Friday, February 14, 2014

BCCI, Star India and the restructuring of the cricket world

BCCI, Star India and the restructuring of the cricket world
TelevisionPost
 Posted on: 13/02/2014 08:00 AM  
 By: Atul Pande 


As the dust settles on the International Cricket Council (ICC) pronouncements and changes, and the strident pleas by the cricket world on the Board of Control for Cricket in India (BCCI) and its ‘cronies’ to correct the wrong, it is time to step back and reflect on the bigger picture. The new revenue structure and why BCCI deserves more While there may be indignant commentary of the new revenue structure, and the skew towards the Indian board and its partners, the reality is that in terms of what it gave to the sport, the Indian board got much lower than its share of revenues. In fact, even after the new revenue share agreement, India still has a lower than its share of the global revenue it generates. After this move, and including the Indian Premier League (IPL) licence fees that India gets, India would still have a share which is less than 50 per cent of the overall cricket revenue in the world, whereas in terms of ratings, GRPs and spends, the value creation is upwards of 75 per cent. I think it’s time now to reflect on how the game could evolve rather than who deserves what revenues, because that debate is over. But before we do that, it is important to understand how the numbers look. The projected sharing of future revenues is as follows: 


In million $ Erstwhile Arrangement New arrangement 
BCCI 117.5 568.0 
ECB 117.5 173.0 
CA 117.5 130.5
 CSA 117.5 93.5
 PCB 117.5 95.5 
WICB 117.5 80.5 
NZC 117.5 75.5 
SLC 117.5 80.5 
BCB 117.5 68.0
 ZCB 117.5 65.5 
Associate Members 522.5 210.0 
Total distribution 1640.0 1640.0 


Just to clarify, these are eight-year numbers, and assume a $2.5 billion rights number over the next eight-year cycle of ICC rights, and are net of the costs of running cricket. So, a few things strike us immediately. India is around 30% of the international revenue—sounds fair if you ask me. The big drop is in the associate number and that is a good issue to mull over. The increases in Cricket Australia and England & Wales Cricket Board are not significant, given their other cricketing revenues. Pakistan and South Africa are a major surprise in the revenue share matrix. There is an element of randomness in the distribution, and I am sure there is some logic to this. But all is not lost, as for most boards, bilateral revenue make for a higher share of revenue than the ICC pie. And if their bilateral and T20 league revenues are considered, this drop would be in single digits, and in some cases, there would be increases depending on their new deals with their host broadcasters. The BCCI Brahmins, the Non-Aligned nations, and Others In terms of revenue fallouts, the countries can be broadly classified into three categories. The BCCI Brahmins—England and Australia, which clearly benefit financially. The other benefit they will get out of the arrangement is that they will almost certainly play India more as this kind of an arrangement will lead to a more clustered structure, that itself will add $80–100 million more to their revenue pie over the next licence period. Then there are the Non-Aligned ones—South Africa, the West Indies, New Zealand, and may be even Bangladesh and Zimbabwe. The impact on South Africa is minimal, and they have a robust cricketing structure which will be able to absorb this hit, and given their quick turnaround on the ICC roundtable, it appears that a deal has been cut with India to support them on other revenues. The West Indies again should be able to manage; it has a reasonably robust financial operation, a decent long-term broadcast deal, and they are aligning themselves to service a western hemisphere-based cricketing audience through some of the new products they are launching. The other Non-Aligned ones will be severely hit—Zimbabwe and New Zealand have little cricketing revenues to speak of, and Bangladesh, though strong in domestic cricket revenue generation, have done precious little to build it over the years, though the latest news is that they have agreed to a four-series deal with India to help them buttress their financial position. What confounds me is the next bunch of countries who I call Confused—Sri Lanka and Pakistan. Sri Lanka more so as they are dependent on the BCCI for survival, and the position they have taken belies their reality. Their revenue loss because of the restructuring, for example, is set off by one Indian tour, and India has really supported them over the years, with contrived trips to the Southern Island. They also have a good domestic structure, which drives their cricket, and some of their financial problems have resulted from political profligacy rather than bad operating management. Their position on this change surprises me, to say the least. Pakistan, of course, is a completely different story. They are probably the only other nation apart from The Big Three, which can build an independent revenue model around their cricket. Apart from the political issues, they have a significant roadblock on the broadcasting side, where their cable system has been completely hijacked by Indian television. So, their product remains under-monetized and in spite of a buoyant local market, it is sold at the fraction of the price it deserves. The board has to drive this with the government in terms of regulatory actions and in the interim find ways to generate more money. All that notwithstanding, it is a board, which I feel is genuinely hard done by the current share of revenues. At 200 million, Pakistanis that follow the game deserve more from the cricket business, and also the value they bring to the game. To a large extent, the situation is out of PCB hands, if recent statements of former PCB chairman Mr Zaka Ashraf are to be believed, and the government has been invoked. Besides, their relationship with the Indian board continues to perplex all, and while it is toned with the political equations between the two countries, the relationship needs significant improvement. The last word on this is not written yet, and in the subcontinent, we should see another series of structural actions, as the players lick their wounds, and transfer their beady eyes to big brother India for resurrection and rehabilitation. Star India to control over 80% of cricket revenues On the cricketing business front, some interesting things begin to happen. The Murdoch group emerges as the dominant player in world cricket, and will control upwards of 80 per cent of revenues of the business. It’s a strategy they have been chasing for some time now, and it’s beginning to fall into place. They will dominate a sport, which services 1.6 billion of the world’s population and also gets them a foothold in emerging markets for the sub-continental diaspora in the west. Is it a bad thing? Not necessarily, because it has been proven in football, where their support to English football has made it the largest league in the world. Product quality will improve, and product costs will increase substantially at the consumer level—something which is very evident if one watches cricket on Indian television now. Emergence of three major cricketing seasons There will be a clear emergence of three major cricketing seasons through the year. June to September—English cricket. October to February—Indian and Australian cricket. And March to May—the IPL season. India will probably travel in the six-week window between December to mid January, when it gets too cold in large parts of the country and it suits Australian and South African markets. And it also leads a July-to-September window open for other tours and the probable enhancement of English ODI and T20 leagues. We will see India, Australia and England play bilateral every year now. In a way, a triumvirate has been created. It is of great interest to see how South Africa gets accommodated in this. They are a cricketing super power and they are the ones who will now have to edge their way in. And so now we understand why they voted for this change. It’s a pity, as they are a proud cricketing nation and put money where their mouth is in terms of cricketing investment and development of the game. As a fall-out, we will see more bilaterals being played by the smaller countries. This is to keep the game going and also continue feeding revenues to the respective boards. The role of Pakistan will be very crucial in this, as they probably have the highest revenue momentum of the remaining nations. It is evident that the FTP will be redrawn now, and how it shapes up is an interesting viewpoint. Possibility of a three-month IPL window It appears to me that all this will lead to a three-month IPL window. It could become a 100-day season with probably four more teams. The interesting question to note on this is whether the sub-continental teams also get a chance to participate in this party. One of the chief concerns of the BCCI has been the emergence of country leagues in Sri Lanka and Bangladesh at a fraction of the value of the IPL, and thus potentially depleting the value of the IPL. If, say, one Bangladesh, one Sri Lanka and two Pakistan teams are allowed, it addresses three issues immediately. It snuffs out the current leagues in these countries, and it opens out higher player participation from these countries in the IPL. And this also opens up a larger market for the IPL in these areas. The current issue of Indian players playing in The Big Bash and the English T20 league becomes easier to resolve and will add more commercial value to those leagues, with more revenue participation, potentially, for the BCCI. And as the current IPL demonstrates, there are enough players willing to hang their hat on this league. This could happen over the next two/three years as the IPL comes up for a rebid, and it appears from a fee perspective, it is poised to take a dramatic leap upwards, as a three-month season gives significant pricing leverage to sports channels to drive their penetration on this product. In my opinion, the product is ready to be taken to more cities, and if the franchise financials are managed rightly, it will find many takers. Formal emergence of the BCCI as the driver of international cricket So, what happens next? As I am not an ICC expert, and do not profess to understand the decision-making process at the venerable institution well, I can only comment on the final outcomes. I think the formal emergence of the BCCI as the driver of international cricket is a good thing to happen. It was quite evident that the BCCI was chafing at the seams over the last few years as it felt it needed more influence on how the game was run. I think the responsibility of running the international game will now also fall on the BCCI more than anybody else, and they will have to support the smaller countries and members to bring up their cricket as envisaged by the ICC constitution. The Woolf committee report, it appears, while being very sanguine on the issues of governing an international board, remained oblivious to the changing viewing dynamics of the game. It is obvious that it did not have full support even at the Big Three level, which forced the strategic ambush that has led to these actions. I am also very confident that the new ICC committee will set in motion a good development plan for new nations. While on the new ICC committee, how it functions would be an interesting thing to watch. The objectives of the three boards are quite divergent, especially when the development of the national teams and cricket structures are concerned. Industry watchers say that they expect developments here as well, as the new structure settles down and the players chalk out their common objectives. The last word on the structure is not written yet, and I continue to observe this with interest. The fate of the associate members is not clear at all. Their funding has been cut down and in a way it appears that the new ICC thinks that they are not relevant. It’s an issue to be discussed going forward, though clearly in terms of immediate importance it could take a back seat. Maybe, the current thought is to grow the game in countries where it is popular and let the diaspora take care of the rest. We will have to wait and watch. Redressal of Pakistan Cricket in some way is also a pending item. The cricket world needs a strong Pakistan and the viewing public deserves a sizzling India–Pakistan rivalry. It is a more complicated issue than it appears because of the way television runs in Pakistan, and also the attendant political issues between the two countries. The BCCI will have to really step to the plate to make this happen. As I write this, and try to make sense of the puzzle, I am left with a feeling that this momentous change is just the beginning of the real restructuring of the cricket world, and will set in motion many events which will transform the way the administration of the game is conceptualised and run across the world, as well as the way it is played maybe. Watch this space! (Atul Pande is the erstwhile Global Head of Ten Sports. His email is atulspeaks@gmail.com and his twitter handle is @atulspeaks)

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