You sound like you know what you are talking about, but could you please explain to me how it is exactly that adding a portion of the Florida market and the relatively inconsequential South Carolina market is going to somehow increase revenueby 20 million per team?
Great question. There are a handful of dynamics in play with regards to an FSU/Clemson move to the Big XII. First, the Big XII’s current ABC/ESPN contract is 5 years old. It was signed 1.5 years before it took effect, and runs for another 4 seasons. So, the valuation is old. Think of it like the housing market. If you buy a house in 2012 for $200k, and do a kitchen & bathroom remodel, then sell it in 2020 for $300k………the remodel didn’t add 50% value to the house. It added “some” value, but most of it was added by appreciation/inflation. That’s how it is with the Big XII. If they added Florida & Clemson, there is a strong bump in the value of their TV contract. But, a large percentage of that value is in appreciation/inflation.
Right now, the Big XII is worth at least $20M…….possibly more. At the time the Big XII signed their last contract, in April 2007, Texas & OU were big dogs in college football, but the rest of the Big XII was horrible. Nebraska was on a downward slide, and had had multiple coaching controversies. Missouri, OK State, and A&M had been mediocre at best the entire previous contract. K-State had fallen off mightily, and Snyder was out the door. Kansas, Colorado, Iowa State, and Baylor were nobodies. Texas Tech had managed a slew of 8-9 win seasons, but hadn’t gotten over the hump. So, the Big XII’s 2007 valuation was based on Texas & OU’s high appeal, and the overall low appeal of all of the other schools, including Nebraska’s declining TV #s. This is why the losses of Nebraska, Colorado, Missouri, and A&M aren’t as bad as people think……..b/c they actually didn’t contribute much to the last TV contract, aside from regional appeal (which was middling at best for CU and MU).
In the Big XII today, you have Texas & OU both seen as major powers, Oklahoma State has surged into a perennial top 25 team, K-State surging back to respectability, Texas Tech has put together a number of very good teams, West Virginia & TCU, who’ve both had very strong TV #s and an equally impressive resume, are joining the conference, etc. The Big XII went from the #3-4 conference in college football in 2007 to the clear cut #2 conference today. So, even with the losses of teams, their additions and the dramatic improvement of their product, will result in a significant appreciation of value. Then on top of that, you add inflation, and you’ve got a conference that should be able to pull in $19M - $25M per team per year with their next contract.
Now, you add Florida State & Clemson to that. It is true that with either school (and that goes for all schools), you do not get “the whole state tuning in”. But, when non-subscription based contracts are written, they’re based on regional & national appeal (sets turned on). WHERE the TV sets are draw from impacts the value of the contract. TV sets turned on outside a team’s DMA or region have a greater impact on a TV contract than sets turned on in a team’s DMA or region. That’s b/c it allows the network to expand the footprint of the broadcast, which creates a diversity of viewers, which increases advertising prices during those telecasts. So, a team that has super strong regional appeal, but has minimal national appeal, would actually be worth less to an ABC or ESPN than would a team that mas minimal regional appeal, but strong national appeal. Examples of these would be Nebraska (former) & Miami (latter).
Both Florida State & Clemson have strong appeal outside their DMAs. Clemson actually pulls very well in Alabama, Georgia, Northern Florida, and parts of North Carolina & Tennessee. Florida State pulls well across all of the ACC states, plus most of the SEC, as well as in Texas and California. So, it’s not just about the size of the state the team is in. This is why teams like Notre Dame, USC, Texas, Florida State, Florida, Alabama, etc are so valuable, b/c when they’re playing, they turn on sets well outside their geographic region.
The other dynamic at play is that if the Big XII brings in 2 more teams, be they FSU & Clemson or others, they'll be able to reap the rewards of a conference championship game. And still further, the addition of 2 more teams opens back up the conference's Fox Sports contract, which is well undervalued, b/c it was signed in haste to raise the conference's payout to prevent further defections. Their FSN contract has a "fair market value" clause in it, which will allow the conference to get a fair market value if the contract is reopened. This clause is not present in the SEC or ACC's contracts, which is why they won't get the bump in payout that they would on an open market.
So, there are a number of factors at play, all which which combined, significantly impact the Big XII's ability to rake in monster dollars if they land the right combination of teams.
