Poundland

An evaluation of the huge opportunity the proposed sale of The Hundred franchises offers the county game

Might Beyonce be tempted to perform at The Hundred?

The late Irish comedian Dave Allen had a good skit on global finances. “The UK are in debt,” he would say, “Ireland and France are in debt. Germany, they’re in debt. Italy – well they’re always in debt. Russia are in debt. Japan – they’re in debt. Even America are in debt.  The question is – who the feck do we owe it all to?!!”

He would have a field day with first class counties balance sheets. They are covered in red. Gloucestershire recently announced a loss of £1.2m. Numerous others have announced deficits for the last financial year. Five have asked for advance payments of their annual £1.3m ECB handouts. Sussex can’t afford floodlights for championship matches. Middlesex can’t afford overseas players. Even big clubs like Lancashire and Warwickshire have debt mountains on account of their ground redevelopment work. And we all know the plight of Yorkshire.

Salvation is at hand. The Hundred ‘sell off’ – offering shares in the eight franchises to private investors - is, or should be, a turning point for county cricket. It will potentially mean a windfall for each county of potentially around £10m. Enough to keep the wolf from the door for a while anyway.

There are many questions – and uncertainties – around this issue. Many are answered, or at least considered, in the latest Analyst Inside Cricket podcast. But I thought I’d explain my workings here also. The first is the likely structure of each franchise deal, helpfully outlined by the MCC – who, of course, will be granted ownership of London Spirit – the first time the club has fully owned and operated a professional team in an English season.

Proposed share-out of the funds from the sale of Hundred franchises (courtesy MCC)

So, as the graphic explains, the ECB will retain 49% ownership of each franchise (which it intends to sell off) and the host venue retains 51%, which it can sell or keep. Ninety percent of the money received for the ECB’s shares will be distributed amongst the 18 counties and the MCC. So, for example, if the value of Manchester Originals were £50m, the ECB’s share would be £24.5m, and 90% of that – so around £22m – would be distributed to the counties and MCC, giving them £1.16m each. Multiply that by 8 (franchises) and the ECB contribution to each county could be £9.28m. And that’s before the host venue has shared out 10% of its share sale too.  

So who is valuing each franchise and what will that be based on? The ECB have appointed the American bank Raine Group – who managed the takeovers of Manchester United and Chelsea  - to run this operation in collaboration with Deloitte who will value the franchises. Most such financial assessments are based on the predicted (or actual) broadcast rights – 80% of which will be shared amongst the eight teams. Given the £350m uplift in the TV deal following the introduction of The Hundred (from around £750m to £1.1bn) it is fair to assume a fag packet valuation of the competition at around £400m. So divided by eight that’s £50m per franchise.In practice some will go for more, and some for less.  Mukesh Ambani, the richest man in India, is known to covet the MCC-owned London Spirit. Given he flew in Beyoncé for his daughter’s pre-wedding party and Rihanna for his son’s equivalent and is worth $116bn, buying access to the MCC’s franchise and therefore the Lord’s inner sanctum would be a snip at £80m.   

Might the value of the franchises diminish over time? It’s unlikely if you look at the trajectory of broadcast rights of cricket (below.)  The IPL rights have gone gangbusters and are expected to rise again by a multiple of 1.4 in the next rights deal. The ECB rights will potentially be the same. These numbers are governed by broadcasters increasingly aware that live sport is the only driver of mass TV and digital audiences and also potential advertising revenue, which, with the advent of digital platforms, is much easier to measure the influence of.  There is so much more data available about advertiser reach, demographics and impact. It was revealed recently that around 1000 companies were clamouring to advertise on the IPL linear and digital platforms. Some of those might well want to be associated with The Hundred.

There is much more to be worked out before these Hundred deals are over the line. County members must be canvassed, potential investors carefully evaluated, there is much more detail to be clarified, not least in what total percentage of a franchise could one investor own? In theory one institution could buy all of the ECB’s 49% and all the host venue’s 51% of a team, giving it complete control, which is neither wise nor ideal. At least the ECB still own and run the tournament, which is vital. (Perhaps the new revenue will enable them to get rid of the tacky-snack sponsors!)  

There is also the question of what happens when the money (to the counties) runs out? Inevitably there will eventually be a new broadcast deal (with the Hundred as a separate entity rather than bundled in with the England internationals etc) and a greater proportion of that sale will be retained by the ECB to be distributed amongst the counties.

There are many decisions and agreements to be made before all this happens. There will be many laments that the Hundred is taking over the best weeks of the summer with nothing for lovers of first-class cricket to watch. But that problem could be sorted by having some first class matches in August at the same time as The Hundred, and to be frank, without some new money coming into the game to prop up unsustainable businesses, there will be a lot less first-class cricket everywhere.

So see the Hundred sale as an opportunity not a threat and even welcome the day when London Spirit have Beyoncé on stage at Lord’s between innings. Although another Allen – Gubby not Dave – will be turning in his grave at the prospect.