Cricket South Africa is preparing for a net loss of US $25 million (approx R342.58 million) from the inaugural edition of the T20 Global League, an amount that accounts for more than half its current cash reserves.
In its 2016-17 integrated report, CSA reported a bank balance of $47.8 million (approx R655.44 million) at the end of April but the costs of running the tournament with reduced revenue and stadium upgrades of $25.5 million (approx R350 million) spread over three years, means the glamour competition will initially cost much more money than anticipated.
While CSA had always predicted it would take at least three seasons before the T20 Global League turned a profit, much like the Big Bash League, the extent of the losses was alarming. Cricket Australia incurred similar losses over the first two years but offset that with revenue from the Champions League T20, a luxury that CSA don't have. With the broadcast deal and sponsorship yet to be sewn up, there could be more bad news to come for South. Africa.
Revenue from television rights and sponsorship has been reduced from what CSA hoped for, as acting CEO Thabang Moroe explained in Bloemfontein. "The numbers have changed, not as drastically as has been reported. Initially we were looking at a total net revenue of $32 million (approx R438.50 million) as far as broadcast and central sponsorship is concerned. At the moment it will be in its 20s."
Moroe expected the broadcast deal, which was due to be completed on Thursday but has still not been signed, to be worth between US $17 and 18 million dollars (approx R233.35 million and R247.09 million). At the same time, Moroe and his team are also seeking out a title sponsor and cutting costs on everything from the opening and closing ceremony to marketing, to cushion the blow.
"We have cut down, but it's not to wane the quality of the tournament. We are making sure our members don't get hurt the most. As CSA, we have decided to absorb some of the losses that our members would have incurred, but we're doing so because when we look at our numbers, we're pretty confident that we can help them regain them in the following year," Moroe said. "We as CSA and the team owners will still suffer losses. Hopefully, depending on how well we negotiate with all the broadcasters, the team owners will break even in year three. Our model is pretty watertight, it's now just a matter of making sure that we deliver operationally."
The team owners, of whom all but one are from overseas, were aware that losses were expected. Moroe said the "bigger teams," referring to those owned by IPL franchises, for example will have to incur a loss of $1.5 million (approx R20.5 million). Despite that, Moroe, who has had meetings with the owners, was reassured they were all on board. "All owners are committed to staying in the league. The owners are happy to accept those losses for the first two years."
While that may buy CSA some time to make the T20 Global League financially viable, it does not decrease the pressure to produce a product that can be profitable. For that, a broadcast deal must be secured and Moroe understood the seriousness of that. "Obviously everything is tied to the broadcast deal," he said. "When you go and see a sponsor the first thing they ask is, 'Where is my brand going to be seen?"
CSA has been in protracted negotiations with Africa's biggest sports broadcaster, SuperSport, for months and while all indications are that they will air the tournament, a sticking point is the price. Former CSA CEO Haroon Lorgat is believed to have turned down SuperSport's previous offers while also excluding CFO Naasei Appiah from meetings, but CSA has been forced to go back to their long-time television partners and will likely have to accept a lower deal.
CSA President Chris Nenzani did not blame Lorgat for the current predicament, and said Lorgat's failure to sign the broadcast deal was not the only reason he and CSA parted ways last week. Nenzani would not go into detail over why Lorgat's relationship with the CSA board had become untenable but would only say the issues began in January and came to a head at a board meeting on May 13. Though Nenzani himself believed the relationship could be saved, the board did not.
CSA is in the process of negotiating a payout with Lorgat, which is believed to be between $218,823 and $437,646 (approx 3 to 6 million rand), small change compared to the other losses.
Ironically, the initial idea behind the creation of the T20 Global League was to enable CSA to become financially self-sufficient, so it would not have to rely on incoming tours from India, England or Australia to make money. Now, this summer's visit by two of those teams, India and Australia, will bring in much-needed money to pump up the depleted reserves.
*One US dollar = 13.71 Rand as on October 6, 2017