Big 12 could earn an additional $1 billion by expanding (Dodd)

[huskymedic]

dennisdoddcbs 10:01pm via TweetDeck
B12 expansion convo, well, expands. B12 could earn an additional $1 bill by adding 4 teams, CBS Sports has learned.

dennisdoddcbs 10:11pm via TweetDeck
Texas vs. $1 billion in expansion. Who you got?

Big 12 could earn an additional $1 billion by expanding

>>DALLAS -- Big 12 administrators will be presented with information this week at the league's spring meetings that expansion could earn the conference at least an additional $1 billion over the length of its remaining TV rights contract, CBS Sports has learned.

If the league expands by four teams, provisions in its contracts with ESPN and Fox provide money for that benchmark. If the expansion is by two teams, the increase would be $500 million.

Those rightsholders are contractually bound to provide "pro rata" for any new Big 12 members. That is, any new members would be paid an equal share of the current Big 12 members -- approximately $23 million per year. <<

 

[whaler11]

Doesn't that just mean the new teams would get the $500 million or $1 billion. Unless the current teams get more - why would they care the 'Big 12' gets another billion?

Do these CBS sources claim it doesn't matter who these four schools are? UTSA? ULM? Anyone they add gets $23 million a year for a decade?

 

[reddevilhusky]

God the Big XII makes me want to slam my head into a coffee table they are so disfunctional.

 

[browndog319]

Damn. That makes up for having to freeze your butt off in November in Hartford...

 

[UconnFamily]

The B12 would be idiots to not expand to 4 teams. $1 billion isn't chump change.

 

[jostar1]

Doesn't that just mean the new teams would get the $500 million or $1 billion. Unless the current teams get more - why would they care the 'Big 12' gets another billion?

Per the story:

"While on its face that doesn't necessarily help the 10 current members of the Big 12, opening the existing contract would allow for a negotiation beyond that $1 billion figure."

 

[jfuchs91]

This is why I never understood the argument about the expansion candidates needing to provide an additional $20M in value. Big 12 schools won't be losing money from expansion - they will, at an absolute minimum, be making exactly the same amount per school with a greater overall distribution.

In fact, conferences were largely created to act as rights negotiators for member-schools. Schools like TCU, Kansas State, etc. would be making nowhere near $20M if it weren't for the conference's collective bargaining. By selling all of the member-schools' media rights together, conferences can sell their rights for more. So, why wouldn't the Big 12 want to expand, increase the conference's overall income, and help reduce the revenue gap between themselves and the other conferences? If the "pro rata" clause is accurate, there's no reason for the Big 12 not to expand.

From what I've read from Big 12 administrators in the anti-expansion contingent, it seems that the motivating factor is merely arrogance. They can't see themselves as equals with lowly schools from the "Group of 5." I understand why Texas execs want to preserve the LHN, but I've read about other people from other schools not wanting to "elevate a member of the G5." That reeks of egotism and ignorance about the college media landscape.

If the powers that be in the Big 12 opt to forgo expansion, that conference deserves everything it brought upon itself.

 

[jostar1]

Do these CBS sources claim it doesn't matter who these four schools are? UTSA? ULM? Anyone they add gets $23 million a year for a decade?

From another story by Dennis Dodd:

Big 12's born again -- and feeling its oats sitting at 10, 12 or 14
May 30, 2012 8:04 PM ET

"The new Big 12 TV deal is expected to be announced any day, perhaps here this week as a celebration of the league's new-found strength. Within that deal is a clause that will give any new expansion candidates the same money as the current members (estimated to be at least $20 million per year).

One industry source said that number applies whether the Big 12 invites, "Appalachian State or Florida State."

 

[HuskyBandDad]

God the Big XII makes me want to slam my head into a coffee table they are so disfunctional.

I already have. Owe my wife new table.

 

[whaler11]

Per the story:

"While on its face that doesn't necessarily help the 10 current members of the Big 12, opening the existing contract would allow for a negotiation beyond that $1 billion figure."

That might be the most ridiculous thing written about conference realignment.

Fox and ESPN are going to pay above and beyond the $46/$92 million annually for the expansion teams?

It's more likely aliens make contact with Earth and want to buy the galaxy rights for the Big 12 at eleventy billion a year.

 

[whaler11]

If the Big 12 makes their media partners pay a billion dollars for schools they own for next to nothing - they would be digging their own grave. Fox and ESPN would spend the next decade doing everthing in their power to destroy everyone that forced them to spend that money.

 

[whaler11]

This is why I never understood the argument about the expansion candidates needing to provide an additional $20M in value. Big 12 schools won't be losing money from expansion - they will, at an absolute minimum, be making exactly the same amount per school with a greater overall distribution.

In fact, conferences were largely created to act as rights negotiators for member-schools. Schools like TCU, Kansas State, etc. would be making nowhere near $20M if it weren't for the conference's collective bargaining. By selling all of the member-schools' media rights together, conferences can sell their rights for more. So, why wouldn't the Big 12 want to expand, increase the conference's overall income, and help reduce the revenue gap between themselves and the other conferences? If the "pro rata" clause is accurate, there's no reason for the Big 12 not to expand.

From what I've read from Big 12 administrators in the anti-expansion contingent, it seems that the motivating factor is merely arrogance. They can't see themselves as equals with lowly schools from the "Group of 5." I understand why Texas execs want to preserve the LHN, but I've read about other people from other schools not wanting to "elevate a member of the G5." That reeks of egotism and ignorance about the college media landscape.

If the powers that be in the Big 12 opt to forgo expansion, that conference deserves everything it brought upon itself.

Nobody cares what the total conference revenue is. The per team rake is all that matters.

Expanding by this formula doesn't close the gap at all.

Why wouldn't they stick huge media companies with hundreds of millions in expenses understanding they have to sit across the table and negotiate with them in the future? That seems to be a fairly simple question of is the squeeze worth the juice.

 

[jfuchs91]

Nobody cares what the total conference revenue is. The per team rake is all that matters.

Expanding by this formula doesn't close the gap at all.

Why wouldn't they stick huge media companies with hundreds of millions in expenses understanding they have to sit across the table and negotiate with them in the future? That seems to be a fairly simple question of is the squeeze worth the juice.

The new teams would likely receive a reduced initial share that would increase the payout for the current conference members.

Also, I'm not sure how the Big 12 distributes its money, but in other conferences, the league office receives a share of the television money; a greater overall distribution means more money that goes directly to the conference, allowing an increase in conference marketing or whatever else they decided to use the money on. It only benefits the conference as a whole.

And stop with the idea that the media companies would hold a vendetta against the conference for expanding. Both the conference and the media companies agreed to the terms of the deal. If ESPN is upset that they have to pay more, they shouldn't have agreed to a pro rata increase if expansion were to occur.

 

[whaler11]

The new teams would likely receive a reduced initial share that would increase the payout for the current conference members.

And stop with the idea that the media companies would hold a vendetta against the conference for expanding. Both the conference and the media companies agreed to the terms of the deal. If ESPN is upset that they have to pay more, they shouldn't have agreed to a pro rata increase if expansion were to occur.

Yeah I'll just stop living in reality. Have you been paying attention to ESPN at all? They are going to be on the hook for hundreds of millions of dollars and they will just brush it off and blame themselves?

No offense but you have no grasp of what happens when you screw someone who is supposed to be your partner.

 

[jfuchs91]

Yeah I'll just stop living in reality. Have you been paying attention to ESPN at all? They are going to be on the hook for hundreds of millions of dollars and they will just brush it off and blame themselves?

No offense but you have no grasp of what happens when you screw someone who is supposed to be your partner.

I know you view most things from an ESPN point-of-view, but the Big 12 will operate in its own best interests.

Is ESPN no longer going to do business with Texas because the Longhorn Network is hemorrhaging money?

 

[huskymedic]

This was a strategic leak for obvious reasons and suspect there are a few pieces of the puzzle being intentionally hidden till Bevilacqua and group present on Friday.

 

[junglehusky]

Nobody cares what the total conference revenue is. The per team rake is all that matters.

Expanding by this formula doesn't close the gap at all.

Why wouldn't they stick huge media companies with hundreds of millions in expenses understanding they have to sit across the table and negotiate with them in the future? That seems to be a fairly simple question of is the squeeze worth the juice.

Question is - how much are those expenses, and how much more would they be than they are now.

 

[whaler11]

I know you view most things from an ESPN point-of-view, but the Big 12 will operate in its own best interests.

Is ESPN no longer going to do business with Texas because the Longhorn Network is hemorrhaging money?

I view things from both sides - this is why my posts have proven more accurate than pretty much everyone including those who claim to have inside contacts.

I have worked on deals worth hundreds of millions annually - I understand how to make deals and the reasons people make them.

The Longhorn Network may impact Texas' relationship with ESPN in the long term if the financials don't improve. It's a ridiculous comparison to expansion though because you are talking about losses in the tens of millions on the LHN and losses in the hundreds of millions on expansion.

 

[whaler11]

Question is - how much are those expenses, and how much more would they be than they are now.

I don't know what the Fox/ESPN payment split is - but for every AAC team that the Big 12 added it would be about $210 million over the decade in additional expense for Fox & ESPN combined.

Since ESPN has been letting 'personalities' go over a fraction of a percent of that money - I'm guessing they arent interested in paying Cincinnati or UCF 6x more than they do today.

 

[kibblesnbits]

Leveraging the terms of an existing contract is not screwing your partners. ESPN signed that contract knowing its terms and will live by them. Furthermore, these media companies are in business - they will bid for the next contract based on the value of those rights at the time the new deal is negotiated. It's called competition. They won't hand a valuable asset to a competitor by under-bidding in some sort of retribution gambit. Let's look at it another way - does anyone think ESPN will bid more for a future contract if the Big 12 does them a favor by not maximizing the value of the current deal? Hell no.

 

[whaler11]

Leveraging the terms of an existing contract is not screwing your partners. ESPN signed that contract knowing its terms and will live by them. Furthermore, these media companies are in business - they will bid for the next contract based on the value of those rights at the time the new deal is negotiated. It's called competition. They won't hand a valuable asset to a competitor by under-bidding in some sort of retribution gambit. Does anyone think ESPN will bid more for a future contract if the Big 12 does them a favor by not maximizing the value of the current deal? Hell no.

This couldn't be more naive. You are talking about hundreds upon hundreds of millions of dollars.

If you don't get the concept of a partner, I guess that is fine - maybe this is the kind of crap they teach in online MBA classes - it's not how the real world works.

The Big 12 would also be screwing Fox - so they would be running out of negotiating partners very quickly...

I get that people want to hold onto the UConn to the Big 12 dream but come on.

 

[kibblesnbits]

Naïve is believing that large corporations (and yes, I've worked for several, including as a senior executive) sign contracts without expecting their terms to be full exercised. I ask again, if the Big 12 members agree to forego tens of millions of dollars of revenue each (the new members would get a reduced percentage for most of the term of the contact leaving more for the legacy members) will ESPN make it up to them in future bids? There's no chance. So being a "good partner" in your world is a one way street.

 

[whaler11]

Naïve is believing that large corporations (and yes, I've worked for several, including as a senior executive) sign contracts without expecting their terms to be full exercised. I ask again, if the Big 12 members agree to forego tens of millions of dollars of revenue each (the new members would get a reduced percentage for most of the term of the contact leaving more for the legacy members) will ESPN make it up to them in future bids? There's no chance. So being a "good partner" in your world is a one way street.

If they withheld half of the money from the new members in a 2 team expansion it's a whole 2 million each annually.

In order to get that 2 million each for a few years they have to blow up their relationship with the two biggest buyers in the market.

If you think ESPN and Fox will forget they paid hundreds of millions of dollars for the Big 12 to add a couple of G5 teams - I don't know what to tell you beyond it would be the worst decision we've seen yet in CR.

If the Big 12 takes either of those bidders out of the market there is no one left. Unless you really feel like a couple of million dollars each a year is worth placing a bet on new entries into the market.

Of course if the Big 12 is still stuck selling their rights in bulk - they added more mouths to feed in the next negotiation.

Maybe they are stupid enough to take that risk - but I'd say they figured out that no one available today changes their longterm outlook - and there is certainly no one available who makes it worth making an enemy of your two biggest media partners.

 

[whaler11]

FWIW - UConn fans should root against Big 12 expansion at this point because even if Texas relents on expansion - UConn is not on their list.

 

[Fishy]

FWIW - UConn fans should root against Big 12 expansion at this point because even if Texas relents on expansion - UConn is not on their list.

Okay.

Who is?