What follows is necessarily inexact. Perhaps very inexact. Cricket has many issues that confront it, but by far the biggest is a lack of transparency. The Woolf review, despite the resources available to it was forced to admit much the same:

We believe there is an overall lack of transparency around financial distribution in global cricket, which means certain aspects of the finances of global cricket are not well understood. We have been unable to obtain a full picture of the current financial position of global cricket. For instance, although there are various media estimates in circulation of the impact of tour cancellations (actual or threatened), it is not known with any degree of certainty the financial effect a tour by one Member has on another Member. It is clear that tours by certain Members (such as India) to other Members give a significant revenue boost to the host nation.

There are four points we know with relative certainty however, from which we can begin a deeper investigation. Again, to quote the Woolf review:

• The level of funds flowing through the ICC and global cricket has been completely transformed in the last ten years, with a significant increase in revenues, principally from growth in income from television rights.
• For ICC-run events, the additional funds from television rights flow through the ICC to the Members.
• For other competitions and matches, such as those under the FTP, the income flows directly to the Members.
• The most notable source and beneficiary of the greater revenue flowing into cricket is India. That nation's love of the game has combined with significant population and GDP growth in recent years, to make India the commercial hub of world cricket. There are unsubstantiated estimates that India generates between 60% and 80% of revenues flowing into global cricket. India also has a significant impact on the ICC's Commercial Revenue, as almost all of the ICC's major commercial partners have significant links with India.

The basic structure of cricket finance runs from TV markets - nominally constituted at a national level - to either the home board of a particular fixture, or the ICC. We therefore need to make three assessments: the size of a local cricket market; the flow of money generated from that market to various bodies; and the distributive flow from the ICC and others.

For most purposes here I'll be talking averages over four years, because this takes into account the cycle of both the FTP (give or take), and the ICC major events. Every cricket board exhibits substantial variation from year to year, depending on who is touring, and the dividends distributed by the ICC.

Cricket Market Size

This is the most inexact of all the estimates, not least because it isn't clear what percentage of the cricket market is actually being drawn on by various members. Empty stands and no push to fill them by sensible scheduling, and fixturing that makes an inefficient use of resources, and no attempt to contextualise the season means most boards make less money than they might.

A previous assessment of TV rights deals across sports in Australia indicated that cricket gets roughly what you'd expect, given its ratings, and total hours of programming. Taking into account sponsorship, merchandise and match-day attendance; then cross-checking against Cricket Australia's annual reports, and adjusting for income earned from overseas, puts the size of the Australian cricket market (or at least, the part of that that pays to watch professional players), at something like an average of AUD$150m (which for current purposes is nearly identical to USD) over the past four years. The most recent TV deal has probably inflated that to nearer AUD$200m . The continuing rapid inflation of sports rights makes this process harder than it might otherwise be.

The simplest model for calculating market size is to multiply GDP (incomes, which includes population) but the level of cricket interest. There are various reasons why it won't correct: the distribution of cricket fans amongst income quartiles (particularly in England and to a lesser extent India where cricket is an upper-class sport); the size of disposable income which will make the sports market in wealthy nations much larger; and the difference between TV income and ground income, with the latter more easily captured in richer, but smaller nations. Nevertheless, I'll look at three methods of assessing cricket market size. Two are quite simple but (relatively) complete, the third complex, but stifled by the lack of annual reports from the most poorly governed members.^[1]

	Announced Revenue avg. Last 4 years	Population (2007 millions)	GDP (millions USD)	% Cricket Players	% Cricket Articles Kaufman + Patterson (2005)	Market Estimate % News Articles	Market Estimate % Cricket Players	Market Estimate Regression Method
India	168120	1169.0	1141346	7%*	46%	419711	669767	600000
England+Wales	185980	55.7	2440505	0.90%	17%#	207443	210265	204000
Australia	157041	20.7	1541797	2.41%	22%#	169598	191894	160000
Pakistan		163.9	231879	8%*	61%	70723	109469
South Africa	62065	48.6	384315	2.06%	20%	38432	49086	40000
Bangladesh		304.4	153000	2.52%*	49%	37485	27914
New Zealand	31399	4.2	169680	2.39%	17%	14423	26282	18000
Sri Lanka		19.3	59408	8%*	57%	16931	21685
West Indies	37219	4.5	50145	3%*	28%	7020	11701	20000
USA	701	305.83	15684750	0.01%+	0.10%+	7842	7948
Ireland		6.1	254500	0.31%	3%*	3156	6744
Canada		32.8	1819081	0.03%	1%	9095	4223
Scotland	2789	5.14	216000	0.20%	4%*	4320	3781
Afghanistan		27.1	19906	1.03%*	10%*	995	817
Zimbabwe		13.3	9802	0.37%*	5%	245	68
IPL	137915
ICC	205409
CLT20	100000*

* Estimate - by which I mean guessed and/or completely made up
+ Estimates of USA market size are very sensitive to assumptions. The K+P figure was close to zero, but also 8 years ago, and there has been a recent shift towards more cricket articles. Similarly, estimates of the number of players vary from the official figure of ~30,000 to ten times as many. Consider this a low figure; under reasonable assumptions the USA is cricket's fourth biggest market. Though almost none of that goes into US cricket.
# K+P give two figures for England - 8% normally and 17% in summer - I have used the higher one for obvious reasons (estimates outside the season are irrelevant). They don't offer similar figures for Australia, which makes all the figures in this column sensitive to this assumption.

Method 1: Estimate from GDP/news media

One of the more interesting pieces on cricket take-up in various nations is the 2005 piece by Kaufman and Patterson. It is worth reading the paper, but for my purposes its most useful feature is an estimate of cricket popularity by counting articles in the sporting press. The numbers have been relayed into the table above, and used to calculate, by multiplying that out by GDP and a factor that makes the markets I have good data (Australia, England, India and New Zealand) approximately the right size (around 120,000).

Method 2: Estimate from GDP/playing numbers

Playing numbers as a proportion of population ought to be a good measure, but are complicated by the fact that, although have a complete set of figures for associate/affiliate nations, I have none for most test nations. Estimates of the major nations should therefore be taken with very large grains of salt. Nevertheless, it gives some reasonable numbers, and those give a good indication of the size of markets where published annual reports are sparse, or the market is undeveloped for lack of matches.

Method 3: Estimate from Annual Reports

Estimating market size from actual revenues is complicated by the amount of revenue generated by most boards in external markets (either overseas tv rights or sales to spectators), and the lack of reporting on the source of that revenue.

India is perhaps the easiest market to estimate, because the BCCI generates relatively little profit from external sources. Their annual report puts average four year revenue (adjusted for currency) at USD$168m, of which $25m is dividends from the IPL or CLT20. Those two competitions have approximately $240m in revenue. The ICC brings in around $200m in revenue a year, of which India is the source of approximately 60% (by most accounts). Finally we must estimate the amount of revenue earnt by playing India at home, and which therefore goes to the local board. If that is assumed to be around $100m then the Indian market is roughly three times that of Australia and England: around $600-700m. This is less than most estimates, but consistent with their annual reporting.

What we really need to do though is understand where the money comes from, and where it goes.

Distributions

ICC Distributions are relatively easy to calculate, and the annual report is quite informative. 75% of profits - after events costs, TAPP payments and administration are removed - are paid as dividends to the ten full members, with the remaining 25% going into the development fund, the majority of which is distributed to the 96 associate and affiliate members. Dividends to full members over the last four years were USD$319.9m, with USD$41.4m being distributed to the development fund. That doesn't include prize money, or TAPP funds, from which relevant members took an extra million or so (relatively little, when considered over four years).

Non-full-members are paid according to a scorecard system - judged on 35% the men's ranking, 41% various participation figures, and 24% administrative development. The top-tier receive $300,000 USD, the bottom $5,000 USD, in addition to $100,000 for associates and $10,000 for affiliate members. High Performance Program members receive funds commensurate with the expected costs of transitioning from amateur to semi-professional cricket structures, depending on what events they play and qualify for. The Asian Cricket Council derives significant additional funding (approx $5m) from the Asia Cup, which in turn feeds into their member-base.

Estimating value: a multi-variate regression approach

A significant proportion of income for full members comes from the rights to host certain nations via the FTP - unless you hire Haroon Lorgat, then all bets are off. To estimate the size of these flows I went through every recently published annual report and noted the revenue in USD - converting by the exchange rate of the time - the year, the ICC grant (where noted, or estimated based on the ICC report where not), the number of home matches, and the number of those matches that were played against Australia, England, India or Other (meaning everyone else). A linear regression was then run, which produced some moderately accurate looking numbers:

The top line of figures - in thousands USD - is the important one - the second is the standard deviation which is worth noting only because they are quite large (around $1.2m on each variable). By multiplying out the revenue earned for a day of cricket by the number of days played I've estimated the flow from markets to boards in the following figure (click for pdf version).

This is necessarily representative, which is why I left the figures off. The size of each board logo and market is proportioned to represent the relativity between comparable entities. Where arrows are not clear, remember the money flows from market to board, sometimes via intermediaries (such as the ICC). I have not noted any payments directly from board to board, though the Woolf report implied they might exist. ^[2] Nor have I accounted for county cricket (which earns perhaps $40-60m) nor other T20 leagues which aren't accounted independently. In the interests of readability, flows less than $1m have been left off, as have most associate members. I can't guarantee I caught everything. ^[3]

Observations

There are a number of points that can be made from this. In no particular order:

The BCCI earns around $4m more than average from home matches, as does England, with Australia on $2.7m. (All give or take $1.2m; the Ashes earns at the top-end of those numbers - i.e.. above $4-6m per day). This makes intuitive sense. It also shows the importance of attendance versus TV in the revenue streams of otherwise smaller markets, and the weakness of the BCCI in creating a home schedule that meets what they might earn. As the annual reports bear out, India earns less from their home internationals than England, which doesn't accord with their perceived financial muscle.

Notwithstanding that the IPL effectively doubles what the BCCI make from their home market, they ultimately end up with only around half the revenue generated locally, despite having a monopoly control over the team that market pays to watch. This is both quite surprising, and an indication of why they are increasingly bullish about increasing their share of global revenue.

Board revenue has increased by $6m a year; that is, the regression estimates base revenue of $29m in 2000, and $89m in 2010. Obviously only three boards actually earned this; the variables are best interpreted as relative amounts. Moreover, the large standard deviation hints at the growing disparity in how much teams have managed to gain from overall revenue increases.

Playing India earns $1.6m for the home team more than Australia or England, and $2m more than any other team. This, in one sentence, explains most of what you need to know about the nexus of finance and the obnoxious chaotic scheduling of the FTP.

South Africa make $450k above the base rate (around $1m per match) from home matches, but New Zealand and the West Indies are making less than that, which means matches against teams outside the big-3 are likely to be losing money. We know this, in relation to why test cricket costs these teams money to play, but add in Pakistan - whose market lies dormant with no tours possible; Sri Lanka, Bangladesh and Zimbabwe, and it is clear the bulk of fixtures are neither profitable nor generating particular interest.

The total size of the non-full member market is around $90m; but it is almost certainly not being tapped. Zimbabwe has no market to speak of at all - less than $0.5m. Their GDP is tiny, their population is small; cricket is a minority sport. You frequently hear commentators remark on the importance of building up existing markets, rather than chasing markets in nations cricket has a small profile in. This is basically nonsense. There are three really big cricket nations, each of which has a GDP in the top-15 in the world. There is limited scope for growth in the big-3. But amongst the rest, because they are already pushing against the point of market saturation; and because their GDP is relatively small - despite their population size in the case of Pakistan and Bangladesh - their potential for growth is weak.

If one attitude weakens cricket's case for globalisation it is the perception - largely because of the bias in the origin of the cricket media - that there is a certain standard to aspire to equal to India, England, Australia and perhaps South Africa. With the possible exception of the USA, and in the longer term, China, no nation will reach that standard in the next 20, or perhaps 40 years, without remarkable (unprecedented) growth. The nations currently in the HPP are too small, or too poor, or both; the G-20 nations that might open up new frontiers have tiny playing bases.

There is, nevertheless, strong encouragement to the idea that cricket could have 20 nations of a standard somewhere between that historically maintained by New Zealand and currently by Bangladesh. With the assumption that, given that, at least a half dozen of those teams will have a transcendent talent (ala Hadlee or Muralitharan) that will allow them to compete with the big-4. A future post may look into this; as some nations will surprise.

If it wasn't obvious, cricket's finances are fundamentally unstable. The wealth available to three boards, and their local competitions means that noone else can afford the market rates for their players. While we haven't seen mass defections, it is increasingly clear that international cricket, as currently structured, cannot support the existing nations, let alone provide the investments needed to promote and grow the game elsewhere. Either a substantially larger proportion of the money moving from market to boards needs to be routed through the ICC (which means them taking ownership and control of tournaments), or a substantially larger proportion of the money must direct itself into competitions that will pay players from all nations, with a reduced emphasis on international cricket.

This would not be historically unusual; it has been the case for West Indies cricketers from the turn of the 20th century in English league cricket, through Constantine and Sobers; and onto the Packer years. There are also various ways both these scenarios could come to pass. Some are outlined in my manifesto on test cricket; others ideas will have to wait for another day. But don't be surprised if the CSA-BCCI spat is a harbinger of things to come. There are too many opportunities for the BCCI to redirect money currently exiting the Indian market back into their own pockets, and too much inequality, for things to stay as they are.

[1] It is interesting the cricket's largest markets come under both the best and worst governed nations but relatively few in the middle. The crisis of governance at ICC level is exacerbated by very different philosophies of action by its board members.
[2] The late Ronald Coase would have found this interesting. There is no good reason why boards couldn't bid for tours, thus maximising both BCCI income and cricket's overall revenue by playing the most desirable fixtures (albeit not those that make the best competition/product). Transaction costs at the ICC are high though, and we are far from man efficient touring structure.
[3] Also, apparently cutting a google map means I get abused by nationalist idiots over J+K. I don't care. Don't bother me over your craziness. It isn't remotely relevant to cricket.

Cricket - Analysis 11th October, 2013 01:52:36   [#] 

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