Wednesday, March 05, 2008

The Business of Cricket

Lalit Modi, the boss of the much hyped about Indian Premier League (IPL) thinks that cricketers will soon be the most highly-paid of any sport. According to FoxSports,

Modi says his IPL will eventually rival - and surpass - football's English Premier League for providing players with unprecedented riches.

"If you look at the comparison, Aston Villa were recently sold for $132 million," he said.

"That is a historic club with a ground and established supporters. We just sold the Mumbai franchise for almost the same amount of money, and the team doesn't even exist yet.

"Then you can compare the players: Andrew Symonds is making $213,000 a week for the duration of the tournament, Mahendra Singh Dhoni even more than that.

"Tell me who in the Premier League earns as much? Maybe (Chelsea's) Frank Lampard ($213,300), maybe (Manchester United's) Cristiano Ronaldo ($298,000). But not many." [..]

India wicketkeeper Mahendra Singh Dhoni attracted the biggest bid at the recent player auction, earning $1.65 million per season, while Symonds was second-highest with a $1.47 million a season with the Hyderabad franchise. [link]
Modi says that they imposed a $5 million salary cap per team to prevent a few people from controlling the league, He went on to say that after the cap is removed, cricketers will be among the most highest paid sportsmen in the world.

If money talks in cricket, it screams loudest in India. Here you have 1/6th of the world population, most of them crazy about cricket. The league has already collected a very cool Rs.7,000 crore (about US$1.7 Billion, if my conversion skills hold) from team auctions to investors for a contract of 10 years. The team owners share 60-80% of TV revenue, 60% of sponsorship revenue with the league and they can keep 100% of other forms of revenue - merchandise, tickets, etc.

IPL's impact on the game would be revolutionary, I say would be because I fully expect IPL to succeed. The IPL as of now has attracted some of India's biggest businessmen and Bollywood stars of the likes of Mukesh Ambani(Relliance), Vijay Maliya(Kingfisher), Sharukh Khan and Preity Zinta. If people like Ambani and Maliya are willing to gamble this big, you can be rest assured they think the league would be big in terms of returns.

Cricket clubs running as business ventures is how it should have been all along, that's how every other major sports in the world is run and it works like a charm. More money in the business of cricket would mean more investment in infrastructure, training facilities, better coaches and players. Aspiring cricketers will now have potential employers competing for their services and all of this will be good for the game.

But how did all this happen so suddenly? I can think of two reasons. One India winning the 20/20 Cricket World Cup. Two, the Indian Cricket League - the rebel league which started a similar tournament last year. ICL may or may not have been a success but what it brought was competition in the market, BCCI suddenly found itself facing competition, the result - it's own version of a 20/20 cricket league, the IPL. Sure, BCCI bullied ICL and behaved like a typical monopoly, but they are after all (unlike in Sri Lanka) a private entity - albeit with heavy political influence. So this kind of practice was to be expected. You could argue, and I would agree, BCCI is a monopoly only because (las is often the case with monopolies) of government's involvement in the game. But at least the BCCI has built in competition in the IPL, which is a good thing.

A pertinent question is whether IPL-like initiative can be spawned anywhere else in the world, the answer is it's entirely possible. Although I don't expect the revenues to be as high in India, there can definitely be some profits made if SriLankaCricket or any other cricketing authority is willing to experiment.

In an impressive paper Preston, Ross & Szymanski (PDF link) has called for pro-cricket back in 2001 proposing there should be a "World Cricket League" for one day internationals, for clubs based on cities/regions. They have argued for ICC to sanction such a tournament and predicted that "if this does not happen, we also think it quite likely that such a competition would generate itself spontaneously". The paper incidentally, recommends India as the most suitable place for such an enterprise.

Their predictions have mostly come true, but there's still a lot of room for innovation and enterprise in cricket, especially in places such as Sri Lanka where the business potential for cricket has been poorly utilized.


Anonymous said...

I think problem in sri Lanka is too much of politics to do anything. only power issues. Now Arjuna Ranatunga, when UNP comes it will be Thilanga Sumathipala like that. everybody wants to just corrupt the system for their own benefit, promote cricket is secondary.

This blog have improved from the last time i was here, keep up the good work.

Anish said...

Agreed. Cricket should always be a business, it's great we are moving away from demonising commercialisation in India.