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Crowded field raises demand and supply questions

Crowded field raises demand and supply questions
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First Published: Thu, Feb 10 2011. 08 59 PM IST
Updated: Thu, Feb 10 2011. 08 59 PM IST
One often hears the complaint that there is too much cricket being played and that the boards and the International Cricket Council (ICC) are packing the calendar to the detriment of the game. Given that the Twenty20 (T20) format —both international matches and the Indian Premier League (IPL)—is now jostling for space in the calendar with Test matches and one-day internationals (ODIs), the logical question is whether there is room for all three formats to coexist. There are those who feel Test cricket will eventually die out; another group feels ODIs will fade away, leaving just two formats of cricket in the long run. Analysing this issue from a demand and supply perspective will shed light on what might happen.
What is the optimal number for matches?
In the marketplace, the supplier of the product is the International Cricket Council (ICC) acting in cooperation with the national cricket boards. There are currently three products available—Tests, ODIs and T20s. In theory, if the ICC was to behave like a profit-maximizing producer, it will keep adding matches to the calendar up to the point where the additional revenue (referred to by economists as marginal revenue) from one more fixture exactly equals the additional cost (marginal cost) of hosting the match. By engaging in this process, the ICC would come up with the optimal combination of Tests, ODIs and T20s that are to be played in a given year. This process of adding matches is, of course, constrained by the number of days of cricket that can be played during a year.
The reality is not quite as simple. The ICC is not purely a profit-maximizing producer. It has other goals related to the overall development and promotion of cricket that dictate decisions regarding the combination and number of matches to be played and the allocation of matches by a country/location.
Is there too much cricket?
Notwithstanding its objectives relating to promoting cricket, the ICC has to pay attention to demand in making its supply decisions. This leads to the next point. How would you quantify demand for a game of cricket?
Demand for a cricket match cannot be simply gauged by counting the number of people attending in the stadium or watching it live on television. An accurate measure of demand is the sum of all those who follow a match in the stadium, on television, on the Internet, in the print media, or on their mobile phones.
If there was no demand for cricket matches in general or for a particular format, then this will be reflected in coverage. A newspaper vying for readership will relegate coverage of matches to the foot-notes if there is no reader interest. There would be no advertisements on the ball-by-ball commentary pages of websites. Money would not be spent on commercials that start immediately after the last ball of an over is bowled, or as soon as a wicket falls. And, there would be no highlight shows in the evening encapsulating the day’s proceedings.
Demand for a particular format of the game could decline over time due to two reasons. First, the opportunity cost of watching a game of cricket (of a particular format) could have increased due to increase in consumer income, or an increasing number of entertainment options that compete with the sport. Economic growth can lead to both happening. This hypothesis can be tested by analysing whether, among cricket playing countries, those that are more economically developed experience lower demand for the game.
Then there is the substitution effect. Fans could switch to an alternate format that has a lower opportunity cost but still satisfies the appetite for cricket entertainment. This is true, however, only if a fan does not have a strong preference for one format over the other and has a fixed quota of time allotted to watching cricket during a finite period of time.
In reality, however, it is possible that there is a core group of fans who watch all three forms of cricket but select a combination of mediums that reduces their total opportunity cost of watching cricket. For instance, they may watch a T20 match live in the stadium or on television, while they might follow ODIs on the Internet and Test matches on television highlights.
On the other hand, there might be fans who have a specific preference for a format because it offers them the entertainment that they value. For instance, fans who enjoy watching heavy hitting might be more inclined to follow T20s or ODIs over Test matches.
Therefore, in terms of long-term viability, it is clear that a format that has a well-defined and significant fan following will survive even if the core group diminishes over time, as long as the suppliers can cover the cost of hosting one additional match of that format. One could venture a guess that Test matches have their own exclusive fan base, which is probably small in number. Prior to the advent of T20s, ODIs, probably, had their own distinct fan following as well. This group likely had a high opportunity cost and valued fast-paced action in the middle.
With the coming of T20s, the ODI fan base has been split. Fans with really high opportunity cost and preference for fast-paced action have probably moved to T20s; the other group follows both formats, but has changed the medium it follows the game on, and has possibly reduced the time it spent watching ODIs.
Therefore, the group that exclusively watched ODIs has been cannibalized by T20s. This line of reasoning suggests that the ODI format will share its fan following with the other two formats and will not have an exclusive group of its own.
Will the suppliers pay attention to the consumers?
If, eventually, the marketplace does not support the supply of ODIs, then it would not make sense for the ICC to promote it at the expense of the other formats. If it does not pay attention to the demand, then it is very possible that an alternate supplier who satisfies this demand will emerge.
The emergence of Kerry Packer’s rebel World Series Cricket that brought in ODIs in the 1970s and the Zee TV-promoted Indian Cricket League that brought in T20 franchise leagues are clear examples. In both the instances, the national cricket boards, Australia and India respectively, responded to these innovations by making them their own.
Will the demand for ODIs eventually dry up? If so, then what happens to the ODI version of the World Cup? Only the consumers can give us answers to these questions.
Ram Tamara is director, Nathan Economic Consulting India Pvt. Ltd, the Indian arm of Nathan Associates Inc., a firm that specializes in patent, competition, and sports economics.
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First Published: Thu, Feb 10 2011. 08 59 PM IST
More Topics: World Cup 2011 | Quick Singles | Ram Tamara | ICC | IPL |