April 22, 2013

IPL-onomics: where Indian players call the shots

Amrit Mathur
Indian cricketers are the chief beneficiaries of the IPL's salary boom

Here's the most telling stat about star player salaries in the IPL: Sachin Tendulkar and MS Dhoni earn Rs 1 crore (about $180,000) every year as part of BCCI's Grade A list of centrally contracted players. That is said to be a fair estimate of the amount they also make from a single 20-over, 3.5 hour IPL game.

Recently I talked about this to Rahul Dravid, who said the commercially driven IPL has dramatically changed cricket's ecosystem and with it the mindset of players. He cautioned that we shouldn't be taken in by the politically correct noises players make about Test cricket being the ultimate challenge. The truth is, every young player wants to somehow land an IPL contract. That is what he is playing for. It is like every bright Indian student who wants to crack the Indian Institute of Technology and Indian Institute of Management exams to get into the country's most prestigious colleges.

Indian cricketers are the chief beneficiaries of the IPL's salary boom. As the tournament mandates that each team must play seven Indian players in its starting XI, the nine franchisees need to hire about 14 Indian players to build their squads. This means that approximately 125 Indian players benefit from what is effectively the BCCI/ IPL's employment guarantee scheme.

Player salaries for capped Indian (and overseas) players are decided by forces more complex than in the era when cricketers were paid by their boards in a structure dictated by them. In a departure from that norm, the value of the players' skills at the IPL are settled through an open and transparent auction. This hammer price becomes a combination of many different aspects: talent, important skill sets (in the 20-over format, multi-utility allrounders are priceless), specific team needs, and/or the whims of an indulgent owner.

This ends up leaving little room for reputations or sentiment. All that matters is the perceived ability of the player to deliver in exceedingly challenging pressure situations. No surprise then that VVS Laxman, stately and stylish, did not interest buyers, Sourav Ganguly was spurned and Brian Lara received no bids. Meanwhile Adam Gilchrist and the Hussey brothers continue to go for plenty. Even an unproven Glenn Maxwell gets a massive million-dollar contract, while Ricky Ponting and Michael Clarke, neither known for their T20 skills, attract much lower numbers.

When asked what the IPL means for seasoned pros like him, Dravid smiled and neatly deflected the question: it is a different world altogether, he said. "The other day I walked the ramp as part of a promotional event. When I started my career, I never imagined this would be part of a cricketer's life!"

Non-cricket factors also affect a player's price, as teams are mindful of the commercial value they bring to their table. Three seasons ago, when Gautam Gambhir, Dinesh Karthik, AB de Villiers and Tillakaratne Dilshan had moved to other teams, Delhi opted for "value" picks but the change provoked disapproval from sponsors, who bemoaned the lack of buzz around the squad. Not only does a team need stars who perform on the field but also marquee names that excite their commercial partners, who are looking for to find a way to leverage their association and reach their customers.

In this complex arrangement there are some unsaid, unwritten rules. One: Indian players count. Except for a handful of overseas names like Gilchrist, Brett Lee and Kevin Pietersen, Indian corporates and Indian fans want Indian cricket stars, which is why Munaf Patel and R Ashwin matter more than Morne Morkel and de Villiers. Two: controversy is bad for commerce, so there is no place for anyone, however good, if he spells trouble.

While commercial forces may be fundamental to every aspect of the IPL's functioning (including the franchise sale in the first place), the IPL's most bizarre move has been denying domestic Indian players market-driven rewards. Instead, it has arbitrarily capped payments to Ranji and Under-19 players, ostensibly to prevent them from getting "corrupted" by cash. Under these regulations, Ambati Rayudu, who is yet to play for India, can only earn Rs 30 lakhs (about $55,000) while Saurabh Tiwary, Venugopal Rao, Abhishek Nayar - all of whom represented India briefly - fetch far more.

Even at these artificially depressed rates, there still remains a crazy scramble for IPL contracts among uncapped domestic cricketers. The contracts are a passport to a dazzling world of unimaginable fame and riches. All manner of player agents - sleazy, slick and suave - have popped up and they lobby and aggressively pitch on behalf of their clients. Most Indian cricketers, including U-19s now operate through these agents. It is not unusual for IPL team managers to have their inbox flooded with smartly produced player portfolios.

Not only does a team need stars who perform on the field but also marquee names that excite their commercial partners, who in turn need to find a way to leverage their association and reach their customers

In the early days of the IPL, franchisees paid serious money to hire top players in order to attract attention towards their brands and engage with fans. Later, faced with financial losses, and alive to the danger of rising player cost that could damage the balance sheet and permanently cripple their business, teams got smarter in picking players. They are still a distance away from the Moneyball levels, but a clear understanding now exists that the player salary expense, unless capped, can wreak havoc. 

Players have become rich, but for some, the cash has become a curse. Yusuf Pathan, Saurabh Tiwary and a host of high-cost players have withered, crushed by the weight of expectation, the gnawing anxiety to justify their cost and the fearsome, although tacit, disapproval of annoyed owners.

There are two sides to earning large salaries in the IPL. Players who earn large sums may also have to surrender some of their commercial rights to team sponsors and partners. Player images are used for advertising but conditions apply: the association of sponsors must be with the team as a whole and advertising cannot be turned into a player's personal endorsement. Players are not individually required to promote a product and any commercial communication requires a minimum of three players to feature together, all wearing the official team jersey.

Players believe there are not enough safeguards in place to protect personal endorsements, because in the wake of the IPL, the market has slumped sharply and demand for individual player endorsements has dried up, except for the few Big Boys (like Tendulkar, Dhoni, and Virat Kohli) who have commercial currency of their own. The rest have been blown away in a marketplace where it makes better business sense for sponsors to associate with a team, and gain access to key players through this partnership.

Still, players stand to benefit cost-wise. For overseas players the money on offer for six weeks of work is game-changing. Sensing this ground reality, cricket boards (especially those with a history of payment defaults and delays) have made peace with their players about participation in the IPL. The ECB is yet to sort out its response, but after the KP controversy and Matt Prior's articulations and the PCA statements, there should be some shift in its position soon.

For Indian players, the IPL is a major leap towards making cricket a viable career. The money offers incentive, insurance, compensation and a certain amount of job security. Of all the IPL's stakeholders, the players are the most critical. The player contract reflects this and is completely pro-player - all players are assured performance-delinked guaranteed payment, and there is no penalty clause. The extent of pay protection in the IPL far exceeds that provided by the Indian government to its employees. (I say this as a former government employee myself). The suggestion some seasons ago that 20% of a contracted player wage would be payable only if the team qualifies for the Champions League was promptly shot down by Indian players.

Besides the comfort of assured payments, there are other benefits too. The IPL mandates that at least 50% of prize money is shared with players. Any trading or transfer can only take place with the consent of the player, and his wage can't be lowered during the contract period under any circumstance.

The peripherals are equally enticing: players are entitled to business-class travel, five-star hotel stay, and a $100 daily allowance. The franchise picks up the service-tax liability, and in the case of foreign players, contributes 10% of the salary to their national boards. Players lose out on minor amounts when they miss games due to injury (50% of the match fee, which is an individual calculation based on their auction fee divided by the number of matches they play) and for non-selection.

In any business, the customer is king but in cricket normal rules of economics don't apply. In the IPL ecosystem it is the players, and in this case the Indian players, who call the shots.

The next article in the series will look at how an IPL franchise prepares to host matches during the season

Amrit Mathur is a former manager of the Indian cricket team and currently a consultant with Delhi Daredevils

Comments have now been closed for this article

  • Ashok on April 25, 2013, 13:42 GMT

    An excellent summary of the true state of Facts. Whilst Dhoni & Tendulkar earn $180,000 from a single IPL game, even Gary Sobers was delighted to get a full 5 month English county season contract of just 5500 Pounds- about $13,000- in 1968! Great Indian Cricketers like Mankad, Umrigar, S.Gupte, D.Phadkar & V.Hazare got <half what Sobers' contract in Lancashire League! So the present day Cricketer must count themselves lucky. Today Cricket is a profession just like Engineering or Medicine or Law. Promising young cricketers of yesteryear had to choose their career path when they reached University at age 17. Many chose Education & hard work at Universities- sponsored by their parents. They abandoned their ambitions of being Cricketers despite their talent. Even Villager Cricketers like Dhoni, Yadev and many others are better off today because they were born in right Era. Kudos to IPL for making Cricket available as a profession to all Indians & making them wealthier than professionals.

  • V.L on April 25, 2013, 7:15 GMT

    @SevereCritic How many years did woods take to make it to that level? Dhoni has made it to 31 in about 6 years and he has 6 or 7 left to better it. By the time he retires, there is little doubt that he will be a billionaire, thanks to n number of endorsements he has been getting.

  • Raj on April 23, 2013, 1:53 GMT

    @severecritic...28 million in a year is not by any means less ..Dhoni and Sachin make much more than many American foot ball and baseball superstars and also many European soccer stars...

  • ANAND on April 22, 2013, 23:08 GMT

    The contract amount is paid to the player irrespective of whether his team reaches the playoffs or not. A player loses money only when he is injured or he opts to not play some games. If he is available for selection all games, he is paid the full amount of his contract.

  • Senthil on April 22, 2013, 22:31 GMT

    IPL in particular and the contract system in general has given the domestic players a chance to make a living out of playing cricket. It has given them a chance to concentrate on cricket and not worry about how to earn for a family. But youngsters should be using IPL as a launch pad rather as a pinnacle of their carer.

  • Arun on April 22, 2013, 21:30 GMT

    @SevereCritic: The reason why the likes of LeBron James, Woods, etc. are paid as highly as they are has everything to do with where they come from. The world's largest economy, which, even today, is larger than the combined GDP of the next 3 or 4 countries (the difference was far more a few years ago). Which are the big economies backing cricket? The UK (#6), India (#10) and Australia (#12) (UN numbers for 2012). Their combined GDP can't match Japan, never mind China or the USA. I'd imagine in PPP terms, though, Indian cricketers get paid as much, if not more, than most NFL and NBA players.

  • S on April 22, 2013, 20:44 GMT

    Cricket is not a high paying sports. Only 2 cricketers feature in Forbes 2012 list of 100 highest paid athletes -- Dhoni (31), Sachin (78). And they earn very little compared to someone like Tiger Woods(3) or Lebron James(4)

  • Zsam on April 22, 2013, 19:23 GMT

    Interesting article by the writer and very well summed up by McGorium.

  • Anubhav on April 22, 2013, 17:36 GMT

    This is the only reason why I like IPL even though I rarely watch it.

  • Arun on April 22, 2013, 16:26 GMT

    An interesting article, but I beg to differ with the final paragraph. The only part he got right was "customer is king". IMHO, the only reason corporates are interested in IPL is because of its potential as an advertising engine. Instead of having to sign multi-year ad contracts with individual players (who may later be dropped, or lose form, be injured, or be controversial), the IPL allows them to hire a pool of players, thereby mitigating the risk (much like stocks). The overall cost to a company for exclusive access to individual star players would likely be much higher than through the sponsorship of an IPL team (hence the annoyance with Delhi's lack of star power mentioned above). A sponsor of (say) CSK gets access to Dhoni, Raina, Ashwin, and Hussey for a price lower than individual contracts with each. Sure, they're shared amongst other sponsors, but they almost necessarily have orthogonal businesses. It's this pooling of resources(and risk)that makes IPL alluring to corporates