BCCI and Indian Cricket – Monopolies are Never Good

Last week the returning winners of the Twenty20 World Cup, jammed up traffic in Mumbai. Sharad Pawar, the BCCI President and also Union Minister for Agriculture, cancelled all his appointments to receive the Indian cricket team. There was a big press conference, at which he made a speech that was, it seems, more a political speech than anything else.

And why not? He is a politician in a cricket crazy country. Why shouldn’t he take advantage of the rare occurrence that is an Indian team winning a major championship? Many other politicians in various states had the same idea and showered gifts and cash upon their home state players. Everyone loves a winner.

Not always though. The Indian hockey team, winners of the Asia cup, did not see the same munificence from either their state or central governments. They had to threaten a hunger strike to get some attention. Sadly, the state governments chose to give their cash awards to the cricketers, who already make a lot, from both cricket and endorsements. If they had the cash to spare, it might have been better spent on the hockey players, who would have appreciated it more.

The fact that winning hockey players have and will continue to make much less than even losing cricket players, is just the market at work. But while they make much more than hockey players, I think our cricket players are underpaid. According to ET, BCCI had revenues of Rs. 652 crores in 2006-07 out of which international players were paid Rs. 43 crores. At 7% of revenues, Indian cricketers get a very small share of total BCCI revenues. Granted there are other significant costs like coaches, staff, travel, renting stadiums. But still, isn’t it the cricketers that make it all happen (when the stars align, that is).

Low earnings for cricketers is just one of the problems here. The other is that everyone is paid the same (there is some categorization). That sounds more like the civil service than a mega sport. In a way, endorsement money makes the differentiation that contract fees don’t – but that’s not a great way to do it. Advertisers are paying for a different product –a cricketer’s ability to win matches matters to advertisers, but other things like popularity, looks (and long hair matter) as well. In a situation where someone like Sachin Tendulkar makes Rs. 60 crores a year from endorsements and Rs. 1-2 crore a year from playing cricket, the incentives look quite skewed.

The question then arises – why do Indian cricketers make so little from cricket? The answer is lack of competition. BCCI is a monopoly. In a labour market where there is no competition, the employer pays only as much as he can get away with. Playing for India opens the magic world of endorsement money – the players would probably play for free if they had to.

There are other problems associated with BCCI being a monopoly. It has little incentive to develop cricket or cricketing infrastructure at the state level. It also has no incentive to develop viewership or game attendance locally. In fact you could argue that they would rather not encourage local cricket because it would compete against international cricket for advertising and ticket revenues. And in fact, so far, beyond selecting and coaching the national team, the BCCI has done precious little for Indian cricket.

Why is BCCI a monopoly? Because it controls a key piece in the structure of Indian cricket – it is the only body recognized by ICC to select the Indian cricket team. That gives them a strangle hold on Indian cricket. The reality is that the team that plays for India is BCCI’s team, not India’s team.

While BCCI is not a private for-profit company this should not make any difference to the way the Indian government or courts handle this monopolistic situation. DoT was a government monopoly which had to be reined in, in order to encourage private investment in the telecom sector which led to the telecom revolution that we are seeing in India.

The day of reckoning may not be too far away. The newly formed Indian Cricket League (ICL) has already taken BCCI to court for threatening Indian cricketers with bans if they join ICL. These are commonly used tactics by a monopoly threatened by a usurper. It will threaten deserters with bans from the Indian team. It will try to control access to infrastructure (stadiums). And it will make big changes to its own agenda – hike players’ salaries, announce big investment plans to promote cricket etc. Some of this is good for the game, but much of it is anti-competitive and harmful. The latter is what the Competition Commission or the courts must stop.

I hope ICL is successful. I hope local clubs are formed under private ownership (not just ICL owned) in major cities. I hope these clubs create a healthy domestic cricket circuit with strong revenues from TV and ticket sales. I hope the club owners make money. If ICL (or IPL) is successful it will be good for the players and good for the fans. And good for cricket.