A look at ECB's financial challenges due to COVID-19
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ECB Chair Ian Watmore explains how the organisation will keep pushing the game forward despite the financial impacts of COVID-19.
When I was interviewed to be ECB Chair – a few weeks pre-COVID – we discussed the strength of cricket’s finances. We all commented on the surge in ECB income due to the new broadcast deal, and the positive situation in some counties, especially those that had pushed to diversify their businesses, and benefited from a World Cup and Ashes year. The ECB income alone was planned to double for the coming five years, compared to the most recent period. We also discussed the way the recreational game consistently delivers so much with such relatively tight budgets.
There were five areas of concern: the relative lack of reserves in the ECB; the stubborn levels of debt in the professional game (especially some of those with larger venues); the reliance for income from the ECB from several counties, with some at 50-70% of total turnover; and the criticality of volunteers to the recreational game, against a backdrop of declining volunteering across society. We also noted that the ECB was extremely reliant on its broadcast deals, with no certainty over the level of future deals. And the fact that this “new money” had all been pre-allocated to an ambitious strategy for growth, with virtually no flexibility to absorb new expenditure until the next cycle.
We felt at the time that all of this was manageable over the five-year cycle that the new broadcast deal gave us. Inspiring Generations is an excellent strategy, so provided delivery focus. It also gave us a roadmap for building reserves and reducing debt.
The new County Partnership Agreements pointed the way to counties becoming less reliant on the ECB distributions. We were hopeful of launching a new facilities and volunteer drive across the recreational game. The women’s game is growing fast. And The Hundred, global sponsorships, targeted philanthropy and other “value creating” ideas, would allow us to simultaneously strengthen our relationship with, and yet be less dependent on, Sky, BBC and the other cricket broadcasters. None of this was easy, but it was doable.
COVID, of course, has changed this assessment radically. There have been big financial shocks throughout the game – not just at the ECB, but at counties and clubs. The shocks resonated beyond cricket too, counties who had smartly diversified were also hit in the same way as hospitality, conference and hotel sectors. Many people who draw their living from the game have had to work even harder than ever, to take pay-cuts, been furloughed or lost their jobs altogether, so there is a human, as well as financial cost, involved. And the international picture is also gloomy, with several international boards struggling for revenue, whilst the ICC has had to cancel or postpone events.
"While it appears as if the game has bridged the financial gaps, this is ephemeral and the financial day of reckoning is yet to come."Ian Watmore, ECB Chair
Fortunately, we collectively benefit from great broadcast and commercial partners, and members, participants and supporters have been very generous in this summer of much reduced cricket. The game has also been brilliant in getting behind-closed-door men’s and women’s cricket going, internationally, at county/regional level and recreationally. While it appears as if the game has bridged the financial gaps, this is ephemeral and the financial day of reckoning is yet to come.
How bad might all this be financially? The ECB has already told the cricket network it has a guaranteed shortfall of £100m this year, and it might be as high as £180m. It anticipates the rest of the game will have a sizeable shortfall in cricket income alone on top of this. All this against a pre-COVID “whole game” income of around £475m anticipated for 2020.
Provided we can get cricket back to somewhere near “normality” next season, the roadmap to balancing the finances is something like this. In short, we have four years to recover one year’s losses, where each of those years has double the income of the recent past. So whilst this is tough given commitments made, it is not insurmountable:
- Overriding the whole recovery plan is the idea of “Same ambition. Just less money”. In other words, resisting the notion that financial cuts mean cuts in cricket aims.
- An obsessive focus on cash and cashflow, combined with a sharp period of cost reduction and efficiencies across the whole game, starting with the ECB itself, which is then maintained over the coming years. Both will be essential to reducing outgoings and buying time.
- Measures such as judicious loans, advance payments, capital injections and other financial assistance from the ECB could give the game time to recover from its own shortfalls. These will need to be offset against future distributions, which themselves will need to be scaled back until they become affordable again.
- A continuous challenge to those tasked with implementing Inspiring Generations is to find non-financial levers of change.
- Searching for new sources of revenue and/or finding new value from existing expenditure.
It will be an urgent task for our Board and all the cricket stakeholders to get a recovery plan of this sort agreed and executed swiftly as time is not on our side. I remain confident we can do this.
What is more concerning is the possibility that our next domestic season is severely disrupted by COVID too – with more cricket cancelled, played behind closed doors or with very limited crowds. At this point we will have two years of losses to recover with only three years left of the current funding cycle, coupled with very severe cash constraints, and a global game in crisis.
The ambition would probably have to be reduced significantly, and many parts of our game could be genuinely at risk of going under financially. We must have a plan for this were it to occur, but the whole game and Governments around the world must equally do everything we can to avoid this situation occurring.
In conclusion, we started with a few long-term financial challenges, but had an opportunity to right these and grow the game given the doubling of ECB finances for the next five years. Commitments were made accordingly. Covid has put a £100-180m hole in these plans for the ECB alone, more when the whole game is considered. Swift palliative action has been taken during the summer. This “one year problem” still has to be recovered, but it can be done over four years with a mindset of “same ambition, just less money”.
This recovery will be difficult but strong cashflow management, an assault on duplication and avoidable or deferrable costs, efficiency cuts, judicious loans, advances and capital injections, offset by scaled back distributions, use of non-financial levers of change, and new sources of value creation can see us through.
A “two year problem” to be recovered over three years is much more serious, potentially requiring parts of the game to shrink, and a general lowering of ambition going forward. A plan is needed in case this is forced upon us by external events, but even more planning must go in to avoiding it in the first place.