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June 8, 2010

Where does A&M fit in the realignment picture?

Two weeks ago, our treatise on expansion started off with discussions on the chances of the Big 10 landing Notre Dame because everything that is going to happen in the coming weeks and months will flow from that decision. As of now, we start with the Irish once more and where they stand before proceeding into the Big 12, Pac-10 and Texas A&M.

Other dominoes could fall first

With everybody focusing on ultimatums to Nebraska and Missouri that expire this weekend, it appears that Notre Dame probably holds the key to the disintegration of the Big 12. Rivals.com's Pete Sampson, the publisher for the Notre Dame site on the network, indicated that if Notre Dame had to give an answer today that it would be "no." Most other observers feel the same way, albeit with one or two exceptions. Notre Dame got to be a national power by being an independent and it would be difficult for them to give it up. The feeling is that additional schools are going to have to be invited into the Big 10m thus undercutting Notre Dame's bargaining power, for the Irish to finally say "yes."

Assuming a negative answer from Notre Dame, it is thought Missouri and Nebraska will receive a call from the Big 10 in order to begin the encirclement of the Irish. At this point, talks with people Missouri publisher Gabe DeArmond indicate that Missouri is all but gone and has been for some time.

Nebraska might be an even more interesting story. It is thought that, because of Nebraska's winning tradition and record within the Big 12, that the North could simply not replace them if they left and that it would effectively kill the conference, thus freeing Texas to lead the way to the Pac-10. More interestingly, however, is the fact that Nebraska and Texas have spent most of the Big 12's history at odds with each other, starting with the fact that Nebraska recruited nationally in the Big 8 because it could bring in partial qualifiers. That spigot was turned off by Texas, A&M and Colorado, which led the way to banning the admission of partial qualifiers. Nebraska was unable to recruit nationally as effectively as it did prior to the formation of the conference and also had to start recruiting the state of Texas more heavily. Although it hired coaches with Texas ties, it still could not compete with Texas or Oklahoma head-to-head for top prospects because of distance. This impacts winning which in turn impacts the number of people who watch you play and eventually imapcts revenues. For this reason alone, Nebraska has plenty of incentive to leave the Big 12.

Another reason is the existing Big 12 television contract. Although the Fox portion of the contract is up for renegotiation in next year, Texas would like to build its own network and encourage other members to do the same. The only question is, how would such a network benefit the other members of the Big 12? Nebraska already farms out games (non-football) within the state, and Oklahoma probably can do the same. Even then, no one knows how lucrative that would be for Texas or how long it would take to generate revenue from it. Nonetheless, Texas's revenues from the Big 12's TV package and it's own network could probably come close to what another conference would be willing to pay the Horns and no other school in the conference is even remotely in that position

Given the uncertainty that Nebraska sees in its own future and the need to recruit nationally, it is hard to see them looking at their situation and thinking that they gain much by staying. No one at Nebraska is talking, but odds are that they would be willing to gamble and simply let Friday's 5:00 p.m. deadline pass.

A&M fits with SEC, but the move is not likely

Continuing down our flow chart, we are finally getting to Texas A&M. Here, we must diverge from a moment and tackle an emotional issue - the SEC.

Ever since A&M and Texas were poised to part ways in 1994 with the Aggies heading to the SEC and Texas to the Pac-10, A&M fans have been left to wonder what might have been (especially given A&M's football fortunes in recent years). The SEC is a football conference and seems to be tailor made for A&M's fan base. A&M has a southern culture and the city with most of their former students, Houston, is essentially a southern city. Most of all, A&M fans feel like that they would have been out from under the shadow of Texas, flourishing in a different conference much like Florida and Florida State have nationally and using the lure of playing in the SEC to out-recruit a school playing in a less prestigious conference with later start times.

Nonetheless, the chances of A&M playing in the SEC now are far worse than when Texas Tech and Baylor maneuvered A&M and Texas into the Big 12. There are several reasons for this.

First, when the Big 10 was discussing expansion and Ohio State President Gordon Gee said in emails between himself and commissioner Jim Delany obtained via open records requests that Texas had a "Tech problem," that meant that even as powerful as Texas is perceived to be, it would be difficult for Texas to go anywhere without Texas Tech due to state politics. This is evidenced by the fact that Texas Tech received an invitation early on from the Pac-10. There really wasn't much of a reason not to stagger the timing of the invitations and at least see if Tech could make life difficult for Texas in that regard. The same thing can be said for Oklahoma and Oklahoma State. Thus, if Texas cannot leave on its own, it is even more doubtful that A&M could.

Second, it is our understanding that in order for the SEC to invite A&M, the Aggies would have to bring Texas along. Like it or not, Texas is perceived to be able to deliver the state of Texas in terms of its television market. A&M is not perceived to be able to do that by itself and the SEC would be hard pressed to generate additional revenues in its television contract to justify such a move without Texas. In addition, the SEC has publicly declared itself to be satisfied in its existing state from a logistical and financial standpoint. Plus, for various reasons such as academics and concerns about the SEC coming into the state to recruit, Texas is not going to the SEC.

Third, although there are certain factions within the A&M hierarchy that favor the SEC, most notably regent and former A&M and Alabama football coach Gene Stallings, the key players with the A&M system favor the Pac-10. Although nobody is talking at A&M about expansion right now, athletic director Bill Byrne was formerly the AD at Oregon and is originally from the Northwest. A&M's current president, Dr. R. Bowen Loftin, is an academic guy and would naturally favor a strong academic conference. In addition, even though a good number of donors and administrative people like the thought of going to the SEC, they will defer to A&M's leadership on this.

So, it's the Pac-10. It was reported last week by the Austin American Statesman that Byrne told people within the athletic department to be prepared for a move to the Pac-10. We have also confirmed that word is around the athletic department that the Pac 10 is A&M's eventual destination.

Follow the money trail

So what does the Pac-10 bring to the table? Money.

Their existing television contract is up for renegotiation in 2011. It has become apparent that a conference can best maximize TV revenues by doing its own network. ESPN paid the SEC lots of money to forego this option. However, what makes the network option the most profitable is that the network's channels would be included in packages to subscribers. These subscription fees are supplemented by advertising revenues. For example, the Big 10 network generates nearly $6.5 million to member schools which is about one third of all conference revenue streams on an annual basis.

Not only that, the network receives $0.88/subscriber in its geographic footprint and $0.05/subscriber outside its footprint. With about 68 million people within the Big 10's footprint and about one fourth of those being subscribers, it's not hard to do the math on what you could generate in the Pac-10's footprint with a population of 90 million (the SEC currently has less than 60 million). That does not include the exposure from hundreds of games every year both within and outside of your footprint. Ultimately, sources indicate that the annual payout would be $20 million per year per team which is more than the SEC pays now and may be able to pay in the immediate future.

Keep in mind that former Big 12 commissioner Kevin Weiberg left the conference largely because he could not get its members to form a network. He went to the Big 10 network and helped launch it and now he's with the Pac-10, largely assuming the same role as its COO. Weiberg's connections have helped put this merger together. For example, it has been reported to us that discussions between A&M, Texas and Tech on this matter have been going for more than two months and that Texas officials met with Pac-10 commissioner Larry Scott and Weiberg two weeks ago. Besides Weiberg, there are additional connections between highly placed individuals of the member schools in each conference. For example, Texas president Bill Powers is a graduate of Cal. In turn, Cal president Mark Yudoh was previously chancellor at Texas.

Academics are part of it, too. Seven Pac-10 schools are members of the American Association of Universities, a prestigious group which helps its member schools generate research dollars. A&M and Texas are also members of this group. Also, travel costs with two eight-team divisions will be minimized since most of the Texas and Oklahoma schools can continue to play each other most frequently. The same can be said for the California and northwest schools.

Moves coming sooner than later

So when will everything start to occur? The deadlines for this weekend are quite real and if Notre Dame turns the Big 10 down and Nebraska and Missouri accept, then we should know everything within the next 10 to 14 days. Given the fact that the new TV contract would not go into effect until 2012 at the earliest, it is anticipated that the summer of 2012 is when member schools could start competing against each other.

The main question remaining is if Baylor has a chance to replace Colorado and perhaps wreck the Pac 10-Big 12 merger. Scott, the Pac 10 commissioner, has already been given the green light to invite whom he sees fit in order to the merger going. In addition, while schools like A&M have been preparing for this for over two months, Baylor is that far behind in trying to rally support. Some people think that they are making progress in that regard but as of right now Baylor does not have an invite if the invitations went out today.

Finally, why would the Pac 10, which like the Big 10 prides itself on its academic standards, issue invitations to non-AAU schools like Tech and Oklahoma State when Big 12 AAU schools like Kansas are available? Again, it goes back to money. The conference's athletic departments are running in the red like many others across the country. In addition, the state of California's budget crisis has hit athletic departments hard. Even Stanford (a private school) saw the value of its endowment decline 30% during the past year and cut 21 positions in the athletic department.

As a result, a conference that might normally settle for an ACC-style contract paying $13 million a year is forced to compromise its standards in search of the biggest payday possible simply in order to make ends meet.

In the end, it is ironic that Texas A&M athletics may stand to benefit from the current economic downturn which has touched A&M athletics itself. Even then, as long as the SEC is out there just over the horizon, beckoning, it's not the benefit that most Aggies are seeking.

Nonetheless, it will probably have to do.




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