The Confidential

The ACC Sports Blog

The Big East’s $20Mish TV Deal

It is expected that the Big East will land a television deal for approximately $20 million per year. Total. As in $2M per school. This excludes the so-called Catholic-7, who are working their own deal.

It has also been widely reported that the Big East once turned down an offer that would have paid each football school $13M per year. Apparently, it was Pitt, WVU, and Rutgers that led the charge to turn down that deal. These three schools and Georgetown allegedly voted against it.

So, if you are decent at math, UConn, Cincy, and USF have lost $11M per year because of these four schools’ rejection of the deal. Granted, there may be some recoupment based on shares of exit fees, but these are huge losses.

If I am these schools, I am furious at Pitt for rejecting the deal and then bolting, leading the charge toward the eventual loss of $11M per year. At least in Syracuse’s case, they were willing to accept the ESPN deal. It can be argued that the improvident rejection was an impetus for moving to the ACC. In Pitt’s case, they rejected on the theory that the Big East was worth more and then were the first domino to make it worth less. And WVU and Rutgers can always note that the Big East would have been worth more had everyone stayed, as they assumed when voting. Pitt is the one that deserves the ire.

As a lawyer, I have seem far far more frivolous suits that ANY theory that UConn, USF, and Cincy could raise against Pitt for these dealings. As a lawyer, I also expect that the Pitt exit fee settlement included a release of those claims (by conference or school). And even if they could, it is doubtful that anyone would sue. But the whole thing does really stink.

From the ACC’s perspective, it needs to throw the book at Maryland. Pitt leaving set off a chain reaction that cost three Big East schools to lose tens of millions of dollars–much more than their share of the exit fee. This is WHY an exit fee needs to be so high. Wake Forest, who is ACC or bust, needs to vote against any settlement for less than face value. If Maryland starts a chain reaction, exit fees are all you’ll have.

More on that later.

For now, let’s all just sympathize with UConn, Cincy, and USF fans.

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10 thoughts on “The Big East’s $20Mish TV Deal

  1. Vinnie Saltine on said:

    I have less sympathy for UConn than Cincy or USF. The Huskies went from a BCS bowl to the Big East basement pretty much with 1 bad college football coaching hire (although I’d imagine most fans are more pissed at Edsall).

    At least when USF hired Holtz, the guy had a resume you can point to and say, “OK, he’s had success every where he went” but Pasqualoni/DeLeone were well past their primes respectively. Sad to say, but that hiring decision (and likely some bad blood between BC and UConn) cost the school tens of millions of dollars.

    At this point, UConn is better-off converting to a Catholic School, dropping football completely, and becoming #8 in basketball-only defectors from the Big East.

    However, 2 questions immediately come to mind:

    1) Do you think it’s safe to say that these 3 schools can now be excluded from any future talks about realignment?

    2) Is this a repudiation of the “National Model” that the Big East tried to create? And if so, how does that bode for the B1G Network’s attempts to move into new markets?

    Regarding future conference realignment, you have to assume that any future expansion by conferences will have to take revenue into consideration; in particular how much will adding that school bring into the conference.

    Based on NBC’s valuations of $2M per school (that is for all sports), would any of the major conferences be willing to take on the perceived risk of a school that could wind-up diluting the amount of money that the rest of the schools make? Is adding a USF, UConn, or Cinci just bringing in another mouth-to-feed? (The Ayn Rand metric for conference realignment).

    Would a team like WVU, whose nouveau riche fans seem to be solely concerned with how much money their school is making comparable to other schools, be willing to take a $4M reduction in their base-conference revenue in order to add Cinci and USF? Adding a Conference Championship game wouldn’t cover the potential losses these two schools could be perceived as adding.

    Or, is this simply a guilt-by-association thing? Does having the likes of E. Carolina, UMass, Tulane, and Houston reduce the overall value. Would adding USF to the BigXII (for example) be the equivalent of adding Houston to the Big East?

    If so, then how can Iowa State, Indiana, Kansas, and Kentucky justify their $20M+ paychecks? It can’t all be from basketball and research dollars, can it?

  2. Vinnie, as always you are on target and bring up some very good points. However; you are attributing the value of a university to a conference…and NOT a network. It seems apparent that the MEDIA is acutually running conference allignment at this point. Three examples that would bare this out:
    1. B1G taking Rutgers and Maryland. Fine academic institutions that are not elite in sports….well at least Football and bball. Each was taken for the eyeballs in their location
    2. Continued discussion of Notre Dame and FSU as two universities that would add value to any conference–wait, they are both in the ACC either all in or association–and every other conference appears to want them as much for their brand and eyeballs they bring
    3. Then we come to Catholic 7 which appears to have a bid that will exceed what the NBE is about to receive….for bball rather than all sports including football. Of course the Catholic 7 have very good bball teams but also have large metro areas as each of their homes…again eyeballs.

    What makes no sense is that the ACC is in the demographic region that is growing and will continue to do so. The B1G eyes this area not only for the very good institutions that compose the ACC but also its geographic location and demographics. Sadly, the ACC’s present TV deal came about one year to early…before the TV $$$ exploded for college sports. How else can you reason why the 3rd most watched football and 2nd most watched bball conference has the worst $$$ value of major conferences.

    Interestingly, ESPN may send a signal by what it does with the NBE. Will it match NBC’s bid of $20-$25mm for the conference….or will it not. If ESPN does not sign the NBE, this may bode well for the ACC…after all, doesnt ESPN need the content it owns 100%…if it truly was smart it would find a way to combine an SEC/ACC network–and keep the B1G and Fox out of our region. Cover all the geography from Boston to Florida and OWN THE FASTEST growing demographic area…and by the way, look to diversity, the hispanic market is going to want to watch soccer and baseball on TV…and the ACC has the best of those sports.

    I am looking for a rationale NOT to kill off the ACC….and what I have said above doesnt seem to have traction in discussing realignment…..help here please.

    • Vinnie Saltine on said:

      However; you are attributing the value of a university to a conference…and NOT a network.

      To clarify, when I say “Conference” in most instances I really mean the network that manages that conference’s rights. For the Pac12, BigXII, ACC, and SEC that is cut-and-dry.

      The exception is the B!G.

      The B1G is a unique situation where as both Conference and Network they can basically do whatever they want.

      In reality, the B1G could place more-or-less value to adding a school for a host of reasons, regardless of how good/bad their sports are, or what markets they can/cannot attract.

      As the Confidential pointed out, one of the biggest, and least discussed factors, seems to be the Research Dollars that a school can bring.

      Johns Hopkins adds Lacrosse, but it also brings in a major source of research money.

      This could prove to be the saving grace for a school like UConn, who from a media-perspective doesn’t really offer much, but could contribute nicely to a consortium of research schools (I’m too lazy to check, but I assume they are an AAU school). Ideally for B1G expansion, they want schools that fit multiple criteria and range from defensive/offensive moves, adding revenue, adding tv sets, placating it’s current teams, etc..

      In many ways, the rest of the conferences are playing Checkers, while the B1G is playing Chess. They are looking several moves ahead…and they are winning.

      As for the ACC’s partner, ESPN seems to be playing Monopoly and taking full advantage of not having to pay rent on the properties it currently owns.

      ESPN was willing to pay $13M/yr for each of football schools, which means that theoretically that money is now available to invest in other conferences.

      My guess is that ESPN will match NBC’s offer; if only to get more inventory. ESPN’s infrastructure for providing content on the internet/tablets, etc… is so far beyond where everyone else is, and they will need to keep the pipeline of inventory up.

      So, assuming they get the Big East content for $2M/yr..that’s an extra $11M they can invest. A large chunk of that will likely go to the SEC, but it would be nice if Rich Uncle Pennybags could spare some of that saved money for the ACC.

  3. I totally agree with you on the REAL cost of replacing an exiting team – I don’t think $52M is too much at all. As for ESPN investing in the ACC – it seems obvious to us that the REAL war is between ESPN, Fox and BTN, but I’m not sure ESPN fully realizes that yet (or if they appreciate the severity of the threat).

    • Vinnie Saltine on said:

      I don’t think that ESPN feels any threat from Fox or BTN. These primarily (if not exclusively) deliver content via TV.

      ESPN, by contrast, is much more focused on multimedia through the internet, tablets, your phone, etc…and far ahead of the curve. Yes, there is going to be demand for tv for SEC football on Saturday, but my belief is that there is a far greater return by putting 30 games to watch on ESPN3 with minimal effort, compared with trying to always select the biggest/best match-ups and hope that the game is entertaining enough to capture/keep the audience.

      If Fox and BTN want to overpay for this, I don’t think ESPN is going to try and stop them – or compete with them (except to drive the price up on them).

      It’s like Fox and BTN are placing their money on the future demand for gas-guzzling SUVs, while ESPN is investing heavily in hybrids/electric cars.

      NBC/Comcast is/was the greatest threat to ESPN in that regard because of Comcast’s internet capabilities (and the ability to deliver live programs through Xfinity). NBC was also desperate enough for content that they likely would have outbid ESPN for the Big East…and possibly even wind up paying more to the BE teams than the ACC is currently paying. Can you imagine the hand-wringing and gnashing of teeth from the ACC if Memphis Football was making more money than Florida State or Clemson?

      So, ESPN did what they had to do: Kill the Big East and kill NBC’s chances of getting a competitor to ESPN3.

      • Blapples on said:

        Ok, you couldn’t be further off when it comes to the BTN being unprepared for the future. They’ve invested heavily on the streaming end of viewing which can be found at http://www.btn2go.com. They also have apps for the iPad, iPhone, and Android.

        Sorry, it’s just foolish to think that any network, let alone one that’s been as successful and forward-thinking as the BTN, could be unaware of the upcoming revolution concerning the way people consume media.

        • Vinnie Saltine on said:

          Watching online is a convenience for the fans, it’s not what is going to pay the bills for the BTN.

          BTN’s business model is based on cable subscriptions, pure–and-simple. Not on the ability to watch games on your computer/mobile device. They need to have tens of millions of people pay each month for their cable subscription, likely for a channel that the majority of them will never watch. (I live in PA, I have the BTN, and I never watch it.)

          Now, imagine if 50% of the BTN subscribers called their cable provider and asked to unsubscribe from the BTN. How do you expect them to pay 14 teams $25-$30M/yr? Their business model will need to dramatically shift in order to compensate for the lost revenue.

          Not that this scenario will happen, but nevertheless they need cable subscriptions to feed the beast. More expansion for the B1G means they need more money, and they need more cable subscriptions.

          My suggestion is that ESPN is being more proactive and trying to avoid unsustainable media contracts; and instead are looking to put their energy behind online content.

          Although I hope that ESPN and ACC can renegotiate their contract for the better by adding ND olympic sports and L’Ville, instead they seem to be undervaluing TV contracts (or are partnering with Fox to foot the bill). With the exception of the SEC (likely) and the BCS bowls, ESPN isn’t spending like a drunk sailor chasing content for television.

        • Blapples on said:

          Replace “BTN” in your post with “ESPN.” It goes the same way for both networks. They both rely on maximum carriage by millions who might never spend a second watching it.

          I think we, as sports fans, VASTLY overestimate how much the general public pays attention to sports. You say 50% of current BTN subscribers would drop it if they could. How many folks would carry ESPN if they could go a la carte? I bet a sizable number of people would drop ESPN as well.

          Secondly, could you explain how ESPN is investing more than anyone else in online content while stepping away from the mega media contracts at the same time? If Fox gets the Tier 1 B1G media deal in the next contract, ESPN isn’t going to be able to stream those games online. So what are they going to stream online? SEC Women’s basketball? SEC Baseball?

        • Vinnie Saltine on said:

          There are many huge differences between the BTN and ESPN. First and foremost, ESPN is a standard cable channel across the entire country. Cable providers need ESPN, much like they need the Food Network, History Channel, and HGTV because without it, they wouldn’t have cable. ESPN doesn’t have to find new markets to try and add their service to; chances are, they are already there.

          Secondly, ESPN doesn’t just rely on college football and basketball. An hour of Sportscenter likely draws more viewers than a football game between Minnesota and Indiana. Something tells me that if ESPN doesn’t get the 1st-tier rights to the B1G, then they’ll do just fine.

          They’ll just have to broadcast NASCAR, the World Series of Poker, or worst case scenario: Big East football.

          At the very least, it’ll just give them 3 more hours on Saturday to spend talking about the NFL games on Sunday. Will the B1G do that on Fox?

          Besides, if Fox steps-up and buys the First Tier rights then it just means that they probably overpaid.

          This is one of the giant problems/misconceptions of the media rights debate, that the Networks are making quadrillions more than they are paying for the media rights.

          Now, I don’t have the actual numbers of how much these networks make as a result of airing these games, but what I do believe is that we are currently experiencing a media rights bubble.

          Much like the Real Estate industry, more people are coming into the market (late) and paying top-dollar with the assumption that values will continue to rise.

          By contrast, it seems that ESPN is not getting involved in bidding wars and is allowing Fox to overpay for rights. After the SEC’s contract (which I fully expect ESPN to go all-in for), barring realignment to super conferences, the prices will be settled and it will be time to see who the real winners-and-losers of the media rights deals are.

  4. …and in the meantime, the ACC may be pulled apart because of ESPN’s seemingly unwillingness to either provide more TV $$$; help ACC build a network….or am I wrong and in the near future ESPN comes to the aid of the ACC and provide cash in some form to keep ACC teams from departing–particularly after ESPN was so active in bringing the BE to its knees. What is ESPN now going to do for the ACC?

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