PFB - Five Quick Thoughts on Television Deals, the Big 12 and OSU’s Future

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Greenhorn
Feb 17, 2018
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If you’ve been reading this website for any substantial period of time you know how much I love thinking about conference revenue and what the future of the Big 12 looks like. I’ve been hollering from the tallest mountaintop in Oklahoma (Sugarloaf Mountain, by the way) that the Big 12 is in a better spot than anyone gives it credit for, and the numbers continue to engender optimism.

So I went into this piece by the Athletic on the future of college football television contracts with eyes wide open about not only the Big 12 but the entire industry as a whole. Here are five quick takeaways from the piece.

1. Moving On Up


According to research done by Navigate Research, college football TV contract trajectories are still pointed straight up.


Based on historical patterns, and the increasing importance of live events for traditional broadcast networks and cable networks, the Big Ten, SEC, Pac-12 and Big 12 can expect to see increases in the range of 45 to 65 percent within the next five-to-six years compared with what they’re making currently. [The Athletic]

Currently the Big 12 is in the middle of a 13-year, $2.6 billion deal with ESPN and FOX that pays $200 million a year on average, although I believe it is more heavily weighted toward the back end of the contract (i.e. right now). Also, all of this was before it sold its Big 12 title game rights to ESPN last year.

That’s (obviously) an overall average of $20 million per school per year. When you add in all the other various revenue the Big 12 brings in, the annual payout is close to $40 million (this last school year it all added up to $37.7 million per school). To increase those numbers in the future by 45-65 percent is wild considering total conference revenue just 12 years ago was $113 million a year.

Of note: In a pre-pandemic world, the Big 12 expected annual payouts (TV revenue plus everything else) to get close to the high-40s in millions per year by the end of this current contract (2025). Remember, right now it’s just under $40 million. That will likely change because of the pandemic (it already has actually, without the NCAA Tournament in 2020), but it’s worth remembering that that’s the number the Big 12 was aiming for. If you start talking about bumping, say, a $45 million payout by 50 percent, you’re getting a number that’s somewhat close to OSU’s entire athletic department budget. Insane.

2. Real Talk


One of the interesting points the article raised is the rise of cord-cutting.


Meanwhile, cord-cutting continues to chip away at the traditional pay-TV model. In 2011 — the year before the Big 12 and Pac-12 began their current contracts — ESPN peaked at 100 million cable subscribers. Today that number is closer to 80 million. Streaming service ESPN+, launched in 2018, has already gained nearly eight million subscribers, but it mostly shows on-demand programming and lower-profile events.

“The cable industry has been a godsend for college athletics,” said Tranghese. “The question is, as the number of cable households, whether it’s ESPN or Fox, goes down, what happens to their ability to pay that top dollar?” [The Athletic]

I don’t know what the mosaic of advertising spending looks like for companies, but I think you could make a real argument that because all audiences have decreased and sports audiences have probably decreased the least, there’s actually more value to be had in advertising within the sports industry than before. There’s a ton of nuance in there that I’m likely unaware of, but it’s not hard to see how you would view it from that perspective.

3. Tech Companies, Where Art Thou?


This little nugget from the article piqued my interest.


Apple recently hired Amazon’s head of sports video, James DeLorenzo, to head up sports content for its Apple+ streaming service, signaling an interest in adding sports rights. Pac-12 Network president Mark Shuken raised eyebrows in April when he told Sports Business Journal that Apple has expressed interest in acquiring the league’s Tier 1 rights. [The Athletic]

We keep hearing about how Apple, Google, Amazon, Hulu and Netflix are going to get into the sports rights game and yet I’m just not sure that’s ever going to happen. Not with ESPN having an OTT product and creating a clear path forward for other companies to do the same.

4. Big 12 Probs


Here’s one interesting quandary for OSU and other Big 12 teams.


If either or both networks felt the need to pull back on college sports, it wouldn’t likely come at the expense of either the Big Ten or SEC, both of which consistently drive big audiences. But for the Big 12 or Pac-12, it could mean lower-than-expected bonanzas. Three of the six most-watched games last season involved Big Ten teams. Four of the top seven involved SEC teams. However, the Big 12 showed up in just two of the Top 10, while the Pac-12 and ACC had none in the top 12. [The Athletic]

The Big 12 has consistently stayed ahead of the ACC and Pac-12 over the last five years in terms of overall revenue, and that’s a good goal to maintain considering the reality that it will never run down the SEC or Big Ten. What could be problematic is that instead of spreading money proportionately across all conferences, networks may spread it disproportionately across two. That would sort of help the Pac-12 and ACC because it would likely bring the Big 12 down to their level and boost the SEC and Big Ten even further ahead.

A great goal for the Big 12 — and one that is attainable — is to maintain a stronghold on its third position in terms of media revenue among the Power 5 conferences. It has quietly and impressively done that so far, but the next five years — as all these contracts come up for renewal — will be crucial for the future.

5. The 2011 Effect


The 2011 OSU-Iowa State game, which buried the BCS, is apparently the gift that keeps on giving to conferences.


Those numbers also account for a new College Football Playoff contract. Consensus appears to be growing for an expansion to eight teams beginning in 2026. Based on that assumption, Navigate estimates CFP revenue jumping from $446 million per year in 2020 to $1.04 billion in 2026, nearly all of which gets distributed among the FBS conferences. [The Athletic]

Eight teams, home games for the top four seeds (?), every conference champ gets in, OSU has a legit path to playing for a title. Distill it down and stick it into my veins.



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