UP395 Wanna buy a Hundred Franchise?

Let us take you inside the Great Hundred Franchise Sell-Off

The Hundred is the England and Wales Cricket Board’s controversial short form format. This week, the ECB has secured an agreement on a funding model between the host and non-host counties - those counties who have a Hundred franshics and those who don’t. 

This could have seismic ramifications for the domestic game in England and Wales, kickstarting a process that will see a large injection of private capital into teams presently owned and run by the ECB.

So, how much is a Hundred franchise worth? Who will buy them and what happens next?

These are just some of the questions we put to Andrew Umbers, co-founder of Oakwell Sports Capital, one of the leading advisers in the sports investment marketplace. 

Unofficial Partner is the leading podcast for the business of sport. A mix of entertaining and thought provoking conversations with a who's who of the global industry.
To join our community of listeners, sign up to the weekly UP Newsletter and follow us on Twitter and TikTok at @UnofficialPartner

We publish two podcasts each week, on Tuesday and Friday. 

These are deep conversations with smart people from inside and outside sport. 

Our entire back catalogue of 500 sports business conversations are available free of charge here. 

Each pod is available by searching for ‘Unofficial Partner’ on Apple, Spotify and every podcast app. 

If you’re interested in collaborating with Unofficial Partner to create one-off podcasts or series and live events, you can reach us via the website.

Transcript

Unofficial Partner 395
The Great Hundred Franchise Sell-Off

[00:00:00] Hello, welcome to Unofficial Partner, the sports business podcast. I'm Richard Gillis. 

[00:00:04] The hundred is the England and Wales cricket boards, controversial short form format. And this week, the ECB has secured an agreement on a funding model between the host and non host counties. Those counties who have a hundred franchise, and those who don't. This could have seismic ramifications for the domestic gain in England and Wales. 

[00:00:23] Kick-starting a process that we'll see a large injection of private capital into teams, presently owned and run by the ECB themselves. So how much is a hundred franchise worth? Who's going to buy them. And what happens next? These are just some of the questions we put to Andrew umbers co-founder of Oakwell sports capital. 

[00:00:41] One of the leading advisors in the sports investment marketplace. 

[00:00:45] Richard Gillis UP: what's a hundred franchise worth?

[00:00:46] The scarcity premium of the two London ones, jeez, I mean, a lot, I'm sure Reliance are going to be really interested and the Ambani family and one of the big two in London. And I have a view as to what they're valued at and I have a view as to what , Welfare and Northern Superchargers are valued at.

[00:01:04] but I would imagine the cumulative value if one takes a hundred percent value that it'd be somewhere between sort of, 380 and 500 million sterling, a lot,

[00:01:16] Unofficial Partner is the leading podcast for the business of sport, a mix of entertaining and thought provoking conversations. With the who's who of the global industry? To join our community of tens of thousands of people. Sign up to the weekly Unofficial Partner newsletter and follow us on Twitter and Tik TOK. 

[00:01:39] There's a sort of what's happening question, in relation to the hundred and the franchises, and I've read various things and I've listened to various people, but I just want to get a definitive, where are we at the moment? Tell me about what's happening, what you see in relation to this question of, you know, the hundred franchises and the capital that is out there that may or may not want to invest in those.

[00:02:03] Andrew Umbers: Okay. So, let's just talk about cricket and why cricket so, in an ecosystem in the round way, it's 2. 4 billion fans around the globe.

[00:02:13] So, it's the second most watched sport in the world. And in the UK, as in England and Wales, which is the ECB, there are 2. 6 million, players, and there are 1. 4 million under 16 year olds. The issue, if you like, of why cricket is more generally attractive is, it's a truly community based game. It accesses every demographic and level of society.

[00:02:39] And, it's engaging and specifically in short format, almost anything you've graded in cricket in a short format has been a success. I mean, that's um, the irony. I just, even now I still can't quite believe it and it's got high quality revenue streams. By that I mean, the broadcasting contracts that if we take the a hundred, which is the BBC stroke sky, it was an eight year agreement.

[00:03:05] If you break down the hundred within that, of which very few people have done, but our research, we're privileged to have that information and have had it in terms of why we were the advisor to the rumored bid for the hundred a year and a half ago by Bridgepoint the revenue attached from the broadcasting is circa 35 million pounds.

[00:03:29] And we'll move to around 50 2025. We'll end in 2028. That's just domestic broadcast revenue, so there's no international broadcast revenue. So, just compare and contrast when I look at or Oakwell looks at the IPL. So the current run rate in the IPL is 1. 16 billion dollars per annum. Just to put it into context, that's uh, Disney Star Viacom.

[00:03:58] So they're basically paying 16 million dollars per match, which is the second most valuable sport behind the NFL. And that's growing at around 80 90%. So, India drives everything is one conclusion. The second conclusion though is, you've got all mightily interested broadcasters and in here, in the United Kingdom, you've got Sky and the BBC.

[00:04:21] And, what's happened, is that, with 100, you've found yourself basically having a, when Colin Graves and Tom Harrison and Sanjay Patel sort of created this thing they've created a hugely exciting innovative format. And, If I can put it in so many different contexts, but it's attracted a new audience to cricket.

[00:04:45] So, the first two years, 50 percent of people who bought a ticket had never bought a ticket in cricket, and that's astonishing. The second thing is that 40 percent plus of women and children, and from a demography for a sport, that's unbelievable. And the other things are that men's and women's matches are on the same day.

[00:05:07] It's got an equal promotion of players on the traditional and the digital media, equal prize money, and I just pause here because when you think about rugby union, when you think about football, none of them provide equal platforms, and of course you've got free to air exposure, and the important thing is, it's not only about reach but it's about you're accessing just multiple bits, multiple stakeholders in a demography.

[00:05:35] The other thing is, and I'm sure rubber union would do this the same, because we would recommend they do it anyway, and almost the EFL should be thinking along the same lines and netball and all these other sports that we're involved in. You've got an established single entry point for fans, and that means to you and I.

[00:05:53] Tickets, website, social, fan data, app, merchandise, content, and hey that's just that's super cool. In other words, you've got a digital engagement strategy which combines with the things that I just mentioned there, which is about fantasy, it's about gaming, Fana, TikTok, tickets in your app, avatars, and it's no wonder, so to give you some stats in context of all of this that you've got.

[00:06:19] 500, 000 internet searches for cricket per month for the 100. That ranks in any sport second. I mean, it's just crazy. You've got 21 and a half million people watching three minute clips. And cricket's never even seen that, hasn't seen that for over a decade. And you've got just attendees and if I can, you know, give you something because the men's and the women's are really interesting.

[00:06:45] So, the average number of viewers per men's game keeps on rising to circa 10 percent per annum. Currently around 400, 000. Bigger than our premature rugby game on a par with mid table EPL game. And the average women's viewing per match is growing at over 20%. Average is around 132, 000 and your daily average hours are up 30 percent of two and a half hours for every game that's watched in the combine as well.

[00:07:15] Well, the point being that it's an extraordinary sort of flavor of you think about. Particularly the women's game and I think what you're going to see in the hundred is There's a very good chance that the women's hundred is going to become the number one cricket tournament in the world It in men's it will never surpass the ipl in india but there are lots of ways that you can reshape that and when I look at women's and we look at women's here at eight quail in all sorts of ways, but the simplest way for the that I thought it was acceptable just to share with you was that when you look at the top 10 most watched women's sport on pay TV last year then the hundred ranked second.

[00:07:59] So it ranked second. It's one and a half times bigger than the WSL. This is women's cricket and it's brilliant. Solheim Cup. is 50 percent less than the 100. When I look at, when we were looking at the South African T20 where was that? 2023 number as well. Again, the 100 is watched by one and a half times more people.

[00:08:21] And, you know, I can go on, the women's open is watched I mean, it's 10 times, 10 times bigger for the 100. So, it's, the women's is more successful than the men's and the men's is very successful. And. You've got this broadcast value that no one really has, I mean, the ECB are very cagey about talking about it, but we sort of know from the work that we've done what it's worth, and, of course the future's about, um, perhaps internationalizing that, I mean, internationalizing the game is about players, The more players you have in particular, the Indian players and the Indian players is, you will know, a centralized, centrally contracted by the BCCI.

[00:09:04] But there's always a, there's always a deal to do. And the interest will be fermented by, and the catalyst by obviously getting Asian players into more Asian players into into the hundred players. Tournaments of both men's and women's and cause it zero, zero broadcast value now, and there will be more in time.

[00:09:25] So, if you like that steady state that's why it's attractive just now. And then the ECB, remember the ECB, they built the 100. When I go back to Harrison Graves Sanjay, they built it for the game. And in 12 months time, post these sales. There are eight franchises and they're selling the papers, the newspapers are pretty accurate on this.

[00:09:50] They're selling equity stakes of there's 51 percent going to the host venues. And 49 percent are held between the ECB, well it's the ECB, would have an ownership of 59, but that's split between the non host venues, of which there are obviously 11, that includes well there are 11, and the recreational game owns 10 percent of a, of an economic interest in both the 50, 51 and the 49.

[00:10:19] So when you think about the sale proceeds of whether or not a host venue sells part of its 51 or the ECB and the non host venues sell part or all of their 49, whichever way you look at it in 12 months there's going to be a lot of money because the distributions are going to go back into the game, are going to go back to First Pearls County Cricket, as in the venues and the non host and the recreational game.

[00:10:45] Richard Gillis UP: . So that's so the ownership bit, and you've really articulated, very well about why cricket, and there's cricket and then you get to why the hundred and I can see why there is interest here.

[00:10:57] So let's go to the other. Bit of it in terms of what are you buying when you're looking at a hundred franchise and just that breakdown, that 51%, 49%, are you buying a majority stake? So if I'm a source, if I'm a private equity group, am I buying all of this, a bit of it, a minority partnership? What is it?

[00:11:21] Andrew Umbers: now there's a collaborative process with the ECB to determine really the exact answers to those questions and, but what I will give you is what I think will happen which is first class that the host venues, the eight host venues will be given 51%. Of a vehicle. So if you like an SPV, special purpose vehicle, which will have a hundred franchising and those teams will have be responsible for ticketing, sponsorship merchandise and the team costs.

[00:12:04] So they will own 51 percent and investor. And in the first instance, a potential investor will be able to buy somewhere between 1 percent and 49%. Depends on where these non host venues and the ECB and RAINN, who are advising the ECB, wish to park now. Of course, there are many people many investors rather, who would prefer to buy a majority.

[00:12:31] So, It might be that they wish to buy part of the 51 percent of the eight first class, that the host venues first class counties own. There's always a premium for control as we all sort of know versus a minority interest. And there's always a shareholder agreement as to what you can have, what you can't have, because there's this thorny issue of right now the first class counters.

[00:12:57] both non host and host venues for the 100. They all own their venues and you know, is there a venue hire here or are you going to own part of the venue? Remember that the first class counties essentially have about six franchises. Women's, Men's, One Day, Four Day, Rachel Hayhoe and T20 Blast and obviously the 100 for those for those first class counties that have the 100 franchise.

[00:13:22] Centrally. And this is why it's interesting. And I'll come back to what the actual investors might be thinking. Because we, the investors are talking to Oakwell very frequently. And we have to decide actually as a business which way we go with this but the distributions from the center.

[00:13:41] So the ECB will, they will retain control. Broadcasting and central sponsorship and some central costs, which are competition, sports and marketing officials, all that sort of stuff. But the big thing is broadcasting. And here it's interesting because what's at stake here is, you know, the precedents out there are that when you look at the business models and the business models and most sports are determined on broadcast income to some extent on Sponsorship, less extent, but still on attendee, attendances and tickets and things like that.

[00:14:13] But in the IPL 50 percent of the Central League revenues are distributed to the IPL clubs. In the CPL, it's 75%. in SA T20, South African T20, it's 50, ECB and the hundreds it's going to be around circa 80, 80%. So the investor is attracted into the broadcast income for sure. His DD will actually be on I'm sure.

[00:14:42] How are we going to see the progress, progression of that broadcast income over the next 10 years? Because as I said, that is. Contract revenue is very important for evaluation of a business. And obviously, scarcity premium, because, in theory these are, you know, a once in a generation opportunity to buy a franchise in a tournament that's going to grow, I mean, it is going to grow, in a very safe geopolitical climate country.

[00:15:13] Well, we will have India versus Pakistan through the hundreds and, you know, it will be very attractive on fundamentals 

[00:15:22] Richard Gillis UP: again, just a slight build on that. So again, if I'm an investor, I love the Sky and BBC are very central to this. And we know, cause we've had, you know, we had Tom Harrison on and we talked about the sort of genesis of it. Sky's role is very important. If I, again, if I put myself in Jonathan Licks shoes or someone at Sky.

[00:15:42] I'm thinking, yeah, we all, we have a lever here. Do they have a stake in this? Is there a future where they're leveraging their position because they're building enormous value into this and they're providing investor security in this. So I'm thinking, well, hang on a minute. I quite like if the, if we're building mutual value here. I should be rewarded rather than just being a rented, relationship, which we know that broadcasters are tiring of in various, you know, guises. This feels like a sort of good example. It came from genuine creative. It came out of Skylabs and Sky, you know, that there was a whole different way of looking at the relationship.

[00:16:21] What do you think about that? Is that something that's a live conversation? The

[00:16:25] Andrew Umbers: liken it actually to the Red Bull example, which is we're creating the value through the investment we're doing. From the brand the branding of red Bull. Well, I'm gonna own the asset itself. We saw back in the nineties, obviously, if you remember Grenada and Sky and Football clubs.

[00:16:43] And that was ruled against by mergers and monopolies. And I don't think therefore go, we're gonna see that. But I take your point. They're creating the equity value, but you could argue, of course, Sky have done that for every EPL club or indeed most EFL clubs as well, and, but, you're right, because they're a broadcast partner, and I mean partnership, rather than someone who's just providing the production, and you know, if you like, their return is, you know, obviously it's on the subscriber base in terms of um, they see how valuable is proposition is when you go back to what I said about the women, children, men mix and the demography as well.

[00:17:29] Richard Gillis UP: point of interest though about this one is their, this relationship with the BBC. I think

[00:17:34] Andrew Umbers: yeah.

[00:17:34] Richard Gillis UP: interesting and, you know, there's a way they've, because again, they've taken a hit there because it was all about subscriber base. They would put a paywall around it and say, come and, you know, pay your, pay the price.

[00:17:44] Whereas the interesting bit about the 100 is its reach and that's what the BBC and the BBC are doing a great job in doing what the BBC does, which is, you know, broad and deep. Sky again are doing a lot here. This feels different in some ways.

[00:18:02] Andrew Umbers: It's a proper sports partnership with a broadcaster. You're absolutely right and free Two Air is a very important part of that. And they're contracted till 2028. The internationalization whether that's through the Disney's or the Viacom's or the super sports in in Africa and obviously India formerly there for the IPL.

[00:18:24] If those broadcasters are interested because of the internationalization of the hundred through players, and that brings more sponsors in, and basically the ownership. Will be part of that equation as well in terms of, you know, will it all be IPL owners and we can talk about that versus American owners and what have you, you know, all of that will mean that you can still have, I'm not saying the perfect storm, but BBC or a free to air broadcaster and BBC aren't the only game in town, in fact, in sport, they rarely are, I mean, they're really not quite the game.

[00:18:59] But you've got others who want to, you know, Niles Sloan in ITV will be looking over his shoulder and kind of going, This is interesting. And Sky, but then you'll have international broadcasting rights and the international broadcasting rights remain an enormous opportunity. Remember that. The 100 as well is not played internationally.

[00:19:20] It's just a domestic tournament. And there is another facet to perhaps the internationalization of 100 and other countries under license.

[00:19:28] Richard Gillis UP: So one of the yeah. So then again, this is, this, I remember talking to Tom Harrison about this, about, you made the point about, you know, Virat Kohli needs to play. If this is going to be the August, the best of the best. A window outside of the IPL, then you need the, in the, you know, top Indian players.

[00:19:46] And we know that's difficult, blah, blah, blah. But the other scenario which we talked about, and this is two years ago now, three years ago was okay, it gets back to who own, who are the franchise owners. So is it someone like Manali who. You know, sitting there at Rajasthan Royals thinking, yeah, this makes perfect sense.

[00:20:05] I'm going to then sort of extend my brand across other franchises. And we start to then see a sort of city group for cricket scenario. And I can see that happening. Centralized branding, international audiences makes the selling of hundred rights in India much easier because you've got a reason. And away we go.

[00:20:28] Is that where you think this is going? I've got, I've also got a question about them. So coming back to the minority partnership aspect of it, if I am Manoj Badali, I'm thinking, can I do what I want with 49%? It's the same as the Jim, I always think about the Jim Ratcliffe, INEOS thing at Man United. What can, what's possible on a minority partnership?

[00:20:49] What needs to happen? To allow the money, the capital owner to say, okay, yes, that's, I can do what I want. I, you know, as in, I can develop it in the way that I want to. It's going to not, I'm not going to be restricted by various sort of deals that have been done before I get to the table.

[00:21:10] Andrew Umbers: Everything's on the table including the Jim Ratcliffe INEOS type model where they've effectively got sporting control. Remember, this is a 100 franchise. And there are two women's franchises in these host venues. There are four other franchises, men's franchises within these host venues as well.

[00:21:32] And, so the, if you like the sporting control, You're not going to see the same sort of sporting control in general, and now, and I'm sort of getting into the realms of what the shareholders agreement is going to look like, or what veto rights a first class county, a host venue might want.

[00:21:51] When it comes to somebody buying a minority interest versus do I sell them 2 percent to give them 51 and we take 49 as a first class county. So, these are all being discussed with AECB and the first class counties. And there is a a third scenario. So, if you're GMR, which is widely rumored In the newspapers for buying Hampshire, they're already gonna own a first class county. Remember that there are three incorporated first class counties out of the 18 plus the MCC, which is 19. Remember the MC only the venue. Therefore, they will, in theory be a 51% owner of a London franchise.

[00:22:32] So, you know, those MCC members are sitting on a bit of a gold mine. and which is probably a discussion for another day. Anyhow, the let's take the live example of GMR which is widely rumored in the press acquire Hampshire, the only first class county with all the men's and women's franchises, and a 51 percent stake in 100 franchise.

[00:22:54] So, the third scenario is well, why wouldn't you buy first class county? Well, of course, 15 out of the 18 are members owned. Now, the problem you've got in cricket, and you've got it in multiple other sports that are sort of over generation, sort of grown up, is that over generation, grown up over decades, I mean, more than that.

[00:23:16] Is that sports become, it's become a commercial business. And the problem is that sort of when you look at first class county cricket and sort of, I think we've been in the, we were in the press maybe about three years ago talking about this and more, more recently, it's a it's a strange one because over 11 of the first class counties rely on over 50 percent of their revenues from the ECB.

[00:23:43] So what I'm saying is they not sort of got a very strong, and it's not a strong business model. And there's 180 million pounds of debt within first class county cricket. And the strong are Lancashire, who make 5 million plus a profit. Surrey make more. So you've got two strong counties plus Lancashire.

[00:24:06] Obviously, you've got the MCC, who don't have any worries. And what you don't want to see, Strong Getting Stronger, you know, because particularly the hundred, and this is why there's a debate about the proceeds. where they should go. It was built for the game, built for the game, as in for a community that's recreational for all the 45 stakeholders on the ECB wider board.

[00:24:29] Now but if you are, so if you are Minaj Badali, I mean, I can't speak for Minaj and I can't speak for Mo Berman the Punjab Kings and all of those guys, you know, then of course you're going to be interested because you already own. You have investments in South African T20, you know, the owners of the South African T20 ironically are Delhi Capitals, Chennai Super Kings, Lucknow Super Giants, Mumbai Indians the Sunrisers, and the Rajasthan Royals.

[00:25:00] You know, they're all IPL franchises. If I look at West Indies, the CPLs owned by the, again, Punjab Kings the Knight Riders. And Rajasthan Royals and look, there are two or three other owners within Mahesh Romani GPC and Worldwide Sports Management owner, but even in the ILT20 and the USA, you know, because it's worth just mentioning who owns these things, then in the ILT20, that's a UAE you know, Knight Riders Delhi Capitals, Mumbai Indians.

[00:25:30] You've got some interesting other ones. So, you've got the Glazer They own the Desert Vipers in the ILT20, Adanis, and Capri Global own Golf Giants and the Char Warriors. In LA, let's take MLC, and I'll give you some of the values as well, because they're interesting, because you'll then get a sense of what the values are on the hundred.

[00:25:50] You know, just a benchmark. If nothing else, then the Knight Riders um, own LA Mumbai Indians own New York GMR own the Seattle Orcas Chennai Super Kings own Texas Super Kings And there's a couple of others, but, you get the sense and I'll make two other comments that I think also lead to other sort of subject areas that you might be interested in.

[00:26:14] So, you know, when we look at the. The average value of a franchise now in the IPL, and we advise a lot of people who, a lot of capital who want to invest in it, and indeed we also advise one or two of the IPL franchises themselves and their strategy is the, they're now changing hands of just shy of a billion dollars each.

[00:26:36] These are for minority equity stakes. Richard. And when we think about the input, the first, you know, from nothing in South Africa and the SA T20 franchises, the average valuation was 21 million for CPL a long time ago three and a half. Now, what does that mean? I can give you multiples of revenue um, circa five, seven.

[00:27:00] And I can benchmark that against Premier Lacrosse GP Sailing, sort of nascent, young leagues and franchises, the way they've been sold. So when you look at a hundred, and I'm, you know, not doing Rayne's job, because we would sit on the other side, in the way that we look at things, either with first class counties or with capital, you know, 

[00:27:20] Richard Gillis UP: what's a hundred franchise worth?

[00:27:21] Andrew Umbers: And um, 

[00:27:23] Richard Gillis UP: the scarcity premium of the two London ones, jeez, I mean, a lot, 

[00:27:27] Andrew Umbers: you know. It's, you know, 

[00:27:28] Richard Gillis UP: I'm sure Reliance are going to be really interested and the Ambani family and one of the big two in London. And I have a view as to what they're valued at and I have a view as to what 

[00:27:39] Andrew Umbers: um, 

[00:27:40] Richard Gillis UP: Welfare and Northern Superchargers are valued at.

[00:27:43] but I would imagine the cumulative value if one takes a hundred percent value that it'd be somewhere between sort of, 380 and 500 million sterling, a lot,

[00:27:54] Per franchise.

[00:27:55] Andrew Umbers: no for the lot, for all eight. And so what I'm saying is that the capital coming into the game, because remember that it's getting distributed back to the game.

[00:28:04] It's going to be really seriously interesting. Look, you know, and you know, the people who are interested in these things there, there's a sort of, first you have to be aligned to what the venue, what they, what the host venue wants. And I mean by that is we have to protect cricket and help it grow in, in, in England and Wales so much.

[00:28:25] And because it's a core part of curricula. And it's a core part of communities. I'm a Yorkshireman. We have more clubs than Australia do. And you know, it's so you need to be very careful what happens. And you know, the Americans I'm sure rain will bring, if you like that, flow of prospective buyers from the USA to I don't know, Timbuktu.

[00:28:50] But they've got to be the right people and the right people sometimes don't pay the right price, the highest price. And I think you know, there's going to be many conversations on that. I think the other thing to point out is, and it goes back to one of the points you made about, you know, Isminaj Vardali, who's a it's got a multi club strategy as you allude to City Football Group.

[00:29:12] I would add by the way in the work that we do when we do all of the stuff with private equity and buy several assets in the same sport, every one of those assets has got to stand on their own two feet. So, actually it isn't so much about the benefit of the sum of the parts.

[00:29:28] Each one's actually going to have the value. And probably Man City are about to see that with the valuation of Girona, just going through the roof in what they've been able to achieve, ironically, but my point is this, that have a look at, because we're in the, we're in the age of player talent, you know, the players and the talent are the IP and the brand, and you're seeing this all around, with obviously what players are doing through you.

[00:29:52] their player funds, you know, whether it was a old LeBron James, Kobe Bryant that started this, you're now seeing everything from the Serena sister, they, the Williams sisters and others, obviously we're seeing this through the agencies developing, if you like, more of a wealth management type perspective.

[00:30:09] So the other thing that's going on is that Wasserman have now I think they own about 70 percent of the global cricket players. As an agency, I mean, you're sort of say strategically and we were talking about talent agencies before we on the, before we went on this podcast, you and I, you know, these talent agencies because we're in the realm of the player and the player is basically getting a pay, going to get paid an awful lot.

[00:30:34] Of course, the talent agencies want to take advantage of that as well. In fact the talent is. Because if we do get the Indians coming over, you do have to have the permission of the BCCI that isn't by the way a given and the BCCI may not want the IPL owners to be super, super strong you know, the way it works sometimes it has to be much more longer term than we've got the money, therefore we want to conquer, and but the players themselves realize they're in a pretty smart spot, and they'll be pushing for where the money is.

[00:31:04] And that's an issue one for player inflation. Remember that the franchises themselves are going to have the player inflation to control. So we've almost got like a, you know, as we're seeing with financial fair play and football you know, you're probably going to see some of that come within cricket in due

[00:31:20] Richard Gillis UP: It feels more, the structure of it feels more sort of American closed,

[00:31:26] Andrew Umbers: Yeah,

[00:31:26] Richard Gillis UP: so controllable from that sense, rather than the sort of madness of the European football of marketplace where, you know the cost control is impossible if not, or very difficult. Well, I've got one other, so other, another bit to it, just a different slight angle in is I'm always interested in whose money is it, as in where it's coming from and at the end of these things, is there anything in there that will, so what can be sold on or who you can sell it to?

[00:31:54] Can you put restrictions in? Because, you know, one of the controversies about capital generally is, okay, do you know the source of it? And obviously, it's coming from various different places. It then is reconstituted into various funds and various things. And it's very difficult. And even due diligence is, you know, it's very difficult.

[00:32:14] So just take me into that bit of the, Okay. equation. Is that a worry for, I mean, we're using the hundred as an example, but there's a lot of sports that are concerned that they don't actually know whose money it is

[00:32:28] it's just been filtered through so many different vehicles.

[00:32:32] Andrew Umbers: the the five and seven year private equity, I mean, not all are five and seven years. Some say they're an hour evergreen. Of course, they're backed by multiple sovereign wealth funds and multiple family offices. That's the irony of the opaqueness of any private equity buying into anything, and that includes sport as well.

[00:32:54] Firstly, so, you know, the issue about do you have A blacklist is yes, you do and the responsibility that will rest with the ECB who will be working with that with the lawyers that they choose to work with and rain who have, they will all have their own KYC procedures that will have to be permanently put in place.

[00:33:18] Or seconded at the right times for the ECB to utilize. Just as we have our own KYC procedures here. So, um, know your client. In other words absolutely know who the ultimate shareholder or the beneficiary is. And most law firms or most Leagues have, Premier League have have that function and the ECB will develop that function.

[00:33:43] But you're right, you know, the type of money that you want in cricket should be long term should be evergreen and long term because what we don't want is in sport short term decisions made for the benefit of someone's IRR. Sport works over multiple media cycles, two, three, four. You know, which is a media cycle is averaging on average four years.

[00:34:07] So it takes you 12 to 16 years sometimes to change the way that a the way that some of these sports are changed and in cricket, it's no different, you know, particularly for those members owned first class counters that are host venues of hundreds which were the, there's only one exception, that's Dugout.

[00:34:26] Hampshire, you know, one has to be very careful to take into account that, you know, for a hundred plus years, these things are effectively, they're mutuals under the sporting act of whatever it is, 2000, I think it's been updated to 2012. And therefore, they come under the financial conduct authority, actually.

[00:34:44] And you have to mirror. That membership and what they need with the potential owners. But remember the hundred is a special vehicle. It's a different vehicle. So it sits outside first class candy cricket for those host venues that will have a hundred franchise. So in theory, you can do whatever you want with it.

[00:35:01] You can have a, You know, a fund in it, you can do whatever you want. But, you know, my advice to any first class candidate would be, you really want somebody who can help commercialize your business, bring talent and bring an understanding of cricket and also help with an international strategy and I mean, help with an international strategy that they've already developed an international strategy in sport, and I'd like it to be cricket.

[00:35:28] And but I think it's we'll have this conversation in 12 months time, Richard, and it'll be fantastic. Different in the way that we're looking at first class county cricket. And we'll see whether the Andrew Strauss report you know, is in effect a reverse process of what the a hundred is.

[00:35:44] And that's quite a controversial statement to make because you could argue that. You know, the non host venues are um, going to receive perhaps the lion's share of the distributions versus the host venues, because they won't have a hundred franchise what they do with that will be interesting, you know, whether they really go and invest in White Bull and what I mean by that is, you know, all their blasts and their women's and things like that versus, you know, what the host venues will be doing which is they, in theory, they should be able to grow these businesses and they should be able to grow these businesses quite profitably because in 2025, the first year of the new ownership, we, that is Oakwell, believe that they will be profitable firstly and then over into, because it'll be a new broadcast cycle, and then it should be very profitable in the second and the third broadcasting cycle, which is 28 to 32, and then 32 to 36.

[00:36:39] So you should be making double digit profits, and or more. And that's without sort of doing much with As I've said, indirectly having an Indian versus Pakistan 100 match at the club level, which essentially is the way it's going.

[00:36:55] Richard Gillis UP: the tricky question or the hard question, I guess, is That by just giving loss making counties more money history suggests that actually they'll just take the money and carry on as per. So it's just like, it's, you know, the, there is a feeling across lots of, not just in cricket, but lots of different sports the way, you know, that actually the money tap at the top. You can always carry on trying scampering around trying to get more money to come in, but actually, if you don't fix how the businesses are run, then you know, you're going to be there in 10 years time having the same sort of conversations because they're just not very good at managing themselves.

[00:37:33] Andrew Umbers: Yeah, 

[00:37:34] Richard Gillis UP: basic thing. difficult problem that however you engineer the money going up at the front end, it's just, they seem to not be able to run themselves very well.

[00:37:48] Andrew Umbers: because 

[00:37:48] they've, yeah 

[00:37:49] it is really fair or it's unfair if I suppose you're let's say over 50 percent of these first class counties are struggling to really make an underlying profit. Why are they doing that, and why are they having to be reassured by the plus 50 percent of revenue they get as a portion of their total revenue from the ECB.

[00:38:10] It's because they don't have a 365 day a year business, so they haven't invested in their infrastructure. Hotels conference centers, public private initiatives, you know, A& E clinics, because they've got massive space, car parking. And things like that. And they would argue, well, we have never had the capital.

[00:38:29] Why have we never had the capital? Because we're a member zone club. And it's the law of diminishing returns on the Red Bull. The Red Bull is an underlying loss making business and subsidy from the ECB. So, if you like, the symbiosis is the ECB paid for the pathway through Red Bull, through their distribution from Test Cricket, from International Cricket.

[00:38:51] So, in theory, international cricket accounts for circa 85, 90 percent of total revenues in cricket in England and Wales. So, but now with that capital, and your real exam question is, are they going to limit the uses of capital? Well, we'll see, but if I was in Richard Thompson or Richard Gould's shoes, you know, I would be absolutely making sure that the uses of capital go into providing business plans or only going to those business plans that can create recurring revenue streams.

[00:39:21] And maybe that's infrastructure. You know, the last thing you wanted to go to is effectively players. But it's not like, I think the mistake that was made in premiership rugby of which the lessons have been learned. And the governance has now been changed, which is that money went into well went into the hands of the owners, but effectively it was trusted to go into the hands of the owners.

[00:39:46] However, that money without that money almost every single club would have gone bust. So it wasn't actually such a a disaster as being portrayed in the press. CBC basically say Premiership Club Rugby is another way of looking at it. With the ECB, you know, I think they'll be looking at, how do we create recurring revenue streams in a members owned clubs?

[00:40:08] And then clubs will be going, We're member zoned, is that the right structure? And how do we become more commercial? How do we, if you're Kent how do we create another 20, 000 seats of stadium down in South London? And, you know, it costs 60 million quid. Well, you know, go figure. It ain't from the members and you know, the issue is that not everybody's as wealthy or as well managed as the Surrey or the Lancashires.

[00:40:38] And they're very well managed. And as is Hampshire and obviously Surrey has 16, 000 members and. Lancashire, I can't remember how many members it has, but they're very profitable businesses. Because they've got hotels, conference centers, and so I've obviously got a very good business model as well, and strong membership to underpin it all.

[00:40:59] Hampshire, of course, has got one hotel, they've got conference facilities, they've got a golf course, they've got other things and a lot of land, you know, and Rob Bransgrove has been a very clever guy in the way he's developed that, and you could argue that, you know, all of this, If you like corporate strategy is going to get embroiled in a debate for a lot of these first class counters.

[00:41:18] These members owned, which are 15 or the 18 that is outside of what the MCC does and over the next 12 months or 18 months. So it's an interesting period of change for first class cricket. Not withstanding, you know, whatever goes on the pitch.

[00:41:37] Richard Gillis UP: yeah. Oh, it's huge. Seismic, isn't It It's, uh, 

[00:41:40] Andrew Umbers: No, it really is.

[00:41:41] Richard Gillis UP: there's the sort of technical bits. There's the, you know, what they do on a day to day basis, but there is always, I mean, the common complaint is that, It's again similar. The analogy is in the Olympic sports where you've got the money tap coming down and there is no great incentive to innovate.

[00:41:55] There's no great, you know, there's a complacency built into the process which is supported by a very conservative audience, particularly around county cricket, for example, they don't want you. to change and the hundred is seen as a culture war about the hundred because it's seen as other and, as commercially minded, you've got that sport and business, but it's where they conflict and, , the cultural challenges, which is supported by lots of journalists in the media who prefer just to talk about cricket and then they get annoyed that , money comes into the conversation.

[00:42:28] So it's quite a, it's a difficult one , so the hundred, I find it a fascinating case study because it incorporates lots of different themes that are just universal across sport, I think there's a whole load in it and we'll keep our, keep tabs on it.

[00:42:40] Listen This is only going to be a 20 minute conversation, but thank you. Fascinating as ever, Andrew. 

[00:42:43] ​