Guaranteed revenue. Yep. Guaranteed long-term rights deals, asset light, so to speak. You can now start to understand why the league collectively has been most recently valued at $16 billion and why the most successful teams like the Mumbai Indians are around 1.3 billion, average teams about 1 billion in valuation. There's real revenue here to support those numbers now.

Absolutely. So this is a TV game. Media rights and central sponsorships are still by far the lion's share of total revenue coming into the league. Local revenue that the franchises are generating, this is ticket sales, luxury boxes such that they exist, suites at the stadiums. We'll get into that in a minute. Local sponsorships, etc. That's probably 15-ish percent of total revenue in the league. So 85-ish percent revenue on the central media rights and sponsorships, 15-ish percent local. Add all that together, you've probably got 1.7, 1.6 billion in total revenue that's flowing into the league annually. Now, here's the kicker. All of this is for a league that currently only plays 74 games in a season that only lasts two months. So one way to benchmark different leagues against another by scale, impact, revenue, value, etc. is to adjust for how many matches they play. There's a difference between the IPL that only plays 74 matches and Major League Baseball that plays, what did you say, about 2,000 some odd games? About

2,500.

So if you look at that revenue coming into the league on a per-match basis, IPL is already the second most valuable league in the world behind the NFL, second most revenue per match in the world. It's like 16, 17 million per match in media rights that are sold. Yep. So Ben, I think you have like the whole list here that you built out.

Yeah. Well, I read so many articles about this that all seem to contradict each other. And from our NFL episode, I felt like you and I had a pretty good understanding of all the different ways that the NFL had sliced their revenue. And I just thought that these people are all misreporting this information. So I went and added all the deals together from each league, divided it by the number of games played in each league. The NFL is so far ahead of everything else that it's a little bit farcical to say the IPL is second. If you include the NFL network, which I think you should, even though some of that is non-game content, the reason people care about NFL network is that it has red zones. So I included that. So you got ESPN, ABC, Disney's deal, Fox's deal, CBS's deal, NBC's deal, Amazon's deal, Google's deal with YouTube, Netflix's deal, Peacock's deal, and the NFL Network, the NFL does a total of $14 billion a year in media rights revenue across not that many games, 285 total games. So the NFL does somewhere between $45 and $49 million per game in media rights revenue. Now, sure, IPL cricket at 16 is number two because English Premier League somewhere in the 15-16 range, but the NFL is three times the next highest. Right. And so then if you

look at a total revenue basis, the NFL total annual revenue, everything Local added up is on the order of $20 billion a year. And then, like we just walked through with IPL, right now, it's called a $1.6, $1.7 billion a year.

For a 17-year league that only has 10 teams.

And only plays 74 games a year. All of this incredible already. If you look at it on the per match basis, it's number two to the NFL and everyone else is

really far behind. We should say English Premier League is the only one that's sort of rivaling IPL cricket, but the NBA is the next closest at 5.3 million. So a third of soccer or cricket. Then you've got La Liga, which is the Spanish soccer league. You've got what's Germany's league, David? Bundesliga. And that's also around five. But then MLB is like a million seven per game. The NHL is 800,000 per game. Major League Soccer, 500,000 a game. The quote unquote big four in the US, it's really the NFL and everyone else in terms of media rights revenue per game. Yeah. So the per match thing is an interesting way to look at this from an advertising perspective. It's interesting if you were renting the facility and you're trying to get the most money out of my facility rental for that night or, you know, some sort of classic unit economics like that. But really, if you're a team owner, the interesting thing is not how much revenue or profit is generated per game from meteorites.

It's absolute economic impact of this.

Right. And I don't care how many games they play at all. I care how valuable is the franchise that I own and how big of a business can I build around owning the franchise. Totally. It's

a tenth the size of the NFL today, by that respect. Right. Now,

the question is, what is the total value of the MLB? If the total value of the IPL is $16 billion, how does that league value compare to other league values? I think that's an interesting way to look at it. But again, nobody owns a league. People own teams. So probably the most interesting way to look at it is how does a $1 billion valuation for the average IPL team stack up to other leagues around the world? It's not NFL. It's not NBA. But it's kind of amazing that in 16, 17 years, these things are in the billion-dollar conversation. Remember the Clippers, when Steve Ballmer bought it, it was only $2 billion. NBA franchises today are like $5, $6, $7 billion, something like that. But it is sort of quickly entering that conversation. And half of the revenue gets taken before you even get to see a dollar. By the BCCI. Yes, yes. I mean, it's crazy. So maybe put another way, is there a world where these are actually $2 billion teams if the BCCI wasn't taking half of it? Yes, absolutely. You would have a lot more costs, like player development and stadiums. So anyway, that's sort of the few different ways to slice it. There's the per game. There's what's the league worth. There's what's the individual team's worth. I also wanted to try to figure out on a multiple basis, how reasonable are these valuations? It's a billion-dollar valuation on these teams for anyone buying in. Again, on average, I suspect some of them will go for more. What does the actual income statement look like? It's impossible to know for sure because none of this is public and reported. It seems reasonable that they would do $70 million, $80 million in revenue. That's after the BCCI's take. That's inclusive of the local revenue. So think about a business that's doing $70-80 million top line. The salary cap is $17 million, and you're not paying any stadium, and your only debt service is if you are still paying a franchise fee back to the BCCI. have almost no cost in this business.

Right. So as you're comparing business dynamics here versus other leagues, and particularly the NFL, on the one hand, you've got this albatross, if you will, of the BCCI taking 50% of central revenue. But you

don't have the players taking 50% of your revenue the way

the NFL does. And you don't have the capital-heavy nature of the stadiums, which there is risk and opportunity to that, as we'll get into in a minute. Exactly. So

I think the team net income right now is about $50 million out of pre-tax basis, but there's no depreciation in other, I mean, not material anyway. So you got a business that is doing $80 million top line and 50-ish million on the EBITDA line. This is a 60, 65% EBITDA margin business. They're growing really quickly. Like every five years, there's this massive step up in media rights. And because these businesses have crazy operating leverage, it all kind of does fall to that bottom line. And again, the reason for the operating leverage is because the player contracts just don't grow that fast, but the media rights revenue is growing incredibly fast. So there's this ridiculous operating margin that has kind of kicked in this media rights cycle. They used to be break-even, and then they were pretty profitable, and now they're really, really profitable. And

as revenue keeps going, they're going to get really, really, really profitable. Right. So right now, at a billion-dollar valuation, that's 20 times EBITDA, pre-tax earnings, whatever you want to call that. And

it's, what, 12x revenue? That's a pretty attractive

valuation as an investor.

Right. Well, whatever they are, they're market valued. Right. There is a competitive market both to buy and sell equity in these teams right now. We aren't saying that something's high or low. It's interesting to see what the market values it at.

And there is a reasonable financial valuation here, unlike many of the other leagues where the teams trade primarily on asset values instead of as P&L, you know, scarcity value. Right. So David, we're

sort of arriving here in analysis. And to start, there's sort of an idea that you planted.

Yes. So I proposed to you a couple days ago that we bring back a version of the bull and bear case that we used to do here at Acquired. And in this case, I think we should do bull, bear, and mega bull case because I think there is a mega bull case here. And the question specifically we should address in this should be, is there a reasonable path that the IPL could 10x in revenue economic impact over the next set of time and be equal to, or perhaps even in Megabull case, greater than the NFL in terms of economic value and revenue generated to be the number one or tied as the number one sports league in the world.

And the reason I think this is particularly interesting conversation coming out of the valuation conversation we just had is the number one thing that matters in valuing any asset is what assumptions you are making about its future. And so you can't say that something is expensive or inexpensive unless you talk about what your inputs are to guide that future. So the most important input in the IPL team P&L right now, there's sort of three big levers as I see it. One is, are the media rights deals going to keep growing at the rate that they have been growing? Which on the media rights, our good friend Arvin Navaratnam at Worldly Partners has actually done the math to look into this. And as always, we will link to his excellent report in the show notes. Since 2008 to 2023, the media rights have grown at an 18% compound annual growth rate from that $100 million a year mark, going with the $100 million, not the $60 million. The headline

$100 million a year mark.

To the $1.2 billion that we have today. Lollit math. Yes. And so then the question is, will it keep at that 18% growth rate? The second big lever is, is the BCCI permanently going to be taking 50% of the revenue? It seems like they will, but I think it's worth examining what could cause that to change. That's a big swing,

one

way or the other. And then the third one is, is there any natural force that will cause the salary cap or the player cut of revenue to grow as fast as the top line? Or is it going to keep getting smaller and smaller and smaller on a percentage basis or even stay the same if it was just sticking around at this 12, 13, 14 percent of total team revenue? From

a team owner basis, that's fine. That's

Right. I think this is intrinsically linked with the BCCI conversation because it's almost like in the IPL, not only do you not have a player union, first of all, let's just say there's no equivalent of the NFLPA, the MLBPA. There's no players union to bargain. Do you know that there actually is a players union?

Yes. Do you know what the players union is? Yes.

It was put into place by the Supreme Court ruling and the players union is only retired players. Yes, it is the union of retired players. It's the pensioners from the PCCI. It's unbelievable. No current players are allowed to be involved. Amazing. So not only is there no ability to bargain, and clearly it's in no player's direct interest to walk away because it's life-changing money. It's fame. It's like your childhood dream. You're going to play in the IPL. There's the element that you can't go play outside of India or else then you can't play on the national team. So that's a big hammer or stick. But there's actually a third and a fourth thing. Your income is determined by the BCCI, who determines your income if you play for the national team or other Indian leagues. Or indirectly the IPL. Yep. Yeah, because the BCCI sets

the salary cap or the auction purse size.

Right. And then there's the fourth thing, which is, okay, cool. There's these other leagues popping up. There's South Africa. There's the US. The IPL team owners are starting to own or have partnerships with the other T20 leagues that are popping up. And so it's very easy for them to be like, you guys shouldn't allow players union and we won't allow players union. OK, great. You guys shouldn't pay higher salaries. We also won't pay higher salaries. OK, great. And this sort of happens at the international governing body level anyway. The

effective state of play right now, they are all effectively serfs to the BCCI and the IPL.

Which is crazy. This whole thing is effectively 50% owned by a quasi-governmental regulator. Amazing. So I just lay those things out there because I think those are sort of the big levers as you consider valuation of what's

going to change. Okay, I love it. That is the right backdrop investor mindset to think through evaluating these cases. First, bull case is just simply media rates expansion, which is just simply demographics. If nothing else happens except that India and the Indian middle class keeps growing like it has been and is projected to, both in absolute size of the Indian middle class and relative wealth of the Indian middle class relative to other countries in the world, that alone is probably the biggest lever here.