March 13, 2008

Opportunity, choice and the IPL

Talk about silly money all you like, but the bottomline is, the IPL will bring competition and the rules of the market into cricket - and that can't be bad

The likes of Ishant Sharma and Andrew Symonds have been sold for the prices they have because the franchises think they can get a return on their investment © Getty Images

The silly season of cricket punditry is upon us, and I blame Lalit Modi. Had the man not unleashed the Indian Premier League, newspapers and websites would not be full of otherwise sensible commentators telling us that the world is coming to an end because there is so much money in the game and the centre of cricket is shifting to savage, uncultured Asia. They rail against the profit motive and splutter indignantly and eloquently against the huge amounts given to some of these players. Some, like Tim de Lisle in a column a few days ago on Cricinfo, complain that such "silly money" is "disgusting" in a country that "encompasses a great deal of poverty".

I disagree. Firstly, I think that the IPL is a huge step forward for cricket. Second, contrary to what de Lisle writes, it is good for India as well. Let's start with cricket.

The problem with cricket in most cricket-playing countries, certainly in India, is that the cricket market is what economists call a monopsony. A monopsony is a market in which there is only one buyer for a particular class of goods and services. Until now, a young Indian cricketer who wanted to play at the highest level could only sell his services to the BCCI. If it treated him badly and did not give him his due rewards, he had no other options open to him.

This was exacerbated by the lack of accountability in the BCCI. The men who run it get their posts by pandering to the state associations that vote for them, by handing those associations ODIs that bring them revenue, by distributing posts within the board, and so on. How the cricket team performs on the field has no bearing on the tenures of these men; those are determined by politics.

This has two implications. One, the incentives for picking the best team possible aren't too strong, as there is no penalty for poor performance. (In fact, regional politics within the selection committee has sometimes ensured that the best team hasn't been picked.) Two, a player who suffers because of this has no other options open to him.

While the BCCI will continue to run along the same lines, the IPL turns this on its head. There is competition between the franchises, who have spent tons of money to enter the IPL and need to make profits to justify their involvement. This acts as a powerful incentive for them to hire the best cricketers they can find, and to develop new talent. Teams that are selected based on politics or bias will play worse than the teams that don't, and their bottomline will suffer.

Equally, all the incentives are tailored towards finding and developing new talent. If the IPL is a success, don't be surprised if the franchises open their own academies and nurture youth teams - it is in their financial interest to do so. Precisely such feeder systems have developed in the Premier League in England, and all for the sake of the much-maligned profit motive.

Think of what this will mean for the players. A talented young cricketer frustrated by the BCCI will no longer have to suck up to officials and hope that they notice his talent in the handful of games he gets in local cricket. Instead, he will find eight potential buyers for his services. If he has either talent or potential, they will compete to employ him.

The BCCI has helped this process along with the mandate that each team employ at least four cricketers under 22. As a result, the players of the current Under-19 side have suddenly become much sought after. This will happen to every future Under-19 side. Young talent will be less likely, in future, to fall by the wayside and be ignored. Callow fast bowlers will be less likely to be injured for long periods of time, for their employers will hire the best trainers to look after their assets - cold as it sounds to call them that.

A common complaint about the IPL centres around the money paid to individual cricketers. Does Rohit Sharma really deserve more than Ricky Ponting? Are the men paying Ishant Sharma more than Dale Steyn and Glenn McGrath making a silly mistake?

Well, firstly, these investments are made not just on the basis of cricketing ability but also on factors like brand appeal and likely availability. Secondly, more importantly, if they are foolish decisions, then the most potent commentary on them will come not from cricket writers but from the balance sheet. Those who make foolish investments will suffer; those who are smart will prosper. Eventually, as this market matures, we will come closer to finding out the true value of players.

There is competition between the franchises, who have spent tons of money to enter the IPL and need to make profits to justify their involvement. This acts as a powerful incentive for them to hire the best cricketers they can find, and to develop new talent. Teams that are selected based on politics or bias will play worse than the teams that don't, and their bottomline will suffer

Some commentators take issue with so much money being spent on a sport in a poor country. "[M]ost of these millions will be leaving India," de Lisle wrote in his piece, "filling the coffers of Australian stars who are already very highly paid. Money shouldn't travel in a direction like that."

If that logic was correct, we might as well stop poor countries from importing anything. Every trade happens because it leaves both parties better off, and the IPL's foreign players are being paid so much because they bring that much value to the table. That value, the return on those investments, will happen within India. Andrew Symonds may be delighted that his services are being sold for $1.35m, but the franchise that bought him also thinks that it can get at least that much value out of him, through the various revenue streams open to them.

Every flourishing business creates employment opportunities and enriches the local economy. The IPL will offer more opportunity to cricketers coming up the ladder, and more choices to cricket viewers. The income disparities that pundits complain about are best tackled using exactly such a combination of opportunity and choice - and not by keeping everyone poor.

Also, we don't live in a zero-sum world - the profits from the IPL will not come at the expense of better causes. In fact, they will be invested back in the local economy, and in the long run, along with the profits of many other businesses started for the supposedly base purpose of making money, will end up creating jobs for people who might otherwise have to depend on charity. That is how economies grow and people progress.

Having said that, the IPL could fail, for not every good idea is rewarded with smart execution. Maybe the franchises got carried away and bid too high (game theorists call it "the winner's curse"). Maybe the games will not get high enough TRPs, as a cricket-loving public deluged with an overdose of cricket finds other ways to entertain itself. If it does flounder, it will be a pity, for its failure will be remembered and used to prevent other such experiments.

On the other hand, if the IPL succeeds, cricket historians may one day write about 2008 as the year that cricket discovered its future.

Amit Varma, a former managing editor of Cricinfo in India, writes on economics and politics. He won the 2007 Bastiat Prize for Journalism, and writes the popular blog India Uncut

Comments have now been closed for this article

  • Sunder on March 15, 2008, 16:35 GMT

    Amit- I like the free economics scenario you project here but something does not seem right, the analogy I draw is Musharaaf espousing his country is run as a free democarcy whereas he still hold the "key".

    BCCI is running the show I am not sure if this is good for IPL 20-20 cricket, given their track record of making a mess of all good things....

  • Mayur on March 15, 2008, 14:50 GMT

    the first half of this article tries to convince that in cricketing terms this is good...but i dont see how given that the IPL severly punishes a player for playing for a rival organisation. BCCI is leveraging its might and armtwisting players into being fearful. Also how many players are foreign and how many are indian players who havetn already made it big. questions like these show that IPL is not ideal for cricketers who have not made it yet. Its good for some players who are getting money who otherwise wouldnt have so soon...but these is just a drop in the ocean of the potential that is there.

  • Roger on March 15, 2008, 10:35 GMT

    Well-written article.

    However, as you have touched on at the end of the article...the key problem that faces the world game is TOO MUCH cricket and the real danger of adding more tournaments and different variations of the game is that the public (who are already saying there is too much cricket) will eventually become overdosed and sick of it.

    Maybe the answer is to play less International cricket and focus more (like eg soccer and basketball) on developing excellent domestic leagues who recaptivate people's imaginations for supporting & following their local team. 20:20 may indeed have a role to play in this. If strong well-attended local domestic cricket can be revived then the present quantity of annual International ODI's and Tests should be reduced otherwise the cricketing public will only reach saturation point quicker.

  • R on March 15, 2008, 1:50 GMT

    Amit, I think extolling the virtues of a free market while ignoring the attempts of the BCCI and other cricket boards to undermine the ICL is myopic. The IPL is a flawed initiative by a flawed bunch of people. What I would like to see from someone is an assessment of the legality of the BCCI's actions. And what I would like to see happen is a massive BCCI-monopoly busting lawsuit.

  • Amique on March 14, 2008, 17:43 GMT

    I am afraid that cricket will end up as American Pro Wrestling,the focus shifting from pure sport to pure entertainment.

  • Chai on March 14, 2008, 14:28 GMT

    economics holds good except for the fact that BCCI is not paying any amount to other cricket boards who are supplying their cricketers to IPL after spending years in nourishing them. Also the newly generated cash in cricket should be used through ICC channel for the betterment of the cricketing infrastructure since it is the efforts all round so far that cricket has reached this stage of popularity.

  • Ramakrishnan on March 14, 2008, 5:02 GMT

    I totally agree with Mr Chriswillott1 on the impact of IPL (backed by ICC) and the moves of certain Cricket Boards to ban players appearing for ICL. Some years back, when the Australians toured England on an Ashes tour, one County player (originally born in Australia) then playing in the English county championship, was drafted into the English team. Allan Border, the Australian captain then remarked this move as: "The Rat who joined the sinking Ship". The present scenario of players from various countries joining the IPL reminds me of the story of "The Pied Piper of Hamelin". Its anyone's guess to know who is the present day Pied Piper.

  • Girish on March 14, 2008, 3:11 GMT

    Well, the article does seem well thought of but the lack of mention of three letters "ICL" also seems intentional. But why? IPL and BCCI would definitely like to take all credit for everything they are "trying" to do for the cricketers both current as well as upcoming but they definitely didn't do that for years. So, why suddenly the change of heart? That's where I think the mention of ICL was definitely missed. It was ICL's announcement that sent the wake-up alarm for BCCI and it reacted with its announcement of IPL. Even now also the approach they have taken to curb and suppress ICL but banning players is so unjust and unfair but I still am surprised to see noted columnist are still hesitant (scared sic?) to call a spade a spade?

  • Krishnan on March 13, 2008, 23:38 GMT

    This is an excellent reply to that comment "silly money" being thrown around. Finally 20/20 provided the much needed Franchise opportunity to cricket whilst Basketball had NBA (in US), Baseball had MLB (in US again!), Americal Football had NFL (in US) and soccer had EPL (across Europe). The problem was that people could not stomach the reality that India took the lead in getting not one but two sets of such leagues (ICL and IPL) and it is not even a so called super power yet much to the disappointment of Tim de Lisle and similar blokes. It is great for the game and 20/20 is here to stay - much to the disappointment of me the purist test cricket lover! But beyond that disappointment is another reason to smile, this is choice for public, for crickets for pure cricketing powers. I wish it had come during my days of playing the game, at least it is here when my son is picking up the bat and ball!

  • Dinesh on March 13, 2008, 21:03 GMT

    I am very worried about the cricket overdose factor. The ICL ends on April 8th and the IPL begins a week later. Moreover, there has been so much hype been created about Symonds, Ponting, Lee etc that it will be a major let down for the public if these players dont show up and/or dont perform, the public will not really like it. Another aspect that concerns me is the commercialism. I hope they dont go overboard with cheer-leaders, insane number of inane advertisements and SMS contests that can win u a chance to hold Pontings bat for like 5 secs!! The Indian crowd knows their cricket. I just hope it doesnt get too much in-ur-face like how the Star Sports coverage of cricket nowadays is. Amit, I must applaud you for ur sense of optimism that these teams will develop farm systems. One thing I know after watching cricket for the past 15 yrs, anything that involves the BCCI means no development, no benefit of cricket. Just MONEY! Pure and simple!

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