The game changers?
Tejeesh N.S. Behl September 30, 2008It hasn’t been a long time since UB Group Chairman and owner of the Royal Challengers Bangalore (RCB) team, Vijay Mallya, vented his ire in public against the nonperforming assets in his team— obliquely pulling up captain Rahul Dravid for his apparent inability to adapt to the Twenty-20 format of the game. It wasn’t so much the lack of runs that was pricking Mallya. The hardnosed businessman was getting jittery about the $1.035 million (Rs 4.76 crore) annual salary he was paying to the batsman dubbed “The Wall”, who was leading his team to successive defeats.
That resulted in the now infamous sacking of team CEO Charu Sharma. Remind Sharma’s successor Brijesh Patel about Mallya’s outburst and there’s distinct discomfort in his tone as he denies the entire episode. But Patel does add that some players who did not perform well, or according to expectations, now know what is expected of them, and so will perform better. “There’s nothing wrong with the remuneration levels except that these are three-year contracts and there’s no exit clause either for franchisees or for players. We will impress upon the Board of Control for Cricket in India (BCCI) to include an exit clause in the contract. After all, even at the national level, players are not selected for three straight years but only for a series,” he points out. But some, like Mohit Burman, Copromoter, Kings XI Punjab (KXP), have managed to insulate themselves to some extent at the start of the first season itself. “We have one-year contracts with several local players and these will be looked at by the coach,” he discloses.
The real heroes
What is causing heartburn among team owners is their inability to reconcile the deficit in runs scored and wickets taken with the massive sums they have dished out—and are committed to dishing out for two more years—as remuneration to individual players. In fact, a detailed look at the player valuations and their worth to their teams points to some glaring inequities. The stalwarts of the game have not really done justice to their auction prices.
According to an exclusive study done for Business Today by leading brand consultancy firm Vertebrand, both ageing warhorse Sachin Tendulkar, captain of the Mumbai Indians, who commanded a price tag of $1,121,250 (Rs 5.16 crore) and Yuvraj Singh, skipper of the Kings XI Punjab ($1,063,750 or Rs 4.89 crore) failed to live up to the hype around their names and, in fact, generated negative returns for their teams (see The Bottom Line). While Tendulkar’s salary notionally “lost” his team $830,207 (Rs 3.82 crore), Singh pushed his team into the “red” by $503,484 (Rs 2.31 crore). Even other icon players, such as Kolkata Knight Riders’ (KKR) Sourav Ganguly and the Deccan Chargers’ V.V.S. Laxman lost their teams’ money.
mosimage The study, the first statistically validated and mathematically rigorous report on valuations of individual cricketers who participated in the Indian Premier League (IPL), took into account the individual performances of 90 contracted cricketers, calculated the “impact” their performances had on the fortunes of their teams and posited these against the price that franchisees paid for them to arrive at a notional return on investment, both at the level of individual players and the teams (see How We Did It). The study shows that franchisees incurred “losses” on almost 50 per cent of all contracted players. Profits and losses have been defined as the difference between a player’s “ideal value” and his auction price.
mosimage Ironically, former Australian paceman Glenn McGrath, who was virtually unwanted in the auction, and was “sold” at his base price of $350,000 (Rs 1.61 crore), gave a return of $249,423 (Rs 1.14 crore) for the Delhi Daredevils team.
But it is the unheralded stars of IPL’s inaugural season—Sohail Tanvir (a profit of $597,861 or Rs 2.75 crore) and Shane Watson ($539,451 or Rs 2.48 crore) of the Rajasthan Royals, Shaun Marsh of KXP ($476,833 or Rs 2.19 crore) and Umar Gul of KKR ($550,442 or Rs 2.53 crore)—who “returned” the highest “profits”.
Charu Sharma, former CEO of Bangalore Royal Challengers, cautions against going purely by statistics. “A player like Mahendra Singh Dhoni (who caused the highest “loss” of $1,128,660, or Rs 5.2 crore, to his team), who bats lower down the order, may get only three to four overs to bat during which he could make a valuable 20-30 runs, or, he could play a supporting role in a partnership with an in-form player where his personal contribution could be small—so, to say that he didn’t justify his price of Rs 6 crore wouldn’t be fair,” he argues.
mosimage But the BT-Vertebrand study factors this into its calculation. Anustup Datta, Partner, Vertebrand Management Consulting, says: “As the T20 format is such a concentrated form of the game, ‘impact’ players are especially valuable, since short bursts of performance can turn matches on their heads. So, our method acknowledges high-impact performances and gives credit for them.” This implies that in addition to standard cricketing parameters like total runs scored and averages, parameters like 4s, 6s, run-outs, scoring rates of more than 100 per cent, 3-wicket hauls, etc., have been evaluated. Thus, it is this study, or variations of it commissioned by individual franchisees, that will determine player valuations and transfer fees when the transfer window opens later this year.
mosimage Mutual consent necessary
Lalit Modi, Commissioner, IPL, points out that franchisees must be willing to transfer and release players under duly negotiated terms acceptable to both parties. “Players cannot be denied the amount that is due to them under the terms of their contracts. If a team wants to trade a player for a lower sum, it must bear the difference,” he says. In fact, he adds, the trading window might see the prices of some players shooting up. But the amount over and above a player’s contractual amount will, be pocketed by the franchisee. “Owning a team is a business and the trading of players will become a major revenue stream in future. So, just as in the transfer of Wayne Rooney from Everton to Manchester United, decisions will be guided by business logic,” says KXP’s Burman.
Then, though none of the franchisees is saying it openly, many of them wouldn’t mind renegotiating individual player fees. “We are not looking at discounting any players’ fees, but a lot depends on the rules,” says Jeet Bannerjee, MD, Gameplan, Associates to the KKR team. He, however, does add a caveat. “I don’t think you can draw a direct link between price and performance. There are other factors, such as a player’s ability to draw crowds, that determine his value to the team,” he says.
That however, doesn’t mean the team owners are letting up the pressure on BCCI to change the rules. This includes a demand for raising the players’ fee cap from the current level of $5 million (Rs 23 crore).
mosimage “By my estimates and based on discussions with franchisees, we could be looking at a hike of $1.5-2 million (Rs 6.9-9.2 crore) in this cap. Discussions on this will be part of the agenda at the franchisee conclave to be held in Goa from October 16-18,” says Modi. Interestingly, the BT-Vertebrand study shows that only four of the eight teams clocked “profits” on player fees. Not surprisingly, the Rajasthan Royals, the most underrated and cheapest team in the tournament, returned the highest profit of more than $1.5 million (Rs 6.9 crore) on this parameter.mosimage A bigger field
There’s another imponderable that may influence player valuations in future. The availability of English players such as Kevin Pietersen and Andrew Flintoff, and also Australians like Michael Clarke and Mitchell Johnson may beat down the prices of other players. “Performance and market forces will determine a player’s valuation and the likes of Flintoff and Pietersen will obviously be in great demand. Importantly, with the transfer window open for a month, there should be some interesting developments in terms of teams looking for suitable replacements,” says Modi.
mosimage Sharma feels BCCI may need to raise the cap on foreign players to 10 per team from the current level of eight, though the cap of four foreign players in the playing 11 is likely to remain. And while he feels that high performers like Shane Warne and Shane Watson, who were bought at relatively low prices, might be more saleable than others, it’s going to be a tough call for team owners to decide between short-term cash gains on the one hand and long-term team performance and brand health on the other. Is this study the last word in player valuations? It probably isn’t. But it is by far the most authentic study of players’ valuations till date—and gives a very good idea about how much individual players are actually worth. So, the next time you go rooting for your favourite cricketer, just keep this report in mind.