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Rediff.com  » Business » It's sports that needs the reforms

It's sports that needs the reforms

August 14, 2004 14:59 IST

Michael Schumacher, Ferrari's champion Formula 1 driver, gets paid $40 million annually; and earns more than twice as much from commercial sponsorships and endorsements. Ferrari has an annual racing budget of $750 million, and makes a profit.

The company that owns the top-end racing business is worth a couple of billion dollars. Or take another case. Kobe Bryant, the American basketball player, is paid just under $30 million, and has a Nike sponsorship that fetches him more than one-and-a-half times that sum. The Lakers, for which he plays, have an annual revenue of $500 million, and profits of $50 million.

If one were to judge from these two examples of successful sports, some ratios suggest themselves. A top-ranked sportsman makes about twice as much from sponsorships as he does from his team. The team earns 10 to 15 times the fees that it pays to its superstar, and makes a decent profit.

And the sport's controlling body or company has a valuation that suggests its revenue stream is not much bigger than that of the leading teams. It seems a fair division of the spoils.

Now switch to India. The top-ranked cricketers (Tendulkar, Ganguly, Dravid) are to be paid Rs 50 lakh (Rs 5 million) a year as a base contract. If you include playing fees, each of them earns around Rs 1 crore (Rs 10 million). Tendulkar probably makes Rs 20 crore (Rs 200 million) from endorsements, the others less. That means the sports body (which in this case doubles as the team company) pays them a tiny portion of their total income.

Indeed, the cricket board's total payments to all cricketers in the country would not cross Rs 20 crore in a year. Against that, it has something like Rs 200 crore (Rs 2 billion) lying in banks as fixed deposits -- money that it should have spent on creating the infrastructure for the sport's development.

The board is now threatened (and deservedly so) with the loss of its tax-free status because, while retaining the cloak of a regulatory body for cricket, it has increasingly taken on the hue of a commercial organisation.

This peculiarly Indian dualism explains why the country's richest sport is run in the way it is, with politicians attracted to its seats of power like bees to honey. As we've seen in the past, banks are willing to give friendly loans to people who bring in big-ticket fixed deposits.

Some of this might begin to change, because the super-star cricketers have been strengthened by their commercial power and now have the clout to negotiate with the board for a better deal that favours all players, not just themselves (shades here of the Association of Tennis Professionals). At the same time, cricket is about to become a much bigger business.

As Business Standard reported yesterday, the cricket board is expecting to make Rs 300 crore (RS 3 billion) a year from selling TV and other rights.

Under the deal still being negotiated, the board will pay about a quarter of that to the players (who as a result will see a dramatic increase in their fees). But the board will have even more money left over than it does now, with no one to say how it should use it.

As the Indian TV audience grows in size and importance, these trends will get accentuated, and the dualism will become increasingly untenable. In short, Indian cricket will have to be restructured and become more openly commercial. If companies are born or get into the action as a result, we might even get a proper domestic cricket season.

And, since we are at the start of the Olympic fortnight, spare a thought for the other sports as the country braces itself for yet another drought of medals.

India's Olympians don't have proper coaches, didn't get their pittance of foreign exchange allowances in time, have little by way of professional support (other than to hush up doping scandals) and, as in cricket, have to recognise the all-encompassing power of those who grace the malfunctioning sports bodies.

It is hard to see change coming from within (KPS Gill is not about to change his ways, for instance). And it is hard to see change coming from the government, when you have a 74-year-old minister for youth affairs and sports. Even more than the economy, Indian sport cries out for reform.

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