India Offers Potential ‘Gold’ for U.S. Leagues Amid China Tumult
In recent weeks, the Women’s Tennis Association decided to suspend future events in China as a response to the country’s failure to adequately address the sexual assault allegations made by WTA Tour player Peng Shuai. The White House, meanwhile, announced plans for a diplomatic boycott of the 2022 Beijing Olympics in response to the “ongoing genocide and crimes against humanity in Xinjiang.” U.S.-based sports leagues have long portrayed China as a lucrative international growth opportunity (none more so than the NBA). But if that opportunity is less viable today than it was just a few months ago, it is reasonable to wonder where else the big five sports leagues could find exponential growth abroad. “India is the other market where it makes sense to try and break in if you can,” said Sam Porter (co-managing partner, Necaxa). He sees a host of macro trends that indicate the second most populous nation in the world “could be an emerging pot of gold” for investors and sports properties alike in the decades ahead.
JWS’ Take: The Chinese opportunity is much further along than the one in India right now. But there are several reasons to believe India has potential to drive meaningful growth (the NBA has suggested it could be the next billion dollar market). For starters, the TAM is massive—and growing (around 1% YoY). And with a population of 1.39 billion, roughly 18% of the global population resides there.
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The Indian economy is also trending up. GDP per capita is climbing around 5% per year, and private data suggests disposable income for Indian consumers will double over the next half-decade or so. Gerry Cardinale (founder and managing partner of RedBird Capital) added, “The [country’s] middle class is expected to double in the next decade to 800 million, and its spending share is projected to grow to over 80% [from 70%] in that same time period.”
In addition to the compelling macro-economic trends, India seems to offer a cultural fit for U.S. sports leagues. As Porter noted, “English and Hindi are officially the country’s first languages.”
The population at large has also shown a strong interest in sports. For perspective, 44% of Indian TV households watched a 2020 IPL cricket league match live (accounting for around 61 billion viewing minutes). And there are more than 300 million active basketball players within the country. “People talk about India, Asia and Africa as emerging media markets,” Porter said. “But India is actually very real because they love sports, and they are emerging as an economy.”
India still has plenty of work to do in terms of infrastructure and grassroots development. There isn’t nearly as much diversity, in terms of the sports people follow within the country, as you might find elsewhere. But the passion Indian sports fans show for their respective IPL and EPL clubs would lead one to believe they could grow to love American teams, too. Said Cardinale: “Everything we’ve learned is that the Indian fan has many similarities to the American fan, rooted in a strong passion for sports. But while the U.S. is ‘mature,’ in terms of the number of sports leagues available to fans, India is much more nascent with more room to run.”
Given the state-owned nature of many businesses in China, the U.S. sports leagues are bound to find it significantly easier to conduct commercial business in India. Some institutional investors have started to move money out of China, and toward India, for this reason.
They will find companies eager to invest in sports marketing and sports sponsorship there, too. Matt Walsh (managing partner, New Zealand Breakers) said that several India-based software and fin-tech companies have expressed interest in “large-scale” sponsorships since his club signed Indian basketball star Princepal Singh just a few weeks ago. That is despite not knowing if Singh will play meaningful minutes for the team. “The country is just so thirsty for a star athlete that [these companies] are willing to make an early bet on the player as he works his way towards the NBA,” Walsh said.
Walsh suggested the various pacts—particularly valuable since that they come from outside the team’s home market and do not encroach on existing partnerships or established asset classes—could end up being worth a couple million dollars in revenue. “There’s a lot of capital [in India], and if we’re strategic with how we market Prince and sell [his] story, there will be brands who want to be part of that,” he added.
The ongoing digitization of India is another trend that should excite U.S. sports leagues. A 2020 Cisco report projected the country will have 2.1 billion internet-connected devices (think: smartphones) by 2023, up from 1.5 billion in 2018. “The fact that mobile device connectivity in the Indian market is growing so rapidly means that rights holders have no legacy structural economic barriers in converting linear TV subscribers to streaming subscribers,” Cardinale explained. “They can go straight to streaming with minimal cannibalization—all upside—which is something every media player finds valuable.”
Smart money has begun to take notice of the Indian sports market. In recent months, RedBird Capital and CVC have invested in IPL teams. RedBird also took an ownership stake in Dream11, an Indian daily fantasy sports platform. The PE firm believes the number of DFS players will grow to 100 million within the next five years (today there are around 40 million).
It’s not going to make sense for every North American sports league to try to break into India (or to invest more heavily than they currently are). But for the NBA, MLS and MLB, sports that are played or watched in the country, it seemingly does.
The NBA and MLB are actively engaged in growing their presence there (MLS does not currently have a strategy specific to growing the league or its teams in India). Scott Levy (EVP, managing director, NBA Asia) explained that the NBA has taken a three-pronged approach to the market, “which includes grassroots and elite development, ensuring NBA games and localized content are widely available, and showcasing the NBA experience through live games and interactive fan events” over the last decade.
MLB opened an office in New Delhi in 2019 and has since initiated school programs and introduced a youth tournament called MLB Cup within the country.
As for the NFL, none of the 32 clubs bid for India as an International Home Marketing Area (the majority of bids aligned with cities where the league has an office). However, the NFL does have an existing broadcast deal in place with Star India, the Walt Disney Co. subsidiary, to broadcast live games each week, including Sunday Night Football, and the entirety of the NFL postseason.
It should be noted that India is not without its own human rights concerns. Strong anti-Muslim sentiment, fanned on by the current government, has led to discrimination and violence against a religious subset of the population.