Decision time for the England and Wales Cricket Board ("ECB") as investment in The Hundred franchise intensifies

County Cricket

Even before the sale of any interests in any franchise of The Hundred, cricket has opened itself to international investors.

In September, Hampshire County Cricket Club (“Hampshire”) became the first county cricket club to secure overseas investment, having been acquired (albeit in phases) by GMR Global Pte Ltd (“GGPL”), the co-owners of the Indian Premier League (“IPL”) franchise, Delhi Capitals. GGPL have pledged to “advance the development of Hampshire’s cricket teams and pathways while enhancing the multi-sport and leisure facilities at the Ageas Bowl, including the stadium, hotel, and golf course,”[1] which is a significant statement of intent and a welcome boost for Hampshire.

According to Laurie Pinto, the founder of Pinto Capital and a well-known broker of sporting transactions, there is “much more stability compared to football, where there is increased competition for assets driving up prices, more barriers to entry such as regulation, and higher levels of public scrutiny.”[2] Pinto  is “bullish on the prospects of cricket becoming a serious commercial entity and asset class as we see in football. The counties, fans and players are ready for this.”[3]

But perhaps the Hampshire deal should be considered in context: Hampshire was already one of just three privately owned counties (alongside Northamptonshire and Durham). The remaining fifteen counties are owned by their members and may prove trickier to persuade into a transaction.[4]  A strong investment case will likely be required.

Further, in respect of a county that is a host county for The Hundred, investors may have noted the ECB’s alarmist reaction to the possibility of investors gaining control of a franchise by purchasing a host county. Concerned that such agreements could deter bids in their sale process and reduce the value of the remaining stakes, the ECB warned that new owners, including GGPL, must purchase the full 49% of the franchise at market value or risk losing the franchise altogether.[5]

The Hundred – The Latest

The auction for the franchises is managed by The Raine Group and is in the second of four stages.[6] A shortlist of potential buyers will spend a month visiting venues and meeting counties. Vendors for each sale will then select a buyer.[7]

Rumoured Interested Buyers

The auction has generated widespread interest. The ECB chief executive, Richard Gould, in discussing potential interest, claimed “we [the ECB] have got the full gamut.”[8] Richard Thompson, the chair of the ECB, remarked that the body was “genuinely shocked over the quality and quantity of interest.”[9]

Seven franchises from the IPL have reportedly submitted bids, including the Sunrisers Hyderabad (owned by the Sun Group) and Lucknow Super Giants (owned by RPSG Group).[10] Investors in the U.S., Australia, Singapore and the Middle East, have also been mooted as potential buyers, emphasising the growing appeal of investing in The Hundred.[11] Hollywood actors and AFC Wrexham owners Ryan Reynolds and Rob McElhenney are reportedly in discussions to invest in Welsh Fire, Cardiff’s team in The Hundred,[12] highlighting the growth of multi-sport ownership, where investors can leverage existing fan bases and create commercial synergies in areas such as merchandising and ticketing.

Valuing the Franchises

The ECB remains optimistic in securing £500 million from the sale.[13] Franchises based in high-demand locations, such as Lord’s and The Oval in London, are expected to attract three times the value of teams based away from the capital.[14] Ankura reports that the primary driver of value in The Hundred will be its media and broadcasting rights, as well as brand value, fan engagement and community presence.[15] Ankura also notes that “investors will be closely watching how the league continues to grow its fan base, both domestically and internationally.”[16]

Some potential investors, however, have been sceptical of the valuation of the franchises. Lalit Modi, the founder of the IPL, labelled the sale as a “big fat Ponzi scheme.”[17] Modi’s view was based on several factors; for example, he described the anticipated rise in international TV rights revenue from £2.1 million this year to £34.8 million by 2032, as making “little sense.”[18] Modi also criticised the forecasted sponsorship growth from £5.7 million to £32.6 million in the same period as “far-fetched.”[19]

Whilst perhaps hyperbolic, Modi has made some legitimate points. The Hundred is yet to meet the ECB’s commercial hopes. Ticket sales fell 7% in 2024, from 580,000 to 540,000, possibly due to the Olympics.[20] More worrying, 46% of attendees were in London, highlighting weaker interest outside the capital.[21] But, as Pinto has noted, “these are rare assets that will be locked in for a minimum of three years and it’s serious money.”[22]

What about Non-Host Counties?

Ankura reports that non-host counties will receive a portion of the proceeds of the auction, which will be a one-off benefit: “10% of the funds raised from the sale will be allocated to the recreational game in England and Wales. Of the remaining 90%, the first £275 million raised will be shared between all 18 first class counties (and the Marylebone Cricket Club (MCC)), and the next £150 million will be allocated solely to the 11 non-host counties.”[23]

Traditionally, the ECB has used its central funding system to address county imbalances, though with varying success. Funds from broadcast rights, sponsorships, ticket sales and other sources are distributed based on factors including participation, facilities and contributions to the game.[24] This funding supports operational costs, player development and local cricket initiatives. Larger counties typically receive a slightly higher share, but all counties rely on this funding as match attendances alone do not usually cover expenses.[25]

As The Hundred grows and more funds are allocated to its promotion, with the benefits being retained by the host counties (or those that keep their stakes in their franchises), there are increased concerns about the level of money available to support traditional county competitions. The ECB will need to address this imbalance. There are several ways they could do so:

1. Increasing grants for non-host counties and investing in county competitions: The ECB could allocate a larger portion of The Hundred’s sales proceeds to non-host counties and support traditional competitions, including the County Championship and One-Day Cup, signalling its commitment to preserving the county structure.[26]
2. Revenue-sharing within The Hundred: The ECB could require host counties to share a percentage of franchise earnings with non-host counties, to promote solidarity and reduce the economic divide, though it would require careful balancing of franchise autonomy and the ECB’s objectives.
3. Expanding media and sponsorship deals: The ECB could increase sponsorship and media rights for county cricket to generate additional revenue streams, reducing reliance on The Hundred funds.
4. Hosting Test matches at non-host counties: The ECB could consider awarding Test matches to major non-host counties, like Durham, whose Riverside stadium has not hosted a Test match since 2016, or smaller venues including Taunton and Canterbury, which have hosted white-ball internationals. This could be an option for future Tests against Zimbabwe, Ireland and Afghanistan.

Comment

By selling the franchises, the ECB aims to capitalise on global investor interest and the rising value of TV deals. This investment could boost the game’s global reputation, especially if potential IPL links come to fruition. The ECB must carefully manage the cash windfall, investing in non-host counties, while allowing host counties to benefit from the rewards. However, will the one-off benefit be enough for non-host counties? Should there be cost or budget control measures implemented to help counties manage the cash windfall?

The auction also poses another challenge for the ECB, namely managing its regulatory relationship with private investors. For example, will owners face a fit-and-proper persons test, and should there be a new financial regulation regime similar to that seen in football? How will the ECB guard against the potential risk of investors seeking to influence contentious issues such as scheduling (some already argue that The Hundred detracts from other competitions).

The Hundred will also have to remain cognisant of existing and emerging competitions (such as Major League Cricket in the U.S.) to ensure it continues to be an exciting competition and one that investors will wish to keep supporting.

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[1] https://www.utilitabowl.com/cricket/news/hampshire-signs-definitive-acquisition-agreement-with-gmr/

[2] https://www.cityam.com/why-english-cricket-is-like-the-premier-league-20-years-ago/

[3] Ibid

[4] https://www.espncricinfo.com/story/explainer-have-delhi-capitals-just-bought-hampshire-1453249

[5] Ahead of the Game: ECB threatens to withhold Hundred franchise over Hampshire sale

[6] https://www.cityam.com/ecb-chair-thompson-ive-found-myself-in-an-extraordinary-moment-for-cricket/

[7]https://www.telegraph.co.uk/cricket/2024/10/01/hundred-sale-ecb-ipl-india-us-middle-east-australia/

[8] https://www.theguardian.com/sport/2024/oct/16/the-hundred-cricket-ecb-sales-warning

[9] https://www.cityam.com/ecb-chair-thompson-ive-found-myself-in-an-extraordinary-moment-for-cricket/

[10] https://www.sportcal.com/news/owners-of-seven-ipl-franchises-interested-in-the-hundred-teams/

[11] https://www.telegraph.co.uk/cricket/2024/10/01/hundred-sale-ecb-ipl-india-us-middle-east-australia/

[12] https://news.sky.com/story/wrexham-owners-ryan-reynolds-and-rob-mcelhenney-in-talks-to-invest-in-cricket-team-13216596

[13] https://www.telegraph.co.uk/cricket/2024/10/01/hundred-sale-ecb-ipl-india-us-middle-east-australia/

[14] Ibid

[15] https://angle.ankura.com/post/102jnie/new-dawn-for-the-hundred-balancing-investment-risk-with-reward

[16] Ibid

[17] https://www.theguardian.com/sport/2024/sep/27/lalit-modi-claims-hundred-franchise-sale-is-just-a-big-fat-ponzi-scheme

[18] https://www.bbc.co.uk/sport/cricket/articles/c0qz8d1gkxno

[19] Ibid

[20] The Hundred 2024 – That was the Hundred that was, as tough season finds an adequate climax | ESPNcricinfo

[21] Ibid

[22] https://www.cityam.com/why-english-cricket-is-like-the-premier-league-20-years-ago/

[23] https://angle.ankura.com/post/102jgss/swinging-for-success-the-hundreds-private-investment-game-plan

[24] https://www.ecb.co.uk/about/what-we-do/finance

[25] Ibid

[26] New Dawn for The Hundred — Balancing Investment Risk With Reward – Ankura