Trial separation for stakeholders in T20 Global League?

Cricket South Africa is in mess, again. This time it’s the classic story of boy meets girl, boy and girl fall in love, boy loses girl and transitions into a psycho stalker.

When Cricket South Africa (CSA) borrowed from Hollywood’s obsession with an ensemble cast, the organisation gathered a bevy of doting cricket franchises, not so much as a band of superheroes hoping to save the city from evil overlords, but as a motley crew akin to the one in Quentin Tarantino’s Reservoir Dogs, ready to storm on to the greatest payday of their lives.

The cast included Pretoria Mavericks’ franchise owner Hiren Bhanu; Nelson Mandela Bay Stars’ owner Ajay Sethi; Durban Qalandars’ Sameen Rana; and, of course, CSA, led by former chief executive Haroon Lorgat, as the significant other. Mr White, Mr Brown, Mr Blonde and Mr Pink, if you will.

“There is a general feeling of the owners being taken for a ride.”

The target was the T20 Global League, and with it the keys to the safe holding hundreds of millions of rands in broadcast rights and sponsorships. But the heist went south. Casualties were suffered, the deal soured, and the honeymoon was off soon after the relationship was very publicly consummated.

CSA turned its back on the franchises and courted someone else. But they moved on too soon. An elementary schoolyard mistake at best, and an expensive financial bungle at worst.

CSA’s and SuperSport’s biggest mistake was announcing their new plans without reaching closure with the disgruntled ex. Heated exchanges took place in Mumbai and Dubai earlier this month, as CSA tried to placate them and avert an embarrassing public spat. It failed, and angry statements flew into inboxes all over the cricket world.

Money, money, money

First out of the blocks was Sushil Kumar, the owner of the Bloemfontein City Blazers. He released a blistering statement last week that attacked the integrity of CSA’s dealings in the whole matter. He didn’t finesse his words: “There is a general feeling of the owners being taken for a ride,” Kumar lamented.

But the matter goes much further than a few jilted businessmen. The cost of litigation could affect CSA’s functioning as a major sports administrator still bruised from the Gerald Majola bouncers a few years ago, which dented the books significantly.

It doesn’t help CSA’s course that this week SuperSport withdrew from its shareholding agreement with the organisation on the new tournament. 

One can understand CSA’s motivations and the need to raise revenue targets. According to CSA president Chris Nenzani’s statement in the organisation’s 2016/17 annual report, the “year ahead brings a renewed excitement with the launch of the T20 Global League.

Not only will this innovation capture the interest of evolving spectator demands, it will also diversify our revenue generation, contributing to the organisation’s continued sustainability.”

The England Cricket Board’s own 20-over tournament to rival the Indian Premier League (IPL) in 2020 is expected to bring in more than 1 billion pounds. The IPL’s broadcast rights for the 10-year cycle just ended are worth $1.6 billion – almost R24 billion. And Star India last year bagged the IPL global broadcast rights for the next five years, for a whopping $2.6 billion.

Clearly, there is a strong business case to be made for such a tournament in South Africa, a powerhouse on the world cricket stage.

In its own words, in the above report, CSA believed the cost of rights to the T20 Global League could rival the record-breaking 2011 deal between SuperSport and South Africa’s Premier Soccer League worth R2 billion.

But a complicated relationship between CSA and some franchises now means the owners are not satisfied with just getting their $250 000 deposits and being compensated for costs incurred. They’re demanding more skin in the game through equity. 

Kausar Rana Resources, the owner of the Qalandars franchise, is adamant it doesn’t want its deposit refunded, expecting CSA to hold up its end of the deal. Clearly the company in it for the long haul and will react when the time is right. 

“Bloemfontein has a lot of potential – it was our first choice of city and we look forward to being based here. Our partnership with the city extends beyond the T20 Global League in terms of the development of cricket at grassroots level, and also in terms of tourism to the beautiful Free State city,” said Kumar last year in anticipation of the League. “We have a 12-month and 10-year plan in place.”

Cutting back

Development projects similar to these in other provinces may be shelved or at least scaled back if the franchises are frozen out of the new deal. CSA spent about R300 million on sport development and transformation in 2017.

In October 2017, former CSA acting chief executive Thabang Moroe uttered these fateful words at a press conference to announce the postponement: “Having discussed it with all our stakeholders, including the franchise owners, we believe that the interest of the league should be our first priority. We have reassessed our strategy and believe that postponing the first edition of the T20 Global League to next year will serve us well.”

It was the old, ‘don’t call us, we’ll call you’ line to the franchise owners and sponsors. Moroe went on: “We will regroup and come back stronger and better. At this time, we also wish to thank all the players, sponsors, broadcast partners, [the South African Cricketers Association] and [the Federation of International Cricketers] who have committed to the project.

At the end of 2017, CSA had a cash balance of R740 million compared to more than R1 billion in 2016.

We appreciate the continued support of the individuals and organisations who have believed in this tournament.”
Those were better days. A lot has changed since then.

CSA’s financial capital is raised through media rights, sponsorships, International Cricket Council distributions, Lotto grants and ticket sales. Last year, it generated revenue of R675 million compared to 2016 revenue of R823 million. That’s a drop of nearly R150 million. Revenue CSA received from broadcasting rights in 2017 (R210 million) was almost half that of 2016 (R414 million). On the bright side, sponsorship revenue grew by about R30 million.

Potential legal claims

At the end of 2017, CSA had a cash balance of R740 million compared to more than R1 billion in 2016. By anyone’s standards, the organisation has bled money over the past 18 months. A potential battery of legal claims over the aborted T20 showstopper could render the cricket body paralysed if the claims run into the hundreds of millions.

For an organisation with a salary bill of R200 million that employs about 50 permanent staff, including 22 fixed-term contractors, 17 men’s cricketers and 14 women’s cricketers, the knock-on effects of a financially vulnerable administrator may prove devastating for a number of reasons.

The amount of money involved was always a mystery – franchise owners were locked into non-disclosure agreements. But the central feature in this thickening plot is the absence of trust. The new deal is as transparent as a block of wood, and equally as flammable.

SuperSport didn’t snap up the T20 Global League broadcasting rights in the first place, which ultimately led to the cancellation of the tournament. It remains to be seen what will happen to this tournament after SuperSport’s withdrawal due to their failure to reach a consensus on the shareholding arrangement. SuperSport, however, is still keen to broadcast the tournament and they are discussing the matter with CSA. 

The CSA board has an important business decision to make as it deals with a moral, financial and existential crisis of its own doing.

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