The anti-monopoly watchdog in India, the Monopolies and Restrictive Trade Practices Commission (MRTPC), has initiated an investigation against the Indian board over its reported threat of a life ban to players joining the Indian Cricket League (ICL).
See BCCI faces monopoly investigation
The rebel Indian Cricket League (ICL) has been grabbing headlines for a while, and the war of words between ICL and the BCCI has been escalating. Courts have given verdicts, current and former cricketers have taken sides and the media has played its part in sensationalizing the story.
The discussion so far appears to have focused mainly on the ICL's role as an unlicensed, unaffiliated body that is promoting itself without knowing exactly what it wants to be - is it a complete alternate cricketing structure? Is is a 20-20 cricket league? Is it an opportunity for players long on the fringes of the BCCI's national team, forever ignored by the selectors?
From an economics perspective, it is none of these. In pure economic terms, ICL is a competitor challenging what looks like an established monopoly. It is instructive to identify the market that the monopoly operates in and conduct a proper analysis.
The BCCI's "business interests" are mainly in selling broadcast rights (television, radio) of live cricketing events, selling official merchandise, tickets at the grounds and so on. Of these, the broadcast rights are the major revenue earner and the most contentious issue. The ICL's chief sponsor, Subhash Chandra, started it only after failing to match or exceed a bid for the rights to telecast BCCI events on his channel, Zee Television. Let us focus therefore on the "broadcast rights" issue, the main revenue source for the BCCI and the bone of contention in this debate.
Starting with the antitrust basics, what is the "market" that the BCCI has allegedly monopolized? How can it be properly defined? How can antitrust economics be properly applied to determine whether the BCCI possesses or is attempting to illegally maintain a monopoly?
"Broadcast rights" are a revenue source because they in turn enable television, radio or other media that acquire these rights to sell "advertising slots" to advertisers. Thus, in essence, the BCCI is merely a "content provider" that enables advertisers to show messages to a specific audience (one that is interested in cricket matches). Thus, the right economic analysis is NOT "control over cricket played in India" - but rather, the sale of "advertising slots".
Any analysis of monopoly must begin with a proper market definition. The next question then is whether an alleged monopolist has "monopoly power" in this properly defined market. The usual analysis begins with the "narrowest" market definition and applies the "Small but Significant Non-transitory Increase in Price" (SSNIP) test. The central question is: can an alleged monopolist in the properly defined market "profitably" implement a SSNIP? If the answer is yes, the analysis proceeds by expanding the market definition until a SSNIP becomes unprofitable. If the SSNIP is profitable only in a very narrowly-defined market, the "market power" held by the alleged monopolist is negligible, and thus, does not satisfy the "monopoly" criterion. [Note: If the market is already monopolized, a SSNIP may not be profitable since substitutes may be relevant at the monopoly price. The correct analysis however is to consider demand substitution at the "competitive price". See SSNIP and cellophane fallacy].
Let us consider the smallest market that the BCCI operates in - this may be defined as the "advertising slots" for a single match involving a BCCI-approved team (India, India A etc.). Can the BCCI profitably implement a SSNIP in this market? It is possible - especially if it is a match that has few substitutes (e.g. a world-cup final involving India, an India-Pakistan match of importance etc.). However, defining a market as a "single match" does not permit analysis of any increase in price as "non-transitory" and is more akin a one-time event, a single round of a multi-round game.
Broadening the definition, let us consider advertising slots for "matches involving the official BCCI India team" over a substantial length period of time. At present, BCCI has a monopoly over these advertising slots, through its ability to control the broadcast of these matches. Given that BCCI's team is widely acknowledged as the "Indian National Team", it is clear that there is no perfect substitute. Now consider some of the substitutes available to the advertisers:
- International cricket matches not involving India - Given an advertiser that is attempting to promote her product in India, these appear to place no constraint on the BCCI's ability to profitably implement a SSNIP. A SSNIP in BCCI's charges for broadcast rights will not result in the advertisers taking their business to an Australia-Pakistan match (the quality of cricket played may be better - but from a pure economic perspective, the advertiser cannot substitute the size of the audience for an India match by advertising in such matches).
- Cricket matches involving other "India" teams - These are also under BCCI's control and therefore not valid substitutes.
- International sports events involving Indian teams or individuals - No other sport in India matches the popularity of cricket. The prices for advertising slots for non-cricket team sports- football, hockey, or other team events or individual sports - tennis, billiards, chess - etc. are "much below" than those for cricket. A SSNIP in cricket advertising slots may push some advertisers towards these other sports - however, the SSNIP will still likely be profitable.
- Other advertising slots - "sporting events" attract a certain audience - and advertising for with other content (e.g. television soaps, sponsored television shows, reality television or game shows, live concert telecasts, movies) is an imperfect substitute for cricket advertising. The per-second rates of some of these events may be comparable (e.g. the Filmfare awards) - however, the target audience reached by cricket is not duplicated by these events.
- Not advertising through these media - clearly, no advertiser will "fully withdraw" advertising from television or other media in response to a SSNIP by the BCCI.
The effects of a monopoly can be seen along dimensions - increased price (already seen in the advertising prices), reduced consumer choice (variety) and reduced quality.
The reduction of variety is obvious in world cricket, especially in comparison with other team sports. Unlike other sports such as soccer or basketball, cricket does not have "club teams" that are composed of talented players drawn from the various countries that play the sport. Unlike basketball - in which the NBA, US College Basketball and international basketball - all follow different rules and therefore, provide variety, cricket is confined to the ICC's rules. The pace of innovation has been slow (e.g. 20-20 or fielding restrictions in ODI cricket etc.), and has often been a response to challengers (e.g. The Kerry Packer alternative is credited with several innovations such as coloured clothing, day-night matches, limited overs cricket etc.). The number of international stars in cricket is capped by the number of international teams playing the sport and also the strength of his team. Thus, many high quality Aussies, Indians, Pakistanis etc. must wait their turn (sometimes for over a decade) to play for their teams while lesser players get the opportunity to compete internationally for teams such as Bangladesh, Bermuda or Zimbabwe.
The reduced quality came to the fore during the most recent cricket world cup. By including several fringe team (under the presumed goal of "developing the sport"), the world body permitted teams that wouldn't be competitive at the club-level in Australia, England or India, to compete with much superior teams, resulting in a large percentage of one-sided games (of reduced quality to consumers interested in watching a keenly contested match). Such mismatched contests are omnipresent in the present structure of cricket.
[One must acknowledge here that the pride of seeing a "national" team compete may not be substituted by city, county or club teams. However, the soccer example - with its immensely popular club teams - and a world cup every four years - proves that alternate structures that preserve international teams while allowing club teams to prosper are feasible.]
The BCCI's pronouncements after the announcement of the ICL and the unveiling of its initial list of players may then be seen as efforts to maintain its monopoly. The BCCI raised salaries for its players in domestic teams (as an employer of cricket players, the BCCI possesses "monopsony" power - i.e. it is the sole source of demand for cricketers), it threatened players with a life ban and that they would not be allowed to represent "India" (raising barriers to entry), it declined to make its stadiums available to the ICL (raising barriers to entry) and even roped in the ICC and other boards to prevent their players from joining the rebel league. It also barred coaches and officials joining the ICL from any current or future ties to "official" Indian cricket (e.g. Kapil Dev was removed as the head of the NCA, past-player's pensions were threatened).
The BCCI is bowling a lot of deliveries that would be considered "unfair" competition at a minimum (and "illegal" under several countries' laws). Let us hope that the ICL successfully ducks some, hooks other to the boundary and overcomes this "bodyline" attack to deliver some spectacular cricket!
