, let this sink in. The middle class in India, per this definition, but still, like, that is enough annual income that you can spend it on consumer goods, is bigger than all of America. That's what's going on here.

Ben Gilbert 37:07 Another stat, we may as well just start really contextualizing the shift here, the Indian government says that 250 million people have been lifted out of poverty between 2015 and today. They lifted an entire America's worth of adults out of poverty-

David Rosenthal 37:26 Yeah

Ben Gilbert 37:26 ... in India.

David Rosenthal 37:27 To all of a sudden buying Pepsi, buying cell phones, buying mobile data plans-

Ben Gilbert 37:32 Right

David Rosenthal 37:33 ... buying, oh, I don't know, Nikes and Reeboks? [chuckles] So what's the next thing that Lalit does after this Sahara deal? There's no gear sponsor, there's no kit sponsor for the team at this point in time. I think some of the individual cricketers had had some-

Ben Gilbert 37:50 Mm

David Rosenthal 37:50 ... super cheap early deals with, you know, Nike or Reebok or whatever. Lalit goes to the three big companies, Nike, Adidas, Reebok, and says, "Hey, I'm putting out for bid, for auction, being the kit provider, the gear provider," kit being the British term for athletic gear.

Ben Gilbert 38:08 Or cycling.

David Rosenthal 38:09 Or cycling, yes, "to the Indian national team. And, yeah, if you wanna win this, I'm expecting minimum $50 million a year."

Ben Gilbert 38:18 Just to float a number.

David Rosenthal 38:19 So Nike comes in and wins at $52 million a year. Oh, and by the way, since Lalit knows that there's gonna be competitive bidding between these three shoe companies, he makes a media event out of it. [laughing]

Ben Gilbert 38:34 [laughing]

David Rosenthal 38:34 So he has them all submit their bids in, like, sealed envelopes. He has a whole press conference, opens the envelopes in front of the media, makes it a whole circus.

Ben Gilbert 38:41 It's like, uh, LeBron's The Decision.

David Rosenthal 38:43 So this is enormous! Lalit, he's two months in to his tenure on the BCCI board, and he just found $150 million a year, whereas previously, sponsorships were nothing. They were making, call it $10, $15 million a year in TV rights. He just 10X'd that from something that's worth far less than the TV rights.

Ben Gilbert 39:07 Yep.

David Rosenthal 39:08 So then he sets up a personal meeting with Rupert Murdoch, who, at this point in time, via Star, has all the TV rights to Indian international cricket.

Ben Gilbert 39:20 Oh, yes. But first, before we tell that story, we want to thank our presenting partner, J.P. Morgan Payments. The modern fan experience, as we are talking about here on the show, extends far beyond just attending an event. There are so many touch points across the customer journey before, during, and after, and when these involve commerce, we, as fans, expect these to be fast, consistent, and frictionless across platforms. If you're a business, you need secure, flexible technology that simplifies these complex shopping journeys, and this is where J.P. Morgan Payments innovation is a star player, helping businesses create an amazing omni-channel retail experience that deepen their customer relationships.

David Rosenthal 40:03 Yep. So let's stick with sports here for a minute. As you all know, we did Acquired Live at Chase Center last year.

Ben Gilbert 40:09 Woo!

David Rosenthal 40:09 The arena itself is known for being incredibly innovative, and what's behind that is a simple approach centered on creating a world-class fan experience, prioritizing both convenience and security. So enter biometric payments. Last year, they introduced pay-by-face biometric kiosks at concessions that are powered by J.P. Morgan Payments. We actually tried it at Chase Center ourselves when we were there. The technology is wild. It completely streamlines the checkout process. You just add payment details and take a quick selfie to easily set it up. Businesses love it, too, since J.P. Morgan's technology means you can trust the secure checkout experience with biometric data that's totally unique to each person, ultimately reducing fraud. And actually, our show at Chase Center was one of the first events there to offer this experience.

Ben Gilbert 40:54 Yes, it was. Listeners, as you know, when you delight customers with amazing, frictionless, end-to-end experiences, it can, of course, drive growth in your business. And with J.P. Morgan Payments, you know you're getting a reliable platform, too, that can handle peak demand. They literally process one out of every two e-commerce [chuckles] transactions in the entire United States.

David Rosenthal 41:13 Wow.

Ben Gilbert 41:14 Another great example, the Formula 1 Crypto.com Miami Grand Prix was the first Formula 1 race to use J.P. Morgan's biometric payments technology. The pilot was a huge success, with 100% of the transactions authenticated and processed in under a second. They've since expanded biometric payments in physical merch stores and launched online retail to meet the increased demand from their fans beyond the race. When you're dealing with complex ecosystems, this kind of scale and flexibility is possible only with payment solutions that are easy to implement, and they'll be back in Miami again this year.

David Rosenthal 41:45 Woo! Acquired listeners can check out jpmorgan.com/acquired to learn more about the innovative payment solutions elevating fan experiences, and how payments can drive growth for your business.

Ben Gilbert 41:56 Okay, David, so Rupert Murdoch- [laughing] ... back entering the picture.

David Rosenthal 42:00 Ah, well, Lalit probably thinks here that it's coming full circle. [chuckles] We're only just getting started. He sets up a personal meeting with Rupert Murdoch, and he sets the meeting for a friendly Friday afternoon tea.

Ben Gilbert 42:17 How very cricket.

David Rosenthal 42:19 And remember, at this point, I think Star is paying $10, $15 million a year for these TV rights. Lalit walks in, sits down, and says, "Mr. Murdoch, I am informing you that your contract is terminated right now. We are going to rebid the contract, and you are welcome to submit a bid. We are mandating that the minimum bid-... is $500 million- [laughs] -for four years. And Murdoch, like, basically spits his tea out. He's like, "Uh, you're crazy!"

Ben Gilbert 42:51 That's what? 10X the current value?

David Rosenthal 42:53 Totally. So obviously, he's offended by that, but he's like, "Who are you, and why do you think this is gonna work?" Remember, Star and ESPN had merged.

Ben Gilbert 43:03 Mm.

David Rosenthal 43:03 There's no other sports channels in India. There's no other sports in India. Rupert's like, "Who's gonna bid on this? You're all hot air here. There's no way that this is gonna work. I'm the only game in town. You're basically trying to extort me, and oh yeah, rip up my contract that I have with the BCCI. You're two months into the job. Like, get lost!"

Ben Gilbert 43:25 Right. "You need me."

David Rosenthal 43:26 "You need me," yeah.

Ben Gilbert 43:27 Hmm.

David Rosenthal 43:28 But of course, Lalit has a plan for this. He's gonna do just what he did back with ESPN in the first place, back in the day. It's not that hard to set up a new network to come in and bid on these rights, and by the way, it is now clearly, demonstrably, and provably so much more valuable than back in the day. We're now 15 years into the television penetration of India, shall we say. There are tons of other broadcasters and cable channels out there. They're just not sports channels. Well, what's a sports channel? That's just a marketing term. [chuckles] It's just a channel. You add another channel. You make, uh, ABC Sports, NBC Sports, CBS Sports, Fox Sports. Anybody can do this. So Lalit goes to Sony, who's the number two broadcaster in India. He goes to Sky from the UK and says, "Hey, you wanna enter India?" And he ultimately goes to an Indian entertainment company called Nimbus, which was a broadcaster, but also didn't have a sports channel, and he says to all of them, "These rights are now available. Minimum bid is 500 million for four years. This is going to be very profitable for you. It's very easy to set up a sports network. I've already done it. I will help you do it. You are welcome to bid." Nimbus ends up winning the auction with a $620 million bid for four years.

Ben Gilbert 44:53 Wow!

David Rosenthal 44:53 They set up the Nimbus sports channel. It, uh, I believe, quickly becomes the number one sports channel [chuckles] in India. I mean, there's nothing else. Like, if you got cricket, you're the number one sports channel in India, and Star and Rupert are out in the cold.

Ben Gilbert 45:07 Wow! So Lalit really did make the BCCI an economic powerhouse, where they really didn't have material revenue before, and now suddenly, they have hundreds of millions of dollars coming in. What? 200 million a year-ish between TV and sponsorships?

David Rosenthal 45:22 Yeah. They've got 150 million from sponsorships, and then they've got... Yeah, what's the-

Ben Gilbert 45:27 Hundred and twenty-five from this.

David Rosenthal 45:28 Yeah, and then another 150 million from broadcast.

Ben Gilbert 45:32 Yeah, so hundreds of millions of dollars a year. Unbelievable.

David Rosenthal 45:36 Totally unbelievable, with more potential to monetize beyond that. I mean, he got 150 million from two sponsorships. You can have more than two sponsors here. [chuckles] Yeah, he completely commercialized the BCCI. Transformative. You know, he would say, when he later gets kicked out of the BCCI, and there's tons of controversy and everything we'll get into later... People are accusing him of self-dealing, doing all these things. He's like, "I created billions of dollars of value for cricket in India, the BCCI, the government, all the players involved, from nothing," and he's absolutely right.

Ben Gilbert 46:08 Yep, absolutely right.

David Rosenthal 46:10 And by the way, he shut Rupert Murdoch out of all of it. [laughs] So here we are now. He's won. He's extracted his revenge. He's taken over Indian cricket. He's created the single biggest pool of money anywhere around the globe in cricket as a sport. I mean, this is way more money that we're talking about here than England, or Australia, or the West Indies, or Sri Lanka, New Zealand, you know, the other cricket-playing nations. England and Australia are big media markets, but they're not this big.

Ben Gilbert 46:41 Well, on a sheer population basis, they just can't come anywhere near India.

David Rosenthal 46:46 Totally, and we're not even at the end of 2005 yet. This guy is a force. But as you might expect, he's not quite satisfied.

Ben Gilbert 46:54 Shocking. If we've learned anything studying all these characters over the entire arc of Acquired's history, they're never satisfied.

David Rosenthal 47:01 Totally. He's, I got to assume, thinking about this 105 days of competitive play that the team is playing. You know, that's 105 cricket matches. That's not a lot of inventory. On the one hand, it's a lot, but it's only one team that you're talking about here, playing 105 matches. The NFL plays what? I think-

Ben Gilbert 47:26 285 games, including the postseason.

David Rosenthal 47:29 So more than double that, and that's the scarcest sports media in the world.

Ben Gilbert 47:33 Yes.

David Rosenthal 47:34 And the only reason that the NFL plays that few games is because the bodies of the players just can't take any more. They would fall apart.

Ben Gilbert 47:42 Right. Major League Baseball, almost 2,500 games are played per season.

David Rosenthal 47:48 Yes, thousands of games. [chuckles] Cricket is not like American football. This sport was designed to be played five days in a row.

Ben Gilbert 47:58 Yes.

David Rosenthal 47:59 The cricketers' bodies are not falling apart. There is a lot more juice to squeeze here, so this sparks, unquestionably, truly unquestionably, this is in zero way a controversial statement, the most brilliant, most successful sports entrepreneurial business plan of all time, the Indian Premier League, a domestic, city-based cricket league in India that Lalit is gonna set up in the model of the very best elements of the NFL, of the English Premier League, of the NBA-

Ben Gilbert 48:36 Of international cricket.

David Rosenthal 48:37 Yep, of international cricket.

Ben Gilbert 48:39 Leveraging the assets that they have with the BCCI's control over cricket. I mean, this is something that is not-... emergent in any of these other sports we're comparing to, there's no BCCI for football in the US. There's nobody telling the NFL what they can and can't do. The BCCI is the one who controls the players' contracts with how much they make, who decides what leagues they can play in or can't play in, who cuts media rights deals. This is all happening by this organization-

David Rosenthal 49:12 Organization that Lalit now de facto controls.

Ben Gilbert 49:15 That is not the league. It's a parent to any league or organized play. And so you mentioned that with the Indian Premier League, they get to learn all this stuff from the other great leagues, but they have this asset, this structural advantage, that no other sports league in the world has, which is the BCCI control.

David Rosenthal 49:32 Absolutely. They innovate beyond the other leagues, too.

Ben Gilbert 49:34 Yeah, totally.

David Rosenthal 49:35 To me, this is not a controversial statement: the IPL is better set up structurally than the NFL. It is the most perfect sports league that exists.

Ben Gilbert 49:46 All right, so-

David Rosenthal 49:47 So how does he do it?

Ben Gilbert 49:47 Yes, what is it? You're telling me it's the most amazing thing ever. Prove it.

David Rosenthal 49:51 So besides Lalit seeing that there's a inventory opportunity to expand cricket in India here beyond the 105 or so days of competition that the international team is playing, there's also the perfect opportunity at this moment within the cricketing world, which is that the whole game itself is undergoing a major revolution. England had just introduced a brand-new version of the game. Up until this point, there were only two versions of cricket that were played professionally. There's the Test match cricket, the five-day gentlemanly event with the cable knit sweaters- [chuckles]

Ben Gilbert 50:29 ... that we talked about.

David Rosenthal 50:30 And then there's the one-day, eight-hour matches that are for international tournaments and competitions, One Day Internationals.

Ben Gilbert 50:36 Yep.

David Rosenthal 50:37 Back home in England, cricket was basically starting to become a dying sport. The nation that invented the game, that was the home of everything sacred in this sport, in this industry.

Ben Gilbert 50:50 Empty stadiums. I mean, truly empty. They had the most incredible stadiums built for cricket, and you look at these old videos, and just empty seats everywhere, empty sections.

David Rosenthal 50:59 And the only people still left watching it are old men, basically.

Ben Gilbert 51:04 Yep.

David Rosenthal 51:05 Women have never really cared, and kids are like, "I'm interested in football, you know, European football. Like, I d- I, I don't care about this."

Ben Gilbert 51:12 Not to mention, who can take five days off work all day to go watch something?

David Rosenthal 51:18 Yeah, this is happening during the day, or even one day during the international tournaments.

Ben Gilbert 51:22 Yes, it is made for retired men, or especially in the old days, the elite, people who didn't have jobs!

David Rosenthal 51:28 Exactly. That was the whole point of the game [laughing] ! It was for the nobility.

Ben Gilbert 51:33 Yes.

David Rosenthal 51:33 Exactly, but not gonna work in the modern world.

Ben Gilbert 51:37 Yep.

David Rosenthal 51:38 So in 2003, the English Cricket Board finally realizes, like, "Hey, we're desperate. We gotta do something." So there was another form of cricket that was mostly played recreationally and by school teams that was 20-over cricket. So rather than these five-day events or the one-day events, it was a limited number of balls, of pitches, essentially, to use the baseball analogy, for each side, and that was 20 overs. An over is six balls.

Ben Gilbert 52:09 Each team gets 120 balls bowled to them, and you gotta make do with just those 120 balls.

David Rosenthal 52:16 So all of a sudden, you're going from Test cricket, which is thousands of balls bowled, pitches equivalent in the baseball world, over five days, then you've got the One Day International, one-day version of the game, you know, hundreds. You're going down to 240 total balls bowled, 120 for each side. Compare that to a Major League Baseball game, for instance, has an average of about 300 pitches per game, about 150 each side. So now all of a sudden, cricket went from, like, the boring version of baseball to the more exciting version of baseball. [chuckles]

Ben Gilbert 52:50 Purely, and with this just very interesting, different thing, the balls are scarce. You have to get the most points possible based on a small, fixed number of opportunities to hit it.

David Rosenthal 53:01 Right. A baseball game can go on forever. Pitches could go on forever, extra innings, et cetera, et cetera. Nope, these T20 games, it is a strict balls bowled count.

Ben Gilbert 53:12 Yep, it's tight.

David Rosenthal 53:14 And that means games take two and a half to three hours. That means games can be played in prime time, in the evening, for the very first time in the sport.

Ben Gilbert 53:22 Finally, we have a cricket for the masses. I mean, how was anyone even supposed to watch these ODIs unless it's on a Saturday? You now can watch cricket every night of the week because there's a three-hour prime time format for everyone of every class to watch.

David Rosenthal 53:36 Yep. So all of a sudden, you start seeing these green shoots in England, 2003, 2004, 2005. Domestically, they start playing T20. They start televising the matches. Younger people start paying attention again. There's a revitalization. So obviously, the international game sees this. Lalit sees this. He's thinking about starting up a domestic league in India. This is the perfect opportunity. What an amazing gift of a new format of the game, perfect for prime time, an incredible opportunity.

Ben Gilbert 54:10 There's one other thing that fell in their lap, which is the fuddy-duddies who love Test cricket absolutely hated it.

David Rosenthal 54:18 Yes, which made it more exciting.

Ben Gilbert 54:20 Yes, and so the way that the original T20 was advertised, even before we get to IPL, you just look at... There's a famous match of Australia versus New Zealand. New Zealand doesn't take it seriously at all. They come out with crazy hairdos, and they're wearing whatever. T20 is kind of a joke from the start, and once the players do that, then the advertising kind of leans into that. This is not a serious sport. This is like party time, and, you know, we just have to be playing cricket.

David Rosenthal 54:51 This is all but the Savannah Bananas version of baseball.

Ben Gilbert 54:54 Yes, yes.

David Rosenthal 54:55 Which we'll talk about the Savannah Bananas later. [laughing] ... for folks who, uh, don't know or who are not in the US, Savannah Banana is like the Harlem Globetrotters of baseball. It's a purely entertainment spectacle.

Ben Gilbert 55:06 It's a spectacle, for sure, and IPL is not quite that. I mean, the T20 is definitely competitive, but the old-timers look at it as a joke, even though it's a highly skilled thing, and that's a perfect spark.

David Rosenthal 55:20 Totally. So the Australian domestic T20 league that gets started right around the same time, to give, uh, you a sense of this, is called the Big Bash League. That's the image that they're projecting, and the Big Bash League is like, they are legitimately a real sports league today, and probably the second-biggest, second-best T20 cricket league in the world behind the IPL, but this is not targeted at the test cricket-loving audience.

Ben Gilbert 55:44 Right, and it sends the right message, too, because you are trying to bash the ball. This is a game of batsmen. There's an amazing moment that happens, I forget exactly which competition it's in, but someone gets six sixes in a row. It's, like, the most amazing thing ever to watch. It's basically Home Run Derby.

David Rosenthal 55:59 Yes. When there's no limit on the number of balls, you're trying to play for a draw if you're behind. You're trying to make things go longer. Now, all of a sudden, it completely changes the strategy of the game. You only have 120 balls, and you need to maximize your score.

Ben Gilbert 56:13 Yep.

David Rosenthal 56:13 So rather than trying to run out balls and whatnot, like, sixes become way more important.

Ben Gilbert 56:18 Yep.

David Rosenthal 56:19 So Lalit knows this is the perfect opportunity. He goes back to IMG, who, remember, he had initially partnered with, with Disney and ESPN way back in the day to start broadcasting cricket in India in the first place, and says, "Hey, I need to hire you as consultants from the BCCI. We're gonna set up a whole new league." And Andrew Wildblood, who runs IMG's India operations, becomes essentially Lalit's partner in setting up, "How are we gonna structure this? What are we gonna create as the business plan

David Rosenthal 56:49 of this new league? We've got some time. We've just done these major rights deals and sponsorships deals for BCCI. Let's be really thoughtful about this. We'll plan to start it in 2009." So here we are, we're now in end of 2006, beginning of 2007, we got two to three years to set this up. And then, in the spring of 2007, a rebel league [laughing] starts up under their nose in India. Another domestic T20 league with city-based franchises announces that they're gonna launch, and they are gonna call it the Indian Cricket League, and it's backed by the broadcaster Zee TV.

Ben Gilbert 57:38 Not only was it called the Indian Cricket League, which is just a great name, that is actually an entity name that Lalit had registered in the '90s.

David Rosenthal 57:48 Yes!

Ben Gilbert 57:49 I don't know if Lalit was thinking he would actually call IPL the Indian Cricket League, but then something else launches called the Indian Cricket League.

David Rosenthal 57:56 Yeah, it's a good point. This opportunity for a domestic cricket league was not some, like, aha brainstorm that Lalit had once he took over BCCI. Everybody knew that this would be a huge opportunity.

Ben Gilbert 58:08 Right. This is like social networking in 2004.

David Rosenthal 58:11 The time just wasn't right yet. So he had been thinking about it all the way back when he was first working with Disney to fight against Star and enter the market, but the timing just wasn't right.

Ben Gilbert 58:19 All right, so what is this Indian Cricket League? Where did it come from? What is Zee TV? So way back in 1996, Subhash Chandra, the founder of Zee TV, kind of recognized, "Hey," exactly what you're saying, David, "I'm a TV distributor." He owned a satellite TV company. He saw exactly what Lalit saw: sports are the most important thing, India increasingly cares more, and more, and more about cricket. This is gonna be the perfect thing to distribute over my airwaves. '96 to '04, he's trying to get the rights to cricket and not getting them. Finally, in 2004, he bid the highest for domestic cricket in India, but the BCCI still did not award the rights to him.

David Rosenthal 59:00 Oh, interesting. So this must have been right before Lalit joined the board and then restructured the whole thing.

Ben Gilbert 59:07 Must have been, right around that time. Finally, two more years goes by. He wins. He gets a five-year deal between the BCCI and Zee TV for the exclusive rights to broadcast cricket.

David Rosenthal 59:20 Oh, wow! I didn't even find this, that they had a deal with BCCI.

Ben Gilbert 59:25 They had a deal.

David Rosenthal 59:26 Wow.

Ben Gilbert 59:27 One year into the deal, there's something that passes called the Sports Broadcasting Bill, and this requires broadcasters to share feeds in real time, like, live feeds, without ads, directly back to the state-owned broadcast channel.

David Rosenthal 59:45 [chuckles] Interesting.

Ben Gilbert 59:46 Which, of course, destroyed the profitability of this enterprise that Zee TV is trying to create here of broadcasting cricket, if they have to give away the very thing they're collecting without an ability to generate revenue on it. So BCCI ignores Zee TV's attempt to renegotiate this.

David Rosenthal 1:00:05 Because at this point in time, Lalit is starting to work on setting up IPL.

Ben Gilbert 1:00:09 Yeah, and I think the Zee TV side of the story is, where did the Sports Broadcasting Bill come from? Why won't they renegotiate? I think, David, you are correctly reading into the BCCI is starting to say, "Uh, just hold tight. We're gonna make some changes here." Not knowing what's going on yet with IPL, Zee TV is like, "This is so weird that, you know, I'm not making any money on this thing that I finally got rights to, that I really want the rights to. BCCI won't negotiate with me, so I'm just gonna start a new T20 league outside of the BCCI universe without their cooperation."

David Rosenthal 1:00:42 Ah, so this is spring 2007, when they announce ICL.

Ben Gilbert 1:00:46 Yes. The BCCI immediately says, "Any players who sign up for the Indian Cricket League are banned for life from playing for India nationally or any other domestic tournaments. This includes if you are a young player who had never even played for the Indian national team yet."... Chandra's freaking out. He's like, "Wait, wait, what?" So he then tries to make this big appeal, the economic benefit that's gonna come from a domestic league like this. "Everyone's gonna watch this. It's gonna promote the local economies of all these places. We're gonna pull in talent from all these other countries," which, by the way, this is straight-up the Premier League playbook. This is what IPL ends up doing. "It's gonna be broadcast on Zee TV. I'm gonna fund a million-dollar prize pool." BCCI ignores this again, and in fact, what they did was they went and pulled pensions away from any retired cricketers, who then went and joined the ICL.

David Rosenthal 1:01:39 [laughing] Amazing!

Ben Gilbert 1:01:41 They're raising the stakes. They're saying, "No one who has any affiliation with us at all can do this." So then other state organizations like BCCI, the Bengali equivalent, recognized that this was gonna be an issue if entrepreneurs started going around the state organizations, so they also banned their players from joining the ICL. So this really hamstrung the whole thing before it could even get going, and then finally, I'll flash forward one year, and then we'll come back. In '09, the BCCI announced an amnesty, and all players could return to official cricket without penalties if they cut all ties with the ICL. So that was the final nail in the coffin, and then in 2009, they would shut down.

David Rosenthal 1:02:20 Yeah, so they do play actually two seasons, 2007, 2008, uh, into 2009, and then they fold. [chuckles]

Ben Gilbert 1:02:26 But this was someone making a, a true run at what if we go around the state institutions, these regulatory bodies of cricket, and try to start something on our own? It just didn't work, period. You can't go around them.

David Rosenthal 1:02:40 Well, I mean, this brings up probably the most important power and playbook theme that I was gonna save to talk about later, but we should talk about now, the cornered resource of the players. If you are creating or running a sports league, it is of paramount importance that you have the best players in the world. If you do not have the best players in the world, you're toast. Nobody wants to watch the second-best players in the world play each other. [chuckles]

Ben Gilbert 1:03:04 Well, I think that's right, but it, it is a two-sided equation. Like BCCI worked themselves into the choke point or ended up in the choke point or the linchpin or the aggregator position, where they aggregated both all the best players, at least the Indian best players, and the broadcast rights. It's the two different things that Dalmiya did under his term at BCCI, both the centralized contracts for players and the centralized media rights that they had the Supreme Court-approved right to auction off to any capitalist companies that want to bid for these rights. So they owned the two things that mattered.

David Rosenthal 1:03:40 Yes, that is absolutely true. The players are the primary thing, though. The broadcasters will follow the players. Star is desperate to rebroadcast cricket at this point in time. They would've loved for the ICL to take off and be able to broadcast that and go around the BCCI, but it just wasn't a compelling product. And the BCCI is basically using the mafia tactics of like, "Hey, if you even think about going and playing there, you are banned for life from..." At that point in time, what really mattered, which was the chance to play international cricket for India.

Ben Gilbert 1:04:10 Yep.

David Rosenthal 1:04:11 So Lalit and Andrew Wildblood and IMG are like, "Okay, we gotta accelerate this. We were planning to launch what becomes the IPL in 2009. We need to launch now, [chuckles] next season, April 2008."

Ben Gilbert 1:04:26 I will say, given how rushed this was, it is shocking how well it is all set up. All these dynamics, all the rules and auctions and everything about this league are so well-balanced, given they pulled it forward a year.

David Rosenthal 1:04:38 Absolutely. It's also lucky for them that they do pull this forward in response to the competitive threat from the ICL because there's another media marketing gift, which is that unexpectedly, India ends up winning the first T20 World Cup that summer.

Ben Gilbert 1:04:58 Yes, and they were initially really dragging their feet. They were resistant to T20. They already had ODI. They loved it, and I think you may have more details than I do, three of their best players didn't go to the World Cup?

David Rosenthal 1:05:11 So what happened was T20 was introduced by England in 2003. It takes a couple years for other countries to catch on, start playing it. Like you said, Ben, you know, there was that Australia, New Zealand thing. 2007 is when the ICC finally starts to recognize, "Uh, maybe there's something to this," and this is the first T20 World Cup that they organized. So they've been doing the One Day International World Cup for years, all the way back to before 1983, when India won it, but 2007 is the first T20 version of this that they're putting on. Well, the sort of first team of the Indian national team, they'd already just played the One Day International version-

Ben Gilbert 1:05:48 Ah

David Rosenthal 1:05:48 ... so they were tired, uh, the best players. You know, look, tired, I think "tired" is in quotes for cricketers. They can play any day of the week, but they weren't that interested, and the star players, they're like, "Eh, let's let the young guys have a go at this new tournament."

Ben Gilbert 1:06:02 Mm.

David Rosenthal 1:06:03 So the young guys go, and the tournament is being held in South Africa. They go over there, not expected to win. The other countries are sending, you know, their first teams- [chuckles]

Ben Gilbert 1:06:13 [chuckles]

David Rosenthal 1:06:13 ... to this. Amazingly, the young guys end up winning the tournament in incredibly dramatic fashion.

Ben Gilbert 1:06:23 And guess who they are playing in the final?

David Rosenthal 1:06:26 Pakistan.

Ben Gilbert 1:06:27 Yes.

David Rosenthal 1:06:28 So during the group play stage, the early stages of the tournament, the Indian team is playing the England team. England, home of cricket.

Ben Gilbert 1:06:38 Yes.

David Rosenthal 1:06:39 Massive underdogs here. You've got the young Indian players. Lalit has come over, of course, to South Africa to watch the World Cup. He's working on the IPL accelerated launch in the meantime, and he's like, "Okay, great, we're playing in T20 World Cup. This is an opportunity. I wanna create some exciting moments here." So he tells all the guys on the team, "If any of you hit six sixes in an over" [chuckles]

Ben Gilbert 1:07:04 [chuckles]

David Rosenthal 1:07:05 So, you know, uh, an over, like we talked about, is six balls, in T20 to 20 overs.

Ben Gilbert 1:07:09 This is six home runs in an at bat back-to-back.

David Rosenthal 1:07:12 Essentially, yes. Very, very, very difficult to do.

Ben Gilbert 1:07:16 Oh, and they're bouncing the ball.... [chuckles] right. And that's, [chuckles] you're trying to hit a ball that is bouncing somewhat unpredictably.

David Rosenthal 1:07:24 The bowlers can either bounce the ball or throw it like a baseball pitch. They can do whatever they want. You don't know what they're gonna do, and it might have spin. You know, like in baseball, you can throw a curve ball. A curve ball curves a little more than a fastball does, but it can't move that much. When you spin the ball and then it hits the ground, it can move a lot, so you really don't know what's coming.

Ben Gilbert 1:07:43 Not to mention a running start. The pitcher has a running start, the bowler.

David Rosenthal 1:07:47 So Lalit tells these kids, remember, they're kids from India, not from wealthy families here, "If any of you can hit six sixes in an over, this is gonna be such a dramatic event. I know this is gonna capture the public's imagination here. I will personally give you a Porsche 911." [laughing]

Ben Gilbert 1:08:08 [laughing]

David Rosenthal 1:08:08 I swear to God, this is true. [chuckles]

Ben Gilbert 1:08:10 Wow, the Acquired Universe crossover. That, uh-

David Rosenthal 1:08:12 The crossovers are amazing. And I believe, in fact, that when they were talking about this in the locker room, he might have first offered a Rolex, and then-

Ben Gilbert 1:08:23 [chuckles]

David Rosenthal 1:08:23 ... the players were like, "No, that's not enough for doing, like, I need a Porsche 911." [chuckles]

Ben Gilbert 1:08:25 Oh, that's amazing!

David Rosenthal 1:08:27 I think that might be the story. Either way, to drive a Porsche 911 in India, period, is like, that's a big statement.

Ben Gilbert 1:08:35 Especially back in 2007.

David Rosenthal 1:08:37 For a young kid, this is the pinnacle of anything they could ever dream of.

Ben Gilbert 1:08:41 Yep.

David Rosenthal 1:08:41 So they're motivated. So they're playing England in the group round, and one of the young players, Yuvraj Singh, is up at bat. He hits one six, he hits two sixes, three sixes, four sixes. By God, he hits six sixes in an over.

Ben Gilbert 1:09:00 Crowd's going insane.

David Rosenthal 1:09:01 Against England in South Africa. The crowd's going insane. I believe something like less than 20 people have ever done this in history, even to this day. This is one of the rarest feats, certainly in cricket, if not all of sports, and he did it. And so he comes running over to Lalit, who- Lalit's there in the stands-

Ben Gilbert 1:09:22 [laughing]

David Rosenthal 1:09:23 ... just, like, jingling his hand back and forth, being like, "I want the keys! My Porsche, my Porsche." [laughing]

Ben Gilbert 1:09:28 Amazing.

David Rosenthal 1:09:29 And he gets his Porsche, and Lalit would tell you that he paid for it out of his own money.

Ben Gilbert 1:09:34 I'm sure.

David Rosenthal 1:09:34 Lalit's quote on this is, "That lit up the Indian television screen. It turned the entire country upside down. Everybody started to tune in." So they win that match against England. Next thing you know, they find themselves in the final against Pakistan. Now, the Indian national team, the first team at this point in time, despite India being the biggest market for cricket in the world, was not that good. I believe they had not won a, an ODI, a one-day international World Cup, in quite a while.

Ben Gilbert 1:10:04 Hmm.

David Rosenthal 1:10:05 Here now, these young guys, the T20 team, is in the finals against Pakistan. They win on the last over, an incredibly exciting, dramatic finish. The television audience back home in India for this was 400 million people. [chuckles]

Ben Gilbert 1:10:24 Wow!

David Rosenthal 1:10:25 The numbers are just staggering.

Ben Gilbert 1:10:27 When India plays Pakistan in cricket, it is a national holiday.

David Rosenthal 1:10:30 That game, that match, was the 10th most watched TV event of the year, period, around the whole globe.

Ben Gilbert 1:10:39 Wow.

David Rosenthal 1:10:39 The young team comes home. Lalit calls up Nike before they leave South Africa, and he's like, "I need open-air tour buses for the team, for the whole retinue. I need you to meet us at the airport. We are gonna do a parade to the stadium in Mumbai, and we're gonna have a big, huge victory celebration," just like they do in Western sports after they win a World Cup. They come home. The team arrives at the Mumbai airport at 6:00 a.m. The crowds are packed. There are four million people on the streets. It takes them 11 hours to get from the airport to the stadium. It's all televised all across the country. It's like a national holiday, and it is the most perfect fertile ground in which to insert the imminently about to launch IPL.

Ben Gilbert 1:11:26 Amazing, which will lead us to the specific rules of how the IPL works and the dramatic auction for the initial teams. But first, this is a great time to thank good friend of the show, ServiceNow. Today, we wanna focus on a new angle of the company: data. We've mentioned that ServiceNow is the AI operating system for the enterprise, helping automate tasks and workflows across different departments, from IT to HR, finance, customer service, and more. They've laid the groundwork to connect every corner of the business and enable automation to happen.

David Rosenthal 1:12:00 But there's one key thing underlying all this, and that's the data that makes it all useful. After all, AI is only as powerful as the platform it's built into and the data it has access to. So a couple years ago, ServiceNow realized that having a coherent set of data was going to be essential as the world got more complicated with AI. In the old world, each department ran applications that were creating their own data in their own silos, and when AI agents came around and needed to communicate across all that data and across departments, that was gonna be untenable. So ServiceNow introduced Workflow Data Fabric, their way to unify all that data across the enterprise and let workflows and AI agents have real-time, secure access to data from any source.

Ben Gilbert 1:12:40 So what use cases does this enable? Well, a big one is the unification of structured and unstructured data. Let's say your order management system was storing discrete numbers about orders from a big customer, but your customer support chat system also had big blobs of text, and on top of that, someone was tracking some one-off rebates in a separate Excel file.

David Rosenthal 1:13:02 Oh, that would never happen. [chuckles]

Ben Gilbert 1:13:03 Never. [chuckles] And you need an AI agent to make a quick and correct decision regarding inventory forecasting based on all that disparate information. That's where Workflow Data Fabric is great, one integrated view across the whole business.

David Rosenthal 1:13:17 This is just one way that ServiceNow unifies silos across your business, so your employees can stop swivel chairing between apps to enter the same data in different places and just make better decisions faster. If you wanna learn more, go to servicenow.com/acquired, and just tell them that Ben and David sent you.

Ben Gilbert 1:13:34 ... All right, so David, India's coming hot off winning the T20 World Cup cricket final, and it's time for the birth of the Indian Premier League.

David Rosenthal 1:13:44 Yep, we have finally arrived at what we've been hinting at the whole episode, just the sheer brilliance of how IPL is architected. So if you are from a clean sheet of paper, trying to design the perfect sport league, there are two things that you need to really try and maximize to make it appealing to an audience. First is that it needs to be the best place in the world to showcase human skill and achievement in that sport, i.e., you need the best players in the world playing there. Two, though, and this is where a lot of sports leagues go wrong, you need uncertainty about the outcome. You need competitive parity amongst the teams in the league. This is the any given Sunday element of the NFL that has been the key critical ingredient to making the NFL the most valuable sports property in the world.

Ben Gilbert 1:14:35 Every little year, they're tweaking things here and there to try and make it a little bit more balanced. The NFL would love nothing more than every team to go eight and eight, and then have an incredibly competitive, who knows what's gonna happen, playoff situation. It was almost a disaster what happened when the Chiefs almost won three Super Bowls in a row. That was so un-NFL that that was a possibility. It took 'em a hundred years, but they became wizards of that competitive balance. And David, I'll say one quick thing: it's not to create the best sports league, it's to create the best business.

David Rosenthal 1:15:09 Yes, I was taking it as tautological that that is what you are trying to achieve. [chuckles]

Ben Gilbert 1:15:12 If you want to create the best business out of sports, you need it to be the most entertaining version of that sport, which means you need uncertainty as much as possible.

David Rosenthal 1:15:23 Now, importantly, this does not mean you are simply creating spectacle, and controversy, and entertainment-

Ben Gilbert 1:15:31 Correct

David Rosenthal 1:15:31 ... without quality sport. You know, that would be the Harlem Globetrotters, that would be the Savannah Bananas. Amazing, incredible businesses and products, never gonna be the biggest thing in the world in their sports.

Ben Gilbert 1:15:42 Correct. And on top of that, it has to remain a game of skill, not chance. So it can't be pure BS entertainment show, and it can't be too subject to randomness. It has to be the best people competing in skill against each other to create the most thrilling product, but in the most balanced game design that you could possibly offer.

David Rosenthal 1:16:06 Yep. So because of everything we've talked about to this point in the episode, the first part of getting the best players in the world, that was actually pretty easy for the IPL. That's what created the opportunity.

Ben Gilbert 1:16:18 Assuming it was birthed out of the BCCI, yes. If it had come from elsewhere, it would've been a non-starter and impossible.

David Rosenthal 1:16:23 Correct. The BCCI has cornered resource access to the best talent in the world-

Ben Gilbert 1:16:28 Yep

David Rosenthal 1:16:28 ... because they have all the money, and they have the Indian fans who care about watching the best Indian players, and they have essentially veto right over the best Indian players playing anywhere else. Now, the trickier one: competitive parity. This is where so many leagues go wrong. To get competitive parity among the teams on the field, you need every franchise to have access to the same opportunity to win, no matter how much money they have or how much money the ownership group has outside of the franchise.

Ben Gilbert 1:17:02 Or how big of a market they're playing in.

David Rosenthal 1:17:05 Exactly.

Ben Gilbert 1:17:06 Or how good they were last year. You can't throw the board up in the air too much every single year, 'cause you need some continuity of fan base, but you also kinda can't really allow for dynasty creation. There's a million little ways that a misalignment could get in there and ruin competitive balance, and you have to think through all the different variables and balance them all.

David Rosenthal 1:17:28 Yep, and we'll get into this later in the episode, but here in the US, I think this is where Major League Baseball has gone really, really, really wrong over the last set of decades. You know, it's the Yankees, it's the Dodgers.

Ben Gilbert 1:17:38 They've never successfully implemented a salary cap in baseball, and so guess who's in the World Series? The New York team and the LA team.

David Rosenthal 1:17:46 Yep, and then the worst example of this is the European soccer leagues. [chuckles] It's the top two, five franchises at the top that are spending the most money, buying the best players, and winning every year.

Ben Gilbert 1:17:56 And you have owners that are willing to spend hundreds and hundreds of millions of dollars on players, and essentially run the teams in the red because they have to spend so much money on players to win.

David Rosenthal 1:18:08 Yep. So now think about setting up this new league in India. For reasons I'll get into in a sec, you need to have a diverse ownership group, as in you can't just have super wealthy industrialists owning all of these teams. But if you look at Indian society at this point in time, it's so bifurcated between the billionaires of these conglomerates, the Ambanis of the world and et cetera, et cetera, you know, the Tata family, and then other people who you would want involved, but are gonna have nowhere near the same amount of godlike resources that these other people have.

Ben Gilbert 1:18:43 Coming out of the '90s, and it's starting to change already here in the mid-2000s, it's essentially an impoverished nation with a very thin slice of billionaires.

David Rosenthal 1:18:52 Yep. So as you're setting up these franchises, you need to make them no-brainer investments for whoever makes them, and you can't have this have-and-have-not dynamic. So the first order of business, which is the easiest one, is stadiums. So Ben, you were mentioning the teams running in the red in the English Premier League. This is, I think, beyond just overpaying for players, the biggest problem in the English Premier League, which is a lot of teams own their stadiums, and then the debt payments that you gotta make on-

Ben Gilbert 1:19:22 Mm

David Rosenthal 1:19:22 ... these stadiums are just crippling.

Ben Gilbert 1:19:24 This is soccer, for anyone who's not a Premier League fan.

David Rosenthal 1:19:27 Yeah, exactly. You know, these are hundreds of millions, if not billion dollar edifices, that you have these teams funding and owning through debt, and then the debt payments are just astronomical, on top of astronomical player salaries that they're paying. So-... first thing that Lalit and Angie Wildblood and IMG decide as they're setting up the league, no debt. No team is allowed to have debt, and de facto, no team will own their stadiums.

Ben Gilbert 1:19:56 And the driving force of all this is the teams have to be profitable because we want to incentivize this diverse group of people to own them.

David Rosenthal 1:20:05 Yeah.

Ben Gilbert 1:20:06 You need to make it so that if you are entering this auction for the first eight teams, you sort of have capped downside. So thing number one, make sure that they're not gonna have insane stadium debt right out of the gate.

David Rosenthal 1:20:19 Yep. Well, guess what? India already has pretty big cricket stadiums in all the cities that you would wanna put franchises in. And who owns and controls those stadiums?

Ben Gilbert 1:20:31 The BCCI.

David Rosenthal 1:20:31 The state cricket associations, which all roll up to the BCCI. So, [chuckles] boom!

Ben Gilbert 1:20:35 Problem solved.

David Rosenthal 1:20:36 Problem solved. Awesome. So next, and most important, is what happens to media rights deals for broadcasting the games and central sponsorships within the league. Are media rights deals negotiated by each team individually, like they are in Major League Baseball, or are they gonna be negotiated centrally and split evenly amongst the teams, like they are in the NFL? Obviously, there is a superior model here, and, hey, guess what? The BCCI and Lalit are already in position to run this as a central model because they already do that for the international cricket rights of the BCCI that Lalit has just hugely successfully done this $620 million deal for.

Ben Gilbert 1:21:19 Yep.

David Rosenthal 1:21:19 So okay, we're going central rights, and then we're gonna distribute that central revenue from both sponsorships and TV rights equally to all the teams. But as Lalit and IMG are thinking about how are we gonna maximize the TV rights deal that we'll do for this new IPL, this new domestic cricket league, they kind of have a problem from the success that they just had selling the international rights. And that problem is they already saturated the entire market of buyers for this form of entertainment, being cricket broadcast in India. Yes, there are other broadcasters who would love to have these rights, but ultimately, the end buyers are the consumer brands that are buying advertising against this programming. And the $620 million rights deal was so big that they just absorbed the entire market of cricket advertisers.

Ben Gilbert 1:22:22 Yes. Basically, the broadcasters who now own those rights took on such a big liability that they're trying like crazy to get their sales force to go and sell as many ads as possible.

David Rosenthal 1:22:35 Get Pepsi, get wireless carriers, car companies, et cetera, et cetera.

Ben Gilbert 1:22:39 And keep in mind, this is something I didn't realize until, I mean, last night, like the end of my research, India's advertising market was historically small. So the entire total addressable market for advertising, not digital advertising, not mobile, advertising, in 2008 in India was two to three billion dollars.

David Rosenthal 1:23:00 Right, and a huge chunk of that just went to international cricket.

Ben Gilbert 1:23:05 So even to break even on these rights, those broadcast networks now need to go sell, what was it, $600 million?

David Rosenthal 1:23:12 Yep, $620 million over four years, so call it 150-ish million a year.

Ben Gilbert 1:23:17 So assuming it's a $2 billion ad market, they need to go sell and take up 5% of the entire advertising market per year, just advertising during cricket games.

David Rosenthal 1:23:30 This is before the IPL.

Ben Gilbert 1:23:31 Right. So that is a real liability. They are signing up, even to break even, to go sell 5% of the ads. They probably need to sell, like, 10% of the ads to turn it into a real business in the entire country for that year across all products. So this creates, to your point, this new problem [chuckles] for Lalit and the gang creating the IPL.

David Rosenthal 1:23:49 Where are we gonna get the money?

Ben Gilbert 1:23:50 You now need to go find a whole new set of advertisers on top of that you've just sold to go and buy a new rights package to advertise into that new rights package.

David Rosenthal 1:24:00 So Lalit actually has a great, [chuckles] amazing quote about this dynamic in the way only Lalit can speak. Here's the quote: "Being the big daddy for all sporting events in India already with the BCCI bilaterals," which are the international matches, bilaterals against other countries, "all the money that was there in the market that brands had for spending was consumed. There were no more budgets left. We had sucked it all out by taking the price of BCCI in aggregate from a few million dollars to a billion dollars. I had already sucked that money out. [laughing] And so when I looked at where are we gonna get the money to make IPL work, I needed women and children."

Ben Gilbert 1:24:42 God, it sounds diabolical in his words.

David Rosenthal 1:24:45 He's spot on. It's exactly what the dynamic is.

Ben Gilbert 1:24:48 Yep.

David Rosenthal 1:24:49 And again, back to the now league dynamics of setting up this league versus BCCI just running the one international team, again, look at the NFL. It is super important that your central revenue stream of your TV rights deals and your central sponsorships, that that be very, very large, and that that be the most important revenue stream for your teams 'cause that's what keeps competitive parity. The risk to the NFL's model is that the Dallas Cowboys or the San Francisco 49ers start making too much local revenue, and then they're making more money than the other teams, and all of a sudden, the balance is out of whack.

Ben Gilbert 1:25:23 Yep. Although, theoretically, the salary cap keeps that in check.

David Rosenthal 1:25:26 Uh, well, we'll come back to that in a minute.

Ben Gilbert 1:25:28 Okay.

David Rosenthal 1:25:29 So you would think they're kind of between a rock and a hard place here, and this is where Lalit and IMG's just incredible entrepreneurial genius comes in. They say, "We are going to make the IPL into an entirely different product."... with a different target advertiser and sponsor than our international cricket.

Ben Gilbert 1:25:53 By having a different audience.

David Rosenthal 1:25:56 Yes. They need to attract women to view the game, and then advertisers who are gonna advertise products at women for IPL. So totally different market segments in terms of advertisers. [chuckles]

Ben Gilbert 1:26:09 Essentially, you need to make the product one where if Mom sits down or if your sister sits down and throws something on for the night, she's gonna pick IPL versus whatever else she was gonna put on.

David Rosenthal 1:26:19 Yes, and whatever else she was gonna put on were soap operas. So I'm gonna read a quote here from Andrew Wildwood at IMG, who was Lalit's partner. "There were a number of guiding principles behind how we put IPL together. One was that it should reflect the characteristics of modern India, so energetic, colorful, noisy, exciting. Two, it should not compete with the other forms of cricket, but rather it should compete with other forms of entertainment, so that's evening prime time view. Not only is India somewhat short in terms of supply of sports content, it's actually quite short in terms of general entertainment content. Apart from Bollywood, Lalit and I agreed that we didn't wanna compete with other cricket, we wanted to compete with the soap operas. We therefore needed to create IPL in the image of a soap opera, so that if you didn't watch last night's episode, you're not in the conversation at the water cooler the next morning. Most households in India were single-television homes, and women controlled the remote control, watching soap operas at night. The man of the house had little to say in what was seen. So in order to create a successful television product, we had to make something that women would be attracted to, and that's what caused us to bring in Bollywood."

Ben Gilbert 1:27:40 Hmm.

David Rosenthal 1:27:41 No other sports league in the world has done what IPL has done here. Today, IPL viewership is entirely 50/50 gender parity between men and women, and the reason that that is the case is because they bring Bollywood into the ownership groups. So Bollywood and cricket were, and still are, the two biggest things by far in India, as Andrew Wildwood was saying. Like, there is no number three. It's Bollywood and cricket, and when it comes to Bollywood, there is one star that shines brighter than everyone else. So there's a quote from Manoj Badale, who is the principal owner of the Rajasthan Royals and wrote a book about his experience. He writes, "Within Bollywood, there are B-listers, A-listers, double A-listers, and way above them all is Shah Rukh Khan, richer and more famous than Tom Cruise or Clint Eastwood, and adored by the entire country. Turns out, he and Lalit had known each other since childhood-

Ben Gilbert 1:28:37 Hmm.

David Rosenthal 1:28:37 ... and there were few others within Indian cricket who could have convinced him to invest and participate so actively in the league. The profile that he provided as the tournament was launching was incalculable." So Lalit knows Shah Rukh Khan, biggest star in India. There's one problem, though. Shah Rukh is not a cricket fan. [chuckles]

Ben Gilbert 1:28:59 No!

David Rosenthal 1:28:59 He's into soccer. [laughing]

Ben Gilbert 1:29:00 Really?

David Rosenthal 1:29:01 So Lalit goes to him and is like, "I need you to be part of the ownership group."

Ben Gilbert 1:29:06 No way, 'cause retroactively, I watched an interview with Letterman, and he's making jokes about he was never good enough. Like, he's fulfilling a childhood dream. He was never good enough to play cricket, so he may as well own a team. That's totally retcon.

David Rosenthal 1:29:18 All post facto retcon.

Ben Gilbert 1:29:20 [laughing]

David Rosenthal 1:29:20 Yes. Yes, yes. Here's the real story. This is amazing, and we should say, all the quotes from Lalit and the direct firsthand information from Lalit comes from a great series of interviews that he did on the Sports Entrepreneurs podcast that we'll link to in the sources. So Lalit obviously knows Shah Rukh. This is the perfect... You know, get him in on the ownership group. He's the brightest star in India. Have him at the matches. "Oh, I could tune into a soap opera at night. Instead, I could go watch, like, the biggest star in India there, dancing on the field with all this incredible going on at the matches." But the problem is, he's not into cricket. So Lalit tells the story. Shah Rukh said, "Lalit, I don't know how to do this. My passion is football. I have no idea how to run a team or do anything."

Ben Gilbert 1:30:00 [laughing]

David Rosenthal 1:30:01 "I," being Lalit, "said, 'Shah Rukh, let me handle it. I'll put a consortium for you together. You just need to write a check.' He says, 'You're gonna take my life savings,' and it was his life savings in those days. I said, 'Just write the check, and we'll talk about it if you end up winning the team at the auction.'"

Ben Gilbert 1:30:18 [laughing]

David Rosenthal 1:30:18 This is the most incredible gangster-type stuff. So here's what Lalit did. Because he's friends with Shah Rukh, he knows that Nokia, the big handset manufacturer at the time... Remember, we're still slightly pre-smartphone era here. We're in 2007.

Ben Gilbert 1:30:34 Yep, and definitely pre-smartphone in India.

David Rosenthal 1:30:37 Oh, way pre-smartphone in India. Nokia is desperate to get Shah Rukh as their celebrity spokesperson in India, and for whatever reason, Shah Rukh is not engaging with them on it. So Lalit says, "Shah Rukh, just trust me. Do I have your word that if I put a consortium together for you, you're in?" He says, "Sure." Lalit turns around, and he goes to Nokia, and he says, "I know you want Shah Rukh. He's not gonna do it, but you can become the jersey sponsor of his new team that he's about to have in this new cricket league that is gonna be the biggest cricket league the world has ever seen."

Ben Gilbert 1:31:15 Wait, wait, David, I have an alarm bell going off in my head. What do you mean it's going to be his team?

David Rosenthal 1:31:20 [laughing]

Ben Gilbert 1:31:20 That seems like something you can't promise when there's an upcoming auction, and you don't know-

David Rosenthal 1:31:24 Oh

Ben Gilbert 1:31:25 ... how the auction is gonna end.

David Rosenthal 1:31:26 Hmm, would it be? Would it be? [chuckles] Yeah. Well, if he were to have this new team, he's gonna be in the stands, he's gonna be on the field, he's gonna be wearing it, he's gonna be singing, he's gonna be dancing, he's gonna be doing the music video [chuckles] -

Ben Gilbert 1:31:43 [chuckles]

David Rosenthal 1:31:44 ... introduction to the team in the league. TV cameras are gonna be all over him, and he's gonna be wearing the shirt with Nokia right there in the front, on the chest.... uh, you can have all of that for the low, low price of five million dollars per year in cash upfront.

Ben Gilbert 1:32:01 Wait, is this to be the jersey sponsor of one team?

David Rosenthal 1:32:04 Yes!

Ben Gilbert 1:32:04 Whoa.

David Rosenthal 1:32:05 Jersey sponsor, one team, five million dollars in cash. One team that doesn't exist, that theoretically might be won at the auction by Shah Rukh Khan, theoretically?

Ben Gilbert 1:32:16 It is crazy the amount of things that need to come together here. This is some major chicken or the egg stuff that does need to come together before a ball is ever bowled. The sponsorships, the media rights, the ownership group, an immense amount of money being promised in contracts, changing hands for a league that has never existed.

David Rosenthal 1:32:34 India, baby. [laughing]

Ben Gilbert 1:32:36 And Lalit.

David Rosenthal 1:32:37 And Lalit. I mean, he is an incredible entrepreneur. So Lalit goes back to Shah Rukh, and he's like, "All right, I got you your team. So I'm gonna set the minimum reserve price in the franchise auction at fifty million dollars, but it's gonna be payable over ten years. And no matter what you bid and what you win, the first year's payment is gonna be five million dollars. So if you bid fifty, it's-

Ben Gilbert 1:32:59 Mm

David Rosenthal 1:32:59 ... five million dollars a year for ten years. You bid a hundred, it's ten million dollars over, you know, a year, over ten years on average, but I'm only gonna charge you five in the first year."

Ben Gilbert 1:33:08 Mm.

David Rosenthal 1:33:08 I believe that's how it was set up.

Ben Gilbert 1:33:09 I mean, on top of it, if you're trying to get people over the line-

David Rosenthal 1:33:13 Just generally, yeah, make it payable over ten years.

Ben Gilbert 1:33:16 Right, the capital calls are the way to do it. I mean, it's kind of an incredible way to get someone to bid fifty to a hundred million dollars for something that doesn't exist yet, and say, "Well, in the first year, you're only out five million." And then there's a sweetener, which you're gonna 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 gonna be taking, even though all of these dollar signs are eye-wateringly large.

David Rosenthal 1:33:42 Yes. Well, again, you- media rights. Importantly, we can't get to the media rights yet, because like we said, there's the problem of-

Ben Gilbert 1:33:47 [laughing]

David Rosenthal 1:33:48 ... to sell the media rights, you gotta bring a w- female audience in.

Ben Gilbert 1:33:51 And you've gotta prove that.

David Rosenthal 1:33:53 And you gotta 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 payments gonna be five million dollars. Guess what? Nokia is sponsoring your team for five million dollars. You are already in the black. You have a profitable enterprise, day one."

Ben Gilbert 1:34:08 Wait, is this after the auction?

David Rosenthal 1:34:09 No, no, this is before the auction. [laughing]

Ben Gilbert 1:34:11 Got it. Okay.

David Rosenthal 1:34:13 This is, you know, "I've got you your team," in quotes here.

Ben Gilbert 1:34:16 I see. Got it.

David Rosenthal 1:34:17 So Shah Rukh's like, "Oh, wow! Okay, great, I'm in." [laughing]

Ben Gilbert 1:34:21 [laughing]

David Rosenthal 1:34:21 "That is an offer I can't refuse."

Ben Gilbert 1:34:23 Wow, a free cricket team, sure.

David Rosenthal 1:34:25 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 twelve o'clock. At three o'clock, he had a signed agreement with Nokia to pay the five million for the front of the shirt for that year. [laughing]

Ben Gilbert 1:34:38 [laughing]

David Rosenthal 1:34:38 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 is in, and they're in for five million dollars for jersey sponsorship of a single team."

Ben Gilbert 1:34:59 So now they've set the price.

David Rosenthal 1:35:00 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, 'cause wherever Shah Rukh goes, you know, he's the leader of the pack.

Ben Gilbert 1:35:11 Mm.

David Rosenthal 1:35:12 The whole rest of the community wants to come along, too.

Ben Gilbert 1:35:14 He's unbelievably charming, by the way. This Letterman interview, he's like butter.

David Rosenthal 1:35:19 Unbelievably charming. I'm trying to think of an analogy in, like, Hollywood. There is no analogy. So one of the top triple A-list actresses, an actress named Preity Zinta, she ends up becoming the principal owner to buy another one of the teams. So this is even more amazing. Now you've got one of the top actresses [chuckles] who's coming in as the principal owner of a team. So now you've got not just Shah Rukh, who even alone, that would've been enough to draw in the women in the general entertainment audience and beat the soap operas. Now you've got triple A, top list, one of the best actresses in Bollywood, who's also gonna be a principal owner of one of the teams, who's also gonna be at all the games, also in the stands, also gonna have TV cameras all over her, and that it's just gonna bring the whole circus. So Lalit says, "In one way, they are 90% of the market," they being Bollywood. "Once I had their reporters and their people in there, and all their stars starting to attend, and everybody getting their makeup artists and their people and their endorsers and their brands, talking about them attending a match, it changed the whole thing around. Them being on the field sent a whole different message to the crowds who wanted to see these people, who could only otherwise see them on screen, but now they can buy a ticket, or they can tune in on TV, and they can come see the stars there out, even far away, every night of the week." And then the pièce de résistance, at least when designing this product for a general TV audience and competing with soap operas, Wildwood meant the quote about competing with them quite literally. [chuckles] So when IMG and Lalit go out to bring the bidding to the TV networks for this, they say, "Here's our schedule and time slot. We are going to have matches every night of the week, seven days a week, one match at a time, at eight pm. We're going to go directly up against the soap operas, which also run every night of the week at eight pm. There's gonna be three-hour matches, eight pm to eleven pm, and it's gonna be like Monday Night Football every single night of the week. Only one match at a time, for two months, and you're gonna have all the biggest Bollywood stars there, all the triple A-listers, who, by the way, will never act in soap operas, because they're only acting in the big-time movies."

Ben Gilbert 1:37:46 Right.

David Rosenthal 1:37:46 "We're gonna have them in our soap opera. We've got them coming, captive in the stadium, with the cameras on them. And then, also, by the way, from a sports programming perspective... "... This is also going to be the best cricket in the world, so all the men who are already watching the international cricket, they're gonna come here, too. The whole family is gonna watch.

Ben Gilbert 1:38:07 And for anyone who's a little skeptical of this, just think, in the US, how many people watched NFL games in the last few years just hoping to catch a glimpse of Taylor Swift when the camera goes to her for the, gosh, I don't know, 30 total seconds per game that it's on? I mean, the amount of newsworthiness that came out of, "Oh, here's what Taylor looked like when she was in the stands making an expression."

David Rosenthal 1:38:29 Here's the jacket she wore.

Ben Gilbert 1:38:30 Imagine if she's the owner of the team!

David Rosenthal 1:38:33 Yes, imagine if Taylor owned the Chiefs. That's what is going on here. There really is no comp for this in sports, except for the single game of the Super Bowl. I think the Super Bowl is like this in the US, where it's a family event, everybody watches. I mean, Jenny watches, my wife, she has no interest in football. She hates Sundays and Monday nights during the season when I wanna watch football, and, like, she could care less. But the Super Bowl, even though she has no interest in football, she will tune in to watch that, just 'cause it's an event. She wants to see the commercials, she wants to see who's there, et cetera. This is what IPL is every single night of the week.

Ben Gilbert 1:39:11 The IPL is like the Oscars, or it's awards season, but it's every night instead of just four Sundays.

David Rosenthal 1:39:17 Yep, exactly.

Ben Gilbert 1:39:19 Okay, so so far you've got three pillars of competitive balance that they've managed to stabilize, here at least at the start.

David Rosenthal 1:39:27 Yep. You've got, first, the stadiums and no debt, not owning stadiums, asset-light business model. Second, you've got a diverse ownership group, which is necessary both to ensure that no one group has financial resources outside the system that can outspend any other, but more importantly, you really need Bollywood to be involved here to unlock the media budgets.

Ben Gilbert 1:39:49 Yep.

David Rosenthal 1:39:50 So then now, three falling into place here is the media budgets, and being able to get a huge central broadcasting rights deal.

Ben Gilbert 1:39:58 Yep, which gets evenly distributed.

David Rosenthal 1:40:01 Yep, exactly. So here we are now by January 2008, all the pieces are in place to get that deal. Lalit and IMG are ready to take it out to the markets for bidding. Of course, per usual, there's just one problem, which is that Nimbus, remember, which had spent $620 million to buy the international cricket rights from BCCI, they're like, "Wait a minute, we already own this. We paid you $620 million over four or five years," or whatever it was, "for the rights to all of BCCI cricket. This is what we're paying you for. IPL is a BCCI product. We should have this already." [chuckles]

Ben Gilbert 1:40:39 Makes sense to me. I see the argument.

David Rosenthal 1:40:41 Uh, and of course, you know, what do you think Lalit says? [chuckles] He's like, "Nope, IPL was not specifically laid out in the contract, and if you would like to sue me, you are welcome to go ahead and sue me. Good luck here winning."

Ben Gilbert 1:40:52 Of course, it wasn't specifically called out by either party, and so therefore, Lalit gets to say, "This is something different."

David Rosenthal 1:41:01 And I mean, look, Nimbus is already making out great. They went from being, like, a middling broadcaster that had no sports rights to all of a sudden having all of the sports rights. And yes, they paid a lot of money for it, but they're making a lot of money for it here, too. Which this is always Lalit's argument, of "I make money for everybody," and this just is how business in India gets done, or at least was how business in India gets done in this timeframe, you know, call it 2008. Sure, from our US, American, and Western perspectives, we can look at this and be like, "Well, what was actually the letter of the contract? And shouldn't there be a process here, and does Nimbus have these rights?"

Ben Gilbert 1:41:39 And you just want to deal in good faith. You just want to assume that if someone knows that they're about to launch a huge new cricket league that's not included in your contract, and you're operating under the idea that it is included in your contract, what's in the contract doesn't matter as much as what you both feel like you're agreeing to. And it's a shame that if what you're relying on is, "Well, the letter of the contract says this," you know...

David Rosenthal 1:42:00 Yep, exactly.

Ben Gilbert 1:42:02 Okay, so Nimbus does not have the broadcasting rights. How do they get sold?

David Rosenthal 1:42:06 So Nimbus, they're out. Star is still out because [laughing] uh, another amazing Lalit quote-- He just doesn't let bygones be bygones. He's talking about how he sets up the broadcasting rights auction: "Rupert Murdoch I had blacklisted. I would never allow him in due to what had already happened, so I blacklisted Rupert Murdoch." [laughing] Amazing. I mean, this was 10 years ago that that happened. ESPN and Disney corporate says that they are interested in bidding on these rights separately from Star, which they're already a JV in, but they think this is so interesting, they're interested in bidding. Ultimately, though, they can't get comfortable enough to put an actual bid in. They say, "We will broadcast it over-the-top as Disney, soon to be Disney+ in the coming years, but we're only gonna do it on a rev share basis. We won't give you cash up front, we'll just share advertising revenue with you."

Ben Gilbert 1:43:00 Hmm.

David Rosenthal 1:43:00 And obviously, that's not what Lalit wants, 'cause he needs the cash to have the central sponsorship guarantees, central media guarantees out to the franchises.

Ben Gilbert 1:43:09 Right, 'cause if no one's [chuckles] gonna bid on one of these teams for 80 million bucks unless somebody is guaranteeing you there is media revenue there.

David Rosenthal 1:43:18 Exactly. So what does he do? He just runs the same playbook he's always been running, which he goes to another broadcaster who does not have a sports channel or sports presence. This time it's Sony, which is the number two broadcaster in India at this point, but like Nimbus before and Disney before that, did not have a sports channel. And he says, "I will make you a sports channel. And by the way, this isn't just sports. This is sports and Bollywood and the greatest entertainment product that India and the world has ever seen."

Ben Gilbert 1:43:45 Yep.

David Rosenthal 1:43:45 "And the minimum bid for this is 600 million for 10 years, but I am expecting a billion over 10 years," which would put it roughly on parity with the India international cricket rights that Nimbus had bought-

Ben Gilbert 1:44:00 Hmm

David Rosenthal 1:44:00 ... the year before. So Sony's like-... Okay, we're interested. We see the value here, but 10 years is a big commitment for what is essentially a startup.

Ben Gilbert 1:44:10 And we don't know that it's gonna work. I mean, again, not a ball has been bowled.

David Rosenthal 1:44:14 Exactly, not a ball has been bowled, no teams have been established yet, there are no official ownership groups that have bid on franchises. Yes, this is a very compelling business plan, Lalit and IMG, but no domestic cricket league has ever proven valuable anywhere in the world.

Ben Gilbert 1:44:29 Hmm.

David Rosenthal 1:44:30 You know, there are domestic leagues in Australia, in England, in New Zealand, et cetera, but they're peanuts. You know, they're the minor leagues. They're fine. They're not gonna justify a hundred million dollar a year, billion dollar over 10-year media rights deal. But they say, "We are interested, so what we would like to do is we would like to buy just the first year at the same pro rata price as the $600 million minimum bid for 10. We'll pay you $60 million for year one." So, you know, it's something. It's money on the table, but it's not really gonna send the signal of strength to franchise bidders that Lalit wants for the auction coming up. He really wants the 10-year deal to project stability and cash flow certainty, that also, by the way, is gonna match up the 10-year payable period-

Ben Gilbert 1:45:20 Ah, right

David Rosenthal 1:45:21 ... of the franchisees. That's why he wants 10 years. So he and IMG say to Sony, like, "Okay, we hear you. Hang on." They turn around, and they go to a sports rights group based out of Singapore called World Sport Group, and it's basically just like the Nokia and Shah Rukh Khan deal. They say to WSG, World Sports Group, "Here's what we need you to do. We need you to bid and buy the 10-year media rights deal at the billion dollar price that we want, but we'll only charge you $60 million in year one."

Ben Gilbert 1:45:58 So then they would owe the remaining 940 over nine years?

David Rosenthal 1:46:02 Exactly. "And so you're gonna put up $60 million in year one," and this is for the global rights, by the way, to IPL broadcasting, "and what you're gonna do is you are gonna turn around and immediately sublicense the Indian domestic broadcast rights back to Sony, who is good for that $60 million on the table."

Ben Gilbert 1:46:22 What?

David Rosenthal 1:46:22 "Cash on the table. And then you, as your, you know, vig [chuckles] for facilitating this, you will have the rest of the world international broadcast rights that you can then go sell and profit from at your pleasure."

Ben Gilbert 1:46:35 Oh, my God. But, I mean, it's kinda crazy. Sure, there's the rest of the world, but without that, what you're basically saying is, "Sign this contract. You'll be cash neutral in year one, and then you will have a massive liability in years two through 10. Good luck. Hopefully, you can make money on it."

David Rosenthal 1:46:53 Yes. Well, so here's the Lalit quote, "I knew that once we had the TV deal signed, all the rest would follow." Remember, he's already set all this up with Shah Rukh Khan. You know, he's got the players, he's got Shah Rukh Khan, he's got the stadiums. He knows this is gonna work if they can secure the bag on the TV money. So he says, "Although the deal was for one billion, I told the broadcasters I only needed 60 million in year one. Let's get the first year done. We'll worry about the rest later. I promise if we don't achieve what we set out to achieve, I won't carry on the IPL after year one." So he's basically saying, "You have a gentleman's agreement from me that if this doesn't turn out like we think it does, I will pull the plug on the whole thing, and you won't be on the hook, WSG, for 940 million in years two through 10."

Ben Gilbert 1:47:43 So if you believe that, then it really is a free option for the international rights for year one.

David Rosenthal 1:47:50 Exactly. Like I said, it's the same Shah Rukh deal. It's like, "Hey, I am finding you the money to cover your costs in year one, [chuckles] and you are in the black. You can make whatever profits you want from the rest of it."

Ben Gilbert 1:48:04 Yep. Fascinating.

David Rosenthal 1:48:05 Which, again, legality or, to the Western view, ethics aside, actually is brilliant. What an amazing way to start something from nothing.

Ben Gilbert 1:48:16 Yep. Transactions create value. Let's throw that abstract idea out. When I pay you for something, and you deliver me that good or service, value is created in the world by that transaction happening, otherwise it wouldn't happen. Otherwise, I'd say, "I'd rather keep my money," you'd rather keep your good or service. And so if you can make transactions happen where it actually is in the interest of both parties to do it, where they otherwise wouldn't have happened, that is literally a value-creative event.

David Rosenthal 1:48:44 Totally, and what Lalit is architecting here is not just saying transactions. He's saying no-risk transactions. "I'm gonna create no-risk transactions, where you have no downside and all upside." And he actually genuinely is able to align all the players here, such that, like, nobody is really holding the bag.

Ben Gilbert 1:49:05 But there's an if. It's, "There is no risk to this transaction if you trust that I'm gonna pull the plug in year two if it's not working, and you don't owe me $110 million a year for something that you're not getting value out of."

David Rosenthal 1:49:17 Yeah, exactly. You need to have some level of trust here [chuckles] actually, a pretty high degree of trust.

Ben Gilbert 1:49:22 That's essentially the trade. In exchange for telling the world that I trust you, I am getting a free option to sell the international rights in year one.

David Rosenthal 1:49:31 Yep.

Ben Gilbert 1:49:32 I am valuing your trustworthiness.

David Rosenthal 1:49:35 Yep. Well, you could argue, if you're WSG, whether you should have or should not have [chuckles] valued Lalit's trustworthiness because what he offers does end up coming to pass, just not in the, uh, spirit in which he offered it.

Ben Gilbert 1:49:50 All right, so how's it go?

David Rosenthal 1:49:52 Okay, so they announced the billion-dollar deal with WSG and Sony. This is like a earthquake that hits the cricket world. No domestic league had ever remotely been valued from, on a media rights basis, like this before. Not to mention, the league doesn't exist yet. There are no franchise owners, you know, et cetera. It's just a business plan. Then, on the back of that momentum-... Ten days later, at the end of January, they launch the franchise auction. And like we said, the minimum reserve bid for each of the eight franchises is fifty million dollars for the ownership groups. But the TV money is now in place. This is why it was so important.

Ben Gilbert 1:50:28 Yep. So how much of the TV money are they entitled to? That will help me evaluate whether I should bid fifty-plus million dollars for a franchise.

David Rosenthal 1:50:37 So here is the prospectus that gets distributed out to potential bidders on these franchises. Of the central media rights revenue, the broadcast deals like they've just done with WMG and Sony, and also the central sponsorship deals, fifty percent, one half of that, will get distributed out to the collective eight franchises to be distributed equally. But here's the kicker: Lalit is the master of manipulating time in his deals. That is what it will be at steady state. In the first year, it will be eighty percent, eight zero, so eight out of every ten dollars that are coming in centrally to IPL will get distributed out. Just happens to be eight teams, so each of the eight teams is gonna get ten percent of the total central money that's coming into the league, and then it's gonna be a sliding scale over the next ten years that's gonna take it down to fifty percent. And so how does the math work out now? Okay, you already know what the TV rights deal is. It's sixty million dollars in the first year, hard cash that's coming in, and then there's upside from sponsorships that Lalit might go sell, but he needed to get the franchises in place before he sells the sponsorships.

Ben Gilbert 1:51:52 So that's about five million in cash to each team in revenue from that deal in year one.

David Rosenthal 1:51:58 Bingo. TV rights alone, five million dollars in cash coming in each year. And remember what he told Shah Rukh Khan, "What's the deal on the franchise fees?" [chuckles] Paid over ten years, but I'm gonna let you pay the effective minimum price in year one, only five million dollars in year one. Magically, it works out. You get a free franchise for the first year.

Ben Gilbert 1:52:21 Amazing.

David Rosenthal 1:52:22 Amazing! No matter what you bid.

Ben Gilbert 1:52:24 You're probably gonna be break even or close to it, even after paying players, which we'll get to, very early in the life of your franchise.

David Rosenthal 1:52:32 And guess what? Magically, once all the central sponsorships are sold, it ends up being ten million dollars per team distributed from the central revenue pool. Exactly the straw man that you are setting up, Ben.

Ben Gilbert 1:52:45 You're giving me ten, and you're saying, "No matter how much I pay for this team, in year one, I only owe you five"? That sounds like a great trade.

David Rosenthal 1:52:51 And it's an asset-light business model. You don't have to invest any balance sheet dollars. There's no stadiums, no hard assets, et cetera. Well, if you are a smart sports investor, the first most important question you would ask next is...

Ben Gilbert 1:53:05 What's the salary cap?

David Rosenthal 1:53:06 What's the salary cap? What about the players?

Ben Gilbert 1:53:09 Which, here's a funny thing. In most leagues, "What's the salary cap?" is the same as asking, "On my P&L, what is the expense line for players?" Interestingly, in the IPL, they don't pay the full salary cap. Plenty of teams are running around there with seventy-five, eighty, ninety percent of salary cap and having a competitive team. It's actually a different question in the IPL of asking, "What's the cap?" versus actually, "What's my team expense gonna be?"

David Rosenthal 1:53:36 Yes, and what makes the IPL unique relative to every other sports league in the world, what they uniquely innovate on this, is the auction system. Players in the IPL are auctioned off just like a Sotheby's auction, like a piece of fine art, or, uh, as the media say when covering it, like cattle and sheep.

Ben Gilbert 1:54:01 It's like the draft, but with money.

David Rosenthal 1:54:04 It is the draft with money, and it is absolutely freaking brilliant. But before we tell the story of the IPL auction-

Ben Gilbert 1:54:13 Yes

David Rosenthal 1:54:13 ... now is a great time to thank a friend of the show, Fundrise.

Ben Gilbert 1:54:18 The Fundrise team is awesome, and they are big Acquired listeners, just like all of you. They've been evolving since we first started working together three years ago. At the time, Fundrise was mostly known as the US's largest real estate investment platform for retail investors. However, they were watching technology markets get larger than ever, thanks to Moore's Law and technology taking over every industry, and feeling like it really was a shame that all these tech companies are staying private longer, and that meant that retail investors couldn't get access. So in 2022, they launched their move to bring their democratized model into venture investing, which was a pretty contrarian idea.

David Rosenthal 1:54:54 Totally. This had been tried in the past but never really worked. Fast-forward to today, Fundrise has invested in great companies like Databricks, Canva, Anduril, Ramp, fellow friends of the show Vanta and Anthropic, and also ServiceTitan, which just went public in December.

Ben Gilbert 1:55:10 It really is awesome what Fundrise has done. They've taken a retail platform that any American can invest in and gotten pre-IPO access to some of the best private companies in the world. They've enabled access to all the value creation that's been locked away in private companies.

David Rosenthal 1:55:23 Yep. When the ServiceTitan IPO happened, thanks to Fundrise, tens of thousands of regular investors got to celebrate alongside VCs, LPs, and employees. And timing really is everything. Fundrise is doing this at a moment where, thanks to AI, there's more value being created than ever in the technology sector of the economy.

Ben Gilbert 1:55:40 You can go to check out the full portfolio that Fundrise is building at fundrise.com/venture, and if you're a growth stage founder looking for a great Series C or later investor, just get in touch and tell them that Ben and David sent you. This is a paid endorsement for Fundrise, and all investments can lead to a loss. Okay, so David, I said the player auction is like the draft with money, but that's not really giving it enough credit. The NFL draft did manage to turn itself into a huge, ridiculous viewer spectacle. Big thing at Radio City Music Hall in New York and TV coverage, but the player auction is both a live spectacle and a key piece to the way that they balance the whole league. And the rules for the annual player auction were nailed down even before the initial bidding for the teams happened, which is important to understand. You need to know-... before you bid on a team as an owner, how this whole auction process is gonna work?

David Rosenthal 1:56:36 It is tied as top priority for the most important thing to know, along with how the central revenue is getting distributed, because by far the biggest expense for any premier sports team attracting the best players in the world is player salaries. Put aside capital expenditures and potential debt payments for stadiums, that's not part of this league. And that makes sense, by the way, that player salaries should be your biggest expense, because that is the most important raw ingredient to your business.

Ben Gilbert 1:57:06 Yep.

David Rosenthal 1:57:07 So different leagues have different ways of dealing with this in different sports, and we talked about this a little already, but I would say until the IPL auction innovation, what was generally regarded as the most effective way to deal with this is a hard salary cap, and that's what the NFL has. Every year you have a dollar amount that is the same for every team. You cannot spend more than that dollar amount. It is simply not allowed, and how high that dollar amount is, is the result of collective bargaining between the players union and the ownership group.

Ben Gilbert 1:57:41 Yep, which is a very sane way to do it.

David Rosenthal 1:57:45 Just taking the three big US sports leagues, NFL, clearly the gold standard, has the best way to manage competitive parity, which is the hard salary cap. Next is the NBA. They're somewhere in the middle. The NBA has a soft salary cap, which means, yes, there's a salary cap, but under some exceptions you can go beyond it, and then there's an associated luxury tax with going beyond it. This is a big problem. [chuckles] Not as big a problem as baseball, which I'll tell you about in a sec, but the reason this is a problem is it all of a sudden introduces the amount of wealth that your ownership group has outside of the business of running the team and outside of the league, now starts to play a factor in how much you can spend for players and starts to affect the competitive balance of the league.

Ben Gilbert 1:58:33 Or maybe to put it in a more generic way, the amount of access to capital the ownership group has. 'Cause whether or not they're wealthy, if they're in a market where you're in a team that can produce a lot of local revenue, well, then you can afford to pay for more expensive players out of your local revenue and pay the associated luxury tax fees.

David Rosenthal 1:58:52 Now, in theory, the luxury tax should address this because you're then now redistributing some of that extra money that you're spending on salary at an equal amount to other teams, but in practice, it doesn't really work out this way. So if you look at competitive dynamics in the NBA versus the NFL, you get dynasties in the NBA, like the Warriors or the Lakers or the Celtics, or the Spurs a few years ago.

Ben Gilbert 1:59:14 Yep. Cavs, Heat.

David Rosenthal 1:59:15 Yep, the Heat. The Spurs are the anomaly 'cause they're not in a major market, but all those other cities, all those other teams I was talking about, San Francisco, Bay Area, Los Angeles-

Ben Gilbert 1:59:27 Mm

David Rosenthal 1:59:27 ... Miami, these are big markets.

Ben Gilbert 1:59:29 Right. The luxury tax sounds great in practice, but the, uh, existence proof that you are now naming shows the flaw.

David Rosenthal 1:59:36 So that's the NBA. Somewhere in the middle. Then you've got Major League Baseball. Major League Baseball has no salary cap at all. They do have what is called a, quote, unquote, "competitive balance tax," which sort of operates like a soft salary cap like the NBA, but in practice it's a total sham. Because in the NBA, there are at least strict rules about when and how and how much you can exceed the salary cap by. In baseball, it's just like, hey, there's some tiers, and if you go into the higher tiers of excess over the competitive balance thresholds, you pay more, but there's no cap on how much you can pay. You can pay an infinite amount and then just pay penalties to an infinite amount. So last year, in 2024, nine teams in Major League Baseball exceeded the competitive balance tax threshold. By far, the worst offender were the Los Angeles Dodgers, who exceeded it by one hundred million dollars, [laughing] which is just ridiculous! And then, of course, they won the World Series, like, duh. [chuckles]

Ben Gilbert 2:00:39 Gee. [chuckles]

David Rosenthal 2:00:40 Gee, how did that happen? And why did the Dodgers feel comfortable exceeding it by a hundred million dollars and paying such a huge luxury tax? Oh, guess what? They're in Los Angeles, the biggest media market in the US, and oh, guess what? Major League Baseball does not have central media rates. The Dodgers have their own TV deal in Los Angeles, which is by far the most valuable in the sport. So they've got the funding, the, as you said, the access to capital to do this, and of course, they're gonna win the World Series. It's a big problem.

Ben Gilbert 2:01:10 Yep. Why would anyone tune in to watch that?

David Rosenthal 2:01:13 Totally. I mean, sure, then you've got also the separate problem with baseball of a hundred and sixty-two games. Like, who cares about a game on a Wednesday night in the middle of the summer?

Ben Gilbert 2:01:22 Totally. I tuned in to watch the ALCS and the World Series last year. It was great. I will say, the ALCS, I'm from Cleveland, the Guardians' total payroll was a hundred and six million dollars playing the Yankees, who was three hundred and nine million dollars. I mean, it's amazing the Guardians got close!

David Rosenthal 2:01:39 Right. I mean, that's just such a stark example. You've got one team that has three X the annual salary payroll of the other team. Like, there's just no way.

Ben Gilbert 2:01:48 Yep.

David Rosenthal 2:01:48 Spring training is more compelling than the regular season. At least spring training is fun. [laughing]

Ben Gilbert 2:01:53 [laughing]

David Rosenthal 2:01:53 And I say this as somebody who deeply loves baseball. But okay, so that's at least state-of-the-art in the big North American sports leagues. As I said, before the IPL comes along, NFL is the gold standard. I mean, they are the true any given Sunday league. Not true in any of the other North American leagues. European soccer is even worse. It's a very, very small number of teams in La Liga or Bundesliga or English Premier League that are winning.

Ben Gilbert 2:02:21 Not to mention, they have relegation. [chuckles] If you perform badly, rather than adjusting the league balance, they just kick your team out of the league, which is great as an owner. "Wow, my media rights and my everything is so valuable that, uh... Oh, actually it all just went away 'cause I'm out of the league entirely."

David Rosenthal 2:02:35 Right. That is the ultimate disincentive to investment and ownership [chuckles] in a league. You definitely don't want that.

Ben Gilbert 2:02:41 Yes.

David Rosenthal 2:02:42 Okay, so Lalit comes up with this incredibly brilliant idea and says, "You know what?... instead of having a salary cap, I've got something that I think might work even better. All these auctions that I keep running for all these media rights, sponsorships, and everything, they work really, really, really well because they collapse everything down to a super clear, one-time, in-the-moment transaction, and I can set the guardrails for minimum, maximum.

Ben Gilbert 2:03:10 And Lalit, this man is so good at using the business laws of physics out there in the world to figure out what things are actually worth. He just makes sure every time, somebody pays what it's worth. There's never any money left on the table on any side. It is very clearly, does price discovery and makes the transaction happen for the exact right amount of money.

David Rosenthal 2:03:29 I'm trying to remember, there's some episode we did recently where we referred to, uh, either the company or the founder as a value maximization pioneer.

Ben Gilbert 2:03:38 Oh, value capture pioneer.

David Rosenthal 2:03:39 Value capture pioneer, yeah. [chuckles] Lalit Modi is a value maximization pioneer.

Ben Gilbert 2:03:45 Yes. It was Qualcomm, by the way.

David Rosenthal 2:03:48 Ah, Qualcomm. So here's Lalit's quote on how the auction comes about: "I got the idea of the player auction because our family company had a partnership with Sotheby's Auction House in India, where you offer the item to the highest bidder. What's wrong with that? Great transparency! I also knew it would be the talk of the town. Extremely controversial. That was a central part of my strategy." And then he says in a different quote, "Our number one pillar, I would call it the pillar of the IPL, was that we needed to have a department called controversy.

Ben Gilbert 2:04:22 [laughing]

David Rosenthal 2:04:22 And controversy allows us to get front-page news. If you're controversial, good or bad, doesn't matter. As long as people talk about us, they hate us, they like us, great, no problem. They wanna talk about us. Let them talk about us, and we don't clarify anything."

Ben Gilbert 2:04:35 I love it.

David Rosenthal 2:04:36 Amazing. Okay, so back to the auction. Of course, this is gonna be controversial. Like I said earlier, you know, the media is writing about this, like, "The world's best cricketers auctioned off like cattle and sheep!" 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.

Ben Gilbert 2:05:14 The NFL, by the way, has two hundred and fifty-five million dollars of salary cap available per team. So let's use this example. You're up to two forty-five, you have two players left, and you wanna sign them both for eight million dollars. What do you do? You don't have room in the cap. You only have ten million, you don't have sixteen million available.

David Rosenthal 2:05:32 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 gonna do a sponsorship deal with you. Like, you're gonna become a celebrity endorser for them, and that's gonna be another three million dollar contract that you're gonna get on the side."

Ben Gilbert 2:05:56 Or, "Look, you get to be an owner in a team at a low basis, and immediately, you gained three million dollars of on-paper wealth or something."

David Rosenthal 2:06:03 Point being, you can't police what happens outside of the sort of artificial construct of, like, a direct salary contract negotiation.

Ben Gilbert 2:06:12 Yep.

David Rosenthal 2:06:12 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 Kelce is a great example here. Travis Kelce 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, et cetera. Does he really wanna be seen as the heel who's turning his back on the Chiefs?

Ben Gilbert 2:06:47 Ooh, that was a good pro wrestling reference there, the heel.

David Rosenthal 2:06:50 Exactly. Yeah, right, right, right. Hey, this is all a soap opera. It's all entertainment at the end of the day. Okay, point being, there's all sorts of considerations about why a player might be willing to accept more or less money for a given team to play in that city or not to have his storyline affected in a certain way, et cetera. Auctions eliminate all of that.

Ben Gilbert 2:07:10 So the point you're making here is, if you have only ten million dollars of cap left, but you need sixteen million, you might be able to use some emotional tactics or non-monetary tactics to get sixteen million dollars of value out of just ten million dollars of cap, depending on the relationship that you have with each player and what their unique situation is.

David Rosenthal 2:07:32 Exactly. Then you get into all sorts of gaming of you're signing multi-year deals, right? And so you can set the number of years of that deal that's negotiated, and you can set the dollar amount in each year, and the cap impact in each year. This happens all the time.

Ben Gilbert 2:07:45 Right, you trade money from one year to another in order to free up cap space.

David Rosenthal 2:07:49 Yep. Oh, I've got the perfect example: quarterback deals, the biggest deals in the NFL. So obviously, they're gonna wanna make a lot of money, and that's gonna have the biggest impact on your cap because they're by far the highest paid player on your team. At the same time, they also wanna win a Super Bowl. And so a highly effective argument for a quarterback to take less money up front than they might otherwise is to say like, "Hey, we've got a window right now. We've got some star wide receivers. We've got a star running back. We've got some star defensive players."

Ben Gilbert 2:08:18 Mm.

David Rosenthal 2:08:18 "We'll give you a big contract, and we'll guarantee your money out in the out years. But if you take less money in these early years to allow us to keep, to retain, or go get some key weapons for you," in the parlance of the NFL- [chuckles] "... you know, some receivers for you, be a team player here," right?

Ben Gilbert 2:08:35 Yeah.

David Rosenthal 2:08:36 This stuff happens all the time. So the great beauty of the auction that Lalit sets up is that he sets both a maximum spend, a purse for every team coming into the auction-... and a minimum spend.

Ben Gilbert 2:08:51 And that minimum's, like, 75% of cap, right?

David Rosenthal 2:08:54 75% of the maximum. And he sets the maximum at a level that keeps every team in the black. So he knows now what the central TV rate and sponsorship dollars are that are coming in. He knows what the franchise fees that all the owners are gonna be paying are. So he can basically mastermind all of their P&Ls, and he sets the maximum that you can spend in the auction, such that every team is still gonna be profitable. And then he also sets the minimum spend so that one team doesn't say, like, "Oh, hey, I wanna be super profitable, and I'm only gonna buy scrubs at the auction and have a really low salary base." Now, you might think, "Wait a minute, an auction? That seems like it's gonna be way more susceptible to the stuff you were just talking about, David, with the salary cap and all the deals and incentives that are happening outside." No, it avoids all of that because it collapses everything down to a single point in time, everybody in the same room with the same finite resources. It turns it into a Monopoly game. It doesn't matter what happens outside the room. Sure, the owners could say, "Oh, my star player, you come play for me, I'm gonna give you an endorsement deal worth millions of dollars." Sure, no problem. That doesn't get you any more resources to spend at the auction.

Ben Gilbert 2:10:01 Well, and even if you and the player collude on a lower price to save cap space, it doesn't mean that the bidder at the table next to you isn't just gonna bid a higher amount for that player. Everyone ends up going for their actual market value.

David Rosenthal 2:10:14 You can collude all you want, and it will never work because everyone goes for their market value, because an auction is a point-of-time event that maximizes market value for each asset.

Ben Gilbert 2:10:24 Right.

David Rosenthal 2:10:25 And the order that players come up, they come up in lots, and then the order within those lots is randomized. And-

Ben Gilbert 2:10:31 Hmm

David Rosenthal 2:10:32 ... it is all architected in a way such that the only way for a team to gain an advantage over any other team in the auction is to have superior market intelligence, which has come to mean have superior analytics and superior player evaluation. So in the first year of the league, the Rajasthan Royals, who have the lowest salary, they actually don't hit the minimum salary, and they get fined by Lalit. So the maximum salary that he sets for year one is five million dollars, or maximum purse for the auction, and then that means the minimum purse is, I think, three point three million. The Royals don't even hit three point three million, they're so cheap. [laughing]

Ben Gilbert 2:11:12 Wow!

David Rosenthal 2:11:12 They were the cheapest franchise that was sold at the franchise auction, too. So they get penalized by the league. They end up winning the championship, 'cause they come into the auction with better analytics than everyone else.

Ben Gilbert 2:11:24 Amazing. I do think the, the one thing that's really important in this, though, to your point of collapsing it all into one single point in time, all contracts are three-year contracts, which really reduces the gaming.

David Rosenthal 2:11:37 Well, I think that there's two important impacts of that. One, most important for competitive dynamics is, you can do all the gaming, all the colluding, all the side deals that you want, that won't get you any more resources in the auction. And it also won't get you any superior information, unless you were to do something really crazy, like collude with a player to say, "I'm not gonna bid on you. You will go to another team, and then I will pay you money to play worse for that team," [chuckles] like, to throw matches. Which, hey, by the way, kind of might start to happen in the next couple of years here, as we'll see.

Ben Gilbert 2:12:13 Hey!

David Rosenthal 2:12:13 Story, yikes. [laughing] But you would have to get really dark to impact the competitive spirit of the game here. And then the other important impact that I think you were saying there, Ben, is because all this collapses to a single point in time, it means the IPL and Lalit can say, "All player contracts are standard contracts." There's no terms, there's no negotiations, every player will be at three years, and both sides have an option to pull out after each year. So the team could say, "After year two, you're not playing good anymore. I'm cutting you, and I'm gonna send you back to the auction pool." Likewise, player could pull out, and that also means no agents. So at this point in time, I-

Ben Gilbert 2:12:52 Oh

David Rosenthal 2:12:52 ... think most IPL players probably do have agents, but agents just can't impact things that much.

Ben Gilbert 2:12:57 Because it's a standard contract.

David Rosenthal 2:12:59 Value discovery happens in the auction process, and then all the contracts are standard.

Ben Gilbert 2:13:03 It's like what YC tried to do with the SAFE. It's just, "Look, you fill in the number. It's the cap. Whatever the cap is, is the cap."

David Rosenthal 2:13:09 Exactly.

Ben Gilbert 2:13:10 Really reduces the legal fees.

David Rosenthal 2:13:12 Yep. So now you might say, "Well, wait, why would players agree to this? This seems really team and owner-friendly and not player-friendly." And indeed, if you look at the percentage of revenue that IPL players make in the IPL versus... In the NFL, players are essentially getting 50% of the league's revenues.

Ben Gilbert 2:13:33 In fact, almost every sports league now, it's on average, players get 50%, except on English Premier League Soccer, it's something like players get 60-plus percent. But like we were saying, the economics of those teams are upside down, and it's actually a bad thing for the league.

David Rosenthal 2:13:47 Yep. In IPL, even today, I think players are getting 12 to 15% of the revenue of the league.

Ben Gilbert 2:13:53 It's extremely low, yeah.

David Rosenthal 2:13:56 But they're thrilled. This is great for the players, for two reasons: there's a carrot and a stick here. The carrot is, before the IPL, they weren't making any money.

Ben Gilbert 2:14:06 There was nothing, yeah. This is constantly Lalit's argument: "Yeah, I know my side is making out great, but guys, we're all making out much better than before."

David Rosenthal 2:14:14 Yep. Before this, all the players were paid by their international boards, which meant, one, you had to make it onto the international team in your country. There was just one team, so there were such a small number of players that could even get paid at all to play cricket. Now, all of a sudden, you have eight teams within India, so it, it increases the pool of players. Two, there's just way more money to go around. Yeah, you're only getting 12, 15% of the revenue, but it's a really big pie. And then the third reason is, the actual IPL season is very short, and you are not locked up for the rest of the year. So it's like, "Oh yeah, you can come play in the IPL for the-... two-month window that is their season, you can then go play for your international team or other leagues around the world, do whatever you want the rest of the year. Earn as much money as you want elsewhere.

Ben Gilbert 2:15:00 Yeah. It's funny, my issue with the salary cap disparity, it wasn't that big a deal in '08, '09, 2010. If the cap was $5 million and each team is only making $10 million total from the central pool, it's actually a fine agreement. It's the fact that the media rights and the sponsorship rights have since blown up like crazy, but the salary cap is pretty moderated in how much it's allowed to grow. And interestingly, it's not an IPL thing, it's a BCCI thing. The BCCI determines those contracts with the players.

David Rosenthal 2:15:35 Of course, they do. So that's all the carrot incentives, and then that brings up the stick incentive, which is, at least if you're an Indian player, the stick incentive is, "Hey, you're gonna be happy with this, or we're not gonna let you play on the international team in India."

Ben Gilbert 2:15:49 Yep, that's exactly right.

David Rosenthal 2:15:51 But all that said, even if you were to have a better collective bargaining system, players were to make more in the auction purse relative to the revenues of the league, this would still be an incredibly beautiful system. Every other sports league in the world should adopt this. They won't, because the existing systems that they all have are too entrenched, but this is the new optimal system for running a sports league. The last point to the structure of the auction is every three years there's a super auction, where everybody gets back in the pool [chuckles] and it all resets, except each team can retain four players.

Ben Gilbert 2:16:28 'Cause you want that local fandom, those franchise players to stay franchise players.

David Rosenthal 2:16:32 You want the equivalent of Tom Brady playing for the Patriots and building that brand equity for the Patriots. Importantly, though, there is still a salary cap that applies to that retained pool. That then does start to get a little harder to police and opens the door up for more side deals and other incentives, et cetera. But for the most part, it really is an incredibly elegant system here.

Ben Gilbert 2:16:57 Okay, so here's the thing we glossed over, listeners, and if you've been paying a lot of attention, you might have caught it and expected us to address this. It's actually an enormous deal. We said, right now, the teams in year one get eighty percent of the central pool revenue, and over time, that goes down to fifty percent. The question you should be asking yourselves is, "Well, wait, where does the other fifty percent go? " [laughing] 'Cause if you listen to our NFL episode, we said the NFL basically is a clearing house that retains zero dollars at the end of every year and redistributes a hundred percent to the teams. What do you mean teams only get fifty percent of the central pool? The BCCI retains fifty percent of the central pool revenue, which eventually gets huge! I mean, these media rights deals, these team sponsorship deals, I don't wanna spoil the numbers yet, but that is one enormous difference between any other sports system, especially the big four in the US, and what we're talking about here, is there actually is a governing body for the sport in the country that sits atop the league.

David Rosenthal 2:18:01 That takes half the money. [laughing] Uh, you know, India.

Ben Gilbert 2:18:07 It's crazy. It's totally crazy, but it's super not clear where the money goes. Definitely, they spend a lot of money on stadiums and upkeep and developing the game and hiring coaches and-

David Rosenthal 2:18:17 Yep. Here's the rationale. I will give you the argument. The role of the BCCI is they are the stewards of the game in India, and as the largest and most important cricket-playing country in the world, de facto, they are the stewards of the game around the world. So what that money is intended to go to is two things: one, infrastructure, like you said, improving the stadiums, you know, et cetera, et cetera. Spoiler alert for later in the episode, doesn't really go there right now. And then the second and, um, you know, arguably more important thing that the BCCI does with that money is player development. So still today, because the IPL is in its infancy relative to other established sports leagues, the teams and franchises themselves aren't set up to develop talent in the way that, say... You know, Major League Baseball is the most developed on this front. If you're a Major League Baseball organization, you have Minor League Baseball teams around the country and academies around the world where you are signing and developing players.

Ben Gilbert 2:19:19 You've built out a spring training facility.

David Rosenthal 2:19:22 Yep. And not just that, but it is a three hundred and sixty five-day around the world global operation where you are identifying, developing, preparing talent to play at the highest levels of the game. Right now, none of the individual teams, franchises themselves in the IPL are doing that. They are starting, but mostly that work falls on the BCCI.

Ben Gilbert 2:19:46 Yep. I just call this out to say two things. One, as we now move forward in the story to the actual franchise auction and who is buying them, it's very different than buying an NFL team, where you are entitled to one hundred percent of one thirty-second of the league-wide revenue. As a team owner in the IPL, you're entitled to fifty percent of the league-wide revenue.

David Rosenthal 2:20:09 And does the BCCI need hundreds of millions, if not billions, of dollars to do player development and sort of non-existent stadium infrastructure development? No.

Ben Gilbert 2:20:17 And the second reason is, to put the question back to you, David, you're harping on the fact this is the new gold standard, which I agree with. Do you need a BCCI in order to create this system? Do you need a parent governing body above the league? 'Cause the league is just the thin agreement between a web of capitalist entities called teams. And then the question is, do you need some force above that?

David Rosenthal 2:20:43 Oh, this is great. You're setting up a question I have at the end of the episode, so we will come back to that.

Ben Gilbert 2:20:47 Great.

David Rosenthal 2:20:48 So okay, that's how the franchise auction works. That is in the information memorandum that goes out to all the franchise bidders for the franchise auction.... I mean, basically, the net of this, as we've implied all along, is you're getting a pretty sweet deal almost no matter what you bid. [chuckles]

Ben Gilbert 2:21:03 This is one of these crazy situations in the world where it's not about how big of a finance brain you have to figure out, "Ooh, is this a good investment opportunity?" It's access. If one of these franchises is offered to you, you should have just said yes immediately, and bid whatever everyone else was gonna bid. This was a complete no-brainer, and the question was: did it get offered to you or not? That's the investment decision.

David Rosenthal 2:21:30 Yes. [laughing] Lalit and the BCCI would say, "Oh, no, no, no, of course, it was open and transparent."

Ben Gilbert 2:21:36 Anyone could have walked in.

David Rosenthal 2:21:37 Sure. In practice, on the ground, almost assuredly, what you just said there is a hundred percent true. [laughing] So minimum reserve auction price for the franchise auction is fifty million dollars per franchise, which would be paid over ten years, four hundred million dollars for the collective eight franchises. They end up selling for seven hundred and twenty-four million dollars collectively, so there's a lot of bidding that happens.

Ben Gilbert 2:22:02 So what, ninety-ish million a team is the average?

David Rosenthal 2:22:04 Yes. The most expensive franchise is the Mumbai franchise, unsurprisingly, being the biggest city, you know, where Bollywood is located, et cetera. That... Gosh, really, you couldn't script this any better! Uh, is bought by Mukesh Ambani, the wealthiest person in India, and the CEO of Reliance, for a hundred and twelve million dollars. Highest bid in the auction, but not, like, that much more. The spread here is not that big between the highest and the lowest.

Ben Gilbert 2:22:32 The way that the weighing machine of this market turned out is, hey, the teams actually are all pretty equally valuable. They did a great job balancing the league. That's exactly what I read to Ambani only paying a hundred and ten million.

David Rosenthal 2:22:46 Totally. The central revenue stream, this is an incredibly well-architected league.

Ben Gilbert 2:22:50 Yep.

David Rosenthal 2:22:51 The cheapest franchise, as we said, is the Rajasthan Royals, which is bought by a UK investor consortium led by Manoj Badale, who's actually lives in the UK, in London, for sixty-seven million dollars, so roughly half the price of the Mumbai franchise. Shah Rukh Khan's group gets the Kolkata Knight Riders for seventy-five million. Preity Zinta's group gets the Kings XI Punjab for seventy-six million dollars, suspiciously close in price to the seventy-five million dollar Shah Rukh Khan bid, but only one million dollars more. Anyway, this, I think, is known at the time. One of the other board members of the BCCI, who would soon become the chairman of the BCCI, a gentleman named N. Srinivasan, who also is an industrialist who owns the Indian Cements company, he buys the Chennai Super Kings for ninety-one million dollars, despite also being a board member of the BCCI. [chuckles]

Ben Gilbert 2:23:40 Hey, uh-

David Rosenthal 2:23:41 Hey! What do you know?

Ben Gilbert 2:23:43 He's very interested in the development of the game.

David Rosenthal 2:23:45 Yeah, exactly. Very interesting. This is a huge, resounding success, and then on the back of the franchise auction, a couple of weeks later, now the player auction actually happens, and it goes exactly as predicted. Interestingly, MS Dhoni, who's a legendary Indian cricket player, he goes for a million and a half dollars in the auction, which was a huge spend. I mean, remember, the cap on the purse is five million dollars, so you're spending one and a half of your five on one player.

Ben Gilbert 2:24:16 And how many players per team?

David Rosenthal 2:24:18 There are eleven players that play on the field at a given time, so, you know, one of your eleven playing players, you're spending thirty percent of your cap on. So anyway, all this, just like Lalit prophesized, huge headlines, just adds to the media buzz, and then, at least from a competitive parity standpoint, it actually works. So the Rajasthan Royals, despite being the cheapos, [chuckles] they bring better analytics than anyone else to the auction. They win the championship in the first year. Now, we should also point out that they have not won a championship since then, in the subsequent sixteen iterations of the IPL season, but today there are ten teams in the league, and seven of the ten teams have won the championship in the, what does it call it, seventeen seasons that have been played so far?

Ben Gilbert 2:25:07 Yep.

David Rosenthal 2:25:07 And every single team has at least been runner-up, you know, second place, lost in the championship game.

Ben Gilbert 2:25:13 Sounds well-balanced.

David Rosenthal 2:25:14 So if you're trying to design a competitive parity league, this is a A plus, plus, plus.

Ben Gilbert 2:25:20 You can see why so many people tune in every single night in prime time, end of March through end of May.

David Rosenthal 2:25:27 Yep.

Ben Gilbert 2:25:28 Okay, so the promise of all this sounds totally amazing, and we know it worked eventually, but most of the things that we study on this show that worked eventually kind of don't work at first.

David Rosenthal 2:25:37 That is not the case here.

Ben Gilbert 2:25:38 Yeah. What does the first season look like?

David Rosenthal 2:25:41 I would say explosive right away is an understatement. [laughing]

Ben Gilbert 2:25:47 [laughing]

David Rosenthal 2:25:47 As you might expect, given the incredible architecture of it and Lalit's force of will personality, this thing is a sensation. Is... All of the predictions that they made, the business plan, the soap opera, the every night, the, "This is gonna be the biggest thing ever to happen to media in India," it's true, and it's true right away.

Ben Gilbert 2:26:12 Hmm. This never happens. Never. The Rolex Daytona flopped at first. The Birkin bag, not heralded as anything special for, like, twenty years.

David Rosenthal 2:26:26 I think it happened in part because it had to happen. Lalit was running such a high-wire act with all of these year-one deals, like, "Hey, I promise you, this is gonna work like we all think in year one, and if it doesn't, I'll shut it all down."

Ben Gilbert 2:26:38 Oh, right, and Acquired is subject to heavy survivorship bias, so we don't cover the ones that-

David Rosenthal 2:26:43 No, this was, like, a one-shot opportunity.

Ben Gilbert 2:26:45 There have been many other high-wire act, one-shot opportunities that we're just not talking about. The one that immediately comes to mind is Activision Blizzard selling the Overwatch League bids. I mean, that just didn't work right away and then proceeded to continue not working.

David Rosenthal 2:26:59 ... Yes. To use a cricket analogy here, this would be like you are a batter facing the last ball of the game, and your team is down by five runs, and you need to hit a six to win. [laughing] IPL hits a six.

Ben Gilbert 2:27:13 But you've bet your entire life savings and reputation on the fact that a six is getting hit.

David Rosenthal 2:27:18 If it hasn't been obvious enough from what we've been implying throughout the episode, the underworld of India and the mafia is definitely involved in all of this, and that is gonna come up in a minute. So it might not be an exaggeration to say lives are being bet on this, to some extent.

Ben Gilbert 2:27:33 Hmm.

David Rosenthal 2:27:34 So April 18th, 2008, first game, first match happens. The Royal Challengers Bangalore, as the visiting team, versus the home Kolkata Knight Riders, owned, of course, by the one and only Shah Rukh Khan. He's there. He's leading the parade into the stadium, doing the big opening event, broadcast around the country. Every TV is watching. And in the game, one of the star players for the Knight Riders, the home Knight Riders, Brendon McCullum, interestingly, your international player, obviously not an Indian-

Ben Gilbert 2:28:09 Yeah

David Rosenthal 2:28:09 ... but bought at auction by the Knight Riders, hits one hundred and fifty-eight in that first game for the Kolkata Knight Riders to win. That number probably means nothing to many of you who are not cricket fans yet. I mean, I say yet, because you might become one-

Ben Gilbert 2:28:23 [chuckles]

David Rosenthal 2:28:23 ... after listening to all this. And the people of you who do know cricket are like, "Oh, yeah, that was one of the greatest moments of all time." To hit a hundred and fifty-eight, which means be responsible for a hundred and fifty-eight runs in a T20 game, where your entire team is only facing 120 balls, you know, pitches, opportunities to score, and you personally score 158 runs on the balls that you face, that is an epic performance.

Ben Gilbert 2:28:48 Wow! What is your sense of how organic it was that this was an incredible spectacle right out of the gate? I mean, it's hard to fake hitting sixes. There's a lot of rigging that would need to happen.

David Rosenthal 2:29:01 There's a lot that would need to go into that. From the IPL's perspective, this could not be a better storyline. So the whole season basically goes amazingly. The average TV share viewership for the entire season is four point nine percent of all active televisions in India are watching IPL, like, on average.

Ben Gilbert 2:29:27 In the first season?

David Rosenthal 2:29:28 First season, yes. A lot of TVs. There is no single soap opera between eight and eleven PM that is getting that kind of viewer share in India. It works. The final match, the championship match, is won in the last ball by the underdog-

Ben Gilbert 2:29:44 [chuckles]

David Rosenthal 2:29:44 ... Rajasthan Royals, the cheapos, in dramatic fashion. That final gets ten percent viewership share of all TVs in India are tuned in to that final match. So it goes really, really, really well.

Ben Gilbert 2:29:58 Oh, and we should say, one other element of this, there's a prize pool that we didn't talk about. So just to add one more great game design mechanic, the winner of the whole thing gets, I think, a three million dollar grand prize in that first year?

David Rosenthal 2:30:12 Five percent of the central media rights deal, and then that prize pool is shared among the teams that make the playoffs, with the winner obviously getting the most. [chuckles]

Ben Gilbert 2:30:19 Which is great, 'cause that actually is one thing that is kind of a bummer about other sports leagues is, you're not monetarily compensated for winning at all. I mean, of all the playoff games, the Super Bowl, all that, you get to win by having a franchise that people love more, and it sort of helps the durability of your franchise, but you don't financially win that year from that the way that you would if there was a prize pool of millions of dollars, like how there is in the IPL.

David Rosenthal 2:30:45 Yes, this is the great irony of the NFL that we learned after doing our episode, and we talked about when we reprised it on the Armchair Expert podcast, which was super fun, with Dax and Monica. Winning the Super Bowl is actually, like, a net negative economic event for an NFL team. Now, in the long term, of course, it's-

Ben Gilbert 2:31:02 Super positive

David Rosenthal 2:31:03 ... better. It's super positive, but for the actual fiscal year that you are operating when you win the Super Bowl, it's massively net negative. [chuckles]

Ben Gilbert 2:31:09 And as we all know from the Dallas Cowboys, you don't need to win Super Bowls-

David Rosenthal 2:31:13 [laughing]

Ben Gilbert 2:31:13 ... to make a lot of money!

David Rosenthal 2:31:15 That's right.

Ben Gilbert 2:31:15 [laughing]

David Rosenthal 2:31:16 Jerry Jones, baby. Just to tie the bow on that, the reason why winning the Super Bowl costs you money is you gotta go play those games. Usually, in the playoffs, best case scenario, if you've got the number one seed, you're playing home games all the way through, so you're not losing money, but usually you're playing some away games. And then the Super Bowl is a de facto away game for everybody. But either way, you're not getting the same share of tickets and luxury suites that you usually would. And then the kicker on top of that, all that, is if you win, then the city makes you pay for the parade yourself.

Ben Gilbert 2:31:47 [chuckles]

David Rosenthal 2:31:47 So [laughing] anyway... But in all seriousness, back to the point in the IPL, this is so well architected.

Ben Gilbert 2:31:53 Yeah, they're solving every little pain point of other sports leagues.

David Rosenthal 2:31:57 Super interesting, on the whole thesis underlying the whole thing of, like, can we get non-male viewers? Can we get women to watch this thing? Resoundingly, yes. In the first season, viewership was about thirty to thirty-five percent women, so not fifty-fifty, although today it is truly fifty-fifty.

Ben Gilbert 2:32:17 Yep.

David Rosenthal 2:32:17 But that's up from zero. [chuckles] No women were watching international cricket before. I mean, no, I'm sure there were some. So thirty to thirty-five percent is a huge win. Like I said, today it's fifty-fifty. Not only does this mean that brand sponsors of commercials during the broadcast can be both general interest brands and brands focused at women, in 2019, the Kings XI franchise, they actually, as one of their shirt sponsor logos, bring on a beauty brand.

Ben Gilbert 2:32:49 Really?

David Rosenthal 2:32:50 So this is the first women's focused brand advertising directly as a sponsor and as a jersey sponsor of a male sports team anywhere in the world.

Ben Gilbert 2:33:01 ... fascinating.

David Rosenthal 2:33:02 And I think that's continued, and probably a bunch more, uh, have, uh, come from it. There's a great passage in Manoj Badale, the principal owner of the Royals, book, where he talks about this. He says, "The sight of Chris Gayle, monster hitter..." Chris Gayle's one of the West Indies player, one of the legendary, big, huge, think like Barry Bonds of cricket, essentially. "The sight of Chris Gayle, monster hitter, sporting a woman's beauty brand across his right pectoral, is quite something to behold. This is the definition of disruptive advertising, or, as one ad executive put it, 'A hardcore female brand on an alpha male chest.' Sales of Lotus Herbals SPF moisturizer- [laughing] ... were up 20% the year that they decided to sponsor the team!"

Ben Gilbert 2:33:43 Wow.

David Rosenthal 2:33:44 "It is a hugely important development." Absolutely! They totally unlocked a new market.

Ben Gilbert 2:33:49 Wow. Okay, so that's the first season. Everything goes to plan and just kinda continues exponentially and perfectly up from there, right?

David Rosenthal 2:33:56 Yes, monotonically, up and to the right, straight line from there to today. No. [chuckles] Year one, incredible. Today, even more incredible times 20. In the interim, a whole lot of zigs and zags, because the very next year, the whole thing almost blows up.

Ben Gilbert 2:34:15 But before we tell that story, we'd like to thank longtime friends of the show, Crusoe. Crusoe is not just an AI cloud platform, they are actually reimagining how AI infrastructure gets physically built from the ground up.

David Rosenthal 2:34:29 Yep. In the past, we've talked about Crusoe's climate-aligned approach, powering their GPU data centers with stranded energy. But what's truly unique about Crusoe is that they're a fully vertically integrated AI infrastructure business. CEO Chase Lochmiller realized early on that in order to become the best AI cloud platform, you actually need to build the entire stack, from sourcing the energy, to building the data centers, and ultimately, to providing the end AI cloud service layer.

Ben Gilbert 2:34:56 The best example of this is the giant 1.2 gigawatt AI data center that they are building in Abilene, Texas. They broke ground in June of 2024, just June of last year, on an empty field, and now within a year, they're about to turn on the first few buildings. Bringing on new capacity of this size in less than a year is insanely fast for the industry.

David Rosenthal 2:35:18 Yep, and to put that 1.2 gigawatts in perspective, if you take the entire data center capacity located in northern Virginia today, where, like, 70% of the world's internet traffic flows through, all of that is only 4.5 gigawatts. So Crusoe's single AI factory in Abilene will be more than a quarter the size of what powers a huge portion of the internet today, and that's just one of Crusoe's locations.

Ben Gilbert 2:35:45 Yeah, so Crusoe handles all the incredible complexity of building physical AI capacity, so that their customers can focus on innovation, not infrastructure, and they just announced two new services to do just that. Their Managed Inference service frees developers from managing servers, and their AutoCluster service eliminates the operational burden of model training. These are just two areas where Crusoe is delivering a seamless and reliable infrastructure experience, so customers can get back to focusing on what makes their beer taste better.

David Rosenthal 2:36:15 Yep. So when you're thinking about where to run your AI workloads, make sure you consider Crusoe. Because they operate and innovate at every single layer of the physical stack, Crusoe delivers unmatched price to performance, speed to market, and a platform that customers can rely on for years to come. It's an incredible company, and Ben and I are excited to be investors in their recent funding round, alongside NVIDIA, Founders Fund, and a whole slate of other great investors, too.

Ben Gilbert 2:36:42 To learn more, head on over to crusoe.ai/acquired. That's C-R-U-S-O-E.A-I /acquired, or click the link in the show notes. And when you get in touch, just tell 'em that Ben and David sent you.

David Rosenthal 2:36:53 Thank you, Crusoe.

Ben Gilbert 2:36:54 Okay, so how does the IPL almost all fall apart in years two and three?

David Rosenthal 2:36:59 Well, before it all almost falls apart in year two, in the off-season after year one, Lalit, the BCCI, all the teams, all the owners, they're all riding high. This was an enormous success, beyond anyone's wildest dreams. So I foreshadowed a little bit ago in the TV rights deal with World Sports Group and Sony, that Lalit had given him his word as a gentleman, that, "If this whole thing doesn't work, I'll rip up the deal, and I'll won't carry IPL forward. You won't be on the hook for the 940 million for the next nine years."

Ben Gilbert 2:37:37 Yep.

David Rosenthal 2:37:38 Well, this thing was such a success, that all of a sudden, 940 million for the next nine years is looking like a hell of a steal.

Ben Gilbert 2:37:46 Which they should benefit from for signing a long-term deal.

David Rosenthal 2:37:49 That's what you would think. Lalit rips up the deal.

Ben Gilbert 2:37:53 Oof!

David Rosenthal 2:37:54 Specifically, he engineers an excuse and says that Sony had been allowing Reliance's telecom division to advertise during their commercial breaks, and that that violated Vodafone's exclusivity over everything IPL, because Vodafone was a central corporate IPL telecom sponsor. He also alleges that he has evidence that Sony had been, at least in certain markets, cutting away from the game early to squeeze in extra commercials, and not showing all the balls that were bowled in an over. Who knows if that's true or not? I don't know.

Ben Gilbert 2:38:34 Could be. Is that the kind of thing that means you tear up the contract, or do you call them and say, "Hey, we know you're doing this. Please don't do that anymore?"

David Rosenthal 2:38:40 I suspect [laughing] -- that had the IPL not been such a huge success, and Lalit were not looking to tear up the contract, he would not have caught these discrepancies, shall we say?

Ben Gilbert 2:38:50 Yes.

David Rosenthal 2:38:51 And of course, it's not till the end of the season that he points all this out. On the back of this, he strong-arms Sony and World Sports Group into renegotiating-... a new deal that is gonna be direct with Sony. They throw World Sports Group a bit of a bone. I think maybe they let them keep the international rights, but Sony is now gonna directly do a 10-year deal with the IPL for $2.4 billion, so $240 million a year. Quite a bit more than the $60 million that they had paid for year one.

Ben Gilbert 2:39:25 So that's 4X the actual cash out per year, and it's 2.4X what the theoretical value of the contract was gonna be on an annual basis.

David Rosenthal 2:39:36 Yep, and really just tells you everything you need to know about how much of a success [chuckles] this is here, because Sony is willing to say, "Okay, fine, I'll let you rip up the contract, and I'll pay you roughly 4X."

Ben Gilbert 2:39:49 Right. Ultimately, they kept the same broadcast partner but started charging them four times as much, and the broadcast partner was like, "Yeah, that's still fine." Clearly, it meant that there was a lot left on the table that Sony was benefiting from in year one because of how big of a success it was.

David Rosenthal 2:40:03 As Lalit would point out, "I made a lot of money for everyone."

Ben Gilbert 2:40:07 Yep.

David Rosenthal 2:40:08 So things start off well, I guess you would call that well, from, uh, IPL's perspective during the off-season. But then as we're getting closer to the season launching in 2009, general elections are happening in India, and elections are contentious. There are security issues, and the government and various state police organizations start coming to the BCCI and the IPL and saying, "Hey, I'm not sure that we can promise security at the matches this season." And so they go back and forth. They're like, "Oh, are we gonna move some of the matches in some of the states, and can some of the states provide security and not others?" Ultimately, they decide, "Shoot, we can't hold this thing in India at all." [chuckles]

Ben Gilbert 2:40:50 They go full NBA bubble, right? It's like the Disney bubble from COVID.

David Rosenthal 2:40:55 Yes. So on very short notice, I think like a month notice, they airlift the entire tournament out of India [chuckles] and move it to South Africa, and then they re-set up all the teams in South Africa. I mean, they're the same teams, same ownership, same player, but they just assign like, "Oh, Mumbai, you're now in Cape Town," or, you know, wherever.

Ben Gilbert 2:41:15 Wow!

David Rosenthal 2:41:16 Reassign teams to all the cities, and they restart the IPL, and they play it in South Africa. [chuckles] Amazingly, it goes pretty well, and this actually becomes a great thing for the IPL because it's still very popular in India. It's broadcast back in India.

Ben Gilbert 2:41:33 Yep.

David Rosenthal 2:41:34 Local revenue for the teams and the stadium gate receipts and sponsorships for the local teams was never that much in India, still isn't that much to this day. So you're actually not sacrificing much revenue by doing this.

Ben Gilbert 2:41:46 I think by our calculations, we tried to estimate a P&L for any given team. We're looking at something today, like 66 million coming from a central pool and only like four-ish million coming from tickets. This is a TV product.

David Rosenthal 2:42:00 Yes, and satellite signals work just fine from South Africa to India.

Ben Gilbert 2:42:05 Maybe even better 'cause it's closer to the poles.

David Rosenthal 2:42:07 Yeah, maybe. [chuckles] This really accelerates IPL becoming a global phenomenon among the cricket-playing and cricket-watching countries of the world. The fact that you can airlift the tournament out of India, put it in another cricket-playing country, have it be just as successful, have everybody be happy, you're only growing the game by doing this.

Ben Gilbert 2:42:28 Yep.

David Rosenthal 2:42:29 On the back of that, heading into season three, they decide, "All right, time to expand. We're gonna add two teams to the league. We're gonna do a two-team franchise auction in the same model as the first one, except now we expect the prices are gonna be much higher."

Ben Gilbert 2:42:46 And I will say, only two teams does show some restraint. The NFL's 32 teams, the NBA... I mean, I could imagine a scenario where they think, "Hmm, let's double it. We're really feeling ourselves. Let's at least do six, eight teams."

David Rosenthal 2:43:00 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. [chuckles]

Ben Gilbert 2:43:15 A little bit higher than 90.

David Rosenthal 2:43:17 Now, central revenue is higher from the new broadcast deal that got renegotiated, "renegotiated," quote, unquote, with Sony, but they are on the hook for paying $33 million a year and $37 million a year.

Ben Gilbert 2:43:33 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.

David Rosenthal 2:43:48 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 Lalit, and despite his incredible entrepreneurial success, he has made a lot of enemies along the way. [chuckles]

Ben Gilbert 2:44:19 Yeah, and everything was up and to the right. Everyone was making money together to this point. You know, there were some collateral damage [chuckles] from these other people who had lost auctions or people who lost out on the media rights.

David Rosenthal 2:44:32 But nobody had ever actually lost money yet.

Ben Gilbert 2:44:34 Right.

David Rosenthal 2:44:34 And now, for the first time, people are losing money, and this is when the knives come out for Modi.

Ben Gilbert 2:44:40 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.

David Rosenthal 2:44:47 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-... bid rigging in auctions.

Ben Gilbert 2:45:09 That's a big one. Who's gonna get teams?

David Rosenthal 2:45:12 Yeah, pretty hard to say that didn't happen. Awarding contracts to his friends, accepting kickbacks on the broadcast deals.

Ben Gilbert 2:45:21 Oof.

David Rosenthal 2:45:22 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, another BCCI board member, N. Srinivasan, who I think by this time had become the chair of the board and was Lalit's sort of main nemesis on the BCCI board, he directly owned the Chennai Super Kings [chuckles] through Indian Cements. So, like, hey, pot calling the kettle black here.

Ben Gilbert 2:45:52 Right.

David Rosenthal 2:45:53 And then the last two are big ones, that he's accused of, uh, betting on the league and money laundering. So I referred a minute ago to sort of the underworld of India being involved here. Gambling in India is illegal. Writ large, back then and still to this day, it is illegal to gamble, full stop, in India. However, as you might expect, much like the movie Casablanca, you would be shocked, shocked to find gambling going on in this institution [chuckles] . There is a lot of money gambled on cricket in India broadly, and on IPL specifically, after it gets going.

Ben Gilbert 2:46:30 In many cases, through foreign bookmakers.

David Rosenthal 2:46:33 Yeah, so much so, the statistic is that just trackable bets placed through, Ben, like you said, foreign bookmakers in countries where gambling is legal on IPL matches, I believe is something on the order of, like, $750 million per match.

Ben Gilbert 2:46:49 It's a big business.

David Rosenthal 2:46:51 Huge, and that's just what is trackable legally in foreign countries. Clearly, there is also a big domestic bookmaking market happening here, too. It's just happening by the underworld, the mafia.

Ben Gilbert 2:47:03 Yep.

David Rosenthal 2:47:04 So the accusations are that Modi is participating in this and actively betting on games. Obviously, these are really serious accusations. The courts in India, the legal system gets involved, the police get involved. As this is all going down, Modi ends up leaving India and relocating to London, where he still lives to this day, and he has not set foot back in India since 2010, when this all goes down.

Ben Gilbert 2:47:31 And in 2013, the BCCI bars him from India cricket for life. I mean, this thing that he, like, willed into existence, that he created billions of dollars of value for all these other people, he has been barred from.

David Rosenthal 2:47:44 Yes. Modi, of course, denies all of this and defends himself vehemently to this day. You might ask, why did he leave the country then, when all this went down? He actually recently said on a podcast, and has said this publicly in several news outlets, that the Indian mafia had placed a hit on him and were looking to take his life, as he put it, because he refused to allow match fixing to happen in the IPL, and obviously, the mafia wanted match fixing to happen. They're facilitating all this illegal betting that's happening, and, ooh, wouldn't it be great if we could also fix the matches? Dark stuff.

Ben Gilbert 2:48:18 Again, the stories you hear are so divergent that it's impossible to know... There's no reconciling, there's no truth that is converged upon.

David Rosenthal 2:48:27 You know, as we started off the episode with, he's a colorful character. I think what really happened here, and the major point is, hey, everything was working great as long as the music was playing, and Lalit never lost money for any of