Posts Tagged ‘Fox’

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It has been a couple of days since the news broke from Sports Business Daily that Fox is poised to enter into a deal with the Big Ten for 50% of the packages that are currently on ABC/ESPN (football and basketball) and CBS (basketball)… for up to $250 million per year for 6 years. Once again, this is just for half of the Big Ten rights that are up for grabs, which would provide for 25 football games and 50 basketball games on over-the-air broadcast Fox (“Big Fox”) and FS1. As observers such as Matt Sarzyniak have noted (who has a great post on the overall dynamics of the Big Ten deal), that amount is approximately the amount that the Pac-12 receives for its entire non-Pac-12 network package. In effect, we’re about to enter into a world where Rutgers and Northwestern are going to earn significantly more TV money than Florida State, Oklahoma, USC and even Alabama and Notre Dame. The Big Ten schools were already ahead before through its creation of the BTN (which everyone should remember how bold and risky that move was a decade ago compared to taking guaranteed money from ESPN), but the gap is going to be blown through the roof if the conference ends up with around $500 million per year for its TV rights without even taking into account the BTN portion. I have had plenty of critiques of Jim Delany and the Big Ten leadership over the years, but their management of TV and media properties has been pitch perfect for the past ten years and far beyond the capabilities (both quantitative and qualitative) of the other power conferences.

Some further thoughts:

  • I have seen a lot of scuttlebutt online that this indicates that the Big Ten might be leaving ESPN entirely, but personally don’t believe that for a second. For several years, I’ve been predicting that Fox and ESPN will ultimately split the Big Ten’s rights going forward and that is still the most likely outcome. ESPN reportedly “lowballed” the Big Ten in its initial offer, yet that is not necessarily outcome determinative since ESPN did the same thing ten years ago (which eventually spurred the creation of the Big Ten Network) and the parties still eventually got a deal done. It would have been difficult for ESPN to unilaterally come in with a massive offer several weeks ago with the continued cost-cutting throughout its organization and the possibility that this might be the time when the sports rights bubble (to the extent that there actually is a bubble) is going to pop. Essentially, ESPN bet that there wouldn’t be anyone willing to pay the Big Ten’s high asking price (just as it bet that the BTN wouldn’t be successful)… and it looks like they’re going to lose that bet badly.That being said, I’ve written many times before that ESPN’s supposed financial woes are being completely misinterpreted by many sports fans. The reason why so many Disney investors are spooked by any cord cutting and ESPN subscriber losses is because ESPN is, by far, the most profitable media and entertainment entity in the entire world. Note that I said “media and entertainment entity” – this is not just about sports networks. Let’s put it this way: ESPN currently delivers monthly subscriber revenue to Disney that is the equivalent to the domestic gross of Star Wars: The Force Awakens every single month guaranteed… and before they sell a single ad. Disney has relied upon ESPN to deliver monopoly drug dealer profits for years to prop up their entire business. Now, ESPN is “only” making oligopoly drug dealer profits.

    All of this is to say that ESPN still makes a ton of money that is far, far, far beyond what Fox, NBC, CBS, Turner or any other entity with sports interests could ever dream of. Even in cost-cutting mode, ESPN still needs to invest in core properties in the same way that the rest of the cost-cutting Disney organization will authorize massive budgets for Star Wars, Marvel, Pixar and Disney Princess movies. ESPN leadership can now go back to their overlords at Disney and say, “Look – we tried to get the Big Ten on the cheap and that clearly isn’t going to happen. We have now already let Fox into the door to becoming a top tier sports network competitor and we can’t let someone else, especially NBC/Comcast, to get even more traction on top of them. We need to the funds to pay up here.” Anyone that thinks that ESPN can just plug in more SEC or ACC games into its lineup is fooling themselves. The Big Ten provides a massive lineup of football games in the best time slots on ABC and ESPN and have consistently garnered the best ratings of any of the conferences next to the SEC. The people at ESPN aren’t dumb – they know the difference between a short-term administrative cost cut and a long-term investment in their core product… and the Big Ten has been a huge part of their core product since almost the beginning of the network.

  • By the same token, let’s not pretend that the Big Ten wants to get away from ESPN. I have seen some Big Ten fans profess a desire to leave ESPN entirely, but that would be as short-sighted for the conference as it would be short-sighted for ESPN to let the Big Ten go completely. The fact of the matter is that if you were to show the exact same game on ESPN versus FS1, the viewership on ESPN would be magnitudes higher. We have already seen a track record of Major League Baseball, Big 12 and Pac-12 games where similar games on ESPN crush the ratings on FS1. There has to be great concern that the notion that “fans will just find the channel if they want to watch a particular game” isn’t necessarily completely true. ESPN is, and will be for the foreseeable future because the stranglehold that they have on sports rights overall, the “default channel” for sports fans. Just walk into any sports bar across the country and, outside of NFL Sundays, the vast majority of TVs are going to be tuned into the ESPN mothership. A game that is shown on ESPN literally gets a ratings bump, whereas that same game on FS1 gets a ratings discount.This greatly matters to the Big Ten, which is trying to position its TV deals in the same way that the NFL has over the past few years. Money certainly matters, but long-term money (the proverbial golden goose) is directly correlated with exposure… and no one can provide exposure like ESPN. Indeed, even with the increase in cord cutting and falling numbers of subscribers, every single other media company in the United States would kill to have ESPN. We have already established that they have the top-rated and most profitable TV network, but it goes beyond just that aspect. Who has the #1 sports news website? ESPN. Who has the #1 sports radio network? ESPN. Who has the #1 sports mobile app? ESPN. Who has the #1 streaming sports network? ESPN. Who has the #1 sports podcast network? ESPN.

    That is what a lot of Big Ten fans that care too much about supposed “SEC bias” on ESPN are missing: there is simply no replication for the multi-platform 27/7 exposure that ESPN provides.* Many other companies have tried to apply the ESPN playbook for years and years (see the CBS and Fox efforts to build their own sports websites and radio networks with only a fraction of the audience of ESPN) and have failed. When a Big Ten game is on ESPN, it gets promoted on (a) Mike and Mike on TV, radio, streaming audio and podcasts simultaneously, (b) SportsCenter on multiple networks several times per day, (c) ads on ESPN’s websites and mobile apps, (d) countless other TV, radio shows and podcasts for an entire week, including the all-important College GameDay for college football fans. Other than Inside the NBA on TNT (which is powered by the on-air brilliance of Charles Barkley, there is not a single cable TV platform in any sport that has anywhere close to the audience that ESPN has for even one of its minor shows, much less SportsCenter, GameDay or Mike and Mike.

    (* Note that it isn’t an accident that ESPN is a master of corporate synergy considering that it is owned by Disney, whose entire existence is based on leveraging its brand across countless platforms. I have never heard of someone that likes Universal Studios, the Jurassic Park movies and NBC call themselves a “Comcast Fan” or a fan of Fox shows and movies call themselves a “Fox Fan” (which is distinct from a Fox News Fan that is an entirely different breed), but you will find millions of Disney fans that travel to Disney parks, watch Disney movies and TV shows and buy Disney merchandise with the Disney branding being a the predominant factor. My sister is a prime example of a Disneyphile. Disney and ESPN simply are masters at synergy via corporate culture that can’t really be replicated even if you followed the exact same playbook elsewhere… and believe me when I say that every one of their competitors have tried.)

    At the end of the day, the Big Ten still needs the exposure that only ESPN can uniquely offer. It’s instructive that out of the 4 major pro sports leagues and 5 power college conferences, the only one that doesn’t have a presence on ESPN is the NHL (which has by far the most limited fan base of that group). Just because the Big Ten could theoretically live without ESPN doesn’t mean that it actually wants to do so at all. That’s why I believe that time will heal wounds due to mutual interests and a deal will get done between the Big Ten and ESPN for the other half of the TV rights that are currently in play. The Big Ten won’t take a lowball amount from ESPN, but I think they know well enough to provide a bit more leeway for ESPN’s bid in acknowledgment of their superior platforms for overall exposure compared to Fox. Both the Big Ten and ESPN need each other here.

  • In looking at the imminent Fox deal with the Big Ten, this seems to be set up to put a weekly football game on both Big Fox and FS1. This will end up being quite a boon for Fox’s college football game inventory quality. From a personal standpoint, I just hope that it improves that actual college football game production quality, which I have found lacking compared to ABC/ESPN and CBS. (I think that NBC’s Notre Dame productions have quality visuals, but the commentary is the college football equivalent of listening to Hawk Harrelson’s calls of White Sox games.) Regardless, if this means that most or all of the games that would have ended up on ESPN2, ESPNU or ESPNEWS are on Big Fox and FS1, then that’s an upgrade in terms of viewership exposure as long as the Big Ten keeps its presence on ABC and the ESPN mothership.Further to what I’ve stated before, I don’t think Fox is as flush with funds as much as ESPN (because absolutely no one is as flush with funds as ESPN), but Fox certainly has a lot more incentive to make a bold move with it being in the upstart position. In particular, FS1 has had a rocky history in its short life. On paper, FS1 has the best sports rights outside of ESPN on paper with MLB, Big 12, Pac-12, Big East, NASCAR, Champions League, FIFA (World Cup), UFC and USGA (U.S. Open) properties, but it doesn’t seem to have a cohesive brand even compared to NBCSN (which seems to have become the yuppie/hipster sports network largely relying upon the NHL, English Premier League and Olympics), much less ESPN. At the very least, the Big Ten may push Fox over-the-top in terms of being a legit college sports destination that it hasn’t quite been up to this point.

    Realistically, Fox can never achieve the synergy that ESPN can provide, but there are strong potential cross-promotional opportunities between Fox’s over-the-air NFL package and the new Big Ten coverage along with the clear connection between BTN (which is 51% owned by Fox) and the rest of the Fox organization. The NFL broadcasts on Fox are by far the strongest on the network (which ought to be the case since they are also by far the largest ratings drivers for Fox), so let’s hope that the Big Ten can receive at least comparable quality in terms of treatment.

  • The reported 6-year timeframe of the Fox deal is unusual compared to the much longer-term deals that the other power conferences have signed. In fact, the Big Ten will end up back at the negotiating table before any of the other power conferences once again. On the one hand, this presents some risk to the Big Ten since they are not locking in today’s high rights fees into the late-2020s or even 2030s. On the other hand, every time that the Big Ten has bet on itself, it has ended up succeeding, whether it was with the formation of the BTN or taking its rights to the open market in a period of uncertainty for sports programming values with decreasing cable subscriptions. By the same token, Fox may be hedging on cable subscriber fee uncertainty itself, as Dennis Dodd had suggested.In any event, the short length of the TV deal means that conference realignment talk might cool down in the immediate term, but will pick up a huge amount of steam in the next 5 years. Whether it’s a coincidence or not (and I tend to think “not”), the end of the 6-year deal term in 2023 is shortly before the expiration of the Big 12’s grant of rights agreement in 2025, which makes any possible damages for a Big 12 defector to be much lower and/or negligible compared to a Big Ten windfall. The same usual suspects of Texas, Oklahoma and Kansas as Big Ten candidates. It will also be interesting to see how schools in other conferences (particularly the ACC) are going to adjust to an environment where each Big Ten school could be receiving nearly $60 million per year in media revenue starting in 2017 (as estimated by Awful Announcing), which would lap the SEC’s revenue (much less any of the other power conferences). A few million dollars per year difference in TV revenue may not have been enough to sway the most valuable schools (e.g. Texas, North Carolina, etc.) to switch conferences, but when we’re looking at an eight figure annual gap, it could change the dynamic quite a bit.

The announcement by Jim Delany at the end of 2009 that the Big Ten was exploring expansion was leading to this moment of a new TV contract. Nebraska added a national name brand for football, while Rutgers and Maryland added two massive media markets based on the East Coast. This isn’t the end, though. I still believe that ESPN is going to end up with the other half of the rights. It will be interesting to see what happens with the CBS basketball package (which hasn’t been talked about as much) since that provided great exposure and time slots for the Big Ten (such as the Big Ten Tournament Championship Game leading into the NCAA Tournament Selection Show) even if the contract value itself pales in comparison with football. Digital rights are going to be a much more significant factor in this new contract compared to 10 years ago, while some second tier sports such as hockey, baseball and lacrosse could end up seeing more telecasts beyond the BTN with multiple other networks. The Big Ten’s new Fox deal is a great start and it’s a sign of great things once we get the final overall media rights picture for the conference.

(Image from Detroit Free Press)

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The financial news stories coming out of ESPN over the past several months have been quite negative. The Disney-owned cable network has endured several rounds of layoffs and reported  last week that it has lost 7 million subscribers over the past two years. This is of particular interest to the Big Ten, which will be negotiating new television contracts over the next year and has been banking on massive increases in rights fees. All of the Big Ten’s off-the-field moves during this decade, from conference expansion to adding a conference championship, has been leading up to providing the league with maximum leverage in this negotiation. The Big Ten Network has certainly been a boon, but the first tier national TV contract is still the Big Ten’s top priority both financially and in terms of brand exposure by a wide margin.

Many of the Big Ten’s financial projections during the conference realignment process were based upon the assumption that ESPN would offer a massive rights fees increase (which in turn would garner similar bids from other media companies, particularly Fox). However, should the Big Ten be worried with the recent turbulence at ESPN? Do the cost-cutting measures at ESPN mean that the network will pull back on what it could offer to the Big Ten?

John Ourand of the Sports Business Journal recently examined the race for the Big Ten rights and noted that the market may not be as “frothy” as it was when the Pac-12 secured a huge rights fee increase in 2011. However, he still expected “ESPN and Fox Sports to at least double the conference’s annual average payout and share the rights” despite the overall market factors (and he would have as great of an insight of what’s likely for sports media rights as anyone in the business).

I completely agree with Ourand on the likelihood of ESPN and Fox splitting the Big Ten rights (as I also predicted in my last post). This would have the effect of ESPN and Fox not having to each completely break their individual banks yet provide the Big Ten with much larger overall rights fees compared to one single contract holder. At the same time, I believe that the Big Ten greatly values the exposure the ESPN provides via its multiple platforms that can’t be matched by any other media company (even with pressures on the basic cable model). I don’t buy the notion that the Big Ten would walk away from ESPN completely – Jim Delany has set up this league to be like the NFL with multiple high profile media partners viewing it as an essential product. (See this article from Ed Sherman from this past March pointing out the presence of ESPN, Fox-affiliated BTN and CBS all at the Big Ten Tournament.)

At the same time, Big Ten fans shouldn’t pay attention to the arm chair observers (i.e. partisans from other leagues that would love to see the Big Ten fail to meet its expectations) that simply assume that ESPN cutting costs in its operations will mean that it will cut its spending on rights fees (and thereby the Big Ten). Ultimately, content is king, and ESPN in particular needs live sports content whether we live in a basic cable world or cord-cutting a la carte/over-the-top streaming world. If anything, retaining premium live sports programming becomes even more critical to ESPN as more people drop basic cable. It’s not going to sell over-the-top subscriptions like HBO Now with more Skip Bayless and Stephen A. Smith shows. The only way ESPN is going to get people to shell out $20 (or $30 or $40 or $50 or more per month) if it has to move to that environment is to have the broadest suite of exclusive live sporting events that large audiences want to watch as possible. That includes the Big Ten.

The adjustments that ESPN’s corporate siblings at Disney in Hollywood have already made years ago provide a template for sports programming expenditures in the future. Movie studios have already had their revenue and profits eroded by the Internet much more quickly than the television industry. Box office revenue is only being buoyed by ticket price increases (masking a general decline in attendance) while increases in digital streaming and downloads have not been enough to offset the decline in sales of DVDs and Blu-ray discs . It’s harder than ever to make money in the movie industry today.

However, that doesn’t mean that Disney has slashed all of its movie budgets. Quite to the contrary, Disney will greenlight massive production and marketing budgets for its tentpole franchises and brands, such as Star Wars, Marvel and Pixar, that dwarf the figures that have been used in the past even on an inflation-adjusted basis. Star Wars: The Force Awakens is estimated to have a production budget of $200 million and films of that size typically have marketing costs that come close to matching that number dollar-for-dollar on top of that. The Avengers: Age of Ultron had a combined production and marketing budget of over $340 million. When it comes to premium content, Disney isn’t skimping because those tentpole movies have downstream impact on the company’s business, such as merchandising and theme park tie-ins. (This classic Spaceballs clip is now literally the business strategy for all of Hollywood.)

Disney will also greenlight lower budget movies, such as documentaries out of its Disneynature unit. Other Hollywood studios have figured out that really cheap horror films provide the best returns on investment in the business, which is why consumers now get a steady diet of new horror movie releases throughout the entire year.

What Disney did completely cut, though, was its middle budget film division. Disney sold off Miramax in 2010 (less than a year after Disney purchased Marvel), which was the Oscar nominee producing machine of films such as Pulp Fiction. The prestige film business might provide nice publicity during awards season, but it doesn’t generate the top-to-bottom movie/merchandising bonanza of tentpole films like Star Wars or the pure ROI of low-budget movies. As a result, Disney has gotten out of the mid-budget film market entirely.

This “high/low” budget strategy while cutting out the middle is almost certainly what ESPN has in mind. Indeed, one the highest profile casualties of ESPN’s recent cost-cutting was the elimination of Grantland. In my opinion, Grantland had produced the best content on any ESPN platform over the past few years (particularly Zach Lowe on the NBA and Bill Barnwell on the NFL) with its mix of sports and pop culture analysis targeted to educated readers. The issue from ESPN’s perspective was that employing the talent to produce such high-level analysis was relatively expensive, yet its mothership website has been getting its most hits for fantasy football lineup recommendations. What is ESPN going to spend its resources on in the future: more top flight reporting on Outside the Lines that is getting marginal ratings, or more lowest common denominator hot take shows where the same broadcast can take up a couple of hours on ESPN2, get syndicated on ESPN radio affiliates across the country and be uploaded to the ESPN website as a podcast? It doesn’t take long to figure that one out.

Believe me – I don’t personally like these trends. Even though I’m a massive Star Wars fan and I’ve got my tickets with the exact seats reserved for opening weekend (along with buying the spectacular Chewbacca Illini T-shirt shown above that might as well have been custom-made for me), I’m also a large watcher of prestige films (and I have zero interest in cheap horror flicks). Grantland was one of my favorite websites and I can’t stand vapid talking head shows (whether news-based or sports-based). We need more resources dedicated to hard news and smart analysis. Unfortunately, the Internet’s business model doesn’t really reward that type of content compared to slideshow click-bait. As a result, prestige content producers may need to go toward an NPR-type funding model.

Putting my personal feelings aside, the high/low budget strategy still works very well for the Big Ten. As far as sports properties go, it’s definitely the equivalent of a tentpole movie franchise and, timing-wise, it’s the only tentpole of any kind available on the TV rights market until the next decade. That’s not hyperbole. Outside of the NFL (which is the undisputed king of TV sports), college football has consistently delivered the best week-in and week-out ratings out of any sport for U.S. viewers and the Big Ten has been at the top of those ratings next to the SEC for many years. This is not a property that ESPN can afford to lose (whether on the mothership cable channel or ABC, whose Saturday programming is heavily reliant on the Big Ten), and this is also not a property that Fox can afford to miss out on. Top tier sports brands like the NFL, Major League Baseball, NBA, SEC and Big Ten aren’t going to be the ones that are worried about cord cutting because they are all proven drivers of viewership on multiple platforms. Inexpensive sports rights with lower production costs and high ROI (think West Coast Conference basketball with Gonzaga games) will also be in high demand. The sports brands that should be worried are the ones that have relatively high production costs but lower viewership, such as Group of Five conference college football and non-major tennis and golf events.

At the end of the day, ESPN (and likely Fox with them) will end up paying top dollar for the Big Ten just as its Disney corporate siblings continue to pay top dollar for Star Wars films. Going forward, ESPN is in a position where it needs to keep its premium sports rights because that is the only way that it can maximize its value regardless of whether the world stays with basic cable (where such rights are needed to keep the basic cable subscriber fees high) or moves to an over-the-top environment (where such rights are needed to draw in direct paying subscribers). ESPN still paid a premium for more European soccer rights in the past month (as Ourand pointed out) and was still willing to sign up for massive deals with NBA and Major League Baseball when they were fully aware of the erosion of their basic cable subscriber numbers. The Big Ten has tentpole sports content and that will always be in demand.

After a long Chicagoland winter that included coaching my twins (and future hopes and saviors for the Illini men’s and women’s basketball programs) in the Naperville YMCA Kindergarten Basketball League, it’s time to get back to blogging. Fortunately, not much has occurred on the conference realignment scene since December when the Big 12 was coming right off of the sting of being left out of the College Football Playoff. After some expansion rumors that included Cincinnati and Memphis, Big 12 commissioner Bob Bowlsby and his conference brethren have a long string of denials about any desire or need to expand. Personally, I don’t believe them – I think the Big 12 is fully aware that they need to expand for the long-term. Whether the Big 12 has any consensus on who they should expand with is an entirely different matter, particularly when those additions will need to come from the pool of non-power schools.

Interestingly enough, the latest expansion scuttlebutt is coming from the Big Ten. Granted, it’s only for hockey, but it’s still an intriguing indicator for the Big Ten’s overall plans (as you’ll see further down in this post). The Minneapolis Star Tribune had an in-depth article last week about how Penn State’s successful start to its hockey program is spurring schools across the Big Ten and the rest of the country to consider adding the sport. Arizona State recently announced that it will be starting a Division I hockey program… and according to the Star Tribune, the Sun Devils have been speaking to the Big Ten about its conference home on the ice:

Arizona State and the Big Ten both confirmed they’ve discussed a hockey future together. An outside school competing in one Big Ten sport already occurs in men’s lacrosse with Johns Hopkins.

Two other conferences with a major presence in the Midwest, the WCHA and the NCHC, are also engaged in conversations with the Sun Devils.

“I think being in a conference with like institutions is important,” [Big Ten Associate Commissioner Jennifer] Heppel said. “[Arizona State] is going to have to think about that from an institutional and sport perspective. The Big Ten and Pac-12 have a historic relationship.”

Heppel oversees men’s hockey for the Big Ten, so her on-the-record quotes directly about Arizona State indicate that this isn’t a fly-by-night rumor.

My knee-jerk reaction: Sounds good to me. Big Ten Commissioner Jim Delany has said before that the Phoenix market is actually home to more Big Ten alums than Pac-12 alums. If you’ve ever visited the Phoenix/Scottsdale area (particularly in the winter and spring), you could certainly believe it with the overwhelming number of Midwestern transplants and retirees (even compared to other Sun Belt locations like Florida). Phoenix/Scottsdale is to Chicago snowbirds as Miami/Ft. Lauderdale is to New York City snowbirds. Arizona State isn’t an AAU institution as of now, but it’s one of the largest universities in the country with respected graduate programs (even with the party school and Girls Gone Wild reputations of its undergrad population). Plus, the fact that Arizona State is in the Big Ten’s brother of the Pac-12 makes a bit easier to envision the Sun Devils as a hockey member compared to, say, Notre Dame.

At the same time, the Big Ten has the opportunity to make this into a broader relationship beyond hockey. For example, imagine if Arizona State commits to playing 1 or 2 Big Ten football teams per year, 2 to 3 non-conference basketball games, and several non-conference baseball games (where the Big Ten legitimately needs help from a powerhouse in that sport like ASU). That’s not a huge commitment from either Arizona State (and they may have wanted to schedule those types of non-conference games on their own, anyway) or the Big Ten, yet it starts building a more in-depth presence in the Phoenix area, which is a key market for Big Ten alums.

A related consideration is if other Big Ten schools will start adding hockey to further grow the league organically. If I had $100 million to spare, I’d start up an Illinois hockey program tomorrow. Alas, I don’t have that type of coin laying around and it doesn’t appear to be coming from other possible benefactors (such as the rumored interest of Jimmy John Liautaud, who is the founder of Jimmy John’s). This is unfortunate since the Illini hockey club has performed well for decades along with having a passionate fan base and that could be supercharged if it turned into the only Division I hockey program in the state of Illinois. Alas, Illinois has everything that it needs from a competition and fan base standpoint to support hockey, but none of the financial support right now.

Instead, from what I’ve heard for at least the past year, Nebraska is by far the closest to jumping up to Division I hockey. The Cornhuskers’ new Pinnacle Bank Arena has icemaking capabilities and the school is also opening a new separate ice arena that can easily be used as a practice facility. Since Nebraska has the expensive physical facilities in place already, they’ve already fought the vast majority of the battle in starting a program. Nebraska has a top tier fundraising operation, as well, so they can get the money into place once they’re given the green light. There have been rumblings about Northwestern, Indiana and Iowa looking at hockey, but if you’re a betting person, you should wager heavily on Nebraska as the next existing Big Ten school to add the sport.

What does this mean for Big Ten fans that don’t care about college hockey? Well, one open question is whether the possibility of Arizona State joining the Big Ten hockey league means that it will blow open the door for more affiliate Big Ten members in hockey or other sports. From my vantage point, not necessarily. Just as Johns Hopkins was a special case as a Big Ten affiliate in being an academic and men’s lacrosse powerhouse, Arizona State hits a lot of metrics for the Big Ten in terms of being in the Phoenix market and a friendly Pac-12 for other sports that don’t exist for other members. Big Ten hockey fans might dream of adding the likes of Boston University, Boston College and Notre Dame if the league were to let in Arizona State, but that doesn’t seem likely (not the least of which is the fact that the Hockey East is a tough nut to crack even with dangling the prestige of the Big Ten). Instead, look at some of the more unique outliers that wouldn’t have the same poaching hurdles. For instance, MIT has Division I men’s and women’s rowing (where just as Johns Hopkins is Division III for all sports except lacrosse, MIT is Division III for all sports except rowing). Could that be leveraged into a relationship between MIT (which would be academic dynamite for the Big Ten presidents) and the Big Ten? What about academically prestigious schools in the Sun Belt that could add firepower to Big Ten baseball, such as Rice or University of California system members? The possibilities are endless, but the Big Ten is also likely to be very conservative in its affiliate member picks.

Separately, the Big Ten is on the precipice of negotiating new TV deals that will start after the 2016-17 season. As Ed Sherman pointed out in the Chicago Tribune last week, the Big Ten is in a great position as the only major pro or college sports property to come onto the market for the rest of this decade. It can expect Fox to bid aggressively for tier 1 rights as well as current rights holder ESPN. In my opinion, the Big Ten will likely end up with a setup similar to the Pac-12, where tier 1 rights are split between ABC/ESPN and Fox while the rest go to its conference network of the BTN. I don’t think there’s much chance of the Big Ten taking all of its rights to Fox even if Rupert Murdoch makes a blood money Godfather offer. The ratings for Big East basketball on FS1 have been depressing beyond belief and, contrary to the rantings of some Big East haters out there, it has nothing to do with the Big East conference itself. Any random game on ESPN and, for that matter, ESPN2, is going to have a massive amount of more exposure compared to the exact same game on FS1. That speaks to a problem with the channel itself – it depresses ratings simply by channel location whereas ESPN boosts ratings.

Believe me – exposure matters greatly to the Big Ten. The money obviously matters, but that money is only there because the Big Ten has had the best TV exposure of any conference for decades. As Sherman noted in his column, the Big Ten had ESPN, CBS and BTN (a partial Fox property) all covering portions of the Big Ten Tournament. That’s akin to the setup that the NFL has – they’re essentially getting paid a lot of money by everybody in the media business. I don’t think the Big Ten is going to step away from that approach – they want as many high profile outlets covering their games as possible. So, I don’t see the Big Ten being willing to move games from ABC and ESPN to FS1 and FS2. Regardless of how Big Ten fans might personally feel about ESPN commentators (and IMHO, Big Ten fans complain too much about them as a whole), it’s horrific for conference exposure to move off of the Worldwide Leader. However, I could certainly see the Big Ten being happy with games that are currently on ESPNU and ESPNEWS being moved to over-the-air Fox and FS1. That points to maximum exposure with a ton of checks being cashed from Disney and Fox with some side basketball money from CBS.

With that, it’s time to fill out my bracket and prepare for watching basketball in the middle of the day. (My Final Four picks: Kentucky, Wisconsin, Villanova and Iowa State, with Kentucky over Villanova in the national championship game.) Enjoy the opening weekend of the NCAA Tournament!

(Image from SI.com)

I know that it’s been a loooooong time since my last post. Let’s get right to some random thoughts:

(1) College Football Playoffs – We have seen two iterations of the College Football Playoff rankings and my mind comes back to the same question that I had when the powers that be first announced that the system would use a committee: Why is this any better than just using the AP Poll (or old Harris Poll)? (To be sure, the Coaches’ Poll is a worthless self-serving steaming pile of garbage.) The former BCS rankings were much maligned, but they were at least a little progressive in attempting to incorporate some objective computer rankings. All that I see with the new CFP rankings is a 12-person poll, which isn’t necessarily any better than other polls with much larger sample sizes. The NCAA Tournament Committee serves an important purpose for basketball since they are vetting at-large teams that much of the general public hasn’t seen before. However, a 4-team college football playoff is much more suited to a “Wisdom of Crowds” determination: the public has a fairly good sense of who it believes to be the very top teams in any given season, so a decision from a small committee isn’t necessarily going to be any better.

Having said that, I do enjoy seeing the broader array of games that matter at a national level this season. The expansion from a 2-team championship race to a 4-team playoff has a pushdown effect where there are more impact games involving many more potential postseason participants. Unfortunately, very few of those impact games have involved the Big Ten over the past couple of months. I don’t believe that this is some type of long-term permanent situation, but it’s an early indicator of issues down the road for the playoff system overall. A 4-team playoff structurally means that at least one power conference champion is going to be left out every year, and when a league like the SEC looks as if though it can garner multiple playoff sports, that means that 2 or more power conference champs can be left on the outside. A consolation Rose Bowl or BCS bowl berth was seen as a worthy prize back in the 2-team BCS championship world, but this season has already shown that 100% of the oxygen in the sport is being taken up by the 4-team playoff race.

So, I’ve spent quite a bit of time once again contemplating the next (and probably final) phase of playoff expansion: the 8-team playoff with all 5 power conference champs receiving auto-bids. If it were up to me, we would just use the traditional bowl arrangements to slot the teams:

Rose Bowl: Big Ten champ vs. Pac-12 champ
Sugar Bowl: SEC champ vs. at-large
Fiesta Bowl: Big 12 champ vs. at-large
Orange Bowl: ACC champ vs. at-large

I expanded quite a bit more on this proposal last year as a mind meld between the progressive (expanded playoff) and the traditional (old school bowl tie-ins). Believe me – if there’s one proposal that I’ve had on this blog that I’d want to see implemented, it would be that one by far.

(2) Big 12 Expansion – Big 12 commissioner Bob Bowlsby was asked last week about Big 12 expansion and he had some comments that we can over-analyze here (as not much has been happening on the conference realignment front lately). Here was his response to a question about whether further conference realignment was coming (via The Oklahoman):

There are several of us that are numerically challenged. I don’t know that anybody could’ve anticipated that the Big 12 would have 10 and the Big Ten would have 14. … In our case, I don’t know that there are a lot of obvious candidates out there. We’re distributing about $25 million per school through our distributable revenue, so anybody that would be considered for expansion in our league would have to bring at least pro-rata value. … But the opportunity to move from one high-visibility conference to another is pretty slim right now. I don’t see much movement in the near- to mid-term. As we get near the end of some of these TV contracts, which would be 10 or 12 years down the road, there may be some renewed conversations. The only movement that is possible right now is from some of the secondary-level conferences that might move people into one of the five high profiles.

The super-conferences concept … has largely been a media fabrication. I have heard no serious conversation among people who do this for a living that the super-conference concept has got any traction. It’s always dangerous when the media starts to interview the rest of the media, and I think that’s where the super-conference thing came from.

Nothing too new here, although Bowlsby does seem to give some hope to non-power conference schools looking to move up to the power ranks (such as BYU, Cincinnati and UConn) in stating that the only possible movement is from the “secondary-level conferences” to one of the power leagues. Seeing that the Big 12 is the most likely conference to expand in the near future (meaning the next 3 to 5 years), anything that Bowlsby says that suggests some possible movement is something to watch. Nothing has changed from my viewpoint a year ago that the Big 12 is demographically challenged long-term (other than the state of Texas) and would benefit from a 2-team expansion (specifically with Cincinnati and BYU under my Big 12 Expansion Index). I’ve never bought the notion that the Big 12 is truly happy being at 10 schools – their leaders will always publicly state that they’re happy with their TV revenue and round-robin scheduling, but deep down, they’re dying for two obvious non-power schools to rise up (similar to TCU and Utah in the past) that they can add on.

(3) TV Contracts – Bowlsby also had some interesting comments about the impact of the Longhorn Network on the Big 12 (once again via The Oklahoman):

The Longhorn Network is a boulder in the road. It really is. They did something that almost no other institution in the country could do because of the population in the state, and we’re looking at some way to try and morph that around a little bit. … It really begs the question about, how are we going to get our sports in the years ahead? If technology changes in the next five years as much as it’s changed in the last five years, we’re not going to be getting our sports by cable TV. I don’t know what it’ll be. But increasingly, we’re using mobile devices … Google Network and Apple TV and things like that are coming into play. … I’m not sure the world needs another exclusive college cable network. Rather than trying to do what everybody else has done, I would much rather try to figure out what tomorrow’s technology is and get on the front side of that and be a part of what happens going forward and monetize that.

I think Bowlsby is trying to spin a nice tale that the Big 12 can somehow take advantage of new technologies in the way that’s different than the Big Ten Network or SEC Network. However, the Big 12 can’t sell rights to games that it doesn’t have the rights to. If anything, the best properties to leverage for digital platforms in the future are conference networks themselves – see the BTN2Go streaming capabilities and the SEC Network’s integration into WatchESPN. The most powerful conferences in the cable world are going to continue to be the most powerful conferences in the digital world.

Separately, the NBA’s record-breaking new TV deal portends some incredible cash on the horizon for the Big Ten, which is the last major sports property (college or pro) that will be on the open TV rights market for the rest of this decade once its current ESPN deal expires in 2016. I wouldn’t be surprised at all if the Big Ten ends up extending with its current first tier rights TV partner ESPN sooner rather than later in the same way that the NBA extended its deals with ESPN and Turner. While there is some fan sentiment out there that the Big Ten ought to separate itself from ESPN, that’s (1) unbelievably short-sighted from an exposure perspective and (2) very likely to be a poor decision financially. (Mark Hasty of Midwest Sports Fans had a great critique of Big Ten fans complaining about supposed ESPN bias against the conference. I wholeheartedly agree with his analysis – our media coverage off-the-field is honestly miles ahead of our performance on-the-field.) It is also a common fan misnomer that the Big Ten is somehow more aligned with Fox. While the BTN is a Big Ten/Fox partnership, remember that the Big Ten actually provides the top picks of college football games for ABC and ESPN every week, which is of immense importance to both the B1G and Disney. (If you live in a cave, SEC sends its top game of the week to CBS.) Ultimately, ESPN has the most cash by far and they have shown to be willing to pay up to ensure that competitors like Fox and Comcast/NBC don’t get their hands on prime sports properties. Meanwhile, there is the risk that cable TV money might not last forever with the increase of chord cutting, so waiting a few years for the open market isn’t necessarily the guarantee of greater riches that it appears a couple of years ago. The NBA made the calculation that it was better to take the cash now rather than later and I’d trust the media savvy of Adam Silver over any other commissioner in sports. I would expect the Big Ten to do the same thing.

(Image from God and Sports)

As promised, we continue to empty out the mailbag (click here for Part I):

Frank,
One of your theories is that if the Big 12 dies, Texas would try for a partial member deal like Notre Dame in the ACC instead of becoming an equal member of another conference. I had agreed with that theory up until Texas A&M exploded onto the national scene at the end of last year and has remained there ever since. Texas is going to make its money anywhere but playing 2nd fiddle to its state rival has to be a blow to the powers that be at UT. I don’t think playing a half ACC schedule mixed with a couple of 2nd tier Texas schools is going to offer enough pub to compete with A&M and the SEC especially with the coming difficultly of scheduling with conferences going to 9 games. Does Texas A&M success, and more importantly attention, change your thoughts on the future of UT? – PSUhockey

Very interesting question. I think that A&M’s success can definitely impact the long-term prospects of Texas, but that it’s a separate issue from the particular conference that UT is in (or if it’s an independent, not in). A lot of sports fans may be looking at the Big 12 through the prism of its relatively good on-the-field football success over the past few years, while the ACC has had arguably its weakest stretch over the exact same period. However, I’d argue that Florida State, Miami, Virginia Tech and Clemson at the very least are more valuable football opponents than any Big 12 school outside of Oklahoma. Personally, I’d put UNC, NC State and Georgia Tech ahead of anyone non-OU Big 12 school purely for football, as well. So, if Texas keeps the Red River Rivalry as an independent, plays 1 or 2 of its fellow in-state Texas schools not named Texas A&M, has a similar 5-game partial ACC schedule like ND and then fills out the rest of its schedule in a manner that’s similar to now, I think that’s very attractive compared to the normal Big 12 schedule for the long-term. We’re not even getting to basketball and baseball, where the ACC is extremely powerful.

So, A&M could certainly put a serious dent in UT’s power (and if it’s not A&M specifically, it could be simply the increased presence of the SEC in the state of Texas), but that doesn’t necessarily correlate in Texas preferring the Big 12 over partial membership in the ACC. If anything, Texas might end up with acting in a way similar to how BYU responded to Utah’s invite to the Pac-12, where independence became mechanism to show how it was “special” compared to its in-state rival.

To me, Big East expansion to 12 schools is inevitable and ought to have happened already. The fact that Xavier AD Greg Christopher mentioned St. Louis, Dayton, Richmond and VCU as the prime candidates isn’t any surprise. SLU seems to be a lock – it’s a perfect institutional fit in a large market (by college sports standards) with a competent on-the-court basketball team. As I’ve stated previously, it’s really a matter of who comes along with SLU. I don’t see the Big East being interested in creating a nationwide conference with schools like Gonzaga and BYU – that’s an interesting fantasy for those purely focused on the basketball product, but it’s a non-starter for all of the other sports. So, Dayton, Richmond and VCU are really the well-worn “other” candidates, with the Big East’s consternation on each of them being that they have major flaws from the conference’s perspective (Dayton is in a smaller Midwestern market, Richmond has a small alumni base, and VCU would be the lone public school in a league of private institutions). It’s also difficult to see many other schools outside of that group that could have both a Butler-like ascent and the institutional and market profiles that the Big East is looking for. The only ones that come to mind are Davidson (which has a small size like Richmond but has had more recent on-the-court success and is located in a college hoops hotbed) and Duquesne (great institutional and market fit, yet they have zero on-the-court credentials).

If I were running the Big East, I certainly wouldn’t see Davidson or Duquesne as panaceas that are worth holding off expansion for. University presidents have proven to be a strange bunch in conference realignment decisions, though. To me, SLU is a lock to get into the Big East when it expands (and I say when because I just don’t see Fox being satisfied with the level of inventory and market coverage that the 10-team setup offers in the long-term), with Dayton as a slight front-runner for the 12th spot. Now, VCU might end up being too much to ignore if they have another Final Four run and, maybe more importantly, keep having fans showing up in droves in Brooklyn for the Atlantic 10 Tournament (as the Big East needs to maintain ticket buyers for its own tournament at Madison Square Garden). The public school profile is definitely a major problem for VCU’s candidacy, though. That factor can’t be underestimated with the Big East presidents.

For the long-term (the next 10 to 20 years), it probably won’t look too much different than now when it comes to U.S. spectator sports: (1) football, (2) basketball, (3) baseball and then a big dropoff to get to hockey and soccer. (This is different than levels of actual participation in sports, where soccer and basketball will likely dominate.) When looking at the metrics, basketball is clearly ascendant compared to baseball: the NBA Finals have been consistently drawing better ratings than the World Series, NBA players are more recognizable to the general public, neutral sports fans are more likely to watch an NBA game that doesn’t involve their favorite team than an MLB game without their favorite team, and, most importantly, the NBA viewing audience is younger and more diverse across economic and racial lines.

I wrote a piece on soccer’s issues with viewership back when David Beckham joined the LA Galaxy a few years ago and the main thrust of that post still holds true: viewership of soccer in the U.S. will be capped as long as Major League Soccer fails to import the best players in their primes like they do in Major League Baseball, the NBA and NHL. Americans want to watch the best of the best, which is why they’re willing to watch the U.S. Men’s and Women’s National Teams play in the World Cup and other international competitions, but aren’t interested in what they perceive to be minor league pro soccer compared to the English Premier League and other top European leagues.

Think of it this way: most sports fans can recognize the difference in the quality of play between an MLB game with a 1-0 score and a minor league baseball game with the same 1-0 score. Likewise, even relative soccer watching novices in America can see that the level of play in a World Cup or EPL match is vastly different than MLS. That’s why I’ve long said that the drag on soccer’s popularity in the U.S. has nothing to do with the supposed lack of scoring*. Instead, it’s that soccer is the main sport where we’re exporting the best players as opposed to importing them, which means we’re getting a worse product than other countries (unlike in basketball, baseball and soccer) and we know it. So, soccer can grow, but it will be limited as long as we don’t get to watch the best players here.

(* Scoring is an artificial construct, anyway. A 21-14 football score sounds a lot different than a 3-2 score (as in 3 touchdowns to 2 touchdowns) even if it reflects the same amount of on-the-field action. The “lack of scoring” argument for why Americans don’t watch soccer en masse is one of my sports pet peeves because it’s so simplistic and misses the larger picture.)

What will it mean for NCAA 14 that the conferences aren’t represented? – @Devon2012 

Ah, yes. Yet another toothless action by the NCAA and conferences in attempting to deflect criticism that they’re taking in billions of dollars on par with the largest pro sports entities in the world. I guess the NCAA has a bit more skin in the game since its brand is in the title of the game itself, but it’s pointless for the conferences to remove their names from video games, but then allow their members to continue to be included under their own separate agreements with EA Sports (and all but one of them have such agreements). We’re not talking about going to some Blades of Steel era logoless and nicknameless labeling of teams here: the Illinois Fighting Illini, Michigan Wolverines, Ohio State Buckeyes and all of their other conference-mates will be playing in a video game league that’s not named the Big Ten but everyone will recognize is the Big Ten. (I’m sure that EA Sports will simply use the mathematically correct “Big 14”.) Why the Big Ten, SEC and other power conferences give up their branding control when their member schools are still participating in the game is beyond me.

I don’t think ESPN and Fox are battling over conference realignment per se in the sense that the only conference where it really matters at this point for them is the Big Ten. In fact, the Big Ten’s next TV contract (which would start in 2016) is in an environment where it’s the only power conference that’s going out to the open market for the next decade, so ESPN and Fox (along with NBC and maybe even Turner) could fight for the conference with realignment being a tangential factor. At the end of the day, I believe that the Big Ten will end up with a Pac-12-style deal where the Tier 1/Top Tier 2 rights are split between ESPN and Fox and then the Lower Tier 2/Tier 3 rights go to the Fox-affiliated BTN, so neither ESPN nor Fox will push the Big Ten or the other conferences to do one thing or the other simply for the sake of TV rights. If anything, the last thing that ESPN and Fox would want is further realignment, as it has resulted in significantly higher rights fees that they’re footing the bill for. The Pac-12, Big 12, SEC and ACC rights are all locked up for a long time, so the networks are just going to end up paying more if any other schools end up defecting to the Big Ten.

Which is more likely for the NHL – expansion or contraction? Which NFL franchise(s) are most likely to land in LA? If none do in next 5-10 years, would NFL expand again? – John O

A couple of key overarching points about about pro sports realignment:

(1) Having an “acceptable” stadium is non-negotiable –  It doesn’t matter how attractive a market might be – if it doesn’t have the right stadium (which means having the requisite amount of luxury suites and sweetheart revenue streams), then it won’t be considered. (See the lack of an NFL team in LA for the past 2 decades.)

(2) The top 4 U.S. pro sports leagues will NEVER contract – Believe me – if I could wave a magic wand, there would be 8 to 10 NHL franchises eradicated tomorrow. However, when franchise values for even the worst pro teams in the worst markets are worth hundreds of millions of dollars, owners would rather (a) collect entry fees from new buyers of those dog franchises, (b) move those dog franchises to new markets with “acceptable” stadiums and (c) simultaneously scare current markets into building new “acceptable” stadiums in the process.

So, the first question is fairly straightforward at a high level – the greater likelihood for the NHL is expansion simply because contraction isn’t a viable option. That being said, when you dig down deeper, how much is it worth for any league to expand at this point? Most NBA and NHL franchises are better off using Seattle as a threat to current markets within their footprints to ram through new stadium deals than putting a team in Seattle itself. Leading into your next question, the NFL has used this type of threat better than anyone with the lack of a franchise in Los Angeles. Think about it if you’re Jacksonville, St. Louis or San Diego – if the NFL won’t put a team in LA for not having an “acceptable” stadium, then they sure as hell won’t care about you if you don’t have the right building.

The team that should move to LA is the Jaguars (nothing against Jacksonville, but it truly doesn’t make sense how that market has an NFL franchise), but it appears that their stadium lease is extremely difficult to break. That leaves LA’s two prodigal sons of the Rams and Raiders as frontrunners (franchises with aging stadiums and relatively low contractual barriers to deal with) along with the Chargers (a fairly short geographical move).

Of course, remember point #1: LA must have an “acceptable” stadium. That has always been the dilemma. The proposed Farmers Field in downtown LA near the Staples Center and LA Live had always made the most sense to me from afar since it presents the best opportunity to be a catalyst to further economic development in that area. Downtown LA still isn’t anywhere near as walkable as New York City, Chicago or San Francisco, but a football stadium is a logical addition to what the LA Live complex has already brought there. Unfortunately, that proposal seems to be dead right now.

The problem is that the massive size of the LA market almost works against it in an environment where getting the right stadium deal matters more than anything else in attracting an NFL (or any other pro sports) franchise. The LA market is so lucrative that tons of potential high profile investors want to get into the action, which means that the region as a hole continuously fails to coalesce around a single stadium proposal. The City of Industry and Orange County, for example, see Downtown LA as a competitive threat as opposed to a partner, so we’ve been seeing lots of stadium proposals from various municipalities and factions over the past two decades without any of them getting broad support. In contrast, smaller markets have a better ability to get behind a single proposal with little infighting.

I’ve been thinking that LA would have an NFL team within the next 5 years for the past 15 years, so while it makes sense to virtually everyone with half a brain, it’s pretty obvious that the NFL won’t budge whatsoever on the stadium issue even with a gaping hole in the #2 TV market in the country. Roger Goodell would rather work with markets that have top tier stadiums in place… like London*.

(* Look – I love London. It’s one of the few places that I’d ever consider moving to by choice from Chicago. However, Goodell’s continuous rhetoric about possibly putting a Super Bowl and/or team in London is wearying. The NFL needs to separate the interest of the American expat population in England that’s interested in the league with the fact that native Brits are unbelievably resistant to the overtures of U.S. sports leagues much more compared to other European countries. The most successful franchises in terms of attendance in the old NFL Europe developmental league were actually located in Germany, while Spain, France and many Eastern European countries are solid followers of the NBA. London simply isn’t a good growth spot for the NFL at all.)

Enjoy the upcoming games, everyone!

(Image from HitFix)

Brett McMurphy and Andy Katz of ESPN.com have reported that NBC has verbally offered the remnants of the Big East between $20 million and $23 million per year for six years for the conference’s TV rights for all sports (including both football and basketball).  That would be approximately $2 million per year for each school in the league.  By way of comparison, each individual school in the Big Ten, SEC, Pac-12 and Big 12 (and depending upon who you talk to, soon the ACC) will make about as much TV money on its own annually than the entire Big East conference.  This is the latest news in the stunning decimation of the Big East since the league rejected an offer from ESPN two years ago worth an average of $130 million per year.  During that time frame, the Big East has lost 5 football members that have actually played in the league (Pittsburgh, Syracuse, West Virginia, Rutgers and Louisville), 8 non-football members (Notre Dame, Georgetown, Villanova, St. John’s, Seton Hall, Providence, DePaul and Marquette) and 2 3 schools that defected before they even played a down of Big East football (TCU, Boise State and San Diego State).  In the middle of that process, the conference also lost its place in the college football postseason structure, where it failed to secure a “Contract Bowl” slot (with its former BCS AQ counterparts Big Ten, SEC, Pac-12, Big 12 and ACC) and is now part of the “Gang of Five” non-power conference group (with the MAC, Conference USA, Mountain West Conference and Sun Belt as new counterparts).  The Big East made a huge gamble in taking its sports rights to the open market when it turned down that lucrative ESPN offer and even the largest conference naysayers couldn’t have predicted how badly that decision would backfire.

The argument that ESPN systemically devalued the Big East to the point where it was effectively destroyed is taken as gospel by many Big East partisans.  It started back in October 2011 with a quote from the then-AD at Boston College stating that ESPN “told [the ACC] what to do” in the wake of Pitt and Syracuse defecting to the ACC.  This line of thinking then continued on as the Big East lost more access in the new college football playoff system than any other conference (in fact, they’re likely going to be the only league that will end up making less money in the new format than it does in the current BCS system) and then suffered a literal avalanche of defections in the past 5 months.

However, it wasn’t the Bristol-based network that effectively killed off the Big East as we once knew it.  Instead, Fox, in its pursuit of becoming the main competitor to ESPN in US sports television, ended up pulling the trigger.  Consider two critical moves:

(1) Big Ten expands with Maryland and Rutgers – When the Big Ten added Maryland from the ACC and Rutgers from the Big East, Jim Delany wasn’t looking to aid its first tier national TV slate that’s being shown on the Disney networks of ABC and ESPN (unlike the addition of Nebraska in 2010).  Instead, the main beneficiary from this expansion was Fox, which is 51% owner of the Big Ten Network (BTN), since it now has an argument that the network should be carried on basic cable in the New York City and Washington, DC markets.  If anything, this move was terrible for ESPN since it makes Fox/BTN much stronger on the East Coast and took away schools from the two main conferences – the ACC and Big East – in which the Worldwide Leader owns all tiers of conference multimedia rights.  Without Fox and the BTN, the Big Ten doesn’t take Rutgers directly from the Big East or indirectly causing Louisville to defect (since the ACC replaced Maryland with the Cardinals).  The Big East still had the ability to survive as a viable football conference with Louisville and Rutgers in the fold, but once they were gone, Boise State (and subsequently San Diego State) didn’t believe that they would receive enough TV money to justify being complete western geographic outliers.

(2) Catholic 7 leave the Big East… because Fox convinced them to do so – A few weeks after the Rutgers and Louisville defections, the 7 remaining Catholic non-football schools (DePaul, Georgetown, Villanova, St. John’s, Seton Hall, Providence and Marquette) decided to split off from the Big East’s football members in order to form a new league (hereinafter called the “Catholic 7”).  Multiple reports from both ESPN (including the McMurphy/Katz report linked above) and Sports Illustrated have stated that Fox is the leading suitor for the rights to the new Catholic 7 league with offers of between $30 million and $40 million per year depending upon whether it has 10 or 12 schools.  That represents the Catholic 7 making around $3 million per year for basketball rights, which is more than the NBC offer to the Big East of $2 million per year for both basketball and football.

I’ve previously set forth reasons why the Catholic 7 would be more valuable than the new Big East even when they don’t offer any football (namely that football in and of itself isn’t what’s driving value and the Catholic 7 brand names and markets are much stronger top-to-bottom in order to garner a premium).  Even if you don’t want to believe that’s the case in terms of comparing the inherent values of the Catholic 7 versus the Big East, a Tweet from Brett McMurphy on Saturday should put this into clearer focus:

Do you see what occurred here if this is true?  Fox approached the Catholic 7 before they split off, which means it’s not so crazy to believe that Fox wanted them to split off.  So, if you believe that Fox is overpaying for the Catholic 7, then you might be right.  However, the point is that Fox needed to overpay the Catholic 7 in order to serve as a catalyst for them to split off.  If Fox just merely offered “fair market value” to the Catholic 7, then they likely would have stayed in the hybrid.  (Anyone that thought that the Catholic 7 would have split off without the knowledge that they’d be getting paid more compared to staying in the hybrid Big East isn’t thinking straight.)  There needed to be an extraordinary financial windfall from Fox in order for the Catholic 7 to take the extraordinary step of splitting off from the Big East football schools.  As a result, it’s almost pointless to try to compare the on-the-court basketball quality of the Catholic 7 versus the New Big East.  The amounts that are being offered by Fox to the Catholic 7 reflect a “blood money” premium offer that they couldn’t refuse, whereas the Big East isn’t going to garner any premium at all and will be subject to the “normal” market forces in play.

That leads to a corresponding question: why would Fox do this?  Why would it want to pay this much for the Catholic 7 instead of, say, simply bidding for the entire hybrid Big East?  Well, let’s take a step back and examine what Fox actually needs in terms of sports content.  The reality is that Fox (and when I say “Fox”, I really mean its new cable networks Fox Sports 1 and Fox Sports 2 as opposed to over-the-air Fox) already has a fairly full sports slate in the fall with Major League Baseball, NASCAR, Pac-12 football and Big 12 football rights.  As a result, they don’t have much of a need for other college football games.  The biggest programming gap that Fox has right now is during the winter, where its cable networks are pretty much wide open outside of some Pac-12 basketball rights.

I’ll put on my own tinfoil hat here, where my semi-educated guess is that Fox: (a) no longer had much interest in the New Big East football product after Rutgers and Louisville left, (b) still had interest in the Big East’s basketball product in order to provide winter programming and (c) didn’t want to get into a bidding war with NBC and/or ESPN to buy a Big East package for both basketball and football when all it really wanted was basketball.  As a result, Fox went straight to the Catholic 7 (who represented most of the schools that they wanted to showcase for basketball, anyway) and offered up enough money that would simultaneously be a financial boon to those schools while allowing the cable network operation to save money compared to a competitive bidding situation for the all-sports hybrid Big East rights.  It’s the very essence of a “win-win” for both the Catholic 7 and Fox here.

Meanwhile, the Big East has been left with only one legit suitor with NBC since Fox obviously has no interest (seeing that it made an offer to the Catholic 7 to split up the league), CBS has little funding for its fledgling CBS Sports Network and ESPN has had lukewarm feelings toward the league.  Without a bidding war, the already thrifty Comcast/NBC organization zero incentive to drive up the price of the Big East on its own, so this very low offer reflects that reality.  Either NBC takes the Big East rights or ESPN comes in to match it with its right of first of refusal (which the McMurphy/Katz article notes that the Worldwide Leader has), but there’s no other potential fountain of cash out there.

Sometimes, it’s not quite as simple as saying “UConn is a much better basketball program than DePaul, therefore, UConn should get paid more than DePaul”.  Timing matters in conference realignment and TV contracts, so in this case, Fox had a specific need in a situation where the Catholic 7 was in the right place at the right time.  Granted, that’s no consolation for the fans of schools that are left in the Big East and who may need to start hanging up pictures of Rupert Murdoch on their dartboards instead of Mickey Mouse.

(Follow Frank the Tank’s Slant on Twitter @frankthetank111 and Facebook)

(Image from Blackhawks DL)

It has been quite crazy in the real life of Frank the Tank over the past couple of weeks, so I apologize for the hiatus.  Let’s get right back into it:

(1) The Enemy of My Enemy is My Friend: Fox Emerging as Top Competitor to ESPN Instead of Comcast (Because That’s How ESPN Wants It) – When I wrote this post on potential challengers to ESPN back in March, I was fairly skeptical of anyone being able to step up to create a full-fledged all-sports network competitor.  Unlike Fox News Channel and MSNBC, which were able to establish audiences to compete with CNN with internal programming decisions within their full control, new sports networks are largely dependent upon winning sports rights from third parties (which aren’t guaranteed).  To its credit, though, Fox has been able to assemble a broad array of what I called “tier one” properties since that time, such as cable rights for Major League Baseball (including postseason games) and NASCAR.  When combined with the Big 12, Pac-12 and soccer (e.g. future FIFA events such as the World Cup, English Premier League, etc.) rights that Fox already has in hand, the likely-to-be-formed “Fox Sports One” looks like a legitimate counterweight to ESPN.  Rupert Murdoch and News Corp. certainly has a lot of experience building empires based on sports properties with BSkyB in the United Kingdom breaking through after the purchase of English Premier League rights and over-the-air Fox doing the same after winning NFL games here in the United States.  (If you were around in the early-1990s, there were legitimate concerns and tons of late night talk show fodder about whether enough people would be able to find the Fox network.  Within a couple of years of having NFL games, though, Fox established itself as every bit as powerful of a network as ABC, CBS and NBC.)  It looks like he’ll finally have a cable sports network in the US that will have access to top properties during the entire calendar year.

In contrast, it appears that Comcast has very few options left for its NBC Sports Network.  For all of the bluster from Comcast that it was looking to invest heavily in NBCSN, it has ended up losing out on every competitive bidding situation for sports rights over the past 2 years with the exception of retaining the NHL and Olympics rights that it already had.  The other properties that NBCSN has added during that time frame are generally low value, such as MLS soccer, Formula One racing and Atlantic 10 basketball.  Comcast may no longer have much incentive to spend significantly on NBCSN since there is literally nothing else of value available over the next few years outside of the Big East rights (which we’ll address separately in a moment).  As a result, I wouldn’t be surprised to see NBCSN go more toward the CBS Sports Network route of trying to keep costs down while providing an overflow outlet for the main over-the-air NBC Sports operation.

What’s interesting here is that ESPN effectively picked the winner between News Corp. and Comcast when it chose to work with Fox in winning the Pac-12 rights against NBC last year.  Once that occurred, it established (or maybe just reflected) a fascinating bond between Disney (ESPN) and News Corp. (Fox) along with Time Warner/Turner (TBS/TNT): no matter how much they might have hated each other, they all hated Comcast even more and showed that they would rather work together to squash NBCSN than let the fledgling network gain any traction.  ESPN and Fox have partnered on the new Big 12 TV deal, while Turner is going to pay twice as much as it does now for MLB rights for half as many games (with virtually all of the games that they’re losing heading over to Fox).  From the perspective of these media companies, it makes complete sense.  Comcast is the largest source of subscriber fees for all of the top cable networks, which means that a Comcast-owned sports network that has enough top tier properties to be used as leverage in carriage fees negotiations is much more dangerous for ESPN, Fox and Turner than any other potential competitor.  So, for ESPN, it was much better for them to allow Fox to rise up as its primary competition than Comcast/NBC.  It’s a classic “the enemy of my enemy is my friend” situation.

The Big East is sitting back seeing this dance unfold.  A few months ago, many sports media industry observers thought that it was a foregone conclusion that the Big East’s new TV contract would end up with Comcast/NBC.  Now, the view seems to have shifted to where a number of people are betting on an ESPN/Fox combo for the Big East (similar to what they have in place with the Pac-12 and Big 12).  What’s hard to tell is whether this is going to end up working out financially well for the Big East since, whether or not they ultimately sign a contract with any particular media entity, they need all three of ESPN, Fox and Comcast/NBC (plus CBS for basketball) to be legitimately interested in the conference’s rights to drive up the price.  If ESPN and Fox are working together while Comcast/NBC decides that it’s going to take a low cost approach, then the Big East may not receive the payday that many of the league’s fans are hoping for.  Therefore, the Big East had better hope that Comcast/NBC is willing to legitimately pay up to compete with ESPN and Fox and not just sell the availability of “exposure” with open Saturday time slots that ESPN can’t offer.  The fact that Comcast/NBC wasn’t willing to do that with MLB rights is a negative sign, but as always, we’ll find out whether that will be the case here soon enough.

(2) BlogPoll Ballot

I seriously don’t try to win the Jim Tressel’s Numb Existence Award every week, but I’m on top of the list again despite my love for Toledo.

(3) College Football Parlay Picks (odds from Yahoo! and home teams in CAPS)

Indiana (+1) over ILLINOIS – I don’t care how bad Indiana might be (and believe me, they’re awful) – Illinois should not be giving points to any team.  Look, I’ve had some prolonged rough stretches as an Illini fan.  During my first three years of college in Champaign, the Illinois football team amassed a 5-28 record (including a winless season in 1997).  When Illinois finally won a game in 1998, fans rushed the field even though that win was against the mighty Middle Tennessee State.  2003 through 2006 featured an 8-38 stretch, which was mitigated a little bit by some glory years for the Illini basketball team.  However, I’m not exaggerating here when I say that this is the most dejected that I’ve ever seen the Illini football fan base.  At least with Ron Zook, there was the inkling of hope that his legendary recruiting ability would eventually turn things around.  Plus, I think we’ll eventually remember the Zook years as being “funny bad”.  Between the asinine 2-point conversion attempts in the first quarter, rugby punts and water skiing without water skis, Zook at least sucked with some style.  (Other examples of “funny bad”: “Evil Dead 2”, the “Cheaters” TV show, and the Henry Burris stint as quarterback for the Bears.)

The Illini team under Tim Beckman, on the other hand, has been completely listless since the loss to Louisiana Tech in week 4.  To use a sports cliche, it’s not that the Illini are losing per se that bothers me, but rather how they are losing.  Several other top Illini boosters are bothered by it, as well, and have made it known publicly that they aren’t happy at all with Beckman or Illinois athletic director Mike Thomas.  Granted, it’s tough to fire any new head coach after only one season (compounded by the fact that the Illinois athletic department is still paying buyouts to both Ron Zook and Bruce Weber at the same time), but we’re getting dangerously close to the point where fan anger turns to fan apathy, which is the worst thing that can happen to a program that can’t count on 100,000 people showing up every week no matter what like Ohio State and Michigan.  For practical purposes, I’m resigned to the fact that Beckman will almost certainly get another year (if only because Thomas would be admitting he made a major mistake in the hiring by axing Beckman so quickly), yet Illinois might be trading a short-term contract buyout issue for a legitimately long-term setback once again.

Cincinnati (+4) over LOUISVILLE – Even though Cincinnati lost a trap road game to Toledo last week, I believe that the real fight in the Big East will eventually come down to between the Bearcats and Rutgers.  Louisville has already had multiple close escapes with a very weak schedule, so the Cardinals’ undefeated record and #16 ranking are paper thin in my eyes.  (The sharps in Las Vegas apparently agree with me since this line has been dropping with money heading towards Cincinnati all week.)

Michigan (+2.5) over NEBRASKA – This ought to be a fun atmosphere in Lincoln with Michigan coming to town, but my feeling is that the Wolverines will end up running the table for the rest of the year to get to the Rose Bowl.

(4) NFL Parlay Picks (odds from Yahoo! and home teams in CAPS)

BEARS (-8) over Panthers – An organization in a tailspin versus the NFL’s best defense isn’t a great combo for Cam Newton and Ron Rivera.  Granted, I’m concerned about Jay Cutler’s bruised ribs (as his passes were nowhere near as crisp in the 2nd half against the Lions on Monday Night as they were in the 1st half), but the Bears have definitely taken care of business against all of the teams that they were supposed to beat so far this season.  Lovie Smith has had this team completely focused game-to-game.

LIONS (-1) over Seahawks – As stifling as the Bears defense might be, the Lions were actually able to move the ball fairly well down field in the 2nd half and it took multiple disastrous red zone turnovers by Detroit for Chicago to come away with the win.  I have no idea why Matthew Stafford seems to miss on half of his throws toward Calvin Johnson with Megatron being such a massive target, but those two connecting consistently is much more likely at home against Seattle than it was on the road against Chicago.

Falcons (+2) over EAGLES – I know that Atlanta has to eventually lose, but I don’t feel that it’s going to come against an underachieving .500 squad in the middle of Philly fan calls for the scalps of Michael Vick and Andy Reid.

(5) Classic Music Video of the Week: “No Sex in the Champagne Room” by Chris Rock

In honor of Tom Fornelli starting up The Champaign Room at SBNation to cover the Fighting Illini (the logo is even better than the name), here’s a memorable ditty from Chris Rock:

Enjoy the World Series and the rest of your week!

(Follow Frank the Tank’s Slant on Twitter @frankthetank111 and Facebook)

As some of you may know, I’m the father a two-year old twins (a boy and a girl).  At this age, the Walt Disney Company is constantly vacuuming funds out of my wallet.  In the past year alone, I’ve bought Lion King and Toy Story Blu-rays, movies tickets to see The Muppets, a dancing Mickey Mouse (complete with the ability to moonwalk, which is actually pretty sweet), Lion King dolls, Disney Princess books, Disney Princess clothes, Disney Princess purses, Disney Princess stage show tickets, Disney Princess toys and of course the granddaddy of all Disney wallet sucking experiences, a trip to Disney World staying in a Disney hotel complete with a Disney Princess breakfast at Cinderella’s Castle.

For all of the money that people like me spend on Disney toys, movies and theme parks and others that watch TV properties such as ABC and the Disney Channel, the Mickey Mouse-controlled  subsidiary that provides more profit to the company than any other by a massive margin is ESPN.  In fact, it’s not even close.  Currently, ESPN is in close to 100 million households clearing over $5.00 per month from every single one of them in subscriber fees.  This means that ESPN is making around $500 million in revenue per month and $6 billion in revenue per year before even selling a single advertisement.  ESPN isn’t just the most powerful sports network in America.  That would be vastly understating the network’s power.  Here’s the real bottom line: ESPN is the most powerful media and entertainment company in America.  Period.

It’s against this backdrop that we have to analyze the prospects of Fox, NBC/Comcast and, to a lesser extent, CBS becoming viable competitors to ESPN in cable sports world.  Fox has just announced that it is forming a new national cable sports network, NBC/Comcast has rebranded Versus to be the NBC Sports Network, and CBS is trying to turn what was once a college sports-focused channel into a broader sports network.  Certainly, it makes sense for all of them to try to get a piece of ESPN’s cable sports pie.  As I noted here last year, there are three key factors in television viewership today:

  1. More old people watch TV than young people*
  2. More women watch TV than men
  3. More people are using DVRs

(* For TV purposes, “old people” are defined as people older than 49 and “young people” are between 18 and 34 years old.  The only rating that matters for advertisers for a network prime time TV show is what it draws in the age 18-49 demo, while age 18-34 viewers command the greatest premiums.  It doesn’t matter that people older than 49 actually have higher incomes – this is about simple supply and demand, where younger viewers are in shorter supply.)

As a result, the most valuable property on TV on per viewer basis is the program that draws the age 18-34 male that watches it live. This is what sports does more consistently and dependably than anything else on TV, which means that advertisers and cable providers pay a significant premium for sports programs even though their overall viewership numbers (outside of the NFL) generally aren’t that large compared to the average network prime time show or even the movie of the night on TNT or USA.  As a result, ESPN is able to charge the highest monthly subscriber fee of any channel on cable by a significant margin.

The problem is that competing with ESPN is much easier said than done.  Fox and NBC might be spinning their networks as “new competitors” where they just woke up yesterday and realized that ESPN needs some competition, but the reality is that they’ve been trying to compete with ESPN for decades to no avail.  Cablevision created SportsChannel America back in the 1980s, which was a consortium of regional sports networks that bought national TV rights to NHL (in the glorious days when the Norris Division was alive) in attempt to create a competitor to ESPN.  Many of those regional sports networks got bought by Fox in the 1990s, where they tried create a similar type of ESPN competitor by buying national cable rights to properties such as the Big 12 and Pac-12 along with creating studio programs such as “The Best Damn Sports Show”.  That has been done a bit better than the old SportsChannel America, although it’s still been fairly lukewarm and the new national Fox sports network (dubbed “Fox Sports 1”) appears to be simply a vehicle to put air the national rights that it already has on a coast-to-coast network as opposed to through regional networks.  In the meantime, NBC Sports Network has been in existence for quite awhile, with it initially being called the Outdoor Life Network.  Comcast already attempted to rebrand the channel as Versus several years ago in order to try to position itself as a direct ESPN competitor, and it’s now doing a rebranding again with its recent purchase of NBC.

So, when I see sports fans that are exasperated with ESPN (for good reason)* cheering the prospects that someone is finally competing with the Worldwide Leader, the problem is that they’re falling for the spin that these companies are just starting from scratch with something brand new.  It’s simply not the case.  The core problem for any network that wants to compete with ESPN is the lack of access to what I call “Tier 1” content, which I would consider to be the NFL, Major League Baseball, NBA, SEC and Big Ten.  These are the properties that a network can use as tent poles to drive casual sports fans to flip over.  “Tier 2” content would be the other major college conferences, the NHL and the elite levels of golf, tennis and soccer, while “Tier 3” is everything else.  A network can fill airtime with Tier 2 and Tier 3 content, but can’t rely on that programming alone to break through to legitimately compete with ESPN.

(* Note that I’ll always consider this blog to be a Deadspin baby, as I was in one of the early sets of commenters on that site due to the graciousness of former editor and fellow Illinois alum Will Leitch.  That original commenter group ended up spawning a whole bunch of blogs with much wider reach than this one, such as Kissing Suzy Kolber and With Leather.  The point is that I’m well-schooled in the lampooning of ESPN, culminating in what is quite possibly the funniest story that I’ve encountered in all of the years of writing this blog: the comically insensitive ESPN college basketball commercial casting call that was real.  I still laugh my ass off at that one.  So, this post is not a defense of ESPN in terms of its editorial and promotional practices, which can be nauseating at times.  However, ESPN is absolutely the best run media organization in the country when it comes to the business side.  That side of the equation should be unquestioned.)

NBC Sports Network has been able to get Tier 2 and Tier 3 content, but nothing at the Tier 1 level (which has been the case for many years).  As a result, the ratings lately have been nothing less than horrible.  Viewership during the first quarter of 2012 for NBC Sports Network is down 22% compared to the same period last year and is actually at its worst levels since 2004, when it was still the Outdoor Life Network (meaning that the ratings this quarter right after the NBC re-branding are worse than at any point when the network was called Versus).  Even worse is the rating in the target demo.  Remember when I noted above that the whole reason why sports networks get a premium is that they are supposed to draw age 18-34 males?  NBC Sports Network’s rating in that demo was 0.4 this past quarter.  By comparison, Lifetime (yes, Lifetime) had a 0.5 in that demo.  There’s no good way to spin those figures.

Fox has a better stable of sports rights to draw from with the Pac-12, Big 12 and international soccer rights such as the English Premier League and Champions League.  However, that’s still a limited amount of content to power an all-sports network that’s aiming to draw a broad audience (not just niche fans) on par with ESPN.  Fox still doesn’t have any Tier 1 tent poles.

In theory, NBC/Comcast and Fox could overcome these disadvantages by simply bidding more for Tier 1 content than ESPN.  That sounds logical, but it’s not quite as easy in practice.  First, there’s not much Tier 1 content available.  The NFL decided to grant its own NFL Network a full season Thursday Night Football package, which means that the biggest potential tent pole of all is now off the table.  The Major League Baseball package will come up for bid likely later this year (the current deals run through 2013), while the NBA and Big Ten will have their packages opened up in about 3 years (with their respective current deals ending in 2016).  The SEC is locked up through the mid-2020s.  That’s not very much out there and even if a network can get one of those packages, that can only take it so far.  A viable ESPN competitor really needs 2 or more of those packages.

That gets to the second point, which is that the Tier 1 content leagues like being around other Tier 1 content leagues.  As much as we believe that sports leagues will simply take the most money no matter who it comes from, the Tier 1 entities aren’t very interested in being pioneers on an upstart network (unless they actually own that upstart network a la the NFL Network or the Big Ten Network).  It’s no different than really wealthy people generally preferring to buy houses in neighborhoods with other really wealthy people instead of going to a place where they’d clearly be the wealthiest people on the block.  During a panel of top sports media executives at the recent MIT Sloan Sports Analytics Conference*, this was called “optimization instead of maximization”, meaning that sports leagues aim to optimize their media audiences and not necessarily maximize revenue.  That might sound like MBA speak gobbley gook, but it’s really just a newfangled way of saying, “Don’t kill the golden goose”.   For instance, the NFL could theoretically make the most money by keeping all of its games for the NFL Network and effectively charge whatever it wants for the channel, which cable providers would almost certainly have to pay.  The Big Ten could do the same by sending all of its games to the Big Ten Network.  However, neither entity wants to do that because that’s taking short-term revenue at the expense of long-term viability.  The Tier 1 sports leagues got to that position because they are able to combine a passionate core fan base with interest from casual sports fans.  League-owned networks and lower distribution channels can still draw the passionate core fan base, but the casual fan segment won’t move over and will deteriorate over time.

(* I highly recommend watching this panel discussion that features the presidents of ESPN, Fox Sports, NBC Sports, NFL Media and MLB Media.  They go through a whole slew of issues, including rising TV sports rights fees, the impact of Internet streaming and on-demand viewing, league-owned networks and cable chord cutting.)

That’s really the toughest part of competing with ESPN: it provides the best platform by far for drawing casual fans, which is what the Tier 1 content providers need.  The interesting thing is that the only successful cable bidder for Tier 1 content outside of ESPN and the league-owned networks has been Turner with the NBA (TNT), MLB (TBS) and NCAA Tournament (TNT, TBS and truTV).  That’s notable because TNT and TBS are not sports networks and are instead positioned as broad-based general interest channels that are the cable equivalents of the Big Four (ABC/CBS/NBC/Fox) over-the-air networks.  This means that TNT and TBS are able to draw in casual TV viewers in a way that, say, NBC Sports Network can’t, meaning that they are much more palatable to Tier 1 leagues.

As a result, the most realistic competitors to ESPN aren’t other all-sports networks, but rather the broad interest cable channels that draw high ratings such as USA (owned by NBC/Comcast) and FX (owned by Fox) alongside Turner’s TBS and TNT.  At least that’s how I’d approach it if I were running NBC Sports or Fox Sports.  It would take many years for an all-sports network to get the critical mass of content on par with ESPN2, much less the ESPN mothership, and that’s assuming that such network wins every competitive bid for Tier 1 and Tier 2 content until the end of this decade.  That’s simply a losing battle.  However, TBS and TNT have shown that they can make a dent on ESPN’s chokehold over cable sports rights and have been rewarded with higher rights fees as a result.  They are able to incorporate Tier 1 sports into their other entertainment programming that draw high ratings, which means that they are getting casual fans (not just the hard core fans) to tune in.  My belief is that it would be easier to sell rate increases for USA and FX adding on premier sporting events than to try to get brand new rights fees for separate new sports networks.  I don’t blame NBC/Comcast and Fox for trying their current all-sports plans because those ESPN-type rights fees are so enticing, but I think that in a few years, they’ll end up retreating and focus on beefing up the sports content on their general interest networks instead.  That’s where they can draw out value that ESPN isn’t able to provide.

(Follow Frank the Tank’s Slant on Twitter @frankthetank111 and Facebook)

(Image from American Progress)

The Pac-12 is ready to announce a massive new television deal with Fox and ESPN worth $250 million annually.  (No one has been covering this story better than Jon Wilner of the San Jose Mercury News.)  I certainly have to give props to Pac-12 Commissioner Larry Scott here.  Up to this point, I’ve thought that he was smart and aggressive but more full of bluster with big ideas without necessarily the ability to implement them.  The amount of the Pac-12 deal, shows that the conference made a smart move in hiring from outside of the college administrator ranks.

Ultimately, the reasoning for a TV rights fee is akin to examining the price of a stock.  A portion of the price is going to be related to the market overall, another portion is connected to the industry sector, and there’s a final part that is based on the fundamentals of the individual company itself.  It wasn’t a surprise that the Pac-12 was able to raise its TV rights fees significantly, as the demand for sports programming in general has been skyrocketing over the past few months.  That’s a market-based factor that all sports entities negotiating new TV deals are benefiting from right now, which I examined in-depth in my last post.  What I didn’t expect was that the Pac-12 would vault itself to a position alongside the Big Ten and SEC in terms of TV revenue so quickly.  The Big Ten has the benefit of having the Big Ten Network that can take advantage of the market trends until its ABC/ESPN ends in 2016, but the SEC is locked into its CBS and ESPN deals until well into the next decade.  That doesn’t mean that the Pac-12 is inherently as valuable as either the Big Ten or SEC.  Indeed, the Big Ten and Pac-12 negotiated for the rights to their respective new conference championship games with Fox at virtually the same time.  Head-to-head, the Big Ten game garnered over $23 million per year, while the Pac-12 game received $14.5 million per year, so that gives you an idea of what the conferences are worth relative to each other when you take timing out of it.  My impression that the SEC championship game would be worth even more.  Still, it’s significant that the Pac-12 seems to have been able to pull away from the ACC and non-Texas/Oklahoma portion of the Big 12.

So, what are the fundamentals specific to the Pac-12 that led to this deal (as opposed to just the overall rising tide of sports fees)?  One important point that I’ve mentioned before but probably underestimated in the scheme of things is that the Pac-12 is the only conference with a BCS monopoly in its own footprint.  In fact, with the additions of Colorado and Utah, it’s the only BCS conference located in the entire Pacific and Rocky Mountain Time Zones.  That’s a pretty massive swath of area to effectively have all to yourself.  In contrast, all of the other BCS conferences compete with at least 2 other BCS conferences in their footprints.  For the the Big East in particular, it has to compete with all of the other BCS conferences in its footprint except for the Pac-12.

Another item to note is that Fox needed to retain the Pac-12 very badly for its owned-and-operated West Coast regional sports networks, especially FS West in the Los Angeles market.  FS West is suffering from the blow of losing its most valuable property of the Lakers next year, who are pouring salt in the wound by creating two competing networks (one English and the other Spanish) with Time Warner Cable.  Losing Pac-12 sports on top of that would have left FSN West to rely on the Clippers… and I don’t care how badass Blake Griffin might be (and he’s about as badass as one can be badass), but if I’m Rupert Murdoch, I’ll be damned if I run any organization that has to rely on the Clippers.  With ownership of FS Arizona and a minority interest Comcast SportsNet Bay Area, Fox had some heavy incentives to protect or expand its Pac-12 programming.

(Note that Fox’s owned-and-operated regional sports networks are heavily concentrated in California, Arizona, Texas, the Great Plains Midwest and the Southeast.  Looking at that lineup, it should come as no surprise why Fox paid up heavily for the Pac-12 and Big 12 TV rights and sent in a large bid for the ACC.  The Northeast markets, on the other hand, are largely the domain of Comcast RSNs with Fox largely being shut out.  This is instructive as to who might be (and not be) looking at the Big East’s TV rights down the road.)

ESPN expanding its relationship with the Pac-12 is a little more difficult to read.  Variety has indicated that the Pac-12 has agreed to provide 4 Thursday night and 4 Friday night football games per year to ESPN, so there seems to be a push from the Worldwide Leader to get more higher quality weeknight college football contests.  The Pac-12 also allows for late night games on Saturdays to compensate for the moves of Hawaii and Fresno State from the WAC to the MWC (which doesn’t show any games on ESPN).  Finally, there could be a return of a 11 pm Central Time Big Monday basketball time slot allocated to the Pac-12, which ESPN used to have for Big West or West Coast Conference games.  Overall, ESPN’s modus operandi may very well have been to ensure that neither Comcast nor Turner Sports would end up with the Pac-12, who could have been used as a cornerstone to really have beefed themselves up as legitimate college sports broadcast competitors.

It’s also a bit of a surprise that a Pac-12 network would be wholly-owned.  This is a good thing if the network can receive basic carriage, but could be a roadblock if there are any carriage disputes.  The Big Ten Network, which is 49% owned by Fox, was able to leverage its basic carriage with DirecTV (which was owned by Fox at the time of the launch of the BTN) to apply pressure on cable operators, while the MLB Network garnered one of the largest basic cable launches of any channel in history by offering minority stakes to several cable companies in exchange for carriage.  Those cable companies also provided capital start-up costs.  On the other end of the spectrum, the NFL Network (wholly-owned by the NFL) is still battling cable operators 8 years after it went on the air.  There seems to be a presumption that the Pac-12 wanted to have 100% ownership of a network, but I’m not so sure that’s the case with the amount of ramp-up costs involved and how critical basic cable carriage is for success.

Regardless, even if a conference network never even gets off the ground, I’m pretty sure the Pac-12 schools are acting like this right now.

(Follow Frank the Tank’s Slant on Twitter @frankthetank111 and Facebook)

(Image from Lehigh Valley Live)

The Big 12 lost one of the best national TV draws in college football (Nebraska), the most popular college team in its largest and fastest-growing market outside of the state of Texas (Colorado) and its conference championship… and then signs a contract for a 350% increase for its second tier cable football rights with Fox.  Did Rupert Murdoch suddenly feel the need to go on a shopping free now that he doesn’t have to pay Glenn Beck anymore?  Is Dan Beebe getting a G5 and a pile of money so that Fox can cash in an insurance policy on Iowa State?  What gives?  Well, let’s take a look at some demographic shifts of the overall TV audience, how it has affected Fox’s most important property, American Idol, and how all of this explains why sports TV rights fees are generally going through the roof right now.

There are three massive changes to television over the past 5 years (and such changes are accelerating):

(1) More Old People Watch TV Than Young People – If you know anything about TV advertising, the overall Nielsen rating that a lot of networks like to trump in press releases is completely irrelevant.  The fact that CBS is the #1 watched TV network overall with top overall-rated shows in several categories has little bearing on what they are able to charge in terms of advertising rates.  Instead, the Nielsen number that really matters is what a show draws in the Age 18-49 demographic and, increasingly, the Age 18-34 demographic.  Historically, this emphasis on younger viewers has been justified with notions that older people are less likely to switch brands or purchase high-end products.  However, that really isn’t true anymore, as people over 50 generally have higher incomes and have shown to have more discretionary spending than their younger counterparts.

Now, the reasoning is a bit different: younger viewers are simply scarcer, therefore advertisers pay a premium to reach them.  Even though older viewers actually have more spending power than younger viewers, those older viewers watch more TV overall and can be reached throughout the day by placing ads on less expensive shows.

The difference between what advertisers will pay for a younger audience versus an older audience is massive – more massive than you probably could have ever guessed.  TVbythenumbers recently compared the ad rates for NCIS (which draws the largest overall audience of any scripted show on TV) and Glee.  It found that even though NCIS had 82% more overall viewers, the fact that Glee had 15% more viewers in the Age 18-49 demo and 92% more viewers in the Age 18-34 demo meant that Glee was able to charge 80% more than NCIS for every 30-second commercial spot.  It basically shows that viewers over 50 are effectively worthless from an advertising standpoint (and even viewers over 35 aren’t worth that much).  You can find a lot of shows that draw in the typical viewer of NCIS (even if that particular show brings in the most of them outright), while there are very few shows that bring in the demo that Glee delivers.  (For what it’s worth, I’m the type of person that enjoys dramas with deep and complex themes with subtle acting that doesn’t beat you over the head with blatant messages.  I can’t think of any show that provides less of what I’m looking for than Glee.)

With that type of advertising rate disparity, TV networks (both broadcast and cable) are continuously on the search for programming that attracts those younger viewers.

(2) More Women Watch TV Than Men – Here’s a fairly shocking statistic: out of the 63 prime time shows that were on the 5 major broadcast networks (for the purposes of this discussion, The CW gets counted as a “major network”) during the 2009-10 season, only 6 drew more male viewers than female viewers6 out of 63.  Three of those shows (The Simpsons, Family Guy and The Cleveland Show) are part of the Sunday night Fox comedy bloc that gets a lead-in from NFL games for half of the season.  Another one of those shows (24) is no longer on the air, a different one (Fringe) has been moved to a low-rated Friday night time slot and the last one (Chuck) has been on the cancellation watch list for a couple of years.  If you’ve ever wondered why ABC keeps churning out shrill high-budget prime time soap operas from Shonda Rhimes, there’s your answer.

Simply put, the TV networks are badly in need of a sausage fest and can’t seem to create any.

(3) More People Are Using DVRs – Nielsen recently reported that DVRs are in 38% of all U.S. households as of September 2010, exhibiting extremely rapid growth as that number stood at less than 5% in 2006.  Those users of DVRs are also younger and more affluent than the average television viewer.  While Nielsen argues that DVR users still watch commercials in decent numbers, the reality of it is that the attraction of the DVR is to be able to skip those ads (cutting down an hour-long show with commercials into around a 40-minute show without them).  As DVR penetration continues to grow (and frankly, I thought that current 38% number seemed fairly low), more and more people are going to be avoiding commercials like the plague.

These changes in who watches TV and how they watch it has had some fairly interesting implications in pop culture.  For instance, a couple of weeks ago, the American Idol audience shockingly voted off (or more accurately, did not vote enough for) widely-perceived front-runner Pia Toscano, meaning that she placed ninth and had a shorter run on Fox than The Heights.  It was enough to make J-Lo start crying uncontrollably while Steven Tyler rose from his crypt and started bashing America’s passion.  Now, seeing that Pia was clearly the top pure singer while also being the best-looking of the competitors, that typically indicates a Charlie Sheen bi-winning combination.  However, when looking at the demographics for American Idol, it reflects general TV viewing trends: its audience is getting older and skewing much more to the female side.  My impression is that these older women prefer the John Mayer soulful acoustic guitar-types as opposed to the hot young divas, which is the main reason why (1) soulful acoustic guitar-types have won American Idol for the past two seasons, (2)  5 out of the last 6 American Idol winners were male and (3) only 2 American Idol contestants left on this year’s show out of 8 are female (rose jacket Rod Stewart copy Paul McDonald became the first male eliminated since the initial public vote cutdown to the top 13).

What American Idol has going for it, though, is that people still generally watch it live.  In the latest week where figures are available, only 9% of American Idol Wednesday viewers watched it on DVR compared to 29% of the viewers of Modern Family and 28% of the viewers of Grey’s Anatomy.  Add in that it still draws a fairly good percentage of the younger demographics compared to most shows on television and it is a complete ratings cash cow for Fox.  Last year, American Idol was able to charge over three times as much per 30-second ad spot compared to Dancing with the Stars, the latter of which actually draws a higher number of total viewers but a lower number in the Age 18-49 demo.

So, when looking at how the TV audience has shifted, it has become clear what type of program obtains a premium greater than any other: the program that draws the age 18-34 male that watches it live.

Let’s take me as an example of the target demo.  I’m a professional 33-year old male that’s about a loyal to TV shows as Antonio Cromartie, can count on one hand the number of scripted TV shows that I watch regularly, and will purposely watch all of such shows on my DVR in order to avoid a single moment of watching any commercials.  I don’t know about you, but I put my DVR right next to food and water on Maslow’s hierarchy of needs.  The catch, though, is that I watch a lot of sports.  Even better, I actually watch them live with commercials.  There is no better vehicle to draw me, a member of the most valuable demographic of all (the male under 35), than sports… and there are tons of people like me in that respect.

Dennis Dodds, who has his own excellent write-up on theories on why sports TV rights are rising, stated the following:

Sports have become one of the safest and highest-grossing buys for media companies. There are no coked-up, petulant stars to deal with. Well, at least not a lot of them. The only “winning” is done on the field. Sports are somewhat cheap to produce.  Sports are true reality television, almost immune to being DVRed. Advertisers love that. There is a built-in following whose interest doesn’t wane with time. Even the strongest TV series are canceled. Try taking Alabama-Auburn off the air.

The success rate of new scripted TV shows has become abysmal – ABC may end up not renewing any of its new shows from this season.  In contrast, sports programs are considered to have “high floors” – ratings may not necessarily go through the roof for every single game, but there’s always a good base of viewers , that base includes a lot of members of the most valuable demo, and those viewers watch it live.  The Nielsen DVR report linked above stated that sports and news programs are watched on DVRs the least of any TV categories.

Sports programming also skews toward the younger demographic than the average show on TV.  During the week that ended April 10th, the only shows in the top 10 of the overall ratings that had more than 30% of their audiences under the age of 50 were the two editions of American Idol (approximately 40%) and the NCAA Tournament National Championship Game (47%).  This is consistent with the demographics for other major postseason sporting events, where the World Series, NBA Finals, BCS bowls and NFL postseason last year all had more than 40% of their respective audiences in the Age 18-49 demo.  (Note that if you were able to buy stock in a league, you ought to bet on the NBA.  It’s the only major sports property that draws over 50% of its audience from the 18-49 demo as well as being the most popular in the growing minority populations just using last year’s figures.  With the NBA now having legit contending teams in New York, Chicago, Boston and Los Angeles along with the Miami superteam, the viewership numbers have been record-setting this season across all of its platforms of ABC, ESPN and TNT.)

Does this necessarily mean that all sports rights fees will necessarily rise at such dramatic rates?  The Pac-12 is looking for even a better deal than the Big 12 (you can count me in as someone that’s more skeptical that they’ll hit those numbers) and the Big East is looking at a possible tripling of its current rights fees.  One ongoing negotiation that may be a better indicator of where rights fees might go for those two conferences is for the NHL, which is a league whose current deal was signed when it was at rock bottom in terms of popularity, has had a resurgence in a couple of key markets (Chicago and Boston), but still largely has a regional as opposed to a national fan base.  The NHL is looking for a substantial increase of around 2.5 times the current deal with Comcast/NBC most likely being retained as the broadcasting partner.

A rising tide lifts all ships in an outright manner, but where the conferences sit relatively each other will likely remain the same: the SEC and Big Ten at the top, the ACC, Big 12 and Pac-12 in the next tier, the Big East at the next level, and then everyone else.  Similarly at the pro level, the NFL stands alone at the top, NBA and Major League Baseball are in the next tier, and the NHL will be behind them.  Still, the circumstances are good for all sports entities.  While the rise of Internet streaming and mobile devices are going to complicate matters for sports leagues to continue cashing in on cable dollars over the next decade, they’re all getting the benefit of a revenue boom today.

(Follow Frank the Tank’s Slant on Twitter @frankthetank111 and Facebook)

(Image from Huffington Post)