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发帖数: 164 | 1 money, but where does it comes from? It is all about the tier three television rights.
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http://outkickthecoverage.com/sec-expansion-to-14-goal-its-own-
"I talked with SEC commissioner Mike Slive in detail at the SEC spring
meetings in Destin and again at SEC media days. He told me then that he had
a couple of revenue producing ideas that he'd formulated. I asked him if he'
d be willing to share those plans then and he wasn't.
But I think I know one of them -- Slive is going to pool the local
multimedia rights for SEC schools and create an actual SEC Network when he
gets the chance to reopen the CBS and ESPN contracts.
Let me talk about why.
1. The individual SEC schools retain the rights to at least 14 football
games.
I'm saying 14 because this SEC expansion wave is going to take us to 14
teams and each team retains at least one game. That is, every SEC football
game is available on national television except one. (I believe Missouri
will still be the 14th team and I'll tell you why later this week. That is,
if word hasn't already leaked out by then). Let's return to the Longhorn
Network. One of the things I've made fun of about the Longhorn Network is
how crappy the programming is.
There are 8,760 hours of programming.
But how many of those hours are going to be must-see? Only football, really.
(Men's basketball would be the second most desirable, but ratings for
regular season men's basketball games are minimal). This explains why there
hasn't been a groundswell of indignation in Texas over the vast majority of
cable providers not yet carrying the Longhorn Network. Even Texas fans aren'
t missing much.
But let's return to the SEC local multimedia package -- there are 14
football games dangling out there.
And if Texas is worth $15 million a year for one -- and potentially two --
football games, what are 14 SEC football games in eleven different states
worth? You can make an argument that every school, at minimum, would be
worth $12 million a year. (If I was the SEC I'd make the argument that it's
actually worth much more than this). But $12 million per school would bring
in an additional $168 million a year just off the tier three rights.
2. This is why the Texas and Missouri markets matter and make sense.
There has been lots of media talk about markets and television footprints,
but this makes less sense right now for the SEC. Why? Because the games are
already nationally distributed on CBS and ESPN. Ratings may well increase
now that a team from Texas -- and potentially Missouri -- is in the SEC, but
the actual market availability doesn't change. If you wanted to watch the
SEC game of the week in St. Louis, you already had CBS. Same with the night
game on ESPN in Texas. Now you may watch more if teams from your states are
in the conference, but the markets and television footprint argument makes
more sense in the cable subscription context. Why? Because when you add a
new market you get to increase the amount of subscription fee that you can
charge cable operators to carry your network in those states.
The more states you have teams in, the more money you make. As an example,
the Big Ten Network makes around .90 cents per subscriber in the eight
states where its teams are located. What does it make per subscriber in the
other 42 states? Try .05 cents.
Given that most of the SEC states view college sports as the primary
sporting focus -- unlike the Big Ten where pro sports still dominate -- the
SEC per subscriber carriage fees would be higher.
So expanding into Texas and Missouri makes tens of millions -- if not
hundreds of millions in the case of Texas -- of dollars and sense using the
network model.
The SEC would be able to charge premium carriage rates in eleven states:
Florida, Georgia, South Carolina, Mississippi, Alabama, Arkansas, Louisiana,
Tennessee, Kentucky, Missouri, and Texas.
Adding Missouri and Texas -- a combined population of 31 million -- would
move the SEC's population footprint in its states from 50 million to 81
million.
3. The SEC has learned from the Big Ten.
Mike Slive and other high-ranking SEC employees told me that the reason the
league partnered with CBS and ESPN was because they believed it was less
risky than starting their own network. In particular, Slive worried about
the battles that might ensue to get cable carriers in the SEC footprint to
carry the network. If those cable carriers were particularly difficult, he
believed that SEC fans would be furious over not being able to watch their
teams play and that fans would blame the SEC for being greedy.
But the Big Ten network has been a tremendous success and its battles, after
a fractious start, have been muted.
How much of a success is the Big Ten Network? Each school received $7.9
million in distributions last year. That might not sound like a ton, but it
represents a 21% increase over the previous year. Already the Big Ten
Network is poised to distribute more money to Big Ten teams than ESPN. How
much better could it get?
"Estimates by SNL Kagan suggest the network will continue to be a boon for
the Big Ten. By 2015, the BTN is projected to generate $333 million."
That's an insane growth rate.
Put simply, the Big Ten Network is kicking ass. And many of the issues that
the SEC worried about materializing, haven't. So the Big Ten, which owns 51%
of its network with Fox retaining 49%, has blazed the network trail. Mike
Slive has told me that he hopes by the time the SEC's television contract
comes up for rebid in 12 years that the SEC's own digital network is a
competitor with ESPN, CBS, Fox, Comcast/NBC, and which ever other bidders
are out there. But what if the SEC created its own actual network too?
Wouldn't that strengthen the network's competitive hand even more?
Keep in mind that the SEC retains the copyright to all the archival footage
created of its games. Can you imagine how popular an SEC Network would be in
the South? Especially the on-demand function? Want to watch any game
featuring your favorite team over the past several decades? Pick up the
remote. Want to watch an SEC-centric pregame show that doesn't spend time on
other conference games? Pick up the remote.
The sky is truly the limit with the SEC Network. (Right now ESPN uses the
name SEC Network, but the league is just syndicating programming. There is
no actual SEC Network. Indeed, there have been reports that the SEC doesn't
have the right to create its own tier three national network under existing
contracts. If true expect for that to be revised in renegotiations).
4. The SEC is expanding the number of conference basketball games it plays.
I just want to toss this in there because men's basketball is the second
most valuable property for a network to have. Right now the SEC plays 16
games, but the league will be playing 18, 20, or 22 in the future. That
means there are more games that it can get on its own network.
5. There are more bidders for SEC rights now.
In our spring meeting interview Mike Slive remarked that the Pac 12 had a
much more robust bidding environment for rights fees than the SEC did. In
particular he focused on the three bidders that the Pac 12 enjoyed: Fox,
ESPN, and Comcast/NBC.
Don't underestimate Comcast/NBC/Versus as a competitor. Fox and ESPN were so
worried about Comcast that they put in a combined bid to ensure that
Comcast didn't walk away with the Pac 12 rights. Other conference
commissioners took note of the Comcast impact on rights fees.
In fact, if I was at Versus, I'd have Mike Slive on the phone right now
trying to get him to put together a package of tier 3 games that I could bid
on.
If you're ESPN and you're nervous about your competitors and you're also
nervous that the SEC might make the same move as the Big Ten and partner
with Fox to create its own network, might you be willing to make a pitch to
create a partnership with the SEC on an actual cable network? Especially if,
as I've written before, you're terrified that your business model is in
trouble because if the leagues all create their own networks they don't need
you any longer.
A rights fee increase is important, but I think the SEC is looking much
beyond an increase in the CBS and ESPN television deals, this is about the
future, not reworking the past.
ESPN, CBS, Fox, and Comcast/NBC would all compete to partner with the SEC on
a network. The benefit to doing a deal with ESPN would be the same as for
the Longhorn Network. ESPN could move more of its current SEC rights to the
SEC's new network. That would drive demand and ratings for the SEC Network
even higher.
6. Selling the tier three rights as a group forestalls a Texas problem in
the SEC.
Mike Slive cares deeply about the SEC's legacy. One of the reasons the SEC
has been so successful is because of the equal revenue distribution model.
But that model only exists for tier one and tier two rights. What if down
the road a Florida or Alabama decided to create its own tier three national
network like Texas has done? What if Florida had an individual deal with
ESPN and wanted to show state of Florida high school highlights on its
network?
You think that wouldn't piss off the rest of the SEC schools?
Slive has told me that the biggest threat to the SEC's future doesn't come
from outside the conference, it comes from inside.
The Longhorn Network provided a scary future scenario for the SEC -- what if
every big state team in the SEC did what Texas did with its tier three
rights, sold their egalitarian soul for the most money it could?
The unique fabric of the SEC would be threatened.
The SEC can make sure a Texas problem never emerges in the league by selling
tier three rights. Yep, in essence the SEC can protect itself by making
more money.
7. What I want you to keep in mind as these contracts are reopened is this:
the SEC is incentivized to carve out space for its tier three rights.
Most media covers commissioner Mike Slive by remarking upon what he's saying
or doing. That's far too late for someone as smart as he is. By the time
Slive lets the media in, the narrative arc has already advanced anew. You
can't cover Mike Slive or the SEC by thinking about what they've done, you
have to think about where Mike Slive is looking next.
My bet is that his focus will not be on how much more money the SEC gets
from ESPN and CBS. He already knows that. I think he's already looking ahead
to the reopening of the existing contracts -- will the SEC fight to create
its own tier three network that could grow to include tier two game as well
in 12 years?
It sure as hell will.
Bottom line: The addition of Texas A&M and probably Missouri is all about
future contracts, not the currently existing ones.
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