One of the burning topics today the world over is the role of government in macro- as well as micro-economic activities.
The Democrats in the US, it would seem, scored a win for government over private initiative in its policies. However, in India, the sector that has faced the most flak for over-dependence on government and public sector woes is sports. Seen by many as a sector where corruption and inefficiencies are rampant, especially in the wake of the Commonwealth Games 2010 controversy, efforts to find solutions have, by and large, been ignored.
There has been no jurisdiction or region in the world, no matter how sophisticated its sports sector, that has escaped controversy and scandal. Hence, there is a strong case for exponentially increasing the role of private initiative in sports, for reasons of viability and sustainability.
FORMULA ONE CIRCUIT
In India, we now have a clear-cut example of privately developed and managed infrastructure leading to successful sports and entertainment properties — the Jaypee Buddh International Circuit in Greater Noida is an example.
Incentives need to be provided to corporations for sports and entertainment investments that lead to positive pecuniary externalities while maintaining world-class facilities and for inviting sports and entertainment properties through normal profit-generating initiatives.
While the Formula One circuit on its own is unlikely to generate enough revenue or interest to justify the investment made by Jaypee, what it does do is provide a year-round facility that is extremely well-maintained for numerous other racing circuits; it can also be used for music concerts, and over time, can provide public access to sports activities at sustainable prices.
The aim should be to incentivise private individual sports properties such as professional leagues and events, so that the revenue and profitability factors would entice sponsors and investors, leading to successful sports properties across the country.
GOVT ROLE
The public-private-partnership (PPP) model has not been successful for whatever reason. Perhaps, it is time to create opportunities for the private enterprises to make a difference in the sports sector. PPP models have not cropped up at an ideal rate, and this is why one must look at providing opportunities to corporations that meet governance and quality standards — by privatising various aspects, including professional sports leagues, centres of excellence, and above all, sports and entertainment infrastructure. However, one cannot possibly underestimate the importance of government in grassroots development, dispute resolution and the promotion of amateur sports.
Removing the government from all aspects of the sports sector is not the solution. The government should be given the responsibility to ensure the social cost-benefit analysis of the sports sector is a positive one. Also, it should ensure that the positive pecuniary externalities arising out of sports are maximised so as to benefit society and, in particular, sportspersons and fans.
Lastly, the role of government in professionalising governance and regulation is crucial, since only a neutral democratic institution should have the responsibility to set in place governance and regulation measures that take into account the rights of all the stakeholders.
FLAGGING IPL
The IPL might be struggling for the very reason that it is seen to be an implicit part of the Board of Control for Cricket in India. IPL has not generated much interest among corporations, especially those looking for wholesome marketing opportunities. A case in point is the lack of interest in the recent sale of the Deccan Chargers — a former IPL championship-winning team, and one with numerous superstars.
By selling at the bargain-basement price of Rs 425.20 crore to Sun TV, and with the pro-rata calculations somewhat vague (five years versus the 10 years over which all other franchisees are expected to pay the franchisee fee), the fact that only two bidders even made the cut makes one wonder at the lack of interest in what is still the most popular sports league in the most lucrative sport in India.
RIGHT BALANCE
The private sector in sports has its own shortcomings as well, which is why there likely shouldn’t be a complete handing over to profit-making initiatives, or autonomy from the government in all aspects. Elitist sports properties may dominate the sports calendar.
The pricing of F1 tickets is one example, and there has already been a sharp drop in revenue and attendance in its second season. Over-emphasis on instant profitability vis-a-vis a fiduciary responsibility to shareholders could be another shortcoming which would take the focus away from sustainability, or developing talent and excellence.
This is why there needs to be a balance of responsibility between the government and private initiative, with a gradual move towards industry status for sports. There has to be a new focus on developing the business of sports and reconciling various economic models to achieve growth in this sector.
The global trend, with the digital information super-highways, has been towards responsible corporate behaviour. Private sector investments in sports properties are likely to be seen as indicative of a level playing field, ushering in transparency and responsibility. Perhaps in a struggling or stagnant economy, perception plays as big a part as actual brand dissemination and sales.
Undoubtedly, the role of government in regulation and governance is extremely vital.
But by ushering in private participation with appropriate governance criteria (or stratifying the sports domain), we will see an increase in viable infrastructure and sports properties all through the year with a quantifiable cost and price structure.
Competition in sports properties is a good thing, if proper floors and ceilings are installed for both private enterprise as well as the sports federations. A mix of appropriate regulation and competition can usher in an independent sports industry.
A case could be made for privatising sports properties and initiatives so that the appetite for risk and entrepreneurship increases in sports and entertainment, leading to synergies and further success stories such as F1 circuit.
(The author is a Sports Attorney at J. Sagar Associates. Views are personal.)