On the “warm reception” accorded Indians on Day 2 of the recent Indian Premier League (IPL) player auction, Mint—an Indian publication and partner of the Wall Street Journal—quoted Tamara’s view of teams’ decisions from an economic perspective: “For the first three seasons, the teams picked big international names because they needed to showcase it as a global franchise. But going forward, they are being more realistic about what is needed for a winning team, which is performance” (Monday, January 10, 2011).
In a follow-on three part series summarized below, Tamara shares his perspective on cricket’s new Twenty20 franchise format, the business of cultivating fans, and how analysis of player performance affects teams’ business decisions and recruitment.
In “T20 raises the bar for business,” Tamara explains how economists view the decisions of players, teams, and league organizers. Players weigh effort versus winnings. Teams, seeking players who maximize revenue, measure player performance to arrive at optimal salaries. League organizers strive to maintain and heighten competition through tournament structure. Of course, without fans, the new franchise and the shortened game format cannot succeed.
In “Cultivating a fan base is key to revenue generation,” Tamara analyzes how teams can cultivate a fan base and convert the base into revenue by (1) assessing demand in various groups of fans, (2) understanding factors other than team performance that create fans, (3) experimenting with ticket pricing, and (4) minimizing costs, especially salaries. Tamara’s hypothesis is that teams in small markets will focus on winning rather than on having star players, because stars don’t always lead to wins. The problem for a “small market team is how to build a winning team at the lowest possible cost.”
In “Use analysis to identify and evaluate key players,” Tamara explains how statistical measures of player performance can provide insight or can blind judgment by narrowing perspective. For example, in the 1990s some statisticians concluded that baseball’s traditional measures of batting average, stolen bases, and runs batted in did not predict wins as well as on-base and slugging percentage. But only players who had good traditional stats were highly paid. Armed with this insight, the manager of the Oakland Athletics began assembling a top performing team for a very low cost in the late 1990s; by 2006 his team was fifth in a league of 30—but 24th in salaries!
Likewise, traditional metrics fail to capture the merits of the “unselfish player,” who plays for a team win, not to maximize personal value. Data collection on such players is affecting strategies and performance evaluation.
Tamara suggests that Twenty20 cricket, much like baseball, will benefit from close analysis of win-producing strategies and critical plays and the consequent development of performance metrics. He concludes that such analysis will “become popular in cricket and sound economic analysis, backed by statistical analysis, will drive the decision making at for-profit franchises.”
Read the full articles from Mint (4 pages in large tabloid format; recommend printing on 11x17 paper)