Thursday, March 29, 2007

Economics of Cricket

Today I read an interesting view by an economist, Niranjan Rajadhyaksha, on the Indian cricket scene.

There is an important difference between those who play individual sports such as tennis and those who play team sports such as cricket. It is called selection. A tennis player is not selected by anybody. He can rise to the top rankings purely based on his abilities.

A cricketer cannot make his mark at the highest level unless he is selected in the national team. This fact is what makes the labour market in cricketers so special - there is only one buyer of their skills. Economists call this a monopsony. The national cricket boards are part of a buyer's cartel. You either get selected to play in the national team, or you languish in the shadows. There is no other option.

In football, for example, there is a professional league where clubs play each other. A footballer not selected to represent his country can still make a career by playing for a professional club like Arsenal.

The cricketing monopsony has gotten even more powerful over the past two decades. The stranglehold that BCCI has over Indian cricket ensures that all attention is focused on a few individuals that BCCI thinks should play for the country. From that come long-term contracts with advertisers and the media - and neither would like competing cricket tournaments that will splinter audiences. The revenue model is based on the assumption that there will be a handful of identifiable superstars, irrespective of their actual performance.

According to Niranjan Rajadhyaksha, a more open cricket market will be a boon for most cricketers (who are denied an adequate chance to play at the top level) and audiences (who cannot choose which players they want to watch). It would be a good idea to break the cricket monopsony and make the market more competitive.

I am wondering shouldn't the national sports body be a non-profit organization? Unlike UK and Australian cricket boards, BCCI lacks administration or corporate structure. I would really like to see the financial statement of BCCI and find out how the generated revenue is being utilized. A for profit corporate entity ploughs back a portion of the surplus back into the business. I would like to know what percentage of the money earned by BCCI is spent for the development of the sport.

monopsony [muh-nop-suh-nee]: A market situation in which the product or service of several sellers is sought by only one buyer.

1 comment:

Gavin said...

Hey Ilango,
how's it going? Good to keep in touch!