Marketers and their CEOs everywhere are watching what James Sutherland and Mike McKenna are doing to Australian cricket and taking notes, and not just because they like the game.
Sutherland and McKenna, CEO and head of marketing respectively at Cricket Australia, are completely transforming the sport's demographics and revenues - almost entirely through marketing.
In the process they are having a big impact on the broadcasting business as well.
It is a fascinating demonstration of the enduring power of a well-constructed marketing strategy, as well as the importance of live sport in the age of digital media.
Whatever the Test cricket purists might think of the Big Bash League (and count yours truly among them), it is clearly working.
The gate crowds are already beating rugby league and the pay TV audience is averaging 293,000 per game.
Foxtel's ratings are up 20 per cent purely because of Twenty20 cricket.
Cricket Australia had two problems: the audience was skewed towards older males and the main "product" involved games against other countries that were hard to control - that is, they could only happen when the other national teams were available.
Cricket is apparently Australia's most popular sport, but only among those over 25 and the followers are, or rather were, two-thirds male.
Among 15-25 year olds and women, the feedback was that the games just took too long.
There had been a Twenty20 state competition going for five years, but it was limping along, failing to get much traction.
In August last year Cricket Australia received a report on the game from Don Argus and then the first ever national conference of all state and territory associations was held to discuss the future.
Out of that came a reconstructed 20-over competition with eight teams instead of six (two from NSW and Victoria) and each with new names and uniforms, and a smattering of star players like Shane Warne and the West Indies' Chris Gayle.
A salary cap of $1 million, in total, per team was set, but that only applies to cash direct from the club.
The big-name players are able to get much more from sponsorships and other payments.
Matthew Dwyer, the national sales director of Mars Confectionary, was brought in to run the sales and marketing effort and he quickly put together a team of 17 marketers and sales executives. By the way, Dwyer was chosen because he knows how to market to kids.
To help fund them it was decided to sell up to 49 per cent equity in two of the teams - Melbourne Renegades and Sydney Thunder - to investors. Credit Suisse was hired to do that and Information Memoranda were circulated among potential investors.
But unlike the Indian sale of IPL franchises, the process didn't attract very big offers, perhaps because control was not on offer - only a minority stake.
Also there was a risk that the cricket business would entirely lose its not-for-profit status for tax purposes if part of the game operated at a profit to service outside investors.
Anyway, Cricket Australia and the six state associations that own CA decided not to go ahead with the sales, and to retain full ownership of all eight teams (although most have outside directors).
Now McKenna says it's likely that none of the teams will be sold at all and that they will eventually be set up as clubs. Memberships in some of the teams are already being sold.
The result, however, is that the $15-20 million needed to fund the Big Bash League has had to come entirely from Cricket Australia's resources, which has been a strain.
One of the differences between cricket and other sports is that the contracted players get a fixed percentage (26 per cent) of revenue, shared 55/45 between the national and state players.
It means, in effect, that the organisers and marketers of the sport are in a joint venture with the players and their own organisation, the Australian Cricketers Association, and everyone is highly motivated to get the revenue up.
Another thing the success of the Big Bash League has created for Cricket Australia is a lot of complexity: most sports have just one game with same rules played at various levels - local, state, national and international.
Cricket has all those levels, plus three different games - five-day Tests, one-day games, both international and domestic, and 20-over games. They all use bats and balls, but the different lengths create entirely different games.
As you'd expect from marketers, the team at Cricket Australia sees this as an opportunity, not a problem.
"We had Coke, then Diet Coke, and now we've got Coke Zero," said one.
And it's true: cricket is in the unique position of having several different games to appeal to different audiences, including one that is obviously attracting the next generation while they hang onto old guys like me.
Maybe one of the forms of the game will eventually fade and die (most likely 50-over one-day cricket), but so far it's still rating well and attracting crowds.
And as we all know, customers are always right.
Alan Kohler is Editor in Chief of Business Spectator and Eureka Report, as well as host of Inside Business and finance presenter on ABC News. View his full profile here.
Tags: business-economics-and-finance, cricket, sport, economic-trends, twenty20 First posted January 11, 2012 08:41:43
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