This is an exclusive guest post on cricexec in response to the extensive coverage on The Hundred’s sale of stakes to private owners, and recent reporting that the process is close to completion.
I genuinely believe that the people involved in the sale side of The Hundred process are failing to understand the true value of English cricket, are selling the wrong product, do not understand the nuances of what is required to achieve the most successful outcome and are giving neither English Cricket, nor the host grounds, nor the investors the best opportunity to succeed through producing the best asset for the game.
Raine, the ECB’s US advisors, have little or no experience in cricket and therefore may not themselves appreciate how to set the offering up in the optimum way or how the global cricket ecosystem works. The process itself appears to be under stress – the Exclusive Negotiating Period having been extended – while the Participation Agreement is negotiated. That suggests that the buyers and sellers are still some way apart – the silence is deafening!
The Product
The first mistake is that they are selling the wrong product. The Hundred as a cricket format is an outlier, it has no International reflection and is played only in England and Wales. All other formats tie into an international competition (50 and 20 over World Cups, World Test Championship). There is no chance that The Hundred will catch on internationally and therefore it will remain an outlier and very likely fail sooner rather than later. That means that irrespective of the players it attracts it is very unlikely that it will ever attract substantial overseas media revenues and certainly nowhere near the levels suggested in the process collateral as reported.
Undervaluing the opportunity
The amount of money pledged by investors on entering the Exclusive Negotiating Period is described by the ECB as being ‘very substantial and beyond all expectations’. That is entirely subjective and the amount could have been significantly greater if they were selling the right product in the right way to the right investors. It is interesting how many sophisticated cricket investors withdrew early in the process and how many of those that remain could not be described as such. It may subjectively be a significant amount of money but does it represent full value for the opportunity and assets being sold?
Consolidating The Hundred and T20 Blast
In my opinion what the ECB should have done, and what they were advised to do by a consortium in which I was involved, was to consolidate The Hundred and the T20 Blast into one short format T20 tournament. This would have:
- made far better use of the available English summer schedule,
- tied into the international ecosystem and thus created international value,
- concentrated value through limiting supply, placed lower demands on the players,
- removed market confusion,
- created greater domestic and international media value.
This is a classic case of ‘less is more’.
Why The Hundred was created
The ECB argue that The Hundred is designed to appeal to a younger demographic and to a wider broadcast customer base (in order to get cricket back on terrestrial TV) e.g. by taking place in the school holidays, being shorter and thus ending earlier in the evening appealing both to the young and to broadcasters.
While there may be some truth in this, and the ECB do have a genuine problem in terms of participation, the major reason for The Hundred is that the counties (the constituent members of the ECB) were unprepared to cede control of the T20 Blast to private owners and this forced the ECB to set up an alternative offering for private sale to fund the game’s future and support their less commercially viable assets.
Importance of the central media deal
Central and overwhelmingly vital to determining the value of The Hundred franchises is the central media deal. In the past the ECB has bundled all of its format rights (tests, ODI’s, T20, The Hundred) into a single offering to the media market. The reason for doing this is to make the value of the whole greater than the sum of the parts. That is a perfectly reasonable strategy if the rights for all elements fall under common ownership as it has the effect of the stronger rights creating greater value in those that may be weaker.
The problem now of course is that the rights will no longer be under common ownership and therefore rights owned by one group of owners (The Hundred) may be causing value to increase in those owned by others, classic ‘stealing from Peter to pay Paul”.
In order for full transparency to establish the true value of the rights, The Hundred rights must now be sold in isolation of the separately owned ECB rights and to the exclusive benefit of The Hundred’s owners. It is reported that the ECB is resisting this and refusing, as I understand it, to make the current media deal contract available to The Hundred buyers on grounds of confidentiality. I am sure that the current broadcasters would allow visibility to those who sign a suitable NDA.
Termination provisions
It seems that the Participation Agreement may be a difficulty for the buyers not least as it contains multiple and wide reaching reasons under which the ECB may discontinue The Hundred with no recompense to the buyers. Any buyer other than the most reckless would not sign up to anything that could be summarily cancelled.
Mishandled process
Finally, at the conclusion of the pre Exclusive Negotiating Period process, the ECB went public with the numbers and applauded themselves and their advisors for the sums raised when, in reality, nothing had been raised. As of now no money has changed hands, no final paperwork agreed and signed and no investor irrefutably confirmed.
What should have happened, as did when the IPL Franchises were sold, is that a fully negotiated and signed Participation Agreement should have accompanied all financial bids together with a substantial deposit, binding the bidder to the financial bid and the Participation Agreement in the event of their bid prevailing.
By doing it the other way around, i.e. agree money first and terms second, the ECB have handed all of the negotiating leverage to the investors who, in the event that reasonable terms cannot be agreed, can simply walk away with no loss to themselves other than their costs and, more importantly, no benefit to the ECB who, in that event, would be humiliated following their earlier announcements of great success and would have done untold damage to the English game.
