2016 Big 12 Meetings
Alright, well, it has been an interesting Tuesday, that is for sure. Leading up into today every thing I’ve not only been told but everything calculated showed the Big 12 was much better off standing pat at ten than expanding, unless someone major hit the market (RE: LSU, FSU, Notre Dame, etc). Matter a fact, I had an entire article penned up talking about all the reasons the Big 12 put the breaks on expansion that was sent out on Tuesday and set to be released on Wednesday stating just that. Now, its all blown to hell.
So what happened to change it?
Thank the Big Ten and ACC.
As I mentioned on Monday, the Big Ten’s newly reported rights deal is basically the same as the Big 12 and SEC’s, combined. It is, quite literally, a stupid decision by Fox and ESPN and it will have ramifications on the industry from regular season rights to the ability for ESPN to convince the owners of the Sugar and Rose to let the playoffs have their spot.
At the end of the media days today the Big 12 announced it will add as many as four members and it will start taking applications immediately, including what they’d propse making.
Yes, you heard that right, they are asking the incoming teams to list what they’d be willing to be paid until 2024, or eight years from now. It is like an anti-bid or, at least, asking a team to honestly value itself. Someone like LSU could say “$35 million”, but could Tulane do the same when they make $3 million a year now? Not likely.
Coming into these meetings everything, including the Big 12’s leadership, was pointing toward happily staying at ten. The Big 12 does not want to expand with anyone. It is exceedingly happy with the ten team format and was excited to mix up divisions to seed a new championship game.
This change in desire is caused entirely by the networks and will likely be solved by them as well.
As it currently sits, the Big 12 negotiated a clause into its media deals that basically says any team that joins the conference would increase the total amount the conference received by one share. So, if the conference made $200 million in 2014 with ten teams, then they’d make $280 million if they added four scrubs. This is where that “bid down” comment resonates. If they find four tems that will be willing to take $5 million a year on averae until the end of the contract, then the current ten teams will add $60 million (or $6 million per team) to their take.
The thing is the Big 12 doesn’t want to add any teams right now, but with ESPN committing to the ACC Network and both ESPN and Fox paying stupid money for the Big Ten, that indicates that the ceiling for revenue within the college sports market is far from met. What the Big 12 wants is to be paid similarly, not exactly, to the rest of the market. As I mentioned in Monday’s article, a revolt is in process and the Big 12 may just be the first chip to fall. The SEC and Pac 12 are likely to find any leverage they can as well, even if that just means making the post season more difficult on ESPN.
The real question to come out of all of this is if the Big 12 doesn’t want to expand, why go public saying they’re going to add up to four teams?
The reason, per the Monday article, is leverage.
The Big 12’s ratings are not very far behind the Big Ten on a per team basic, especially when you factor that no other conference had as many games on FS1 as the Big 12. Due to that, the difference in per game payout should be minimal, 5-15% tops.
That is not what is happening, however. The Big Ten’s new deal is 157% of the current Big 12 deal. Add to this that the Big 12 inquired about adding a new network and there was little interest, now ESPN announces they are buying back the ACC rights from Raycom and Fox to start an ACC Network.
If you want to piss Texas off, show them how Purdue is worth more to ESPN than them. If you want to piss Oklahoma off show them how you want to broadcast Wake Forest lacrosse nationally, but not the Sooner’s Olympic sports, who just happened to roll in the titles this year.
This about face from the Big 12 has nothng to do with what the Big 12 wants to do, which is not expand, and everything to do with what the Big 12 has to do, which is force the networks to value the Power Five fairly.
By threatening to add four teams that ESPN currently pays $12 million for totally, the Big 12 will force the networks to pay 667% more than what they currently shell out. However, that payout is only for 50ish football games a year and 80% of the men’s basketball games. Expansion of this amount means the Big 12 will have 40% more inventory that Fox and ESPN would need to air to pay for the expansion. They can either do that on their current stations, which don’t have a lot of openings, or they can create a new channel for the Big 12.
All of a sudden teams which didn’t matter due to market on Monday are the most important thing in the world on Tuesday.
Coming into Tuesday the Big 12 only expanded with teams who brought value. Now, assuming they expand with whoever takes the least amount of money and is geographically friendly, the Big 12 can expand with whoever it wants. Adding Tulane, Memphis, Cinci and Temple not only injects the Big 12 into the ACC, Big Ten, and SEC’s footprint, all of which ESPN has a major stake, but it also adds major cable households to the mix as well. Louisianna, Tennessee, Ohio and Pennsylvania add millions of additional conference network subscribers and are geographically friendly, reducing travel expenses. Shift Tulane for Central Florida and the subscriber number skyrockets, even if travel becomes more difficult.
And this is only considering the easy pickings. The Big 12 has been contacted by over twenty schools already and some of them reside in the Power Five, including the Pac 12, SEC and ACC. Arizona and Arizona State make less on their media deal than Kansas State and will continue to do so for years. Bill Snyder implied that two old Big 12 schools had wanted to return. It is easy to infer that this could mean Missouri and Nebraska, but it could also mean Colorado. Even with their alumni base in California, having games on late in the Pacific Time Zone has eroded the Buff’s exposure. Expanding now with the Arizona schools and two of Colorado, Nebraska and Missouri makes a pretty solid line up, even if you need to deal with West Virginia’s distance. Speculation is rampant at the moment, but if Missouri left the SEC they’d be easily replaced with West Virginia, who is a much better geographic fit and marginally different in households due to residing in the Pittsburgh DMA. This would allow the Big 12 to add someone like BYU or UNLV and dominate the central and mountain time zones, leaving the Pac 12 to hold only the Pacific.
While it is fun to play this game of risk with college conferences, the fact remains that the Big 12 doesn’t want to expand. What it wants is to be provided similar exposure and media revenues to its Power Five peers. Making 20% less than one conference is no big deal year in and year out, but making half as much is egregious.
This announcement is less about Memphis and Cincinnatti and much more about warning the networks that the Big 12 can make these decisions much more painful. It is less expensive to pay the Big 12 matching revenue for the networks than it is to have to match revenue the Big 12 is slated to make with four more teams. It is less expensive to pay the Big 12 more for the Sugar Bowl, per Monday’s article, then it is to host the Playoff games on New Years Eve.
The initial rounds were fired by the Big Ten and the ACC, but were returned by the Big 12 today. It is only a matter of time before the Pac 12 and SEC follow suit causing the media landscape, as we currently know it, to change very drastically.
The Power Five media wars have begun.
If you would like to continue this discussion please visit this thread.
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