re: Conference expansion = more money?

Slive is putting together the Mother of all Deals but it takes time. He is leveraging multiple things to get the max long term return. How the SEC Network is set up is probably the most important thing from a long term financial perspective the SEC has. Do it the right way and you assure the SEC of long term financial dominance over the other conferences. Do it wrong and you could be stuck with a deal that has minimal impact.

The key to that deal is Slive is negotiating with ESPN to be the partner in the SEC Network. This has huge upside because it solves the content issues with ESPN also being the Tier 2 rights holder so they can essentially put anything but Tier 1 content on the network and thus assure it to be a quality channel that people want. The bar is to get it picked up in every major metro in the SEC Footprint as a part of the main TV package and to eventually charge $2 per month. If that happens, which it looks like it will, you are talking about a ridiculous amount of money for the SEC. There are 81 million people in SEC states and at least 50 million potential subscribers. So at $2 per month that is $1.2 BILLION in revenue. Take out the costs for the network and ESPN's share and you are still talking about $50 million PLUS per SEC school for something that SEC schools now make a few million per year on (UF makes a little more).

At the same time you have the Tier 2 and Tier 1 rights being renegotiated. The Tier 2 rights are the big dollars and that deal will likely get mixed in with the SEC Network but the numbers are going to be staggering. ESPN is all in with the SEC and with the SEC Network it will be far moreso. This is also where the SEC's biggest trump card lies. If ESPN doesn't give them what they want they can just say "Fine. We will star our own network and when our Tier 2 rights deal expires we will just take that content back and effectively kill your college football coverage." The SEC is the only conference that can legitimately make that threat.

On top of that you have the Tier 1 deal which is small potatoes in the big picture because it just isn't that many games. Latest on that though is this from the CBS Sports President: CBS President talks contract

quote:

---

CBS's deal with the SEC, negotiated in 2008, pays the SEC an average of $55 million over 15 years, according to the SportsBusiness Journal. The publication reported in May that CBS was balking at any significant pay increase because adding Missouri and Texas A&M did not change the deal.

"The relationship is really good," McManus said today. "We're talking about exchanging value and I think we'll figure out a way to satisfy what it is the SEC needs and what it is we need. There's no doubt we're going to come to an accommodation."

McManus said CBS currently can't add more SEC games, although that could change because of discussions to alter the U.S. Open tennis schedule. CBS airs the U.S. Open in early September before kicking off its SEC coverage the following week.

Viewership for CBS is usually driven by a team's national ranking, McManus said. After that, he said Florida, Alabama, Georgia and LSU have "enormous" national appeal, Texas A&M has become a "very attractive" national team and South Carolina is appealing, too.

Texas A&M, a surprising top-10 team, made only one appearance on CBS -- a victory over then-No. 1 Alabama. That game drew the network's third-highest viewership behind Alabama-Georgia and Alabama-LSU.

"Obviously, bringing in fans from a state as large and populous as Texas can only help," McManus said. "Especially when they have a player (Johnny Manziel) as dynamic and as nationally recognizable as there is with one of the great nicknames in all of football (Johnny Football). What's true about about any sport, including the SEC, is you never know where the big story is going to come from."

---

As the final cherry on top you have the restructuring of the BCS with the playoff system. With the massive increase in the payouts for the playoff teams (which could have 2 SEC Teams more often than not) and the elimination of the "No more than 2 teams per conference" rule you are talking about a dramatic change in the bowl payout landscape. Whereas now each SEC school will end up with around $4 million when all is said and done in a couple years that could be $20 million with 2 SEC Playoff teams and 2 SEC BCS teams (Sugar and Orange most likely).

So yes, it is true the SEC isn't getting any more money RIGHT NOW but that's just a matter of timing. Contracts this size take time to negotiate and to start paying out. The biggest positive/negative affect is the SEC has to be very careful about any further expansion to make sure it doesn't dilute the value of the league. That is why the only realistic adds are in North Carolina and Virginia, likely with VTech and UNC. The SEC is in no rush to add anyone though because they don't need to, they will only do it if they see the ACC breaking up that would force their hand to an extent.

All you really need to do though is look at the other major conferences and how they are managed to see just how absolutely brilliant Slive is. The Big 1G is the 2nd best league in terms of management but how would you feel if you were an Iowa fan and they were adding Maryland and Rutgers?

Aggressor--Excellent post.

One question. What is the possibility of the SEC negotiating with someone other than ESPN to be the partner of the SEC Network channel, say perhaps CBS? Is that perhaps a backup plan if the SEC and ESPN can't come to terms?

Whatever happens the SEC needs to retain a majority equity interest in the network, like the B1G has with the BTN. (Letting someone else own the golden egg-laying goose while you supply goose feed, you always run the risk of having your supply of golden eggs cut off. Owning a majority of said goose guarantees a future stream of income from golden egg sales.)

quote:

---

One question. What is the possibility of the SEC negotiating with someone other than ESPN to be the partner of the SEC Network channel, say perhaps CBS? Is that perhaps a backup plan if the SEC and ESPN can't come to terms?

Whatever happens the SEC needs to retain a majority equity interest in the network, like the B1G has with the BTN. (Letting someone else own the golden egg-laying goose while you supply goose feed, you always run the risk of having your supply of golden eggs cut off. Owning a majority of said goose guarantees a future stream of income from golden egg sales.)

---

It seems as though they are pretty far down the path with ESPN because that is really the best option. That said the most likely other options would be to simply do it completely by themselves and create their own brand or to go with Fox. CBS really doesn't have the right setup to be a good player here and there is a lot of value in keeping CBS as the Tier 1 rights holder while the other content is on different networks.

The ownership issue is a complex one that honestly I'm not smart enough to answer. In theory your assumption is correct in temrs of who owns what but realistically you can come up with plenty of protections to allow for ESPN to have 51% if that is an issue. For instance most corporate structures allow the majority owner to make lots of decisions but most major decisions require 2/3rds or 3/4 vote for approval. The benefit to ESPN getting 51% is it keeps the SEC out of the TV business while likely making the SEC the 2nd largest sports investment for ABC/ESPN after the NFL and thus they will be ALL IN to make it work and to push the hell out of it. It's incredibly complicated and thus another reason why it has taken so long, they want it done right because the long term affects are so significant. A seemingly small clause today could have a major impact 5 years from now either positively or negatively. That's part of why Slive has watched the Big 1G and what they have done and the LHN and what it has done to look at the right and wrong way to set up the deal.

Had the SEC not expanded it would definately mean less money due to Alabama taking a beating in the NC game by aTm..

quote:

---

Which leads me to my question, are the SEC teams making more money now? Is CBS paying more for the SEC rights this season? ESPN? If so, how much more? What about bowl revenue, nine teams last year, nine this year. Split 14 ways this year instead of 12.

---

Once the SEC network is enacted and the television terms with our broadcast partners are restructured, the absolute floor amount each team will bring home is $30M per year. The likely figure is somewhere around ~$40M with many pundits suggesting it will reach $50M.

HTH.

quote:

---

TAM was a no brainer. Missouri was a lame brainer. When we could have had WVU and the Pittsburg market, or NC State and the Raleigh market, or Louisville etc.

Missouri was plain crazy

---

Don't get the full amount of money for lets say North Carolina viewers because you'd have teams from the ACC and SEC in that state. You don't get the "PITTSBURG" market. It goes by the PEOPLE IN THE ACTUAL STATE!!! Not metro areas extending into other states.

Louisville, once again you already get the LOUISVILLE market with Kentucky. Learn about expansion and the money before speaking about markets.

Great link.

Aggressor, I'm modifying the Billy Madison quote for you:

Mr. Aggressor, what you've just said ... is one of the most informative, enlightening things I have ever heard. At no point in your concise, thorough response were you even close to anything that could be considered an irrational thought. Everyone in this room is now smarter for having listened to it. I award you full points, and may God have mercy on the OP's soul.

quote:

---

I kind of sorta expect CBS Sports Net to get a couple random games that normally would have been PPV.

---

Most of the SEC PPV games this year have been ran on ESPN3 / WatchESPN.

I have noticed that Alabama has been having fewer and fewer PPV games since the 90s though.