Different spin needed to score with T20

Twenty20 is both the greatest challenge to real cricket since Kerry Packer and an even greater opportunity to grow the game's financial base and future prosperity. Once again, an intersection of cricket with business threatens the traditions of the game and presents the need for a new way of thinking, a change of mindset and priorities.

Twenty20 is, without doubt, a part of the future and the opportunity must be embraced and maximised.

But how? How can the competing demands of conflicted focus and player scheduling be reconciled with the potentially enormous pay-off? How should the traditional game respond to the new upstart?

Entertainment – not cricket

A major contention on which this article is based is that Twenty20 is simply not cricket. Instead, Twenty20 is a new sports entertainment product based on cricket. The distinction is important and leads to a vastly different mindset in managing its future. Twenty20 is a branch of the cricket tree which will bear lots of fruit, but the fruit must be harvested to the benefit of the remainder of the plant.

Twenty20 can and should be leveraged to provide a renewed financial basis for the game, providing funds which can be directed to the ongoing development of the generations of players to follow.

While the entertainment demands of the paying public are changing, the same core disciplines are required of the junior player today as when I learned the game as a freckle-faced kid in the '70s, in Sydney's western suburbs. Without really understanding it, my friends and I were part of a system of clubs, schools, associations and programs which all worked towards the goal of teaching both fundamental skills as well as a love for our great game. That system still exists today, but it is challenged by the stresses of time, money and competition for attention from myriad other activities and available sports.

Nonetheless, the system that taught me to bat, bowl and field as a youngster still has to give the future player the same basic skills needed before adapting his/her play to the game's various forms, including the specific innovations required in the newest and shortest form. The same steps and stairways which opened in front of me as a youth, and which led me to the world's great cricket stadiums, need to be kept in the best of condition for the cricketers yet to start that journey.

In fact, Twenty20 can provide a big part of the answer to the 21st-century challenges of keeping the sport relevant to today's target market of 10-year-olds. Firstly, Twenty20's bright lights will attract them to the sport and then, if leveraged properly, it can provide the money to train them. So those responsible for the next steps in Twenty20's commercialisation have the tough job of designing a structure which creates value in the right parts of the system for the long-term benefit (or perhaps even the survival?) of the sport.

A product to be commercialised

When viewed primarily as an entertainment product, Twenty20's future structure and marketing can be approached in the manner of any new product development. Those responsible for the product's development to date (in cricket's case, over at least the past 100 years) must agree to allow outside participants to enter and share future benefits. Twenty20 must be set aside from the remainder of the game and a vehicle created that has the limited role of conducting that form only. Appropriate business plans can then be formed, a legal framework laid out and an ownership structure created which marries the product with the necessary business skills and new equity.

These elements combine to maximise early-stage growth and value creation, with capital providers anticipating the prospect of appropriate risk/reward returns. Capital is required to speed growth, take financial risk and provide vital funding to improve sales and marketing programs and the quality of the product.

The Twenty20 business fits this commercialisation model perfectly, but the mindset and approach lie outside traditional cricket's historical perspectives.

Cricket Australia is wrestling with the concept of the marriage of cricket with big business, as potential investors in a commercialised Australian Twenty20 league make overtures to the game's administrators. The politics of state-versus-national cricket governance in Australia are complicated and there's an intriguing mix of special interests and power playing out in the game's inner circles as decisions are taken about how best to proceed – how to lay-off the risks and then divide the spoils of Twenty20. There is real potential for error in these processes, either through inappropriate motivations or misguided paternalism and the result may well be a huge missed opportunity.

The idea that Twenty20 must be kept within the confines of cricket's existing administration for any longer than is necessary to complete a well-ordered initial sell-down confuses objectives and starts from the incorrect premise that Twenty20 should be regarded as an equal partner to first-class and one-day cricket. The argument that Twenty20's financial benefits (as opposed to administrative control) should be retained at the national level rather than distributed so as to create value in the franchises misses the point about where the opportunity was derived from in the first place. It also risks starving the states of the capability to keep the game's fundamental structures sound and fruitful.

Twenty20 has grown rapidly in recent years, denigrated by many cricket lovers and administrators, but attracting huge new audiences at a growth rate unparalleled in recent sports marketing. These audiences, both at the ground and at home, love the immediacy of the spectacle and the way it fits their time-poor lifestyles. It's a marketer's dream – the kids take their parents rather than the other way around and those kids are the sport's potential future. But even for the traditional cricket fan, there is much to like in the athleticism and innovation on display. This new game (or more accurately, new entertainment format) is here to stay and those responsible for managing (and growing) the sport must leverage the opportunity in a non-emotive and business-like fashion.

New sources of capital and a non-traditional approach to Twenty20's ownership and management structures have the potential to throw off significant short-term financial benefits to “the main game”. Arguably, if maximised, Twenty20 has the potential to underwrite traditional cricket's financial future in Australia and provide state associations with vastly increased capability to grow their primary sport in line with their own core competencies: providing the nurseries for talent; that is, competitions, coaching and development. Therein lies the exciting potential for the commercialisation of Twenty20.

An Indian model of wealth creation

The Indian Premier League provides an indication of the size of the financial opportunity as well as a loose guide on how we should proceed with the Australian business. However, it's a model which can certainly be improved on here in Australia.

The IPL was established in 2008 and has quickly grown to become one of the most significant sports product franchises in the world. Teams are privately owned and strong capital growth is already evident over the initial speculative ownership investments. Two new teams were introduced in 2010. Prices of $US333 million ($315 million) and $US370 million were bid for the new franchise rights. This represents an incredible 210 per cent per annum growth over the average initial investment of $80 million by original team owners back in 2008. It was also apparent in last year's bidding process that there remains considerable unsatisfied demand for investment opportunities in the Twenty20 “industry”.

Capital participants exist and are awaiting an opportunity which offers the right mix of stability and growth potential. The initial value of the Australian franchise shareholdings, should they be put to market, will bear a direct relationship to those Indian sales. Buyers are likely to include recent IPL under-bidders and prices will vary in proportion to the total revenue available to Australia's Twenty20 from the sale of television rights and other sponsorships. Globally, these television rights have the potential to outsell almost any other Australian-based sporting product given the incredible demand for Twenty20 content internationally. However, to maximise this potential, our local franchises must be financially independent and capable of contracting a strong stable of international players so as to produce a world-class product. We have our lead in terms of the potential for franchise values. No doubt, our state associations understand this potential and are eager to get on with the process. Several have already been approached by potential investors.

Major sports franchises across the world have a number of common core attributes. A central body governs the game , creates the legal structure for owners, sets the rules which all its franchises must follow and sells the major marketing and television rights to the competition globally. As the majority of actual operating expenses are incurred at the franchise level, the majority of revenue is distributed to the franchises who are then responsible for player salaries, management, the conduct of scheduled matches, local level marketing and sales of remaining rights carved out by the governing body. The NFL in the US for example, distributes all of the revenue from all sources to its franchisees. This model creates the opportunity for private owners at the franchise level to create viable businesses which can grow revenues and value over time as they succeed in attracting playing and management talent. Shareholders have legal certainty and a strong share of the revenue growth provided by improved ratings which are the result of their own efforts in creating and marketing a great product for their fans and viewers. In the US, where franchising of sporting teams was pioneered, these attributes have been the foundation on which incredible long-term value has been created.

The local version

The franchise model can be readily adapted and applied here, with some minor modifications which reflect both the symbiotic relationship between Twenty20 and the traditional game and the need to leave cricket as a significant beneficiary of the Twenty20 business into the future. State associations must retain a majority stake in their local franchises. This reflects the reality that the majority of players will be sourced from the playing roster of the associations and it gives them financial dividends immediately. It also retains the potential for further value to be extracted by the states once the initial growth phase is completed.

The new outside shareholders then have certainty that they will have access to their co-owners' player pool to underpin their operation. They will be encouraged to participate, provided their franchise has access to the lion's share of competition revenues and the ability to sell either all or part of their shareholding down the track. Franchises should have separate and professional management and board structures which reflect their owners' interests and the necessary mix of business skills to make the franchise successful. In setting up the structure in this manner from the outset, the venture has viable and business-oriented ownership, with maximised access to capital in the short term. It also creates a wealth effect at the right level for the game's future health and well-being which can be leveraged by the states to keep the production line rolling to develop cricketers for all forms and at all levels, including the local parks where I first started daydreaming about one day donning the baggy green.

Next year's Twenty20 competition, taking over from where the Big Bash started, will comprise an eight-team competition, with second franchises being added in both NSW and Victoria. However, potential investors and current team owners (our state cricket associations) await decisions regarding ownership and financial models – how will the marriage of business and cricket at the franchise level be achieved? These decisions must provide future investment certainty and be framed so as to maximise the value of the states' franchises. If approached on this basis, Twenty20's development stage financial risk can be effectively transferred so that cash outflows incurred in growing the new product are not to the detriment of traditional cricket. All this can (and must) be achieved without giving up important administrative control, including limits to playing calendars and access to players. This framework can also protect the core attributes and marketability of the longer forms of the game, which should always remain the primary focus for cricket administrators.

Delivery Time

In delivering a model which creates value at the state level, Cricket Australia will deliver the capability to keep the sport at the grassroots level healthy and provide the means to foster talent through the renewal and modernisation of century-old systems of recruitment, coaching and competition. The game only exists at the elite level because these systems have done their job in the past. Their ongoing viability must be the first concern and the primary driver of decisions about Twenty20's future structuring.

Arguably, the creation and commercial development of a jointly owned structure for Australia's Twenty20 competition is already well overdue and we risk missing the boat with further delay. The states need fighting funds to continue to deliver playing talent in an increasingly busy market place and only they can best direct the funds and activities to maximum advantage on the ground.

Cricket Australia, in conjunction with the state associations, must now move quickly to create the parameters within which the new model can operate. They must let the investment bankers and lawyers in to have their day. Equity must be attracted and encouraged to take the early financial risks. Now is the time for decisiveness and a bold approach to an opportunity which will not come again. Let's hope that cricket's powerbrokers seize the moment and realise the opportunity to revitalise, rather than seek to overturn, century-old structures which have served Australian cricket well.