Apr 12, 2007

The business of Indian cricket

It's Big Business but Not Businesslike
Knowledge@Wharton on the business of cricket:

"Sachin Tendulkar, arguably India's best-ever cricket player, earns some $30 a minute. India's highest-paid CEO, Mukesh Ambani of Reliance Industries, gets $10, and celluloid superstar Amitabh Bachchan, $8. Ordinary people like Indian President A.P.J. Abdul Kalam and Prime Minister Manmohan Singh get 3 cents and 1 cent respectively. These figures from PaycheckIndia, which describes itself as an Internet-based labor market research tool, are back-of-the-envelope calculations. But even if you ignore the numbers, the conclusion is that India's cricket stars are handsomely paid.

Last year, Forbes magazine attempted a valuation of the different cricket boards. According to its calculations, the BCCI was worth $1.5 billion, the England & Wales Cricket Board $270 million and Cricket Australia $225 million. The ICC was pegged much lower at $200 million. The others were Pakistan ($100 million), South Africa ($65 million), Sri Lanka ($14 million) and Bangladesh ($5 million). "There are 10 full members of ICC, but in terms of revenue India contributes more than 70% to the game," the magazine wrote. "Most sponsorships and broadcast rights come from India, and Indian tours make foreign boards rich."

"I see three problems with the business model of Indian cricket," says Jitendra Singh of Wharton "First, the market is not as deep as it is in the U.S. It allows those who have talent to command a very high price, while those who are not part of that small group don't make money. In the U.S., performance is what drives your compensation. In India, the money from endorsements exceeds payment for performance by many multiples. We should ask if these incentives are structured the right way. Second, the governance system for cricket is not functioning effectively. The third issue is the motivation of the cricketers. In the past, it was an honor to play cricket for India. Now some players make $30 million to $40 million a year. If you make so much money, to what extent does that take away your motivation for the game? Money has changed the nature of the game." "There is a distinction between individual incentives and collective incentives," says Jagmohan Singh Raju, a professor of marketing at Wharton. "The individual gets a lot more from outside sponsorships than from playing cricket. If all the money came to the BCCI, and it was then allocated to the players based on how popular they are, it would have been a different story. But if that money comes from outside, the players' incentive is not to retire but to keep playing as long as they can. They may spend more time in front of the TV cameras rather than on the cricket field. It creates an incentive structure that is not good for the game.""

I met Prof. Jitendra Singh once in Bangalore on a social occasion, unfortunately we never got around to discussing cricket :-)

I've never viewed or thought too much about the business of sports, however the Cricket World Cup recently has got me thinking about the HR aspects. Some questions that have bothered me are:

  1. How do you keep exceptional talent motivated? How do you coach them?
  2. Cricket is driven (indeed, some would say it's consumed by) statistics, where individual performance sometimes clouds team achievements (witness Saurav Ganguly's lack of piling on the run rate against Bangladesh). How does one create a culture of team in such a place?
  3. The quality of management is distinctly one of "command and control". In fact the BCCI must be the only cricket body that calls itself the Board of "Control". Compare that to "Cricket Australia". Does the name reflect the mindset? I would think so.
  4. The BCCI is not a company. It does not have shareholders to be answerable to. In fact the only people it has to be answerable to are its constituent state clubs. So the ordinary cricket fan has no say in the functioning of a body that governs his much loved game.