PILOT: Ronaldo’s WC Controversy, Toto’s Mercedes F1 Sale & the Cost of England's Ashes Collapse?

0:00Hello and welcome to the pilot episode of Business of Sport The Breakdown, a brand new show where we'll be reviewing the week's biggest stories from sports sports business. And I'm delighted to announce that joining me on this exciting venture will be none other than Charlie Methven, the man who has run multiple football clubs, including Sunderland and Charlton, who has worked across all kinds of sports for companies such as McLaren and the Jockey Club, and of course, who delivered some of the great moments in behind-the-scenes sports documentaries on Netflix's incredible Sunderland Till I Die.

0:31The two of us will be joined by a number of guests, dependent on the happenings of each week, to add even more expert insight to what we bring to you. So why are we doing this? Well, as we continue to rattle on about on the main interview show, the business of sport has never been of more importance or more relevance to fans, to executives, to investors and to athletes. And the current news needs a bit of digesting. We'll be talking through various stories from the week, looking at takeovers, investments, governance decisions, athlete deals, you name it, we'll talk about it. And most importantly, we want to do this with your participation.

1:09This is not just a chance for us to enjoy the sounds of our own voice. It is an opportunity to dissect, educate and hopefully entertain all under the banner of sports business chat. And this today is your chance to influence. I'm very excited to release our pilot recorded last week talking through everything from the economic impact of a two day ashes test to Toto Wolff's minority sale of Mercedes. We want to hear from you, what you like, what you don't, where we can go deeper, where it worked well, hopefully. We will be kicking off the show properly in January. So please have a listen, message us on our various platforms, comment.

1:47We want your take so we can make this a show that delivers the best business of sport conversation out there. So with that in mind, I'm delighted to introduce Business of Sport, The Breakdown. so charlie a new show a brand new format more of a discussion piece than the interviews we normally do obviously we've had you on the interview uh show before so having you back for this is going to be pretty exciting for me well it's extremely exciting for me um i remember when i came in here for the first time i had absolutely no clue who you were but subsequently subsequently after i had literally about a thousand people calling me to say that they'd actually seen the interview i looked into it and found out that I was actually the one who was privileged to be asked long in the first place.

2:30So even more excited to be here on a regular basis because there is a lot to talk about. And I think the premise of this is to give a bit of an insight into the things that we may talk about on the main show, into the things that you're exposed to in your life in and around sport, the experiences that you've had, well, most importantly, across multi-sport as well. This isn't just a single discipline in sport for you. This has been a career built around many different things. And if we can do that, I feel we're going to be delivering some top quality content for the people most interested to understand what the real business of sport looks like.

3:01No, that's absolutely right. I've failed across many sports. And over the last 20, 25 years, I've seen the inside of a lot of interesting rooms, a lot of interesting boardrooms, dressing rooms, crisis management rooms. And as you see some of the themes that are coming up today, it's interesting how many of them have their roots in that recent history. You see something happening and you go, oh, I know why that happened, why that's happening now. I remember 10, 15 years ago when this came up and why it was pushed back or why it didn't quite happen then and why it might be happening now. So I think it's just really interesting to sort of explore the nuances of these situations and the history and the backstories and actually perhaps give a little bit of insight into what the real conversations which are happening behind closed doors before you read the perfectly put together press release.

3:49So for this week, we've picked out a few and I think we should start with the one that from a fan's perspective has driven me personally absolutely crazy and I was trying to find a I was trying to find a silver lining I guess in everything and it was a silver lining slightly when I thought of all the money that cricket Australia could be losing from the absolutely appalling display that England put on the cricket and then I actually started thinking about the wider impact of that and what it means for Test Cricket and have a look into it. And all jokes aside, the actual business of Test Match Cricket is really, really important right now.

4:24And England's two-day collapse has created some interesting financial discussion points. So I think that's a good place for us to start. Yeah, well, I mean, like you, when it comes to Test Cricket, I'm very much a fan and a punter. I've never actually worked in cricket before. It's one of the few major sports I've never actually worked in. So I'm a fan. And probably like you and many listeners, I was throwing cushions at the screen and sort of running up and sort of walking up and down the garden, sort of cursing as England displayed over two days exactly how not to play test cricket. And it's quite interesting because, you know, cricket's one of those things, I think, which you don't need to have played it to understand quite a lot about it.

5:00You need to have watched it a lot. So you often find that sort of some of the great experts at Wisden and these types of places are basically nerds, but they've watched an awful lot of cricket. And I think, you know, most of us now have watched enough test cricket to understand that there is a balance to be had between attack and defence, as there is in most sports actually. It's a crucial element of management in sport, is achieving that balance. And when you go too far in one direction and you lose the other direction, you become exploitable. And I think what we saw in England's two innings is that Australia knew that England were going to try and play in a certain way, and they simply devised bowling plans to enable England to get themselves out and the frustrating thing was watching england do it as you say the one slightly amusing thing was sat up in the cricket australia box watching on on the one hand with some degree of pride and joy that the poms are being done over yet again would also have been people uh on the business side of cricket australia scratching their heads and going okay this is actually going to cause a bit of a problem um funny enough the um commercial director at cricket australia is one of my oldest friends and so he's going to be one of the people who is scratching his head and working out how to sort the problems out.

6:10Because Cricket Australia last year lost 11 million Aussie, which I think is about eight or nine million US dollars. It might not sound like a lot, but for a governing body, it is, right? Because unlike a football club or something like that, where you might have a rich owner who comes along and says, okay, that's fine, I've got this. When a governing body starts losing large amounts of money, it's much more complicated. It's much more complicated. You know, who is it who covers those losses? if they start running up significant debts, does that become a government matter? Because effectively, you know, if you think about Cricket Australia, it's like the FA here.

6:42Cricket's the biggest sport in Australia. So, you know, the government can't let it go pop. So if they're running up big losses, then there's a problem. Now, if you look politically behind the scenes, there was a bit of a ruckus when they announced those losses, which covered last year. Now, last year is when they had India touring, which is their second biggest tour. And there was a bit of a row when the head of Cricket Victoria, which is probably the largest member state, the equivalent of the largest county here, it would be the equivalent of Surrey here. Obviously, they're the ones who control the Melbourne cricket ground, the biggest cricket ground in the world, and so on and so forth.

7:14The head of Cricket Victoria came out and castigated Cricket Australia, saying it's absolutely outrageous that we should be losing this much money in a year when we had India coming and playing an utterly compelling test series. Cricket Australia hit back, saying that, well, yes, but we didn't have the short-form white ball matches. Actually, India came back to play those in this year. If it hadn't been for that, the losses would have been much smaller. And then the second thing they said was, and of course, this year, it's going to be totally different because we've got the ashes and the short-form stuff falling into this year.

7:43So when they go and lose$3 million on their projections from England collapsing and not lasting, I mean, I was going to say five days, but actually normally they project for four days, particularly in the modern era. You wouldn't expect so many tickets for day five. So that$3 million Aussie,$2.5 million, dollars, when you think about repairing the black hole of the previous year, the problem is now becoming real. And if England keep on doing this during the season, you can see how Cricket Australia's entire financial situation could be absolutely blown apart. And it's damaging, right? Because it's damaging for the appetite of fans to go and buy day three and four tickets even.

8:17It's damaging for the broader value of the sport when you're looking at it and you're selling anything in. And the sponsor goes, well, I'm not convinced I'm going to get the full value out of it. And it reminded me of when I was thinking about it what bill sweeney was telling us when he came in with the rfu and he was looking at all of the finances and how they basically did all of their forecasting and we can absorb these losses these losses these losses because we know in a world cup year we're going to get x amount right through and that is going to offset all of those other years now is that a good model to work on that's a different conversation but those years of supposed like flourishing are so important to be able to actually create that longer term sustainability, as you say, because without it, you're in a continual cycle of loss.

8:58Yeah, I mean, I honestly think in sports, it's very, very dangerous to rely on anything, because there are so many outside things that can happen that can derail you, weather being one of them, right? I mean, you know, you could have an entire test match, which is, you know, freak storms, and you lose the entire match to weather, pandemic, that all sorts of things can happen. So I think that it's actually much better, particularly for governing bodies who don't have the cushion of a ultra high net worth to come in and pay the bills. I think for governing bodies, they have to be very, very cautious about underwriting the sort of the sudden influx of a big success.

9:33Because if that then doesn't happen, then they are there with their pants down as the tide goes out. Do you think it really highlights a bigger problem with the format of cricket then for the business? Well, I think it certainly causes me great worries about the programming of test cricket. Because if governing bodies start to think, well, hang on a second, we can't guarantee how much we're going to get from a test series. Because test series, they stretch over quite a long period of time. So if you think about the amount of white ball cricket that you could get into the space of a five-match test series.

10:05So we've gone out there in mid-November, and we're going to be playing through until the end of January. So you're talking about two and a half months, five matches. Now, if those five matches go on average to three days, that's 15 days of cricket in two and a half months when the players are fully contracted to be just playing that format throughout that entire time. That's a problem, right? Now, you know, I don't have an easy answer for this, but I'm really passionate about test cricket. I actually find one-day cricket, of all its various forms, roll like sort of Haribo suites. I can't even remember what the result is a month later.

10:37Literally, I can have gone to a 2020 match, and then a month later somebody says to me, oh it's great to see you at that 2020 match and if I try and cast my mind back I'll remember the conversation with the guy I'll remember the lunch I had but blow me down if I can ever remember the result it just doesn't matter no one cares right unless it's the world cup in the 50 over format no one cares about the individual matches and that in itself is really dangerous for any sport is that when you get to the point where even quite passionate fans like me don't really care who wins each individual match yeah and it's different isn't it cricket because you do have that opportunity for things to end so quickly.

11:09If you're thinking about other sports, and we'll always try and, I think, find that comparison to balance it out and make sure it's fair. You know, football's 90 minutes long regardless. Same for rugby. I mean, tennis is obviously different. You can have a situation like we had in the Wimbledon final in the summer with Swiatek and the Samova, and it was six love, six love, and all done in 45 minutes and people paying thousands of pounds to be there. These sports that have that variability in them, They have another layer of concern when we're trying to model all this out. Yeah, because we haven't spoken about the broadcasters either, have we?

11:42And at a time when broadcast deals are under intense pressure, and I'm sure that's a theme that we're going to return to again and again and again, Charlie, is the difficulties these days of achieving significant TV rights revenues from broadcasters around the world. All of that's under severe pressure. Now, a real sort of flagpole event like the Ashes, you are going to get significant revenues for your TV rights. But if we start to get to the point where the broadcasters on a regular basis are having to then fill whole days of empty space, they lose the viewers. They have to slot in shoulder content, which no one really wants to watch, etc.

12:14I mean, it's a real problem for them. I noticed actually it was interesting in the statement that the chief executive of Cricket Australia made. The first entity that he sort of apologized to, he said, like, I feel really sorry for everyone, especially the broadcasters. Which I was like, wow, that's a bit odd. you know normally you'd say especially the fans number one maybe then you go on to our box holders and you go on and then eventually okay and also the broadcast no he said number one the broadcasters because what he knows is that actually his biggest challenge over the next few years is extracting the same level of broadcast revenues that these sports have become used to for these rights and also you look at the other stuff so it's three million just on tickets yeah that's just so that was just three million just on tickets then it's very hard to quantify the broadcast piece now and what damage that does.

12:58But we'll know, as you said, whether it's just from an image perspective or an eventual financial one, it's damaging. You then actually lift that and go, well, if that happens in Melbourne, 100 ,000-seater stadium, more hospitality, more expensive tickets, that loss suddenly increases. So, you know, you can end up location-dependent on being in a really, really problematic situation. Yeah, I guess you're right. I mean, if the Melbourne test finished in two days, Cricket Australia could probably end up doing their entire annual budget just on that match. I think I worked it out just under 10 million is what it would have come to.

13:32They would have lost. Right. So it's pretty dramatic. It's problematic because I think that, you know, test cricket is the apex of the cricket pyramid, the apex of the cricket pyramid. That's what we want everyone to be aspiring to. But at the same time, being realist and understanding how the modern sports industry works, if this continues, then you're a real problem. because there's another problem related, which we'll come back to at a subsequent point, which is the relatively small number of international teams who are competitive in this format, which is a structural problem to do of how effectively the Indian Cricket Board enables the funding of world cricket and controls it.

14:10So if you think about where I spend a lot of my time now in Jamaica, effectively the West Indies have been starved of funding. That then means that their players who would be the players who would be in their test team, they can't afford to pay them properly, which then means that those top West Indian players go and play in the 20 over formats around the world, which then means they're not available for West Indies test selection, which then means the West Indian team isn't competitive, which then leads to a lack of interest in that region in test cricket, which then means that basically your global audience reach is coming down and therefore all the global sponsors start thinking, okay, well, we've lost that region now.

14:43We're now also potentially losing Pakistan because they're not playing much test cricket. So there are some fundamental strategic problems here. I mean, basball is a sort of slight freak one-off. I don't think there's a lot of evidence that we are moving towards an era in general of two-day tests. So it may well be that after this series, when we've got thumped 3 or 4-0 and Stokes and McCullum resign and we go back to a team that's managed by Alastair Cook or something, you might end up with test cricket becoming a little bit less exciting but maybe more financially viable. But all jokes aside, I think I did do something on this.

15:20I can't remember the exact numbers, but the number of tests that do finish in three days with England is incredibly high. Incredibly high. So, you know, I agree. Well, you know, part of this is reactionary to something quite extraordinary. You know, there's only been 24 tests, I think, that have finished in two days ever. So this isn't the norm. But it does highlight, and this is why it's a good chance, it does highlight the vulnerability and the fallibility of a sport that actually, from a business perspective, is in a really tough place anyway. You know, you mentioned that. They've got really three competitive test match teams, right, that financially can support themselves.

15:53the rest of them really struggle and as you said then prioritize elsewhere so if we are looking at the longer term future of a game a game that is built on long form sport you've got we've got you've got to find strange isn't it because international audience is massive like in crickets move past the american sports into second place in the international sports spectator league but it totally lacks strategic direction you know effectively it's controlled by the indian cricket board who in turn are controlled by the team owners of the IPL franchises. So the total lack of strategic direction. So in as much as there is strategic direction, it is simply to enrich a small number of billionaires who own the Indian franchises.

16:30So there are big challenges here at the same time as the sport's booming worldwide. But anyway, watch this space. I think it's perfect time to move into another topic we have because it actually links beautifully into one of the things we were talking about there. And this is what I'd love to do. I'd love to find us seamlessly transitioning in between sports because it really does highlight exactly what we said at the beginning but broadcast broadcasters and the landscape we look at right now as you said you know it's the contributing factor to the business of the majority of this industry we last week saw this whatever you think of it fight can we call it a fight joshua anti-joshua versus jake paul yeah come into the mainstream and some people lose their heads other people get very excited by it the numbers attracted associated with it sorry a huge massive 140 million purse supposedly between the two of them split evenly but the thing that really interested me was actually going into the broadcast side of this and looking at how that had netted out because that was where I saw personally the most interesting moves being made what do you think about it when it comes to boxing there's nothing new under the sun boxing's history is of what's called matchmaking so going back hundreds and hundreds of years this a very ancient sport compared to all the other stuff we're talking about this is going back into like the 17th century right effectively there have been boxing promoters who have put on fights between two fighters and who have charged money to watch that fight who have taken bets on that fight and have taken a certain amount for themselves and given a certain amount to the fighters that's how boxing starts right and the sanctioning organizations the the bodies that effectively sort of structure the championships who declares who is currently the world champion i mean many listeners will know but there are four such bodies right the wbc the wba the ibf and the wbo and these are all basically there's an original founding one the wba and then you've got various different split-offs and sort of right you know strange sort of you know well so and so threw his toys out the plan when he was on the board of this body and decided to go and start his own body so you've ended up with four separate bodies and this has been for the last 30 years right to last 30 40 years they're mostly based in sort of slightly obscure central american places and i'm sure absolutely would um pass any governance test whatsoever um so eventually got um to the point where the whole system was so sclerotic that the major magazine of the sport which is called ring magazine decided right okay what we're going to do is we're going to look at all the boxers who are competing across these various different things and all these various different things and we're just going to take a view and we're going to start ranking the boxes so what you'll often see now is so and so is the undisputed champion ranked number one by ring magazine right and sometimes there'll be a guy who actually is only the champion of one of those sanctioning bodies but ring magazine will still say actually he is currently the number one so the situation is already sclerotic and a bit mad and these organizations effectively have been fighting against each other or sort of sparring.

19:33Occasionally there's a rumor that two of them might merge, but it's all quite political, very political, and very personality-driven, and in times over the last 20 years also quite corrupt, right? So when something like this comes along, which effectively is an old-fashioned matchmake situation where, you know, a promoter, in this case, you know, the manager of Jay Paul, slash, I guess, Eddie Hearn to a degree said, hey, if we got together and put these two together, it doesn't actually matter what the WBA or the WBA, whatever it might say, We can make a lot of money because a lot of people want to watch it.

20:03So that's going back to the oldest traditions of the sport. So I don't have any problem with it from that perspective. No one's claiming that the winner of this fight is going to be the world champion, right? But everyone then talks about legacy, right? This is where the fight really calls into question, I guess, AJ's most dangerous part, which is, you know, oh, well, can he be taken seriously as a fighter if he goes and does these things? I mean, my personal view is it's completely different. It's not the same sport. This is a WWE almost style entertainment product, not a AJ versus Fury for the world title.

20:39I mean, what it looks to me like is that Anthony Joshua has at some level accepted that he is not going to be the best fighter in the world anymore. Yeah. Right. He's of an age and a stage. He's been through that period of his career when he was his peak, had one or two great moments. But ultimately, he wasn't quite as good as Tyson Fury, who in turn isn't quite as good as Alexander Yusik. right so he is at best fighting at his peak the fourth fifth sixth best heavyweight in the world and at an age where he's starting to go downhill so the question now is is can he actually start to do a few things which are going to create like generational multi-generational wealth and for somebody in a trade where you're putting your life on the line all the time what what's what's the problem why not like i mean you know why keep on saying actually i want to fight against someone who is the mandatory challenger for the wba title etc etc and it's some guy who no one's ever heard of so the total purse for it's like 10 million 20 million whatever it might be i've actually got no problem with it whatsoever i don't even see how anyone could or should have a problem okay do you think it devalues the sport though because that's where so many people have commented boxing's always been a circus boxing's always been a circus it's always been crazy and sometimes it has the capability of just putting off like monster upsets i remember when i was a kid and they set up this fight for mike tyson who just been killing everybody not literally but beating everyone very thoroughly and they set him up with this like sort of total bum called james buster douglas who was like the number 12 in the world or something like that and buster douglas knocked him out right so we don't know this could be interesting right so we're not testing who's the best heavyweight in the world actually what we're testing here is can an influencer who is not really a professional boxer if he had sufficient training and if he really went for it could he could he maybe beat somebody who is really significant that's what the interest isn't it right that's what it's all about so it's a totally different narrative a totally different storyline but nonetheless a valid one i think this is now where we see it so much in sport right narrative is trumping talent right people find opportunities to create storylines around things rather than just pitching the two best people in that discipline against each other because that doesn't necessarily now draw the biggest crowds but it still happens right they still those events still happen yes they don't necessarily draw the biggest crowds because ultimately you can't tell spectators what to be interested in what not to be interested in but you know, Alexander Yusik still fights.

22:53Yusik still makes vast amounts of money. Yusik is creating a legacy, which will mean that he'll be regarded as one of the greatest fighters in history, which Anthony Joshua will not be regarded as one of the greatest fighters in history. So, you know, you pay your money, you take your choice. And effectively, I do not have any problem with it. I think it's smart. I think if there's an audience for it, then that's absolutely fine. I think something that you mentioned earlier on is interesting is what's happening around the TV arrangements. What's your view on that? I think this is the most interesting part because while everyone else was sitting there crying around, you know, what it may mean.

23:22You actually look at how this fight happened. And to me, the first blocker, right, you look at it and you go, that can't happen on Netflix because AJ has signed a massive deal, supposedly 100 million a year with DAZN for five years to exclusively fight on their platform. DAZN have done this for ages. They did it with Canelo, I remember, signed with about 250 million deal, well, I don't know, about eight years ago. And the whole point of that, literally the whole point is that they get exclusive access to these fighters. So when I suddenly saw this, it was like, well, how have Netflix managed to do that?

23:50You know, is there something in those contracts that means that this does sit outside of it? And then very quickly it came out, well, perhaps supposedly DAZN just got a nice 10 million pay packet off Netflix or whoever it was that actually brokered that deal to release him from it. My view on it, honestly, from that side is I loved it. I thought that was so good because it does show an awareness that, do you know what, it isn't like, it isn't binary. It isn't you win or you lose in this space. DAZN will go, well, we could stop him, but that would probably create some resentment. this is the opportunity of a lifetime for him as you said to create some generational well 70 million quid i mean incredible let him go we take a good fee for it it opens him up to a new audience we know we know the power of jake paul right from an influencer from a brand perspective he goes out to the u.s he opens himself up to them there's a chance they suddenly become quite interested in aj what happens if they become interested in aj do they become interested in his own platform and what we do with him potentially so just from their side it would It would have been so easy for them to not let him do it.

24:46But seeing this kind of deal just seems, it seems far too sensible for sport for me, which I liked. Well, I think there's some interesting stuff going on at DAZN. Let's try and sort of unpack a bit of that. It does go into other sports. We're going there, are we? Right. So effectively, why does this happen? I think DAZN have liquidity problems. And they, not that long ago, cancelled their contract to televised French football and had to pay a penalty fee to get out of that. but not even really sure how they managed to get out of it but they did they've just done the same with belgium football they've just walked out of belgium football last week they announced they're walking out of belgium football and that's headed to court as well now these are for sums which are significant but not vast right so getting out of belgium football is going to save them top line maybe 100 million euros but they would get return for it right so it's not a pure saving of 100 million i mean let's say it's going to save them 50 million or something like that and they're have to pay a penalty as well, court fees and all this type of stuff.

25:43So they're trying to extract themselves from what they regard as being potentially non-core assets. And at the same time, we saw them putting vast sums of money into the Club World Cup, for instance, which was a very strange situation where at the same time as they took in a very significant investment from Saudi, at the same time, they also agreed there was a major sort of television deal done for... About the same value, wasn't it? It was exactly the same value for the Club World Cup as it happens with FIFA, which is the same organization that is hosting the World Cup, which Saudi managed to get unopposed.

26:17So there's a very strange circularity going on here. I don't quite know what's happening at DAZN. But when you see an organization start to either release or try and get out of or accept other people coming in and taking various of what would previously have been considered core assets, for me, that says liquidity problem. Interesting. so you think that that's far more about them looking at it going oh 10 million 100 percent i don't give a shit about the contract 100 percent charlie because i reckon that when they invested that money in joshua the bet was that aj was going to be one of the big heavyweight stories and the reality is he's not right now so they're they're playing both that they're winning both ways here first of all they managed to defray the cost right so we we 100 million great now we're getting 10 million back okay so that's defraying the cost but at the same time as you said there's also a possibility of saying, okay, he's not going to work as we hoped he would as a major mainline heavyweight title contender.

27:08So if these other guys are going to try and turn him into a major YouTube figure, et cetera, where we can monetize his fights in a slightly different way, okay, maybe that might be a way in which we get some of our money back. What do you think about Netflix going into this space? Anyway, they've done it a few times. Yeah, I mean, I think what's happening, what's becoming quite clear to all of us in the sports industry is that the major streaming platforms that maybe three or four or five years ago, a lot of people were hoping that they would become competitors for the same types of packages that the major linear broadcast platforms were paying big money for.

27:41So the hope was at the time, wow, this could be amazing, right? So Sky are willing to pay a billion for the Premier League rights. And then Netflix are going to come along and they're going to outbid Sky. And then it was like, actually, no, they're not. Why? Because they're not a linear platform. So they don't need constant content all the time, filling out their schedules and their days. So what they look for much more is what are the flagpole events which can attract people onto our platform and we will then have the job of trying to retain people on our platform. So put that back to the ashes.

28:12Yeah. If they add the rights to the ashes, such a good point. Yeah. Actually, the issues are completely different, right? Because they've got people on the platform to watch the ashes anyway, whether it's two days or five days. It doesn't matter. In fact, the drama of it all happening quite quickly in some ways can then be console compressed is probably you know going to work just as well for them as it stretching over four days into a much more boring match right so yeah you're right but i don't i don't think that means that netflix starts bidding for test cricket because you can't guarantee it right so what they want is they want to they just draw up a model saying right if we pay x amount for this event and y amount of people are going to access our platform just to access that event if we then have a customer retention rate of x or y and those people start paying x or y and we then retain those for the next three or four or five years, then basically that's how we justify paying for this event and more, right?