I am writing this a few hours after two of the most shocking upsets in World Cup history. Both India and Pakistan have lost. India still have some faint hopes, with two games in hand. If they win both these games, and really heavily, there is still a faint chance that they may qualify. Pakistan, however, have no such hope. Having already lost to the West Indies, they are out of the world cup.
When the organizing committee of the Cricket World Cup (CWC2007) came up with the present format, it was hailed by one and all. ?We give a chance to the minnows, polish them off and have a proper world cup in the 92 format among the 8 major teams?, they said. Most people nodded. One thing, however, that people didn?t reckon was about the impact of an upset.
The pair of yesterday?s upsets has created havoc in the world cup schedule. Ireland are most probably through to the super eight, and Bangladesh will also be fancying their chances. However, it is unlikely that the minnows can consistently sustain their form, and this means that their games in the super eight will be rendered useless. Another upset, and England?s poor form could actually render the whole super eight exercise to a sham!
The Value of an Upset
The financial value of an upset is huge. If (god forbid) India fail to qualify for the super eight, Sony Entertainment Television (already smarting under the feed sharing ordinance and late night matches) stands to lose a huge amount of money in terms of advertising revenue. This would be an utterly crippling blow to the bouquet of channels, something it will take a long time to recover from.
Inzy?s head is set to roll. He is most likely to be stripped off captaincy. There will be large scale changes in the Pakistan team. With Pakistan being Pakistan, some team members might actually be Escobared. The same is likely to be repeated in India if we could see some similar scenes here (no Escobar, though).
Then, most of the team members are brand ambassadors of various brands. These brands are likely to lose heavily thanks to the exit. Carefully crafted advertising campaigns will come to nought. Then, there are a large number of firms who rely on events such as the World Cup to boost sales. Offers are already flooding the market from various durable manufacturers, especially television. All these will come a cropper, with the hardest hit probably being Tata SKY.
The impact of the upset will not be restricted to the upset countries alone. With a large number of super eight matches turning meaningless, gate receipts (which are already not much) will dwindle. In-stadia advertising will decline. If they have already been sold, the people who currently hold the rights stand to lose.
People who were planning to Caribbean to watch the super eight might now suddenly cancel their plans, with their favorite teams out of the world cup. Tourism in the islands (which has already been hit thanks to a hefty visa fee) will be hit further. There are already heavy protests that they impoverished governments have spent too much for the World Cup. The protests will increase, and we might see a few Caribbean governments falling.
Clearly, the total costs of an upset are huge. Enormous.
It is amazing that the organizers never took into account an upset and the huge costs the current format brings to the various stakeholders. The committee should?ve devised a format where the odd upset wouldn?t have had a major impact on the tournament so early (like Zimbabwe beating India in 1999).
That said and done, nothing much can be done now. The format has been fixed and the upsets have been made. Still there is a ray of hope. Can?t the losers from the upset compensate the winner and overturn the decision? Can we try and salvage as much as possible from the current situation?
One illegal and immoral solution
It is clear that Ireland is in the super eight, so nothing can be done about that. However, there is still a ray of hope in group B (india?s group). I know it is illegal, but wouldn?t it make sense for a consortium of say SET, Tata SKY, LG and maybe tourism departments of West Indian governments to offer money to Bangladesh and ask them to lose to Bermuda? ?you have done a fantastic job so far in the world cup. You?ve beaten India. Must be a very proud moment for your country. Can you please take this money now and leave, so that the rest of the world cup can go on? We would be better off without you!?
You might say this is scandalous. I don?t disagree. You will say it?s illegal. Of course it is. It will bring the game into disrepute. Yes. However, market forces and economics dictate that I do this. That this group (ok let?s leave the Caribbean governments out) offer money to Bangladesh to lose to Bermuda. On a purely financial basis, everyone will be better off!
Is there a legal solution to this problem? I mean, if you keep offering money to the underdogs to lose, aren?t you infringing on sporting spirit? What is the use of a tournament then? And why restrict it to cricket, I know that the Chennai Open lost a lot of money after Nadal was upset. Couldn?t all his opponents have been offered money to make sure he went to the finals?
One legal solution
Sadly, this solution can?t be implemented right now, but the parties concerned might want to look at this from the next tournament (starting with say the French Open; or maybe the Euro 2008 qualifiers) onwards. It is not a complete solution, but at least it helps the parties concerned mitigate the loss caused by the upset. It is the fine financial art of hedging.
By buying broadcast rights for a major tournament such as a world cup, you are unwittingly betting on the results of a few matches. Betting that the country where you?ll broadcast will do well. Betting that there aren?t too many major upsets. Betting that results will follow a certain pattern. You know you can?t affect the results, so the next best thing is to hedge!
Go to Ladbrokes, and take the opposite position. Bet, and bet well so as to limit your losses in case some results don?t go according to plan. Maybe you?re not very good at betting, and after all it?s not your core competence. Not to worry. I?m sure some good investment banker would come up with a product with returns linked to the results of a few matches. He will provide you a product with which all the implicit bets you?ve taken will be hedged. And he will go to Ladbrokes and hedge his position by taking positions there. And charge you a small premium for it. Beautiful, isn?t it?