PLAYER RETENTION STRATEGIES

The player retention rules for the fourth edition of the Indian Premier League are out. So after weeks of speculation, here they are:

A. The maximum number of players that can be retained are 4.
B. The maximum number of Indian players amongst those retained can be 3, and the maximum number of Foreign Players amongst those retained can be 2.
C. Irrespective of what fee is paid to the retained players, the deduction from the total salary budget of US$ 9 million will be in the following format:
                1 Player(s) Retained - US$ 1.8 million
                2 Player(s) Retained - US$ 1.3 million
                3 Player(s) Retained - US$ 0.9 million
                4 Player(s) Retained - US$ 0.5 million

So lets say that a franchisee retains just 1 player, then irrespective of what they pay him, they can spend upto US$ 7.2 million at the auction. If they retain 2 players, their spending power will be US$ 5.9 million. It will be US$ 5.0 million if they retain 3 and US$ 4.5 million if they retain 4 players.

So what will be retaining strategy be like? In this post, I will try and look at it purely from the finance point of view (with a little bit of a reference to cricket).

The first major question that will need to be answered is that whether the player who is to be retained is really worth the amount that will be deducted from the team's budget... or whether all the players to be retained collectively are worth the total amount that will be reduced from their spending budget at the auction.

For example, Mumbai Indians should not hesitate in retaining Sachin Tendulkar and Kieron Pollard, for together they are easily worth US$ 3.1 million (if not a lot more). Chennai Super Kings have a similar state as far as the duo of MS Dhoni and Suresh Raina is concerned. Well, frankly, I am not a big fan of Dhoni and don't think he is worth much... but there is not doubt that he will be retained for his Brand Value. The entire brand marketing of Chennai's franchisee has been done around Dhoni. He is the poster boy of their team. Therefore, he will definitely be retained.

The problem will occur for the likes of Rajasthan Royals and Kings XI Punjab... I don't think anyone on their present team is worth US$ 1.8 million. Maybe Yuvraj Singh is, but then he does not want to stay at Mohali (from what has been reported).

The second consideration is that even if the teams do not retain players, they will have to spend upwards of US$ 1 million each in buying at least 2 big names that can benefit their team... maybe, even upwards of US$ 1.5 million. So it might be ideal to retain the old ones as one does not really know how high the valuation for the new ones will be, whether they will be worth it.

For example, Praveen Kumar may not justify a price tag of US$ 1.8 or 1.3 million, but it may be wiser to retain him as his price may well exceed US$ 1 million when 10 owners sit together for the bid - and - buy auction process.

The third major question, as I have already talked of in one of the examples above, is the brand-building. Chennai Super Kings have their entire brand name built around the image of Mahendra Singh Dhoni. There is no way they can let him go. No other cricketer in the league is has his brand so closely associated with that of the franchise as the Indian skipper.

And yes, finally there is the question of whether the entire team can be bought in US$ 4.5 million if a team decides to retain 4 men. We must remember that in the first ever auction, the limit for spending was up to US$ 5 million only. So there is no reason why an entire team cannot be bought for US$ 4.5 million, especially considering that in doing so the teams will be retaining their 4 main old men in their squad.

It would be interesting to see the auction process when it does take place. For the sake of the existing fans, I hope that there is not much of a reshuffle so that fan loyalties towards a particular player can be maintained. And for the sake of the fans of the two new teams, I hope they do get a chance to net in some big names who will perform for them well in the tournament.