Business of Stardom

Entrepreneurship is a way of making money and in the process, satisfy your internal and external stakeholders. Ms. Latika Khaneja

According to a leading business magazine, half of Virender Sehwag's star power stems from his prolific batting. The other half is the work of Latika Khaneja, his manager and founder of Collage Sports Management. Virendra Sehwag was known to the family. That was the time I was contemplating getting started with some venture of my own again, says Latika. At the outset, Latika had no idea about where to go. Where are the sponsors? Viru was still emerging and not a known sporting personality for the corporate and brands to bet their money on. How to get sponsorships? How to get the money in? How to deliver maximum value to the clients as they had trusted Latika with their non-cricketing part of careers? I was Passionate and brought deep sense of personal involvement. In many ways, my ignorance was indeed bliss. I had no mindsets and when I look back I marvel at the element of freshness that I had carried into a brand new business such as this Celebrity Career Management! says Latika Sumit, Latikas husband is a keen follower of Cricket. Sumit also knew Virendra Sehwags family for a long time. Sehwags success presented the cricketer with the challenge of managing his non-cricketing affairs such as negotiations, endorsements and brand management, etc. Sumit was a trusted person for Sehwag. One thing led to the other and soon Latika found herself setting up Collage with Sehwag and Dinesh Mongia as the two players Collage would represent. The dynamics of sports and celebrity management industry in India is marred by low entry barrier, very little infrastructure requirement and a model that perpetuates on network and trust. Further, in a country like ours, there are only a handful of celebrities or athlete, who have the confidence to put the stakes of their own value realization in the hand of others (agent in case of athlete). It is imperative for sportsman to rely on agents for management of their non-cricketing affairs courtesy their packed sporting calendar and relative incompetence in this sphere.
Rajeev Ranjan has prepared this case for the basis of class discussion. IWSB prohibits any form of reproduction, storage, transmission without permission

In this business successful sportsman/athlete can be regarded as products or brands that, with the right marketing strategy, can represent significant value. Further, for a celebrity to be associated with you and to bestow trust, sense of security you bring in as an agent are critical to this business. Its difficult to deal with a celebritys insecurities, adds Latika. Over the years, challenge for Latika has evolved from managing sportsman and musicians to the looming threat associated with a non-self perpetuating model of the business. IPL (Indian Premier League) franchising and player auctions with the conflict in contractual agreement of brands within the franchising umbrella and brand endorsement by individual players have further added to uncertainty.

Celebrity Management: In countries like US and UK, the structure of sports industry is evolved. The stages for sport and sportsmen to develop follow a structure which evolves from the school, college and graduate level to university stint. There are academies where athletes train and the structure evolves to a trainer acting as an agent/manager. These are early opportunities for athlete representation. Out of this organized structure, corporate like IMG align the industry at the global level and create brands out of performing stars. The non-supremacy of one individual sport or game helps hedge the inappropriate cost implications from an early career association with players to the time when the player becomes a superstar. In India, not many games command viewership and hence the attractiveness for sportsman to command brand association and endorsements is long drawn. Take the case of Abhinabv Bindra. He came under collage management before his Olympic gold in shooting. He was attractive to Samsung after his achievement before which it was difficult to position him in the corporate wavelength. The situation of sports in India at the grassroots level is basic and uncertain. For an agent to spot talent and nurture them, both in terms of excelling in sports and to command a corporate acceptance for sponsorship is difficult. Value in the relationship: Endorsements have become an important source of income for athletes. Whereas, match fee and winnings contribute to the income of athletes, a lot of emphasis these days is placed on their other off field activities, appearances and remunerations thereof. Highly skewed distribution of income through endorsements (or other activities) between different athlete of same sport is not an anomaly. In many settings, a few at the top of their profession earn much 2

higher reward than those just below the top. Economists call this a superstar or winner-take-all phenomenon. The career of athletes as endorsers tends to be short lived and volatile. The Commercial opportunities generally depend heavily on the athletes performances in the arena. His value as an endorser (brand ambassador) is at risk of injury, loss of form and controversies.

Creating Value $ Capturing Value

Figure: 1 The Athlete Lifecycle

Time

Much like marketers for other brands, marketers for athlete first build a brand before they can reap the benefit. This is true for Collage Sports, as the associations with players like Virendra Sehwag, Gautam Gambhir, Ravindra Jadeja, Ishant Sharma, and Dinesh Mongia started during the time when they were unknown commodities in the international scene. In India, large companies entering the celebrity management industry scared athlete with voluminous documents and revenue uncertainty. This compelled the industry to remain unorganized and with little entry barrier, people in personal capacities began to align with players and began managing the value drivers. This is further supported by quiet a handful family and friends assigned as agents and managers in Indian Sports. In the current structure, there is very little legality involved in athlete association with Collage Sports or for that matter with any talent management company in India. On the other hand maximum value for the celebrity as well as the firm, agents initiate air-tight contracts. Each contract negotiation takes about 3-6months. There are too many conflicts in the process that the agent resolves to bring value on the table. With realizations of 10-30% in the process, this business has been attractive for the last 10 years for Collage Sports.

Figure: 2 (The Marketing Model)

Collage Sports

Firms

Athlete

Brands

IPL, Franchise and the game changer: The IPL changed the landscape of cricket around the world. It was driven by commercial considerations, challenging the existing controls of national cricket boards. Well before the eight franchisees made up their mind over participating in player auction, the league raised nearly $2 billion from sales of media rights, sponsorship fee and initial franchise license payments. IPL hired the marketing and event management firm IMG to help develop the plan for the new league and to manage the tournament. The IPL created a free market for players, who could make far more in six weeks with the IPL teams than they could in a year playing for their national teams Ref: Exhibit 1: Estimated IPL franchise profit and loss as of May 2008 This commercialization threw unprecedented challenges to the space of celebrity management. The conflicts were galore. The point of conflict was with respect to brand endorsements by players and the association of competing brands which were now either on board IPL courtesy franchise association or with the broadcaster (WSG). The franchisees commitment to these sponsors was in direct conflict with the interest of brands that individual players endorsed. For example, being part of Delhi franchise, Sehwag and Gambhir had to shoot for commercials to acknowledge city franchisees. This gave rise to conflicts in player contracts and individual brand commitments. These players were always on the radar of companies which could not reach star players otherwise or couldnt afford them. Courtesy the IPL deals with city franchisee of these brands and a lot 4

of networking activity in post match events led to direct negotiations of brand association. These were not necessarily being routed through the agent. (A case in point is the Carbon Mobile promotion by Sehwag and also, the Hero Honda brand association.)

Brand Sehwag: How can brand Sehwag best be described? It is easy to say that his performance on the field is largely responsible for Sehwags appeal as an endorser, but there are other dimensions which are equally, if not more important, adds Latika. A first observation is that of as a starry-eyed youngster from Najafgarh, where his family ran a flour mill. Sehwag grew up, like many others from his generation, wanting to be Sachin Tendulkar. Indeed, when he scored his first one-day hundred, filling up for his injured idol against New Zealand in Sri Lanka, he could have been mistaken for him: there was the same back-foot punch on the off side, the minimalistic straight drive and the wristy whip to the leg. And on his Test debut, on a fiery pitch in Bloemfontein, he matched the master stroke for stroke as they both blazed away to hundreds. But soon he emerged his own man, and not long after Tendulkar was playing a supporting, and somewhat calming, hand as Sehwag romped away to a triple-hundred, the first by an Indian, in Multan, bringing it up with a six. Two Tests ago, he had been dismissed trying the same stroke five short of what would have been his first Test double-hundred. His uncomplicated approach - batting is all about scoring as many runs as quickly as possible - belies a sharp and street-smart cricket mind. He has a keen grasp of his own, and his opponents', strengths and weaknesses and exploits them in a forensic manner. What appears risky to many is merely an opportunity for him, and his lack of footwork, which does get him in trouble against the moving ball, is mostly an advantage, for it creates space for his brilliant handwork. Few batsmen have hit the ball harder square on the off side, and fewer still have hit them as frequently. And the sight of a spinner brings the savage out in him: and for many spectacular assaults against the world's leading spinners, there have been numerous outrageous dismissals against the not-so-reputed ones. The most remarkable aspect of Sehwag's career of course has been his ability to build massive Test scores at breathtaking speed. He holds the Indian record for highest number of Test double-hundreds, and came within seven runs of joining Don Bradman in scoring three triple-hundreds. That innings, against Sri Lanka at the Brabourne Stadium in Mumbai, epitomized the Sehwag brand of batsman ship: a mix of imagination, daring, power, skills, and clarity of vision. Virender Sehwag has constructed an extraordinary career with a relentless quest, and a genius, for boundary hitting. With minimal footwork but maximum intent, he has piled Test runs at a faster pace than anyone in the history of cricket. Despite his performance with the bat brand Sehwag poses a few challenges to visual medium. Visual medium demands certain amount of endearing physical appeal, which Sehwag certainly does not have, 5

says Latika. With a little inconsistency thrown in from his bat, nine endorsements as on date with names like Reebok, Hero Honda points to a fair valuation for brand Sehwag, says Latika.

The way forward: One of the major challenges for the industry in India is that the cost is disproportionate. The athlete association begins (for an agent) when he is just about to set his foot in the international sports arena. The financial returns at the domestic level are way below what players make in the international scene. As a result, in the initial part of an athletes lifecycle, the agent is the mainstay for the player. And thus begins the relationship with the players by being approached with the right deal/negotiations. Further, as the players grow in stature (through performances or any other competencies), the relation in the value chain becomes complicated. It is highly likely that players like Virendra Sehwag or Gautam Gambhir in times to come will negotiate contracts on their own courtesy the personal and other transactional platform. In India, such business transactions may or may not be routed through the agent as the contracts in the relationship does not have a legal and binding provision, says Latika. IPL has not only been a game changer in terms of getting revenue to the board, visual medium and players, but also to the independent agent-athlete relationship. Ability of the city franchise to attract either the crowd or the sponsor is facilitated by a few players who are the mainstay due to their performance. In such a situation, it is unfair not to acknowledge the contribution of such players, feels Latika. In a few years from now, to align the contractual agreements between players/athlete endorsed brands and franchise sponsors, its highly likely that the independent agent and player relationship is at risk and it may move to the city franchise. For entrepreneurs like us, who have had no compulsion to be in this business, probably two years is the time to reflect and act on the implications of this shift, says Latika.

As Latika settled into her seat, she wondered whether Collage Sports could successfully cope with the many challenges that lay ahead. Several near terms decisions could determine whether the company was prepared to confront these challenges. She remained pre-occupied with questions.

What do you think will be the future landscape of this industry? What 3 strategic steps would you recommend for Collage to emerge a stronger player in the emerging scenario? In view of the current challenges, is there a scope for deriving value in the agent athlete relationship? Where does the value in the relationship between agent and Collage Sports reside? Is it with the agent, athlete or Elsewhere?

What do you perceive to be the biggest challenge in structuring the business around stardom?

Case prepared by Rajeev Ranjan (For class discussion only)

Reference: International Management Group (IMG), Harvard Business Publishing Maria Sarapova: Marketing a Champion (A), Harvard Business Publishing
MGM & Tom Cruise, Harvard Business Publishing th Outlook Today: 15 Oct 2008