Mumbai: The prices paid for cricketers who will join the Indian Premier League (IPL) in its second season clearly show no signs of the recession blues tormenting the rest of the economy.
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The first season saw franchisees grabbing star players who could pull in crowds and sell merchandise. An economics professor and his student show in a recent research paper that attributes other than cricketing abilities also mattered in 2008—nationality, iconic status and age, for example.
Satish Deodhar of the Indian Institute of Management, Ahmedabad (IIM-A) and his student Siddhartha Rastogi estimate that only around half of the amounts paid to Mahendra Singh Dhoni ($1.5 million, or Rs7.3 crore today ) and Sachin Tendulkar ($1.12 million) is for their abilities on the field. The rest is a premium paid for their iconic popularity in the region they represent in IPL. There is a similar stiff premium for the likes of Sourav Ganguly, Yuvraj Singh and Rahul Dravid.
Alas, it was the non-glamorous and icon-less Rajasthan Royals who walked away with the inaugural championship.
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And what about 2009? Have the lessons been learnt?
There were no Indian icons on offer on Friday; so many of the qualitative parameters that drove up prices last year were absent. But the Rajasthan Royals’ victory seems to have played on the minds of the bidders this time around.
Mint tried to gauge whether the lessons of the first IPL season have been learnt. It seems so.
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What we did is this: compared the price paid for a player with his Reliance Mobile ICC one-day international ranking. Each player gets three rankings—as a batsman, bowler and an all-rounder. We chose the ranking where he scores the highest. And we have only considered the 12 players who have such rankings. For example, former England captain Kevin Pietersen, who will join Bangalore Royal Challengers for $1.55 million, is ranked at 51 as an all-rounder, eight as a batsman and 151 as a bowler. We chose his batting ranking, since that is his strong point.
There is a close link between performance and payment. Of the four top earners for whom rankings are available, three are in the Top 10 in their respective categories. Mumbai Indians have taken a risk with South African batsman Jean-Paul Duminy, who is 29 in the international batting rankings, but was paid $950,000, the third highest. On the other hand, the Mumbai team will get New Zealand bowler Kyle Mills (five in the bowling rankings) for a mere $150,000.
The IIM-A researchers used heavy-duty econometrics to come to their conclusion. Our analysis is by no stretch of imagination that scientific. But it does seem that the Rajasthan Royals’ victory in 2008 has ensured that IPL franchisees want players who perform rather than just heart-throbs.
Graphics by Sandeep Bhatnagar / Mint