Why BCCI fears more threats to its ICC revenue
A substantial reduction of potential earning from the ICC's central revenue is only part of the concern for the BCCI, which fears that a fundamental change in the principle of income distribution could lead to further shrinkages for all the cricket boards, with the Indian board taking bigger cuts.
While attention has been focused on the reduction in revenue for the BCCI - from $570 million in the Big Three model to an estimated $255 million now - it has emerged that even this figure, and indeed the potential revenue for every board, could be subject to change because a new variable has been added to the distribution model - the ICC's own costs are now flexible.
Previously, the ICC's projected revenue - pegged at $2.5 billion - was the only variable in the earlier model in which all the costs, including the payout to the member boards, were fixed. The ICC was granted a budget of $870 million - $550 million for staging events, $250 million as administrative costs, and $70 million for a Test fund - and the member boards received fixed percentages of the total revenue. But in the latest model, which has hiked the ICC's costs by $160 million - $60 million of which is for a contingency fund - the boards will be granted a percentage of the surplus.
"Since it is based on surplus, there is an uncertainty of earning," a person closely involved with the earlier model told ESPNcricinfo. "If the ICC decided to spend more on admin or events or increase the contingency fund, it will further reduce the share of the member boards."
The BCCI now fears it stands to lose about $330 million after its share from the ICC's revenue pool was reduced in the revised distribution model for the 2015-2023 period, which was passed in principle at the ICC Board meeting in Dubai. If the ICC schedules two extra world events during the period - and negotiations to do so are reportedly underway - the BCCI's estimated fall in revenue could be as much as $400 million.
The ICC, however, pegged the BCCI's drop in revenue at only $200 million for the 2015-2023 period. Apart from the two organisations disagreeing over the principle of reducing the BCCI's share, there is also a significant divergence between how the BCCI calculated its revenue under the Big Three model, and how the ICC calculated it before further cutting the BCCI's share under the new distribution model.
The ICC estimated the BCCI's original share according to the Big Three model to be $450-455 million - and not $570 million - because it had raised its costs by $160 million, thereby reducing the share of the revenue that was available for distribution to the member boards. The BCCI was unhappy with what it considered to be an arbitrary increase in ICC costs, which were upped by the working group responsible for cutting the BCCI's share in the new distribution model.
The ICC working group led by its chairman Shashank Manohar arrived at an increase of $160 million in costs because it said event expenses had gone up by $50 million, central ICC revenues had also gone up by $50 million, and $60 million had been allotted as a reserve and contingency fund. The rise in costs was then readjusted down to $90 million, after doing away with the expense of $70 million for the ICC Test fund.
Another key decision taken by Manohar's working group was to remove the contribution cost borne by the ICC, which had been introduced in the Big Three model. The ICC was to pay 'contribution costs' to Full Members from its gross revenue through a graded percentage share. The contribution cost paid to a country was arrived at via four parameters: the revenue contributed by the country to the ICC, its historical ICC membership, its on-field performance over the past 20 years in men's and women's competitions, and its domestic development performance.
According to the Big Three model, India's "value contribution" for the 2007-2015 period was over 80%, while that of other Full Members ranged from 0.1% to 5%. So for a projected revenue of $2.5 billion the BCCI, under the Big Three model, would earn close to $570 million from the ICC, which included a distribution cost amount of $63 million given to all Full Members.
The BCCI's argument is that there needs to be a cap on the ICC's expenses, otherwise the surplus of ICC revenue left for distribution among boards could reduce in the future. Due to the present increase in the estimate of the ICC's expenses, the distribution costs received from the ICC by every Full Member has dropped from $63 million to $52 million.
The BCCI has been the most vocal opponent of this revision.
After Manohar became the independent ICC chairman in early 2016, he said he wanted the ICC revenue distribution to be fair and equitable for all the Full Members. In the first version of the new distribution model, after factoring in the $90 million increase in ICC costs, the BCCI's share fell to $440-445 million from the estimated $570-million in the Big Three model. In percentage terms, it went from 22.76% to 17.8 %.
The ECB's revenue fell from $172 million to between $145-150 million and CA's projected $130 million was revised to between $110-115 million. The other seven Full Members would also have seen cuts, ranging from US$1-10 million, when compared to the original model.