The Oklahoma Factor

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After Oklahoma President Boren went on a PR campaign about the Big 12 needing to expand and start a network last week, I was inundated with questions that were all over the map.   However, this was, by far, my favorite:

 

Monkey Mail February 1 2016

 

Well, Anonymous, if that is your real name, what is going on with Boren is he is starting a political chess game within the Big 12 that could dictate the future of the league.  No one I talked to in the past week thought Boren’s comments were a “do or die” message where Oklahoma was going to take its ball and leave if it didn’t get what it wanted and he has softened his approach since then.   However the macro message was clear; Oklahoma wants massive proactive changes in the Big 12.

It does not necessarily mean that Oklahoma wants all the things it is asking for because, most notably, all of those things added together don’t necessarily improve the Big 12’s current position and may actually hurt it in the long run.   What is clear though is he wants the Big 12 prepare for something big, real big.   What it is, however, seems hidden in the message.

The best speculation I received back from non-revenue coach at Oklahoma is that everything said is a negotiating tactic with Texas.   How it works is if Player A pushes that the team needs something that it can’t have because Player B has it and the only way the team can get it is if Player B gives it up to the team, well then Player B is in a lose/lose situation.   Either you need to provide me what I want, deny me what I ask and risk infuriating the team, or placate me by offering me something else of value to let this particular topic go.

That last part is where I think the truth in this situation relies.  Oklahoma wants Texas on board with expansion and is willing to offer up its Tier Three to get it.  Oklahoma’s deal with Fox pays the Sooners what the SEC receives for the SEC Network and Oklahoma does it by providing less inventory than the SEC schools need to provide.  That’s a net win.  A Big 12 network is not going to bring in more money for Oklahoma than their current deal and it will also offer less exposure over all.

Think of it this way.   There are 8,760 hours of programing to fill at a network of that 16 minutes of every hour or about 25% of the total air time is commercials.  That leaves 6,570 hours of programing to fill.   In the SEC or Big Ten, that means that each school receives 469 hours of exposure on the conference network per year, or about 39 hours a month.  Oklahoma’s current deal is for 1,000 hours of exposure with Fox.  Even if you factor in advertising that comes out to be 59% more exposure for the Sooners in Oklahoma’s local area than a typical SEC school will receive in its local area.

And, at the end of the day, media deals are only a tool for exposure.   So if changing the course doesn’t provide more local exposure for all schools, but namely Texas, Oklahoma, Kansas and Iowa State who all have massive local exposure deals, why would he mention it?  Why would he desire it?

Similar to this, the Big 12 now has the option of staging a conference championship game with ten teams.  On this topic he made this specific point, “I would probably lean against it without expansion.”  This is the major reason for Boren’s outburst after the NCAA ruled the Big 12 could hold one without twelve teams and without divisions. The concern in Norman is that this would cause the schools who were unsold on expansion to kick the can down the road even further than it is.

League presidents are already extremely hesitant on adding a conference championship game, even with the change, just go get that 13th data point the other conferences share.  In the history of the conference when it had 12 teams and hosted a game, the top seed was upset nearly 40% of the time.

Additionally, many ADs believe that the reason that TCU dropped from 3rd to 6th in 2014 was because the conference did not choose a champion and let the playoff committee do it.  The committee then chose Baylor, who didn’t have a great body of work outside conference play and TCU, without the bonus given to conference champions, had to drop below the Bears.   Ohio State, who had a better schedule than Baylor, jumped to 4th.  Many in the room this week contend that had the Big 12 picked TCU as its champion, who had a better schedule than both Baylor and Ohio State (TCU’s only loss coming from a last second FG on the road at Baylor), the Horned Frogs would have remained third with the bonus that conference champions receive.

Things may change starting this week through about June, as the Big 12 brass meets several times, but as it sits today there isn’t a lot of support for a conference championship game with ten teams.  If there isn’t the support for a championship game and, as discussed, there isn’t an overwhelming reason to rework the member controlled rights for a ten team conference, why make such a splash about two topics unlikely to occur?

From what I can tell by poking around it is that Oklahoma wants to get back to twelve, but not for a conference championship game or home games or for easing competition.   These comments Boren made are not the reasons to expand, only ways to push the conversation and force people to the table.  So, what may be more important to consider is HOW Oklahoma wants to get back to twelve.

The Sooners, along with most of the Big 12, were caught off guard with the last round of realignment, unable to work together until it was too late.   They were reactionary instead of being proactive participants.  Boren, as the only Big 12 president around since the formation of the Big 12, is not willing to let history repeat itself.

The last time realignment took place, it happened over several years.  It was not an immediate event.  This is probably the most important part of the expansion puzzle, it takes time to get pieces in place and to lay the groundwork to expand.   This is Boren’s concern, not that the Big 12 has to be at twelve today, but that it won’t be ready if someone is interested in joining if it doesn’t plan ahead now.

In five years the Big 12 starts to negotiate its next media deal and, for the first time in the history of the conference, can take its Tier One (National) and Tier Two (National Cable) deals to market at the same time.   This is a far bigger deal than is often mentioned.   First, having them both out at once allows the conference to have much more leverage in any deal than it has had in the past.   And, second, the Big 12’s current Tier One deal with ABC/ESPN is vastly undervalued due to just being an extension of the old one.  With the SEC signing a new $6 billion deal over 20 years for all of their inventory (including the SEC Network) and the Big Ten taking everything not on BTN to bid in 2017, this means the Big 12 will lag behind the big two in a couple years until they can revalue in 2023.  Not in a gigantic degree, but a couple million delta by the time we hit 2020.   This delta is far and away more dramatic than any third tier rights package.

Forget all the talk about conference networks, that’s just a way to push negotiations with Texas, who leads the schools who are less interested in expansion.  West Virginia and Kansas State are in Oklahoma’s corner, while Iowa State is interested in expansion, but less interested in giving up Cyclone.tv.  There are a lot of moving pieces here.   What this is really about is preparing for negotiations for the next media deal and that really gets us to the heart of what Oklahoma wants.

You’ll hear a lot of buzz about Boren saying that you can add anyone right now to the media deal and it pays the same.   It is often interpreted incorrectly to mean that you could add Delaware and they’d be worth $20 million a year when they are only worth $1 million a year now, if that.  What the contract allows is the ability to sell more games at a set amount.   Currently any member can use this to sell their member controlled rights back to Fox.  It also means, with a four year buy in, the current ten members can keep their revenues the same until it is time to renegotiate a new deal.

That’s where things get a little sticky.  Because media deals and conference championship games are valued off the games you’ll be providing to the network.  If you have more good teams with big fan bases, you’ll be worth more.   If you have more bad teams with small fan bases, you’ll be worth less.  The reason the playoff is currently worth a lot of money is there is never an instance when the top four teams are not represented in the two playoff games.  This is simple supply and demand – if you rush to add two teams now, who are bad, you may make the same amount for the remainder of this contract, but you will have a lower demand for the conference championship game and in the future media deals you negotiate.  That’s bad business and not what Oklahoma wants.

To cut to the chase, Oklahoma has stated numerous times it wanted Louisville and feels the Big 12 missed a chance there, mostly because they fit perfectly between the current teams and West Virginia and were nearly free to grab, no major rights issues to worry about.  However, there is another team Oklahoma wanted badly for number twelve, still wants badly and has been talked to often over the past several years; Arkansas.

Adding a team like Arkansas, as opposed to a directional school, increases the Big 12’s media negotiations in 2022 drastically without really effecting the SEC’s valuation.  Arkansas and Louisville to fill out the remaining roster was the dream matchup out of Norman, however, the Big 12 was not in a place to invite Arkansas, still licking its wounds from the rest of realignment.   Oklahoma wanted the conference to take Louisville and stick at eleven to lure in twelve later, but that didn’t materialize.

If you look at what Boren is saying now, it is clear that the changes he wants to start implementing are due to conversations between Arkansas and the Big 12, case in point the conference network.

There are two groups of schools when it comes to valuations in Tier Three networks, the haves and the have nots.  Oklahoma is a “have”, obviously.  Arkansas is a “have not” in the SEC as the bulk of the fan bases are made up of Georgia, Bama, LSU, Florida, Tennessee and A&M. While a good sized school with a strong brand, Arkansas doesn’t sit in a massive market, being roughly the same size as Kansas and smaller than Iowa.  While the Big 12’s current “member controlled rights” format would be a massive draw for some “have” schools, like LSU or Kentucky, Arkansas benefits greatly by a regional network that provides it access into Texas, especially Dallas, as opposed to getting screen time in South Carolina.

The development of a Big 12 Network, at the same time as the Tier One and Two contracts come to market is a very complex issue and something the Big 12 won’t be able to do at the last minute, especially with the Longhorn Network being controlled by ESPN.  It is also a starting point for conversations between the Big 12 and Arkansas to address the schools concern with a move.  The Razorbacks have a great interest in playing more games in the Texas/Oklahoma area, not to mention getting out of the brutal recruiting wars in the SEC West, but won’t give up something great for something akin to napkin math.  It has told the Big 12, in no uncertain terms, that it is interested, but the Big 12 needs to get its act together first.

Additionally, several billionaire boosters for Arkansas and the Big 12 have been speaking to the Big 12 about ways to make Texas whole if LHN’s contract was ended.  Currently this is merely cocktail talk and nothing formal.  No one is looking to make an offer until the Big 12 can come to an agreement on the direction it wants to take.

Oklahoma wants to expand to twelve, but only by filling the last two spots with quality schools with big fan bases, e.g. Power Five schools.  Boren is indicating to the rest of the league that Oklahoma is ready to give up its powerful advantage by sharing its brand evenly, something the Big 12 has never done in its 20 years, and it wants the rest of the schools (namely Texas, but to a lesser degree Kansas and Iowa State) to do the same.

That is a major offer for Oklahoma to strengthen the Big 12; it is not a sign that Oklahoma wants to leave.   Boren knows that in order to expand with top candidates, who have been talking basics with the Big 12, the league has to come together, just like the Big Ten and SEC, who the Big 12 is closer to financially than the ACC and Pac 12.  Additionally, if the Big 12 wants to be ready to do this by 2022, the time to start talking is now, specifically February 4-5 in Dallas.

Stay tuned.

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©2016 Number Monkey Media

1 COMMENT

  1. Very interesting. So Arkansas is legitimately interested in switching over? That’s the big question. When I saw how well they dominated K-State in the Liberty Bowl, I was saying to myself that they could easily compete for the conference title on a yearly basis in the Big 12, as opposed to perpetually being the fourth or fifth best team in the SEC West. Plus they don’t have a GoR in the SEC to hold them back, so if the Big 12 could gets its house in order we could take them now. The question is if we hold at 11 teams for the better part of a decade until the ACC’s GoR expires so we can bring in Louisville. Or just go ahead and take Cincinnati as the 12th team…or even more compelling, see if Missouri would be willing to come back if they could be convinced that Texas will play nice.

    I don’t know how realistic Boren’s vision is, but at least he’s being ambitious and thinking big.