On The Two Pies In Cricket

I have previously argued that the point of the position paper is not the get more money from the ICC, but to free up the domestic calendar to expand T20 leagues. My rationale for this view is that there was that there was far more money to be made domestically in India, England and Australia, than there was from ICC Cricket.

Here is a look at what 4 cricket boards will make in the year 2016. What I've found provides good evidence to support the view that "contribution costs" (an idea which has been approved in principle by the ICC on January 28, 2014) are designed to basically to hurt the poorer boards which depend more of ICC's money, than to benefit the BCCI. I'm considering only TV rights. Sponsorship deals are over and above this.

A quick search on the google machine revealed the following (all figures are in US dollars):

1. BCCI:
IPL TV with Sony deal worth ~165 million per year
Domestic and International cricket in India, TV deal with Star Group worth ~620 million over 6 years, or 103 million per year

2. ECB:
Domestic and International cricket in England TV deal with Sky worth ~464 million over 4 years, or 116 million per year
Additionally, a smaller radio contract with BBC until 2019, but I'm not including this in the calculation.

3. CA:
Domestic, International and Big Bash League in Australia TV deals with Channel 9 and Channel 10 worth ~519 million over 5 years, or ~104 million per year

4. CSA:
Domestic, International cricket in South Africa TV deal with Taj Television worth 202 million over 8 years, ~25 million per year

The amounts in the table below are in million dollars

Taking only TV rights deals into consideration for the sake of the present argument, under the current distribution of revenues, Cricket South Africa makes about 58% of its revenue from the ICC, while BCCI makes only 5% and England and Australia make about 13-14% each. The proposed "meritocratic" redistribution, increases the amount of money provided by the ICC to BCCI to 21% of its total income (for the year 2016 under the present proposal).

Now, if the FTP was eliminated, and each of the three richest boards could control their calendar without having to follow the FTP, they could potentially make far more money from their domestic contracts. New contracts will be renegotiated in India, England and Australia in between the 2017-2019 period. The ICC's new contract will be negotiated for the period from 2015-2023.

I put it to you, that these figures suggest that the potential for growth of the domestic contract far exceeds the potential for growth of the ICC's contract. It is also in conflict with the ICC's contracts which, in order to grow, will have to use up a large chunk of every single team's calendar.

If we believe the ICC President, the ICC have effectively agreed in principle to an explosion in T20 cricket. I predict that by the end of this decade we will most probably have a 150 match IPL season and a BBL season of similar length. The point of "contribution costs" is not that the richer boards contribute more than the poorer boards and therefore deserve more of the money, it is that the richer boards have the potential to get much richer, and the poorer boards should get out of the way.

But it is not even trickle down economics. The standard economic argument is that if you leave the wealthy to do their thing (by reducing taxes and regulations - the FTP and the current revenue distribution model of the ICC can be see as such), they will grow the size of the pie faster, so that even if the poorer boards get a smaller share, in absolute terms they will get more. Things will be more unequal, but on balance, everyone will be better off, as long as one is willing to ignore the adverse consequences of inequality.

This is about two pies. The ICC's pie must not be allowed to grow (since in order to grow it would have to use up a greater share of a finite resource - the calendar) beyond a point. Each Board's pie must be allowed to grow as much as possible. Except, that here the big three have a decided advantage to start with.

I predict the following things in the coming years:

1. The next ICC TV rights deal will not be substantially larger than the previous ICC TV rights deal.
2. The next domestic TV rights deals in England, India and Australia will be vastly larger than the current ones (and increase will be greater by some distance compared to the increase in the ICC's deal)
3. The guarantees, if any, for following the FTP over the next cycle (upto 2023), will not be honored by England, India and Australia over some pretext or the other.
4. There will be an significant increase in the number of games played in future editions of T20 leagues in England, India and Australia.
5. A few of the smaller boards may survive in something resembling their current form, and even thrive by developing T20 leagues of their own. But many will shrink.
6. In about 3-4 years, the gist of the present position paper will be revived at the ICC by the big three in a far more aggressive form.