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April 23, 2013

Aggies now have the multimedia advantage

Yesterday's decision by the members of the ACC (including Notre Dame) to grant their television rights and revenues for 15 years to the conference itself effectively ends movement between the five power conferences (SEC, Big 10, Pac 12, Big 12, and ACC) into the foreseeable future.

When I first started covering realignment in the summer of 2010, the main goals of everyone involved was to maximize their revenues. In order to do this, certain markets became targets, most notably Notre Dame and the Texas schools in the Big 12. Remember that everything started primarily because the Big Ten was after Notre Dame and did everything that it could to entice them into the fold. At that time, they had 11 schools and Notre Dame would make 12, thus enabling them to have a playoff game. At the time, the Big Ten's fledgling network was almost an afterthought.

At the same time, the Pac 12 made a move to grab six Big 12 programs that would make them the first 16 team superconference and essentially lock up every major market between Texas and the West Coast. Both conferences were being paid substantially below market money for their media rights. The motivation of commissioner Larry Scott was to have a conference network with as large a footprint as possible. The network could become a part of certain premium sports packages (as with the Big Ten) in which subscribers within the footprint pay for the network even if they didn't watch it. The Pac 10's move ultimately fell apart as Texas A&M instead made overtures to the SEC before deciding to stay put in the Big 12. Colorado left and with Utah enabled the Pac 10 to get to 12 teams so that they could have a playoff. When Notre Dame resisted all of the Big 10's efforts, Nebraska was invited to the Big 10 and the Big 10 now had a playoff game but no Notre Dame.

Ever since that time, there have been some constants in realignment. The Big 10 continued to pursue Notre Dame and even poached programs from the Big East and ACC. The reasoning behind these moves was twofold: one, the Big 10 wanted to weaken Notre Dame's then current and eventual home and make either untenable as an option in realignment. However, in the process, the Big 10 network became a success much faster and on a larger scale than anyone imagined. Thus, the Big 10's emphasis shifted to obtaining a larger footprint to add subscribers that paid a higher amount per month than those outside the footprint regardless of whether or not Notre Dame could be enticed into the fold.

More importantly, everyone else began to gravitate toward the Big 10 and Pac 12's business model regarding a conference network. This was because the major networks more or less were tapped out after renegotiating the first and second tier rights for almost all of the BCS conferences from 2010 to 2012. Conferences and schools began to look for additional revenue and found it in their third tier rights, which could be bundled into a conference network with subscribers paying a monthly fee with an income stream that was far larger than what could be obtained via their first and second tier rights.

FBS (Football Bowl Subdivision) conferences have for years been subdivided into BCS (Bowl Championship Series) and non-BCS entities. The BCS schools had larger attendance and larger television contracts and thus generated far more revenue than the non-BCS schools. However, a new level of FBS conference has emerged…those with conference networks.

They are not the 16 team superconferences that everyone was predicting a few years ago because a playoff system was to be source of the money, not a conference network. Even so, the Big 10 and Pac 12 ARE superconferences all the same because they have their own networks which provide superior revenues and visibility. The SEC is set to join them in 2014. All three superconferences will have bundled their third tier rights into a network in which subscribers within the footprint are charged a fee per month that is much higher than those outside the footprint. As a result, overall revenues for individual members within the three conferences will eventually be far higher than those conferences without such networks.

In contrast, the Big 12 and ACC do not have a conference network (although the ACC does have its programming branded as such on ESPN). The ACC signed over all three tier of rights in 2011 to ESPN. However, sources indicated that ESPN would be loath to start another conference network so that it could sell the forthcoming SEC Network to providers. In addition, with SEC programming going to a conference network, it needed ACC content to replace the SEC content that was going way. According to Florida State president Eric Barron, yesterday's ACC's grant of rights may give ESPN enough confidence to launch a ACC network as well which would be a major boost in revenue and viewership to the conference.

That leaves the Big 12 as perhaps the only FBS conference lacking a conference network. Essentially, when ESPN agreed to start the Longhorn Network in 2011, it was paying for the Big 12's third tier rights except that all of the money was going to Texas. Since that time, each of the Big 12's member schools has consummated an agreement for their third tier rights. However, because they were negotiated individually and for a limited number of viewers per school, they are worth far less to the member institutions than the third rights for the members of the three superconferences. In addition, as ESPN and Texas found out via the distribution problems of the LHN since its launch, without a national or even regional (multi-state) following, it's difficult to find providers since just one school drives the content. As a result, the viewership provided by the LHN is far less than that expected from a conference network and is one reason no similar deals have been done outside of the Big 12 since its launch.

For the SEC, Big 10, and Pac 12, conference networks enhance both their profitability and visibility. This will eventually enable them to separate themselves from a competitive standpoint from the conferences without networks with better support and more money for facilities and coaches. In fact, one of the problems that ACC schools continue to run into versus SEC programs located in the same state is the difference in revenues. When the SEC Network finally launches, Big 12 programs (except for Texas) will have similar issues with Texas A&M and even Texas will lack the regional distribution of its product that the SEC Network will provide A&M.

In short, there's another gap opening up at the FBS level between the haves and have not's except that the have not's aren't accustomed to being in that position. In addition, with the Big 12, Pac 12, Big 10, and ACC members having granted their media rights and revenues to their respective conferences, this gap is going to become semi-permanent. From Texas A&M's standpoint, the move to the SEC and the coming SEC Network means that A&M becomes a have at the expense of its former rivals who will be playing in a conference that is perceived to be behind the SEC in most sports…a chasm that's in evidence in states across the south where SEC and ACC programs already coexist and one that's not going away any time soon.


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