After the failed auction of the Deccan Chargers, I can't help but notice an interesting trend: the stock prices of the owners of nearly all the Indian Premier League cricket teams have lost substantial value since the league was started four years ago.
It's not just Kingfisher Airlines and Deccan Chronicle, the corporate owners most often in the headlines now, that have suffered. The same holds true for GMR, Reliance and others.
Of the nine Indian Premier League teams, seven are owned by companies that have lost a combined $25 billion in market value since the league began in April 2008. While the Sensex index has also suffered during that time, returning just 15 percent before the rally connected to the government's recent economic policy changes, all seven stocks associated with the I.P.L., including India Cements, News Corporation and Bombay Dyeing and Manufacturing, have underperformed the Sensex.
The remaining two I.P.L. team owners, Shah Rukh Khan and Subrata Roy, do not have large listed companies, but Mr. Roy's Sahara Group is deeply troubled, having been recently ordered to pay $3 billion to investors. (At least Mr. Khan is still a king at the box office.)
Could the I.P.L. be cursed?
That may be overstatement. What's true in India appears to be true throughout the world. Let's call it the curse of the sports team, instead.
Guess which company owns the naming rights to the newest major sports stadium in the United States, the nearly $1 billion home of the Brooklyn Nets? Barclays - yes, the Barclays that agreed in June to pay $450 million to settle accusations that it tried to manipulate the benchmar k London interbank offered rate, or Libor. Barclays bought the naming rights in 2007, years before there was a hint of the Libor scandal.
Citigroup bought the naming rights to the New York Mets' new stadium in 2006. Two years later, as the global financial crisis erupted, Citigroup's stock plummeted.
But the steepest downfall in recent years of a company with a sports connection may have been that of Enron, which bought the naming rights to the Houston Astros' park in 1999. In December 2001, it was embroiled in one of the most spectacular bankruptcies in modern corporate history.
“Pro sports teams are a lot like works of art,†the author Malcolm Gladwell wrote last year on the sports-oriented Web site Grantland. He argues that buying a team, like buying a painting, is less about profit than about “psychic benefits,†that is, “the pleasure that someone gets from owning something - over and above economic returns.†Mr. Gladwell notes that sports t eams do go up in value in the United States because they are inherently so few of them. One day, the I.P.L. owners may see similar gains, but at least in the auction of the Deccan Chargers that wasn't the case.
It's not clear whether I.P.L. team owners make money from their franchises, because these numbers are not public, but they have certainly lost equity value on their main businesses. And the loss in equity value in the main businesses would dwarf any operating losses in running any I.P.L. team.
If any of India's banks buys a sports team, or the naming rights to a new stadium, perhaps the Reserve Bank of India should take notice.
There are some exceptions to the rule, at least in the United States. The technology entrepreneur Mark Cuban, for example, has done wonders with a once-moribund Dallas Mavericks, who won the N.B.A. championship in 2011, but he spends in an inordinate amount of time on the team. Similarly, the Pittsburgh Steelers and New York G iants have been profitably run by families who focus on the teams, rather than treating them as part-time occupations. Corporations that stray into sports often end up on the losing side.
In India, however, sports teams appear to be a distraction from the main business. And, for most I.P.L. owners, it has been a very expensive distraction indeed, given the amount of share market equity lost on their main businesses.
