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The collateral damage of the pay dispute

July 10th, 2017 | by admin
The collateral damage of the pay dispute
Australia
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The dispute between Cricket Australia and the Australian Cricketers Association began over the kind of pay model due to the players, but it is pressure from the commercial dollar that now appears to be hastening its end

A recurring sight and sound of the Australian winter is that of top cricketers doing their best to act like they’re playing at the height of summer. That’s because July and August are when advertising and promotion for the following season are shot, whether it is Steven Smith and Glenn Maxwell for KFC, Usman Khawaja and Nathan Lyon for Toyota, or all of the above for Nine’s summer of cricket.

The Australian cricket pay war, however, means none of those shoots are currently happening at a chilly North Sydney Oval, an overcast Allan Border Field, or between showers at the SCG. Nor are any of the deals that usually result in said advertising being struck, at least not within the bounds preferred by Cricket Australia (CA) and its extensive list of protected sponsors (meaning that no player can sign to other sponsors in the same space – such as Toyota precluding Audi, or KFC ruling out McDonalds).

In fact the only person to announce putting pen to paper in any way, since CA announced a downgraded alcohol partnership with Lion Nathan back in March, is Mitchell Starc. As of last week he is now on contract to an Audi dealership in western Sydney, in clear defiance of CA’s concurrent deal with Toyota. Depending on how talks between CA and the Australian Cricketers Association (ACA) progress, it is almost certain that Starc will not be the last player to sign up for a similar kind of deal.

Via correspondence to players on the eve of the previous MoU’s expiry on June 30, the team performance manager Pat Howard warned players against such deals. Starc’s actions demonstrated that the players were not fussed by the warnings, and that CA is rapidly losing control of a commercial space it had previously managed comfortably between players, sponsors and its annual grant – in lieu of the players’ intellectual property (IP) – to the ACA.

Among the many reasons CA used to justify its attempt to break up the fixed percentage revenue model was uncertainty about the future commercial landscape. On the face of it, this was true – Commonwealth Bank have downgraded their sponsorship, Carlton and United Breweries ended theirs, and the Nine, Ten and Star (overseas rights) networks all have deals up for renewal next year.

But in pushing the dispute beyond the expiry of the previous agreement without any sign of a resolution, and in turn leaving more than 230 players out of contract – including Smith, Warner, Starc and other marketable names – CA have invited a commercial maelstrom that has created far greater uncertainty than that which existed at the start of MoU negotiations last November. The pressure on CA’s leadership – the chairman David Peever, the chief executive James Sutherland and the lead MoU negotiator Kevin Roberts – is now mounting from all sides.

Among the most pressing right now is that of major team sponsorships, after CommBank elected to get out of its Test team and series rights to concentrate on the women’s game, and CUB opted out of sponsoring the ODI team and the series it plays in. It has already been reported that the booming financial services firm Magellan is on the cusp of signing on for Test rights, but for many weeks now it has remained on the verge without actually signing.

One of the reasons for this seeming hold-up is quite simple, and directly related to the pay dispute. As an ASX-listed company, Magellan must disclose all such activity to its shareholders and the market in general. By announcing the deal in the middle of the dispute, without any certainty about access to Australia’s top players or when they will next be playing, Magellan stands to put itself at risk of stalling a share price that has jumped from A$2.15 at the end of the 2012 financial year to A$27.07 as of Friday last week.

At least in the case of Magellan, it appears CA will be able to announce the new partnership whenever a new MoU is struck. However, there is less assurance around deals for the limited-overs team. As recently as last week it is believed that CA was still searching for companies to take up advertising space in the ODI and T20 formats, and finding it decidedly difficult to find takers at a time when the governing body’s usually secure place as a home for advertisers, broadcasters and fans is being eroded.

All the while, existing sponsors have been left wondering what is next, and how valid their contracts can be in the current climate. Commercial partners were sent correspondence by CA on June 29 – one day before the MoU expired – in which they were told that they still had IP rights access to players still contracted, and that it would also be possible to use IP for uncontracted players provided it was used to promote the game. The problem? Not one Australian player remains contracted, while only CA could use player IP to promote the game. In other words, commercial partners were left high and dry, without the ability to use any Australian player IP. Which, in short, leaves a long queue for using the likes of Ashton Agar, Travis Head and Moises Henriques: none likely to be taking the field for the first Ashes Test at the Gabba in November. “I’m sure,” one industry figure said, “that’s not what Optus signed up for.”

As recently as last week it is believed that CA was still searching for companies to take up advertising space in the ODI and T20 formats, and finding it decidedly difficult to find takers at a time when the governing body’s secure place as a home for advertisers, broadcasters and fans is being eroded

Not helping is the spectre – however remote – of that very match and the four Ashes Tests to follow it being affected by the dispute. No single story has infuriated CA more than last Friday’s revelation that England do not plan to fly down under for their women’s and men’s tours in the event of an extended dispute, on the basis that the players would not be afforded reasonable preparation if there were no professional cricketers to play warm-up matches against.

Whether or not the ECB’s message was motivated by the chance to lob a grenade into the opposing camp is a matter for conjecture, but what is not in doubt is CA’s private anger that another cricket board would say anything to destabilise the expectations of fans planning to travel. The fallout from the ECB’s admission was felt on Monday when the Barmy Army’s co-founder Dave Peacock told the Sydney Morning Herald that any such prospect could send the longtime fan group bankrupt.

“[The Ashes] is on the bucket list of so many sports fans who’ve shelled out between £15,000 [A$25,000] and £20,000 for the 51 days,” Peacock said. “It’s a huge investment and now there’s an element of concern over whether an agreement will be found. There are 30,000-plus fans travelling to Australia this year, and they’ve already booked their flights, hotels, tickets and tours. We could go bust if this isn’t sorted out.”

Whenever and in whatever way it is sorted, the MoU is likely to have one major change regarding the commercial side of the game – namely the previous state of detente around player IP that had CA get generous rights to the players in exchange for its annual grant to fund the ACA. Much as previous iterations of the CA board have strained to break the perceived shackles of the fixed revenue percentage model, so too have players, managers and the ACA grumbled every now and then about protected sponsors and CA windfalls from the use of IP.

There was nothing more commercially contentious in CA’s original MoU submission to the ACA last December than the following words: “Given that CA is an employer of the players and the ACA is the collective bargaining agent for the players, we question the appropriateness of CA directly funding the ACA.” It was a warning followed up later in negotiations by the strong assertion that the board would no longer fund the players’ association, meaning the withdrawal of annual payments amounting to around $4.5 million paid directly by CA to the ACA over the past five years. Another payment to factor into commercial rights is the A$3.6 million paid by CA into a marketing pool for all centrally contracted players, in return for their use as wearers of branded uniforms, the reason spectators and television viewers see signage at grounds, and the faces and names of advertising and promotional material and appearances.

But in seeking to remove the ACA’s annual grant, CA has opened up a debate in which the association and also the agents of individual players believe more can be done; they believe that CA’s list of protected sponsors – nine for the men, all sponsors for the women – is too lengthy, and that greater freedom of sponsorship and movement would allow the players to earn more while also funding the operational costs of the ACA.

“The ACA have set up the Cricketers’ Brand, which means they could exploit the players’ rights, sell them to CA for a net A$10 million dollars, the ACA could run itself and the players would get more than A$3.6 million,” a player manager said. “Whatever happens going forward, the MoU gets signed and players are again housed under that deal, but CA shouldn’t have the right to have nine protected sponsors, they should have three or four paying enough to get that right. The rest shouldn’t be protected and the ACA should, in conjunction with the agents, exploit the images in other ways, to pay their own way and pay the players more.”

In the meantime, more players will join Starc in signing individual contracts with all manner of sponsors, while the aforementioned Cricketers’ Brand will chase opportunities to seal more collective deals – as evidenced by the fact the ACA’s commercial manager Tim Cruickshank is reportedly set to fly to India this week to test the marketplace. Even when an MoU is signed, the convention in the past has been for existing deals to be honoured for their full term but not renewed, for instance when Adidas and then Asics requested, as part of apparel deals, that all players wore their brand of whites, rather than the assortment, usually aligned with bat sponsors, used previously. A mess of different deals signed in the midst of the pay war would serve only to drive down the value of protected sponsorships with CA.

Which ties in with one of the more telling stories about how complex relationships between CA and commercial partners can be – one that suggests it is this money, rather than the cut the players are seeking, that will force an end to the dispute. The story of Warner’s attempt to punch Joe Root in a Birmingham bar in 2013 is well-documented; less so the commercial chaos it caused behind the scenes. The very day an angry Sutherland spoke in Brisbane about Warner’s transgression, and its attendant narratives of alcohol and late nights out, a Victoria Bitter promotion was scheduled to take place on a barge in front of London’s Tower Bridge. At a cost of about A$80,000, it would serve also to help CA sell tickets for the home Ashes series that was to follow.

The promotional event did not end up going ahead on its original date and, given the particular nature of the issue, would not have been a surprise had it been cancelled altogether. But it did take place about a week later – with Warner absent – CA’s marketing and commercial arm having gone through hoops to ensure it did go ahead. How much Warner’s hefty punishment – and the decision to then terminate the contract of the coach Mickey Arthur – was about brand protection is a question only Sutherland can answer. This time, of course, the entire Australian team is currently unavailable to the game’s increasingly jumpy sponsors, and may not be again until those adverts actually need to be shot under sunny skies.

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