Pricing of Players in the Indian Premier League1 The year 2008 was a game

changer for cricket as a sport. The Indian Premier League (IPL), the
professional cricket league tournament initiated by the Board of Control for
Cricket in India (BCCI), changed cricket forever. It significantly increased the
entertainment value of the game as well as the players’ remuneration. Three of
the nine IPL teams appeared in the list of 50 highest paying sports teams in the
world in a survey conducted by sportingintelligence.com in May 2012 across
278 teams in 14 professional leagues. The salaries paid by some of the IPL
teams were far better than what was paid by many popular football clubs in
Europe and some of the basketball clubs of the National Basketball Association
(NBA), USA. The prices of the IPL players ranged from USD 20,000 to more
than USD 2 million for a tournament that was played over 7 weeks. The right
price for a player and the factors that influenced the pricing puzzled many
sports analysts. For example, Suresh Raina and Lasith Malinga had scored more
runs and taken more wickets, respectively, in the IPL history, but were not paid
as much as some of the other players in the league. Prices were inflated if more
than one team was interested in a player. For example, during the auction held
on February 4, 2012, Ravindra Jadeja was sold to the Chennai Super Kings
(CSK) for more than USD 2 million. Both CSK and Deccan Chargers (DC) bid
for Ravindra Jadeja. As of May 14, 2012, Ravindra Jadeja had scored 174 runs
at an average of 17.40 and had taken 10 wickets in 14 innings. Whether this
performance deserved more than USD 2-million paycheck was debatable.
Kolkata Knight Riders purchased Gautam Gambhir for a record USD 2.4
million in Season 4, which was the highest auction price until 2012. The IPL
teams had several restrictions on how much money they could spend on
acquiring their players, and it was important that they spend their money wisely
to put together a successful team, after gauging the true value of a player.
Indian Premier League
The Indian Premier League was a professional league for Twenty20 (T20) cricket championships that
was started in 2008 in India. The IPL was initiated by the BCCI with eight franchises comprising
players from across the world. The first IPL auction was held in 2008 for ownership of the teams for
10 years, with a base price of USD 50 million. In 2012, the IPL consisted of nine teams, and the brand
value of the IPL based on the four seasons starting from 2008 was estimated at USD 3.67 billion.
Sportingintelligence.com rated the IPL as the second highest paid league after the NBA on a pro-rata
basis. In 2009, Forbes magazine reported that the IPL was the fastest appreciating sports business in
the world. The broadcasting rights of the IPL matches for 10 years were sold to Sony Entertainment
Network for USD 1 billion. Delhi Lease & Finance (DLF) Limited, the Indian real estate giant, paid USD
40 million to be the title sponsor of the IPL for five years. The IPL had the backing of prominent
Indian industrialists and celebrities adding glamour to the tournament. The owners of the IPL teams
ranged from well-known industrialists such as Mukesh Ambani, Chairman of Reliance Industries, and
Vijay Mallya, Chairman of the UB Group, to Bollywood actors such as Shah Rukh Khan, Preity Zinta,
and Shilpa Shetty. Within a short time, IPL has seen several controversies. The most prominent one
was the removal of the founding chairman of the IPL, Lalit Kumar Modi, from his post based on
corruption charges. One of the franchises, the Kochi Kerala Tuskers, which played in the 2011 IPL
matches, was terminated by the BCCI for breaching the contract. In the tournament, all the teams
played against one another in several matches, at home and away. The teams received 2 points for a
victory and 1 point for no result. The top four teams at the league stage played in the semi-finals,
and the winning teams from the semi-finals played in the finals. The winner of the finals was
declared as the winner of the league. The top three teams from the IPL would also get a chance to
compete in the Champions League Twenty20 tournament with the league champions from other
countries.

IPL Player Auctions

The franchises acquired players through an English auction that was conducted every year. However,
there were several rules imposed by the IPL. For example, only international players and popular
Indian players were auctioned. A base player fee at which the bidding would start was fixed for each
player. In the 2008 auction, the franchises were allowed to spend a maximum of USD 5 million in the
auction. The players were graded into different baskets based on base price band, specialty, and
availability. The players were paid on a pro-rata basis if they were not available for the entire
tournament owing to other commitments. The franchises were allowed to acquire players who were
not part of the auction; for instance, many Indian players who never played for India were not part
of the auction. The money spent on players acquired through the non-auction route was not part of
the USD 5 million auction cap. The average weekly salary paid by different franchises based on 2012
survey ranged between USD 56,000 and USD 80,000.

The auction itself was conducted basket-wise, with breaks between baskets for the franchises to
assess their bidding strategy. In the 2008 auctions, five Indian players were nominated as Icon
players: Rahul Dravid (Bangalore Royal Challengers), Sourav Ganguly (Kolkata Knight Riders),
Virender Sehwag (Delhi Daredevils), Yuvraj Singh (Kings XI Punjab), and Sachin Tendulkar (Mumbai
Indians). Each Icon player received 15% more money than the franchise’s highest-bid player in the
bidding. Further, each franchise had to select at least four players who were under 22 years of age,
and the franchise was allotted a catchment area for acquiring local talent. The franchises could
select a maximum of 10 non-Indian players; however, only four non-Indian players could be part of
the playing 11. The teams could also buy Indian players outside these annual auctions; the price paid
to these players who were not part of the annual auction was not revealed. The teams also retained
a few of their players; again, the actual amount paid by a team to retain a player was not publically
available.

The Pricing Challenge

The price of the players in any sports event is driven by many factors. Not all the factors that drove
the price of a player are directly related to their performance on the field. For example, David
Beckham, who played for LA Galaxy, took home 31.5 million euros in 2012, mainly because of
advertisements and endorsement contracts totalling 26 million euros. Beckham’s performance on
the football field, in terms of the number of goals scored or the number of assists, in 2010–2011 was
nothing to write about compared to the on-field performance of Barcelona’s Lionel Messi or Real
Madrid’s Cristiano Ronaldo.

The price was also driven by the marketability of the player; anecdotal evidence suggested that
whenever Sachin Tendulkar got out, the television rating points (TRPs) fell sharply since the fans
were switching off the television sets. The British Broadcasting Corporation (BBC) quoted that when
Sachin Tendulkar went out to bat, people switched on their television sets and switched off their
lives. For several years, Tendulkar was one of the biggest brand ambassadors in India. We
interviewed former players, administrators, and domain experts to understand their views on the
factors that influenced a player’s performance. Sanjay Manjrekar, who played for India in 37 Test
matches and 74 One-Day International matches over a period of 10 years, said: Recent form and the
ability to play T20 matches are the major factors that influence a player’s price. Franchise owners
are very conscious of the T20 ability of the players; very good Test match players may not be
selected if their ability in the T20 format is not good. Players who are not worth investing in are left
out, especially aging players. I am impressed by how quickly teams have learnt to pick the right
players. Some players though are highly overpaid.

Sujith Somasunder, who represented India in One-Day International matches and was the coach of
the Kerala Ranji team, said:

Teams closely watch players’ performances in limited over matches. Strike rate is a major factor that
influences a player’s pricing. Players who play cameo innings and finishers are preferred by the
teams.

Rajesh, sports analyst and Stats Editor with ESPN Cric info, said

For a batsman, the ability to score quickly and the flexibility to play anywhere in the line-up are
important factors. For bowlers, strike rate and economy rates are important. Fielding skills are a
bonus. Players like A.B. de Villiers of South Africa are ideal for this format. He is a top class
aggressive batsman who can bat at any position as well as a good fielder who can also keep wickets,
and he can captain the side if necessary. A few of the players have fetched far more than they are
worth, especially a few Indian players.