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Friday, August 24, 2007

Competition will unlock hidden value in cricket

In their purest and simplest form, the issues and controversies surrounding the Indian Cricket League (ICL) are typical of those engendered by the prospective end of any monopoly, says Mr Nandan Kamath, Director, GoSports (, a Bangalore-based career management and advisory firm for sportspersons.

Mr Kamath, a graduate of the National Law School (Bangalore), the University of Oxford (on a Rhodes Scholarship), and Harvard Law School, has represented India and captained Karnataka in cricket at the junior level.

What is the problem, in essence?

Essentially, this is a problem of ‘monopoly’ disruption. There are many beneficiaries of a monopolistic regime and each feels insecure about his impending redundancy and displacement. The new entrant is unconstrained by extant institutions and structures and is often able to think unconventionally and unlock or redistribute economic value.

Why is the BCCI feeling insecure?

Founded in 1929, for almost 80 years the BCCI has held the only set of keys to Indian cricket. The Zee-backed ICL is the new car on the block and, in its wake, the BCCI may no longer be able to retain the same gate-keeping value.

Competition is good economics, isn’t it?

Yes. The ability of competition to reveal true value is at the root of any capitalist economy. The cream rises to the top in a free marketplace and the provider that best delivers the highest value will be rewarded by the market in the long run. “Rivalship and emulation render excellency, even in mean professions, an object of ambition, and frequently occasion the very greatest exertions,” is a quote from ‘The Wealth of Nations’ by Adam Smith. That “Monopoly... is a great enemy to good management,” is another.

But public interest may necessitate monopolies?

Historically, a few markets such as the railways have received governmental protection from competition being categorised as ‘natural monopolies’ – there being a pro-competitive public interest in not replicating certain types of infrastructure and investment.

Is BCCI one such?

No, not a ‘natural’ one. BCCI, as in the case of many continuing monopolies, is a strong institutional legacy (which might have made economic sense at some point) that no one has, since, either dared or bothered to replicate.

But why now?

Given the amounts of money that have flowed into cricket in India, it is somewhat surprising that a rival league didn’t materialise earlier.

Does ICL make commercial sense?

Basically, an initiative such as the ICL makes eminent commercial sense because it provides the opportunity to marry the eagerness of Indian sponsors to spend on cricket with the very best international talent (unconstrained by nationalism and boundaries), much as the English Premier League does with sponsors and international football talent.

Will it hit at some of the inefficiencies of the current system?

Quite likely. For instance, in a global marketplace, it is hard to imagine that the current state of play – Australian World Champion cricketers earning fractions of the amounts that Indian World Cup first-rounders do – can last for long. Only an imperfect market would allow that and imperfect markets are the sorts facilitated by monopolistic entities.

Do you see an unlocking of value, for the player?

Yes. Spectacular sporting performances unlock value and all sporting talent requires stages, such as tournaments and leagues, to perform on. Performers will naturally ally with stage-setters who are willing to share fairly in the value generated by performances on their stages.

Is there a distortion in the current scheme of things?

When all the stages are monopoly controlled, more often than not, the stage-setter unduly benefits and the performer receives a very small share of the pie. With competition comes an opportunity, nay a necessity, to renegotiate this pie; because he has alternatives, each contributor is now better placed to receive fair compensation for the value he brings to the table. For that sole reason, competition is good for the game.

What do you think of BCCI’s reactions?

On expected lines. The BCCI’s retort to the ICL is typical of an insecure legacy monopolist – player and service provider bans, limiting access to stadia and revoking financial benefits that players have earned over long and, often, distinguished careers. This reaction stems from self-awareness that the BCCI could have been delivering far more value to its players (present and past) and sponsors.

What more can we expect from the monopolist?

The BCCI’s predictable next steps would be “rewards” for its “loyal” players through increased salaries and benefits (i.e., the beginnings of a market-led correction).

Could an ICL have been averted?

Were the administration of cricket in India completely spotless and transparent, the ICL would have no raison d’ĂȘtre. The fact is that the value-pie is open to renegotiation and this is the ICL’s automatic unique selling proposition to underpaid players and over-taxed sponsors.

Is the BCCI on a strong wicket, from a legal perspective?

A sticky legal wicket, I’d say, and it is of little assistance to the BCCI. India has an evolving competition law regime that frowns on anti-competitive acts. Ironically, the court case that established the BCCI as subject to this legal regime was its pyrrhic victory in its cricket telecast rights case against Zee Telefilms (of the group promoting the ICL)…

On that case…

In that case, Zee had failed to convince the court that the BCCI was a state functionary and therefore amenable to the writ jurisdiction of the courts. Stating that the BCCI was a completely independent “society” registered under the Societies Registration Act, the majority judgment of the Supreme Court held the organisation not to be “state” under Article 12 of the Indian Constitution. The flipside of this decision is that the BCCI’s practices do not enjoy the immunity from anti-monopoly, competition and restrictive trade practices laws that all state functionaries do. As a result, the BCCI’s actions would be subject to the general competition laws of the land.

Which means the recent reactions of BCCI can be questioned?

That’s right. The player and service provider bans, discriminatory denial of access to stadia and revocation of benefits could be challenged in a court of law by aggrieved parties based on legal principles such as unreasonable restraint of trade, unfair competition and the “essential facilities” doctrine.

How do you see the ‘game’ unfolding?

Only time and experience will tell whether it is the ICL or the BCCI that will be better able to effectively attract the best talent, administer the game professionally and share fair value with the various stakeholders. Ultimately, the two entities could well merge into one, i.e., when both recognise their mutual financial interests lie in retaining the cricket administration monopoly that makes it possible to squeeze maximum value from players and sponsors. Until such time, at an absolute level, competition will be good for the management, growth and development of the game and its participants. The toss is over. Now, may the best team win!

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