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B1G Money for Big Ten?

April 19, 2016

Written by Jon Miller

Hawkeye Nation

The Big Ten’s Tier One television rights have been ‘on the block’ for a while now, something you likely already know.

We’ve all been waiting to see just how high the the dollar values in new deal would climb, which networks would be involved, the term of the contract and more.

On Tuesday, the first inklings of the next B1G TV deal began to surface.

$250 million per year for six years, for HALF of the Big Ten’s Tier One rights? That is…whoa.

From the linked item in that tweet: “…around 25 football games and 50 basketball games that it (Fox) will carry on both the broadcast channel and FS1 starting in the fall of ’17. The deal runs six years and could cost Fox as much as $250M per year, depending on the amount of rights the Big Ten conference puts in its second package.”

The Big Ten’s current deal with ESPN/ABC was for ten years, set to expire in 2017. That was for $1 billion, or $100 million per year for ten years for ALL of the Tier 1 rights. If this report is true, Fox is paying $1.5 billion for HALF of what ESPN paid $600 million for eight years ago (that’s six years worth of $100 million per year).

That is simply INCREDIBLE. But there is still the other shoe to drop, as in the other half. Again, from the embedded link above:

“The second package also is expected to include around 25 football and 50 basketball games. The package also could include rights to the football championship games every other year, though sources caution that the rights in the second package are flexible and could include more – or less – games.”

IF the Big Ten can get the same amount of money for the other half, you’re talking $500 million per year for the league’s Tier One rights, or nearly $36 million per school.

This does not include the package of games you’ve come to know on the BTN; those are the Tier Two rights, which are under contract through 2031-2032. That was a 25-year, $2.8 billion dollar deal with the BTN, in which FOX owns a 51% stake.

Do you see the synergies? The Fox stake in the BTN has always been a ‘clue’ as to where this all was heading. Fox has a legion of regional sports networks (RSN’s) and is making another attempt at a national sports channel ala ESPN, in FS1. It also has a national broadcast network in its over the air Fox network, like ESPN has with sister network ABC.

Let’s take on a few angles and aspects to this ‘news’ and what it could mean, plus some fun speculation.

PRESSURE ON ESPN: The news from this fall that ESPN had lost 7 million subscribers the past two years sent ripples through the cable television community. Cord cutting had begun to take a bite out of the ‘cable bundling’ monopoly/system, and in a big way. DVR’s and ‘time shifting’ viewing habits have also put a pinch on advertising sales, as viewers can fast forward through advertisements. ESPN parted ways with several big names and laid off scores of other employees in the midst of the carnage.

The last bastions of ‘live watching’ programs are interactive reality TV shows like ‘American Idol’ ….wait, that show was just cancelled, too. Welp. The last bastion, the saving grace, is live sports on television. The drama of live sports is not something that you can replicate anywhere else in the world of television.

Have you ever recorded an Iowa game (or that of your favorite sports team), sent texts to all your buddies and family to NOT TEXT ME ANY SCORES OR UPDATES! I’ve tried that, and it usually fails, because I forget to turn off push notifications from a sports app or something like that, or a long lost friend from Illinois texts me a taunt if Iowa is not doing well, etc. So you have that, but you also have something else which makes watching sports live an absolute must for the modern and technically savvy sports fan: Twitter.

Twitter has its shortcomings, but it is a must have companion during live sports. When you watch a game on replay, aside from risking the loss of drama from a spoiler text or phone call, you also miss the interaction with fellow sports fans on Twitter that happens between plays and timeouts.

So live sports is the trusted and last haven for regular run television advertising. ESPN is a sports entertainment network, whose ‘entertainment’ shows don’t move the needle (I’m looking at you, Skip Bayless) to pay all the bills. The live sports, and rights contracts, those do pay the bills. Those are bankable commodities and what will keep folks from cutting the cord and moving away from the traditional cable and satellite bundles.

This is especially true with the BTN on some cord cutting platforms now.

Will ESPN pony up and pay big time dollars for the ‘other half’ of the Big Ten’s Tier One rights? You can put that on the board; YES they will, even if it is through gritted teeth. A friend of mine texted me this on Tuesday:

‘How do you continue to call ESPN the world wide leader if they don’t have NBA Finals, World Series, Super Bowl, Stanley Cup, BCS, Final Four etc?’

Sure, they have the SEC Network and the rights to the second most valuable sports conference in the country. But the Big Ten still has the majority of the eyeballs pursuant to the top TV markets in the country, cumulatively. 25 or 50 years from now, that could be a different story as the population base keeps moving south, so something needs to be done there. More on that in a bit.

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GO WHERE THE FOOD IS!  The alumni bases of Big Ten schools are the biggest, which leads to generations of Big Ten alums and eyeballs and helps you to understand the magnitude of the bat Jim Delany has to swing.  Point your peepers to this:

Screen Shot 2016-04-19 at 8.41.40 PM

The average Big Ten school has nearly 10,000 more undergraduate students than the average SEC school. That’s a big difference.

Penn State has the largest living alumni base in the nation, at over 600,000. Indiana has 580,000 while Michigan has 540,000. Ohio State has over 500,000, as does Minnesota. Rutgers is over 450,000, Minnesota over 435,000, Illinois has over 420,000. I stopped looking.

Auburn? 200,000. Heck, Iowa has 251,000 living alums and they are one of the smaller schools in the Big Ten.

Eyeballs.

START UP THE EXPANSION MOTORS? What, you thought this topic was dead? Nonsense. It’s not dead until the Big Ten says it’s dead. Will the Big Ten expand again? Absolutely it will. When will that be and who will they bring in? That is the part to be determined.

Texas, who has their own Longhorn Network tie with ESPN (though it has been a bit of an embarrassment thus far), has to be looking at this Big Ten deal with envious eyes, as does Oklahoma President David Boren, who seems all to eager to look for ways to distance himself from the Big 12. Kansas would like in on the Big Ten action (as would Oklahoma). It’s been rumored that Big Ten commish Jim Delany covets his alma mater North Carolina. Georgia Tech has been a rumored Big Ten expansion target in the past. Notre Dame has turned the Big Ten down time and again, but recently ‘joined’ the league for hockey, possibly beginning a long thaw between them and the league.

The Big Ten has the chance to position itself for the future with this next round of expansion. Forget that Rutgers has been an embarrassment on and off the field/court; they bring the New York TV market. It doesn’t matter how many eyeballs you think are actually coming from that market; that’s how you get to $250 million per year for 50% of your Tier One rights, because the TV networks know the numbers. Maryland brings the DC market and those eyeballs, and ditto for the impact.

Texas would be the master stroke for Jim Delany, his ‘endowment’ for the future of the league, if he could lure the Longhorns into the fold. To land them and Notre Dame would be the two best financial options. But I will take Notre Dame at their word until I see different; we’ll leave them out of the mix. Oklahoma would be a great tie in with Texas, stick them both in the Big Ten West and send Purdue to the East and you have a balanced football conference again, along with two of the winningest programs in the history of the sport, which would give you six of the top ten in all time winning percentage

1 Notre Dame
2 Michigan
3 Ohio State
4 Oklahoma
5 Alabama
6 Texas
7 Southern Cal
8 Nebraska
9 Penn State

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Kansas would be on the next tier, as they bring the most storied program in the history of college basketball with them as well as the Kansas City TV market, which ranks 33rd in the nation. Dallas is #4 and Houston is #10, by the way. Oklahoma gives you Dallas eyeballs, too. Here is a list of the largest TV markets, and you can see the number of ‘Big Ten cities’ listed:

Screen Shot 2016-04-19 at 7.25.27 PM

See Atlanta at #9? Yeah, Georgia Tech is located in Atlanta. It’s also in the heart of SEC Country. It’s also a great academic institution, one the ‘academia’ side of Big Ten universities. But don’t short shrift the ‘B1G in the Heart of Dixie’ side benefit here. Still, Georgia Tech would be a fantastic addition to the Big Ten in terms of television value and expanding into the belly of the SEC beast.

Charlotte is #22 on that TV market list with Raleigh-Durham #25. Two great metro areas, with the Raleigh-Durham research triangle a great, great fit for many reasons.

If Delany is truly a mob boss in disguise, he takes the Big Ten from 14 to 18 teams, brings in Notre Dame, Texas, Georgia Tech and North Carolina, drops his mic and Dave Revsine utters ‘Pay zee man hizz money’. Paul Finebaum’s phone lines melt into a Chernobyl-style magma.

In Nate Silver’s 2011 look at the most popular college football programs, 7 of the then 12 Big Ten teams ranked among the Top 20 (including 6 of the top 15), while 4 of the then 12 SEC schools figured into the Top 20. The SEC added Texas A&M which made it a 5th for them in the Top 20.

Georgia Tech ranked 11th. Texas ranked 5th. Notre Dame ranked 4th. Oklahoma ranked 19th.

The Big Ten is going to expand. Time and schools to be determined.  Delany will not go quietly into that good night.

PS: Remember that part about why ESPN is going to pay up for the other half?  See the TV market graphic again, with all of the Big Ten markets listed.  No brainer, and Delany’s splitting the Tier One rights in half is a master stroke of genius; he just drove up the price ESPN will have to pay to get half the inventory it once had.

MEET THE NEW BOSS, SAME AS THE OLD BOSS  If you haven’t listened to this week’s HN Podcast with Miller & Deace, you might want to give it a spin. Deace talked about how he felt the Big Ten had to stay on ESPN, as a matter of some relevance.  He made a good point, and seeing how Delany split the Tier One rights in half makes me think Deace was laying down what Delany and others had taken into consideration for the near term.

At this point, I don’t think you want to abandon ESPN entirely.  They are still the Worldwide Leader, and they are an incredibly powerful brand….until they are not, and until a worthy alternative has its legs underneath it.

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How do you find that worthy alternative when it doesn’t exist?  You help build it, of course.  What is the timeline for helping to build that alternative to the point where you can leave ESPN and it’s SEC ***kissing in the dust?

Oh, about six years….or exactly when the Big Ten’s Tier One rights will likely come back up for bid.  It would be hard to imagine that other half of the Big Ten’s Tier One package will be for any longer or less than the six years Fox will reportedly get.  You keep those things tied together and on the same timeline for the strongest negotiating leverage.

The Big Ten eyeballs helps to legitimize FS1 over the next six years.  FS1 and Fox RSN’s go out of their way to make sure the Big Ten has most favored nation status on their highlight packages, promos, featured programming, you name it.  Keep Clay Travis around on the website as your token SEC shill, by all means.  And I like Clay, by the way, and I look forward to his spin on all of this. In a few years, he may be giving his opinions on the first legitimate sports television rival to ESPN, in large part thanks to the Big Ten.

No, entirely thanks to the Big Ten.

Bottom line: Fox is in position, HAS BEEN in position logistically, to take a run at ESPN. Their RSN’s are a built in geographical network that the conference who has the largest collection of living alumni can a) take advantage of and b) help grow.

While Fox will pay the Big Ten a LOT of money, it’s basically a two-fold investment:

1) Sell advertising and make money
2) Pay the Big Ten to be a de facto business development arm for Fox Sports

Six years, folks. In six years, Fox will either be able to stand on its own legs against ESPN, aided by Big Ten fans, or it won’t.  If it can’t, ESPN will still want the league’s Tier One rights. Either way, the Big Ten will win again in six years.

And if the TV landscape has changed in tectonic fashion by then? I guess I think 20 million Big Ten fans would pay $5/month, eight months out of the year, for an ala carte BTN viewing subscription. That’s $800 million dollars per year, or $57.1 million per school. The kids are alright.

ONCE THE SMOKE CLEARS:  Assuming ESPN/ABC picks up the tab for the other half of the Big Ten’s Tier One rights, you’ll have Big Ten football on over the air national channels on Fox and ABC every weekend,  perhaps even three games per week on free, over the air channels.  In that same week, you’ll have one national prime time game on the BTN, and at least one national game on ESPN or ESPN2.  In that same week, you’ll have at least one Big Ten game on the national BTN channel during the day, possibly two on some Saturday’s.

The SEC will be able to match this, given their national deal with CBS, the ABC/ESPN family and the SEC Network, but the Big Ten is now back on (at worst) an even playing field in that regard.  For the folks worried about a negative impact on Big Ten recruiting if they appear less on the ESPN family of networks, the league will be just fine with regards to national exposure.

Will we see two Big Ten games running on prime time Saturday nights, one on the over the air Fox channel and one on BTN or ABC?  Possibly more often than not, especially since the Big Ten is moving to nine-conference games per year as opposed to just eight, which is another ma$ter$troke move by Diamond Jim Delany

While the Big Ten and SEC can boast similar national exposure platforms (that no other conference can approach), Big Ten schools will get paid more money for similar reach.  A lot more money.  Remember how gaudy those $45 million per Big Ten school payout stories seemed?  The number may wind up being higher than that.   One media outlet thinks Big Ten schools could receive $60 million per school starting in 17-18, regardless.

Oh by the way, the year before the BTN launched, Big Ten schools received roughly $14 million per year. That seems like ancient history, as does the year before the BTN launch when BTN Mark Silverman made himself available to every sports talk show host and newspaper reporter from Council Bluffs to Punxsutawney; I had him on my show several times back then.

Forbes named Jim Delany the most powerful man in college sports in 2015. He’s flexing his muscles now, and while ESPN may not look like a target, it was and I believe, still is somewhat personal for Delany.

It was ESPN who rolled the dice with Delany and the Big Ten in 2004, offering Jim a ‘take it or leave it’ offer. Delany famously said, ‘consider them rolled‘.

Now, Delany is cruising down Lake Shore Dive with a pair of fuzzy dice hanging from his rear view mirror and ESPN will have to pay the his asking price….or risk becoming just ‘The Southeast Leader’.

Do you like apples, ESPN?

How ya like them apples?

LATE ADDITION:  This link will take you to a companion piece, which sheds lights on more of the potential impact for this deal on Fox, the Big Ten and the landscape of college athletics.  It’s a good read.

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