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May 1, 2013

Kyle renovation, SEC Network changes the game for A&M

Tomorrow morning, SEC officials will gather together to finally the announce the specifics regarding the long sought after development of the SEC Network.

When Texas A&M announced that it was leaving the Big 12 in 2011, I always said that it was business, not personal. Both of these events will be evidence of that because if we've learned one thing on the business side of sports the past few years, there's two primary generators for a athletic program or sports franchise: your stadium and your television contract. The Aggies are poised to hit a home run on both fronts.

The redevelopment of Kyle Field will deal with structural and safety issues from a physical standpoint that probably should have been addressed years ago. However, the fact that the redevelopment has been put off until after the opening of Dallas Cowboys' stadium means that everyone involved got an opportunity to see how a stadium could be designed to generate revenue. Those individuals involved have taken that to heart and as a result you are going to see a stadium that's geared toward high end suites, seating, and service that will be pricey. However, that's where the money is these days.

Suites will be going for seven and eight figures and there should be over 100 of them, not to mention covered club seating, each seat bringing in thousands of dollars. There will be not one Zone Club but three equivalents, one of them extending the length of the east side of the stadium.

People will be permanently losing the seats that they have become accustomed to and the cost of being an A&M is going to increase exponentially. It's the price of doing business in college football.

On the television side, the SEC Network is coming to a region with a footprint of approximately 90 million people and about 30 million households. In addition, it includes two of the big four states in population (Texas and Florida), the only conference outside of the ACC that can do so.

Reportedly, the Big Ten is able to obtain about $1.00 per month for the channel within its footprint and a significantly reduced amount per month for households outside of it. If ESPN/SEC is able to do the same thing, then you are theoretically looking at gross revenues from subscriptions alone within the SEC's footprint of $360 million annually. Since ESPN is putting together the infrastructure like Fox did for the Big Ten, they'll take about a 50% cut of that which would leave the conference with a mere $180 million or $15 million per team for their third tier rights. That doesn't include revenues from advertising, nor does it includes revenues from subscribers outside of the footprint so it's actually a conservative estimate.

If you are wondering if this projection is from fantasyland, last year, the Big Ten distributed $284 million to all 12 members or an average of nearly $24 million per program (Nebraska is not yet getting a full share since it joined the conference in 2011). This distribution is for all three tiers of each school's media rights from ABC/ESPN and the Big Ten Network. That's a reportedly tops in the country and doesn't include households in states such as Maryland and New Jersey…and the University of Maryland and Rutgers will be joining the conference to add as much as $100 million in net revenues to the conference. In fact, knowledgeable observers project that the Big Ten's total payout could be in the range of $30 to $35 million annually per team by 2014.

Currently, the SEC's first and second tier deals with CBS and ESPN bring in roughly $20 million annually per school with each school currently having a different deal for their third tier rights which could bring in another few million depending on the individual school. With the addition of a conference network , now you are looking at a payout of $35 million annually (per out conservative calculations) for each SEC team to (what we have been told) as much as $40 million annually.

As you can see, the numbers we calculated are easily supported. They are not going to be achieved right away as ESPN has to negotiate with individual providers to get the SEC Network into their premium packages which won't be easy, even with a year's head start (the network won't begin operations until August 2014). However, no one is questioning their ability to eventually succeed given the fact that ESPN already charges far more for its lineup than any other network out there and has been involved in these kinds of negotiations since its creation over 30 years ago.

Overall, A&M's move to the SEC is looking better and better every day from a financial standpoint. The interest created by playing in college football's best conference has already generated increased donations to the A&M athletic department but has also served to provide an impetus to donations and interest in the Kyle Field project. By adding another eight or nine million households within the state of Texas for television, A&M alone may have made possible the creation of a conference network that will be a monster revenue generator, something that would have not been otherwise possible either for itself or other SEC members had it stayed put.

Gone are the days of long lines at concession stands with limited choices for food and beverage or wondering if this week's A&M game would even be on television. A&M fans will now be able to watch the Aggies in either a state of the art stadium with all kinds of modern amenities or on television in the comfort of their own homes on high definition networks.

The move to the SEC is a business decision will eventually benefit every A&M fan out there in a personal manner. From that standpoint alone, no other move in realignment has better for an athletic department or fan base than A&M's to the SEC.


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