Chicago Sun-Times: Big10 Will Add 15 & 16

[Pudge]

For Whaler specifically ... and others tangentially ...

What I have noticed (primarily for the ACC), is that the EXPANSION of more Universities directly opens up these Contracts with the TV coverage. While you may think that this means that 16 is splitting the same pie instead of 14, the reality is that the applicable Network pushes the Revenue to a new high. In the era of increasingly valued Live Sports product, I think Delany (and Swofford) know that this is a way to keep Gross Revenues growing.

It may say covering Increased Labor Costs ... but the addition of 2 Universities and 2 Markets lead to a REFINANCING/RECAPITALIZATION event for the Conference. Without a "change in circumstance", the contract doesn't open.

 

[Waquoit]

That does in fact make CT contiguous with B1G property.

And couple that with the fact that part of Ohio used to be part of Connecticut and it's case closed.

 

[whaler11]

For Whaler specifically ... and others tangentially ...

What I have noticed (primarily for the ACC), is that the EXPANSION of more Universities directly opens up these Contracts with the TV coverage. While you may think that this means that 16 is splitting the same pie instead of 14, the reality is that the applicable Network pushes the Revenue to a new high. In the era of increasingly valued Live Sports product, I think Delany (and Swofford) know that this is a way to keep Gross Revenues growing.

It may say covering Increased Labor Costs ... but the addition of 2 Universities and 2 Markets lead to a REFINANCING/RECAPITALIZATION event for the Conference. Without a "change in circumstance", the contract doesn't open.

Huh? I've never commented to the idea that it would be the same pie divided by more schools.

What I don't get about this article is why unionization would be a motivating factor.

The Big 10 wants more revenue because they want more revenue - they don't need a specific expense to balance it to desire to create it.

The ACC contact seemed to reopen due to the changing membership. I don't remember the Big 10 contacts being renegotiated due to the addition of Rutgers and Maryland. I don't know the exact dates but they are close to term I thought?

 

[tzznandrew]

Huh? I've never commented to the idea that it would be the same pie divided by more schools.

Well, unless I've misunderstood you, you have in other threads when you suggest a new school to the B1G would have to bring an additional 30-40 million in revenue.

 

[mavblues]

I expected a nice visual to follow of a B1G cheerleader with nice, uh, lungs. Yeah, nice lungs.

OK, but you asked for it:

 

[Waquoit]

Oh My!

 

[whaler11]

Well, unless I've misunderstood you, you have in other threads when you suggest a new school to the B1G would have to bring an additional 30-40 million in revenue.

Oh I absolutely believe that. Thats less than 3 million a school - if the Nebraskas, Iowas and Minnesotas aren't going to get paid why would they support Connecticut joining?

So they can have more expensive travel and lose better football games off their schedule?

Saying the same revenue is divided by more schools would mean their rake goes down.

The last two they added was a clear cash grab, why would their motivation change?

 

[FAIRTIDES]

To be fair, there are a lot of UConn alumni in NYC and its suburbs, myself included; but the rest of NYC only turns blue when that team WINS. No one within roughly 500 miles (UNC and Duke are about 500 miles away by car) of Times Square has more NCAA men’s titles than UConn. Thus, the Huskies get a lot of love in the Big Apple. That is what the B1G saw.

Exactly. If we're honest, we have to admit that a circumstance that saw CUSE or,even, Rutgers at the MSG Regional Final would have generated a fan reaction similar/equal to ours. The important point is that UCONN continues to advance to regional finals and continues to generate fan interest. This time it happened to be the close-in NYC/MSG. Next time it might be another location. To draw crowds to big events, a program has to qualify for those events. Given recent history, name a better bet than UCONN.

 

[tzznandrew]

Oh I absolutely believe that. Thats less than 3 million a school - if the Nebraskas, Iowas and Minnesotas aren't going to get paid why would they support Connecticut joining?

So they can have more expensive travel and lose better football games off their schedule?

Saying the same revenue is divided by more schools would mean their rake goes down.

The last two they added was a clear cash grab, why would their motivation change?

So then I don't really get why you really protested Pudge's characterization of your position. Pudge's point is that the same pie won't necessarily be divided because it allows them to re-open and re-negotiate. That means it has little to do with the amount of individual money a school brings it, it all has to do with the ability to renegotiate...since the rights for live entertainment themselves have been increasing steadily increasing in worth.

A school doesn't have to bring that much money because the conference is appreciating in value every year, and so any individual school is really an excuse to allow the conference to up the value of the contract as a whole and get more money up-front.

 

[bobbyinaz]

So then I don't really get why you really protested Pudge's characterization of your position. Pudge's point is that the same pie won't necessarily be divided because it allows them to re-open and re-negotiate. That means it has little to do with the amount of individual money a school brings it, it all has to do with the ability to renegotiate...since the rights for live entertainment themselves have been increasing steadily increasing in worth.

A school doesn't have to bring that much money because the conference is appreciating in value every year, and so any individual school is really an excuse to allow the conference to up the value of the contract as a whole and get more money up-front.

The B1G did not get a renegotiated contract when the announced the RU & UMD additions. In fact they will play the 2014, 2015 & 2016 seasons under their existing Tier 1 agreements. The existing 12 schools will not make any less over the next 3 years. The increase in BTN revenue is what they are banking on to pay RU & UMD over that period of time.

It's been reported that RU will make 50% in year 1 & ramp up over 5-7 years before receiving a full share. I haven't seen what UMD will make but my guess is their payout will be similar since Nebraska had a similar deal. UMD did get a 1 time $20MM upfront "travel expense" reimbursement which is code for money to be used to pay exit fees. If the B1G is currently paying out $25MM per school, RU & UMD's 50% shares equal a $25MM increase in BTN revenues between the 2 of them.

Using that math, 2 new additions to the conference will need to generate $30-40MM in BTN revenues to keep the existing schools at their current payouts

They will start accepting bids/renegotiating a new agreement in 2016 for the 2017-2018 season

 

[whaler11]

So then I don't really get why you really protested Pudge's characterization of your position. Pudge's point is that the same pie won't necessarily be divided because it allows them to re-open and re-negotiate. That means it has little to do with the amount of individual money a school brings it, it all has to do with the ability to renegotiate...since the rights for live entertainment themselves have been increasing steadily increasing in worth.

A school doesn't have to bring that much money because the conference is appreciating in value every year, and so any individual school is really an excuse to allow the conference to up the value of the contract as a whole and get more money up-front.

Since every time Delany so much as sneezes it's a sign why don't we look at what he said:

It's not about what the Big Ten does for a school, it's about what a school does for the Big Ten.

Seems pretty clear.

If the 14 schools hypothetically get $40MM each in television money in 2017 - do you really believe the league would expand if they got $40MM each with 16 teams?

Of course for this hypothetical you have to ignore that there isn't another legitimate candidate available.

Minnesota is going to let UConn in if they don't get extra revenue? Rutgers is going to lose a recruiting advantage to UConn for no extra revenue? Penn State is going to play Michigan or Ohio State or Wisconsin less often for no extra revenue? Iowa is going to spend money sending teams to Storrs and E Htfd for no extra revenue?

You don't think their analysis includes projections for a 14 versus a 16 team league? You don't think their analysis differs based on who 15 and 16 would be?

This conversation seems silly - if a school doesn't positively impact the current membership financially they aren't getting invited. You can debate what the threshold is for inclusion or any individual school's ability to meet the threshold but that you need to be a net positive seems fairly obvious.

 

[tzznandrew]

Since every time Delany so much as sneezes it's a sign why don't we look at what he said:

It's not about what the Big Ten does for a school, it's about what a school does for the Big Ten.

Seems pretty clear.

If the 14 schools hypothetically get $40MM each in television money in 2017 - do you really believe the league would expand if they got $40MM each with 16 teams?

Of course for this hypothetical you have to ignore that there isn't another legitimate candidate available.

Minnesota is going to let UConn in if they don't get extra revenue? Rutgers is going to lose a recruiting advantage to UConn for no extra revenue? Penn State is going to play Michigan or Ohio State or Wisconsin less often for no extra revenue? Iowa is going to spend money sending teams to Storrs and E Htfd for no extra revenue?

You don't think their analysis includes projections for a 14 versus a 16 team league? You don't think their analysis differs based on who 15 and 16 would be?

This conversation seems silly - if a school doesn't positively impact the current membership financially they aren't getting invited. You can debate what the threshold is for inclusion or any individual school's ability to meet the threshold but that you need to be a net positive seems fairly obvious.

I obviously think there is a financial benefit to any addition.

I was just suggesting one way that might not be that an individual school brings 40MM...which no school can possibly do, and which neither Maryland nor Rutgers brought (nor anywhere near what the valuation was at that time).

And yes, there was no renegotiation with Maryland and Rutgers, but it does ultimately give them leverage the upcoming one.

 

[whaler11]

I obviously think there is a financial benefit to any addition.

I was just suggesting one way that might not be that an individual school brings 40MM...which no school can possibly do, and which neither Maryland nor Rutgers brought (nor anywhere near what the valuation was at that time).

And yes, there was no renegotiation with Maryland and Rutgers, but it does ultimately give them leverage the upcoming one.

The amount of money you needed to generate prior to Rutgers and Maryland was lower. For one they were 13 and 14 not 15 and 16, and the BTN revenue they generate raises the baseline.

If you don't think Rutgers generates 40 million in their projections you might want to check your math though.

7 million cable homes in NYC alone at 90 marginal cents a month per box.... is a heck of a lot more than 40 million.

 

[tzznandrew]

The amount of money you needed to generate prior to Rutgers and Maryland was lower. For one they were 13 and 14 not 15 and 16, and the BTN revenue they generate raises the baseline.

If you don't think Rutgers generates 40 million in their projections you might want to check your math though.

7 million cable homes in NYC alone at 90 marginal cents a month per box.... is a heck of a lot more than 40 million.

I get the math with regards to splitting it different ways. I'm also a skeptic of UConn to pretty much anywhere despite the fact that I look for a silver-lining in things.

But I'm skeptical they'll get that much in the NYC DMA. I don't think they get close to that, or that they're worth $40MM or even $30MM. I mean, ESPN2 doesn't generally get that on average...more like $0.68. I don't think Rutgers has enough pull to merit that type of money. And if you're going to look at what subscription costs look like, SNY makes UConn look quite good.

 

[whaler11]

I get the math with regards to splitting it different ways. I'm also a skeptic of UConn to pretty much anywhere despite the fact that I look for a silver-lining in things.

But I'm skeptical they'll get that much in the NYC DMA. I don't think they get close to that, or that they're worth $40MM or even $30MM. I mean, ESPN2 doesn't generally get that on average...more like $0.68. I don't think Rutgers has enough pull to merit that type of money. And if you're going to look at what subscription costs look like, SNY makes UConn look quite good.

I don't disagree, I think the BTN is in for a war in NYC and I personally don't think they are going to win.

I also agree that if the BTN tried to get $3 in Connecticut they could and that would generate the revenue that makes them make a lot of sense.

BTN hasn't altered their strategy to my knowledge outside of a lower rate in PA? Maybe they will in the future.

 

[reno tony]

I am quite happy in the AAC because I live in Florida and now UCONN plays here twice a year. Besides, there is a rumor that if we change conferences we will be doomed.

45 TO GO​

 

[mavblues]

If the 14 schools hypothetically get $40MM each in television money in 2017 - do you really believe the league would expand if they got $40MM each with 16 teams?

Yes, I absolutely do, and you don't have to be a rocket scientist to figure out why. In fact, I think they'd expand even if they had to take a slight hit in the short term.

It's about expanding the footprint, getting eyeballs, and improving the quality of the demographics. Do you think UConn helps in any/all of those areas?

Money payouts are not only about carriage rates (which seems to be all anyone talks about), it is also about attracting advertisers. If you add UConn, you add New England, and arguably greatly improve your chances in NY. Not to mention you've added the flagship University of one of the wealthiest States in the country. Don't think that's attractive to advertisers?

In addition to the aforementioned improvement in demographics from a $dollars$ standpoint, you also add an entirely new demographic, at least for some B1G schools. How many women/girls/etc. do you think would now watch a previously unwatchable B1G WBB game when all of a sudden their school is playing the perennial #1 team in the country? Those are all brand new eyeballs for BTN, from within its existing footprint.

UConn's women's basketball program generates positive cash flow, and has already demonstrated (in the BE) it's tremendous ability to elevate the quality of/interest in other schools' WBB programs. You instantly turn several of B1G's money losing women's programs to money makers/revenue neutral. Don't argue the point - it's exactly what happened in the BE. Still not enough?

Are you just going to shut down the BTN when it's not football season? Endlessly replay football games from the fall? You need content. And it has to be quality content. Delany himself has said this numerous times. Baseball, soccer, lacrosse, hockey, etc. do matter. I'm convinced there will be a BTN2 very shortly and it's going to need even more content.

Having said all of that, is a Midwest centric BTN more attractive to advertisers, or one with penetration into NE and NYC?

It's not only about today's carriage rates, it's about generating additional BTN advertising income each year going forward from advertisers, something the BTN is currently struggling with.

BTW, what did SNY's minimal deal with UConn generate in terms of revenue (for SNY)? Given that, why is it that you think adding the rest of UConn's content to that would leave our contribution so far short of $40MM?

So in summary, I think the B1G would be foolish to overlook a program (any program) that greatly enhances demographics not only from a purely numbers standpoint, but also from a quality standpoint.

 

[Dooley]

OK, but you asked for it:

Is that a poop stain?

 

[Rocktheworld]

There are only two places from whence that came

 

[BlueMAB]

There are only two places from whence that came

I am begging you. Please say one of them is photoshop.

 

[mavblues]

Is that a poop stain?

Whatever answer lets you sleep at night.

I prefer to think of it as one of life's great mysteries.

 

[whaler11]

Yes, I absolutely do, and you don't have to be a rocket scientist to figure out why. In fact, I think they'd expand even if they had to take a slight hit in the short term.

It's about expanding the footprint, getting eyeballs, and improving the quality of the demographics. Do you think UConn helps in any/all of those areas?

Money payouts are not only about carriage rates (which seems to be all anyone talks about), it is also about attracting advertisers. If you add UConn, you add New England, and arguably greatly improve your chances in NY. Not to mention you've added the flagship University of one of the wealthiest States in the country. Don't think that's attractive to advertisers?

In addition to the aforementioned improvement in demographics from a $dollar standpoint, you also add an entirely new demographic, at least for some B1G schools. How many women/girls/etc. do you think would now watch a previously unwatchable B1G WBB game when all of a sudden their school is playing the perennial #1 team in the country? Those are all brand new eyeballs for BTN, from within its existing footprint.

UConn's women's basketball program generates positive cash flow, and has already demonstrated (in the BE) it's tremendous ability to elevate the quality of/interest in other schools' WBB programs. You instantly turn several of B1G's money losing women's programs to money makers/revenue neutral. Don't argue the point - it's exactly what happened in the BE. Still not enough?

Are you just going to shut down the BTN when it's not football season? Endlessly replay football games from the fall? You need content. And it has to be quality content. Delany himself has said this numerous times. Baseball, soccer, lacrosse, hockey, etc. do matter. I'm convinced there will be a BTN2 very shortly and it's going to need even more content.

Having said all of that, is a Midwest centric BTN more attractive to advertisers, or one with penetration into NE and NYC?

It's not only about today's carriage rates, it's about generating additional BTN advertising income each year going forward from advertisers, something the BTN is currently struggling with.

BTW, what did SNY's minimal deal with UConn generate in terms of revenue (for SNY)? Given that, why is it that you think adding the rest of UConn's content to that would leave our contribution so far short of $40MM?

So in summary, I think the B1G would be foolish to overlook a program (any program) that greatly enhances demographics not only from a purely numbers standpoint, but also from a quality standpoint.

Maybe and maybe they are foolish.

UConn would be short because of what the BTN charges. They don't vary the rate and the number of cable homes in Hartford/New Haven don't generate enough.

There is almost no such thing as quality college sports content that isn't basketball or football. Hockey maybe - but everything else is never going to do much beyond help you recruit because you family can see some of your games.

 

[mavblues]

But you can resell excess content and/or shift it to a second channel. And SNY proved, without a doubt, that UConn's content is very valuable on its own merits.

 

[UConnJim]

Maybe and maybe they are foolish.

UConn would be short because of what the BTN charges. They don't vary the rate and the number of cable homes in Hartford/New Haven don't generate enough.

There is almost no such thing as quality college sports content that isn't basketball or football. Hockey maybe - but everything else is never going to do much beyond help you recruit because you family can see some of your games.

UConn is not short. Once you have a fixed cost network, each new sub has a high incremental margin. Let's say the BTN produces a 35% cash flow margin today. Each new sub you add is at 90%+ cash flow margin, so adding UConn and Connecticut, never mind NYC, would produce a 90% incremental margin and is cash flow accretive to the BTN. Based on $0.90 per sub, Connecticut would produce about $12 million in revenues and ~$11 million of cash flow to the BTN. Since the BTN pays out $7 mill+\- to each Big 10 school, UConn, after Fox's cut, is still accretive.

And there are other ways UConn adds value. Ad revenues are about $2 mill per school and you are getting more eyeballs by adding UConn in a wealthy demographic. Plus, you get additional content: football, basketball (men and women), hockey...

In my mind, the issue is not the BTN, it is does UConn add enough value to the national media contract? Clearly, football needs to improve, but men's and women's basketball more than pull their weight.

My conclusion is that football can get back to where it was, the economic case for adding UConn to the Big 10 makes sense. All that said, based on economics, there are many P5 schools you would add before UConn, but would they move.

 

[CL82]

The amount of money you needed to generate prior to Rutgers and Maryland was lower. For one they were 13 and 14 not 15 and 16, and the BTN revenue they generate raises the baseline.

If you don't think Rutgers generates 40 million in their projections you might want to check your math though.

7 million cable homes in NYC alone at 90 marginal cents a month per box.... is a heck of a lot more than 40 million.

Except that Rutgers is in NJ not NY so their addition doesn't impact NYC carriage rates or are you just talking about NJ homes?

 

[whaler11]

UConn is not short. Once you have a fixed cost network, each new sub has a high incremental margin. Let's say the BTN produces a 35% cash flow margin today. Each new sub you add is at 90%+ cash flow margin, so adding UConn and Connecticut, never mind NYC, would produce a 90% incremental margin and is cash flow accretive to the BTN. Based on $0.90 per sub, Connecticut would produce about $12 million in revenues and ~$11 million of cash flow to the BTN. Since the BTN pays out $7 mill+\- to each Big 10 school, UConn, after Fox's cut, is still accretive.

And there are other ways UConn adds value. Ad revenues are about $2 mill per school and you are getting more eyeballs by adding UConn in a wealthy demographic. Plus, you get additional content: football, basketball (men and women), hockey...

In my mind, the issue is not the BTN, it is does UConn add enough value to the national media contract? Clearly, football needs to improve, but men's and women's basketball more than pull their weight.

My conclusion is that football can get back to where it was, the economic case for adding UConn to the Big 10 makes sense. All that said, based on economics, there are many P5 schools you would add before UConn, but would they move.

I'm taking about all in it doesn't matter what components get you to the threshold.

But the size of the Big Ten national contracts make it difficult for anyone to impact them - that is why a school that is almost worthless nationally like Rutgers is in because in theory they make it up elsewhere.

 

[kyleslamb]

Whatever answer lets you sleep at night.

I prefer to think of it as one of life's great mysteries.

That's one either/or situation I don't want to know the answer.

 

[whaler11]

But you can resell excess content and/or shift it to a second channel. And SNY proved, without a doubt, that UConn's content is very valuable on its own merits.

What excess content of value would they be selling? I don't see any way in the world BTN2 is viable. They already have thousands of hours a year where they have nothing to show.

 

[UConnJim]

I'm taking about all in it doesn't matter what components get you to the threshold.

But the size of the Big Ten national contracts make it difficult for anyone to impact them - that is why a school that is almost worthless nationally like Rutgers is in because in theory they make it up elsewhere.

As I read the thread, it was discussed that schools would have to bring in $40 mill to the BTN which I disagreed with. If you want to now argue all in, OK.

First, the Big 10 media contract today is worth much less than $40 mill, it is about $18 to $19 mill per school including $7 to $8 mill from the BTN. The Big 10 also pays out money from the NCAA for tourney credits, bowls, ... which is another say $5 to $6 mill. Since the latest national media deals are in the $20 mill range per school, the Big 10 could get $20 to $25 million per school plus $8 mill from the BTN. Since UConn would have gotten $20 mill in the ACC, UConn brings about enough in TV rights to cover itself, plus brings top notch content in basketball and helps bring NYC.

The financial case is OK for UConn, BUT there are other schools that would bring more like Texas, Notre Dame... It seems that Big 10 will expand to 16 in the future because scheduling 4 pods of 4 is much better than 14 teams as you play all the teams more frequently.

 

[whaler11]

As I read the thread, it was discussed that schools would have to bring in $40 mill to the BTN which I disagreed with. If you want to now argue all in, OK.

First, the Big 10 media contract today is worth much less than $40 mill, it is about $18 to $19 mill per school including $7 to $8 mill from the BTN. The Big 10 also pays out money from the NCAA for tourney credits, bowls, ... which is another say $5 to $6 mill. Since the latest national media deals are in the $20 mill range per school, the Big 10 could get $20 to $25 million per school plus $8 mill from the BTN. Since UConn would have gotten $20 mill in the ACC, UConn brings about enough in TV rights to cover itself, plus brings top notch content in basketball and helps bring NYC.

The financial case is OK for UConn, BUT there are other schools that would bring more like Texas, Notre Dame... It seems that Big 10 will expand to 16 in the future because scheduling 4 pods of 4 is much better than 14 teams as you play all the teams more frequently.

I was talking all in to the league. Doesn't matter if it's ESPN, Fox or BTN. What UConn would have gotten in the ACC doesn't much matter and they were never close to an invite anyway. If the Tier 1/w rights holder isn't willing to pay 16 more than 14 on a per school basis and the school can't make it up in other ways you can cross them off the list. A list that probably only exists on places like the Boneyard anyway. If any of the better targets you mention were interested Rutgers would be in the AAC.

I'm working off their future projections not what they get today, but I've been using 40 since it's a round number. It may turn out to be 35 or 45 or whatever.

Notre Dame is never happening. Well at least not in any of our lifetimes. If something happened where they were forced to join a conference and it's not; they would head to the ACC.

I can't see Texas either. They run their own conference where they have huge advantages - why go be under the thumb of the Big Ten power structure when you can play in something that you run and makes a lot more geographic sense.

North Carolina would also be a huge get for the Big Ten and another one that isn't going to happen.