Financing a test championship
Russell Degnan

As the ICC moves towards a test championship it is worth reflecting on the most significant barrier to potential reform: the financial impact of scheduling changes on the members involved.

The existing financial structure of bilateral cricket

At present, excepting some tour payments that cover costs, full members sell their tv rights, and take the full amount of local revenues whenever a team tours. They sell those rights globally, meaning that for many members in small markets, the bulk of their income from test cricket comes not from their local market, but by selling their local content to overseas television. Moreover, because those stations are primarily interested in their own local team, only three tours are worth significant amounts of money (if not profit): India (by some margin), England and Australia. A fuller explanation of these values is outlined in this post.

Although ICC revenue makes up a significant proportion of overall revenue for smaller members, there is none forthcoming from test cricket. As there is no ICC run and owner test championship (except for negligible prize-money), the ICC owns no rights. In the past decade, the big-3 has consolidated their financial positions by increasing the amount of tours they make to each other. Those marquee tours to each other are longer, and more sought after by local fans (particularly the Ashes which is worth upwards of 50% over a normal tour). It is difficult to calculate the exact value of tv rights for test cricket, as they are sold as a package of formats. But, based on projections of audience, across the number of matches played, a rough guide to test cricket revenue sources for the big-3 versus the other seven full members is as follows:


Figure 1. Existing test cricket revenue sources

The disparity between the value of these popular tours and everything else is so great that my estimate puts the value of marquee tours at something like half of all test revenue. And the value of a big-3 tour to anywhere at 65% of all test revenue. The significance on this on governance can also not be over-stated. As the vast majority of touring revenue comes from hosting the Indian test team, this dynamic allowed the BCCI to rake in power to itself by trading tours for votes, and the threat of no tour for compliance, prior to the reforms (after which they no longer needed to manhandle the other board members).


Financial hurdles to reform

As we shift towards a test championship and more sensible structure, the existing revenue distribution suggests several barriers to any proposal being approved.

As the big-3 make a significant proportion of revenue from their incestuous touring schedule. The more evenly the schedules are created, the more money floats out of that bubble and into the general pool. Under reasonable assumptions, a seven team division with an even number of matches would shift around $10m in revenue per year from the Big-3 (mostly Australia and England) to some of the other full members. In the context of their billion dollar incomes over each cycle, that isn't a huge amount. But that figure hides a more serious problem at the other end of the table.


Figure 2. Test cricket revenue sources under an even tour distribution

Every one of the other full member nations depends on those periodic tours from the big-3 to top up their revenue. By creating an exclusive top division, and removing them from that revenue source the West Indies and those below them will find their own $40m hole in already teetering budgets. The broader the base of nations that need to be sustained, the larger the revenue drop for the big-3 will be.

As marquee series are also more popular amongst local fans, there is no guarantee the drop off in overall revenue from reducing them will be regained from the context of a test championship, nor where that money will end up. Uncertainty will push administrators away from any proposals. With one or two exceptions, they are inherently risk-averse, and focused primarily on what their board will receive, rather than the potential growth of overall revenues.

Around an impasse - schedule splitting and collective bargaining

If fear of uncertainty - and potential losses - will kill any proposals, then that suggests two measures by which a future test championship could incorporate features of the existing distribution into future programs.

Firstly, as noted above, the touring calendar of the Big-3 is roughly evenly split between their marquee series and everyone else. Although survey responses to date indicate a strong preference for a championship to be an all-inclusive part of the FTP over a short tournament, there was a split response over whether series should be of even length, and the maintenance of marquee series ranked highly among the presented aims and concerns. At least amongst the fans I have had respond, the maintenance of series like the Ashes ranks as important as creating a working championship format.

One possibility is to split the four year cycle, between bilateral fixtures in two years, and a test championship in the others. The existing marquee structure would remain in place, and the big-3 would suffer no potential revenue or fixture losses, as those tours would continue as they do now. However, the institutionalisation of marquee fixtures would fill the calendar in the space reserved for bilateral tours; removing the ability of the other full members to attract the big-3 for tours of their own. To circumvent that, they need a source of revenue from the test championship.

The second reform to achieve financial stability is for the other members to collectively bargain their home touring rights. At present, there is a zero-sum game in attracting tours from the big-3. Relegation presents itself as a removal of lucrative tours and financial armaggedon for members who drop out of the top tier.

By pooling their individual home rights in test championship years, and selling them via the ICC as a packaged tournament, it would no longer matter who the big-3 tour in that part of the cycle. All money would be collected and distributed amongst the members involved: partly by need, partly by performance, partly by value foregone from signing away their collective rights. (The big-3 signing on is optional, but preferable from a commercial perspective.) As each member is also now invested in a test championship, it is in their interest to create a format that maximises revenue: by competitiveness and meaningful matches.


Figure 3. Test cricket revenue sources under a shared tournament revenue model

The exact nature of that format is outside the scope of this article. It is possible to have strict tiers over a cycle, and fluid ones, that move from qualification stage to qualification stage. Each has their merits and followers.

Without financial reform though, in which the ICC must take a central role, there are too many reasons for members to opt out of a system that, broken as it is, provides low risk grease for the financial wheels of smaller members. A more robust system, via collective agreement is possible, and even necessary if scheduling reforms are to be achieved.


If you missed it, I am conducting a survey on test championship aims:


Take the survey now!


Idle Summers 27th February, 2016 12:27:02   [#] 

Comments

Financing a test championship
Very interesting article. I agree with all of it. Only skeptic in hoping that today's big money earners may be willing to give up their toy to a super-nations body. I believe that todays big earners will make even more money from a, davis-cup-like, Test Championship. If world cricket fans base doubles from present, biggest beneficiaries will be top Nations because more appealing for other Countries TVs. Therefore top Nations would benefit from a broader base.The difficult is to have them to make a jump into the future from a pleasant, unworried present.
andrea lanzoni  28th March, 2016 06:04:11  

Financing a test championship
Thanks Andrea. I think you are right. One argument I tried to make her though, is that it doesn't need to big-3 to come on board, as the other nations could pool their collective rights without them. The reform process is largely driven by uncertainty over future finances and player availability amongst those members. Anything that allows them to avoid that uncertainty will hopefully be welcomed.
Russ  1st April, 2016 11:50:25