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I've written these things in bits and pieces in a variety of threads, I thought I'd bring everything I believe together in one place.
Decision metrics of the major conferences and their TV partners in regard to UConn:
ACC & ESPN
• ACC has sold everything to ESPN
• ESPN – richest content inventory. Cares about marginal value of content – given what I already have, what content adds new viewers?
• Winter sports add little value since there is a ton of winter and spring inventory (pro and college basketball, hockey, baseball, soccer)
• Football adds a lot of value because it is the only fall college sport
• So ESPN values basketball at a low level; values football highly, and ESPN’s valuations are the ACC’s valuations.
• UConn is therefore undervalued by ACC-ESPN; what UConn offers does not add the required $20 mn+ marginal value to the ACC, and ESPN has obtained most of UConn’s value from the AAC for $2 mn per year, so ESPN in particular has little motive to support a UConn to ACC move.
• Wildcard: the state of Connecticut might have influence with ESPN and be able to get ESPN to help UConn as a favor to the state.
B1G & BTN
• B1G values winter sports much more than ESPN because it has no pro sports inventory, so it needs college sports to fill its winter and spring programming
• UConn is a national winter sports brand that will draw additional viewers throughout the BTN footprint, increasing fee strength everywhere. UConn men and women basketball teams alone bring 6-10 $2 mn national games per year
• The B1G values markets because of its cable subscriber model; UConn has proven with SNY it delivers huge subscriber revenue in Connecticut. Based on SNY revenue, Connecticut alone could bring the BTN $2/mo * 12 months * 1.4 million cable households = $34 million per year, plus an extra $0.10 in NYC and southern New England for about $0.10/month * 12 months * 5 million cable households = $6 million per year
• UConn draws in New York and New England; it also gives Penn State, Michigan, Ohio State chances to play in New England and doubles the chances to play near NYC; it gives B1G the chance to claim it is NYC’s college league and New England’s college league.
• When you factor in all these considerations, even if the B1G doesn’t exploit its pricing power in Connecticut fully, UConn adds at least $35-45 mn per year to the B1G and pays for itself.
• However … the B1G is so rich, just paying for itself is a neutral consideration. B1G schools make $35-45 mn per year with or without UConn. Money will not be the decisive consideration.
• Three factors will decide: strategic goals (such as penetrating the northeast and becoming the northeast’s premier league – UConn wins here), culture and academic fit (this is where AAU matters and size matters, UConn loses on this criterion); and influence on other additions – would UConn’s presence in the B1G improve or degrade its chances to bring in other desirable schools like UVa, UNC, Kansas, Oklahoma, Texas? (this hurts UConn in the short term because uncertainties about other schools motivate the B1G to wait and keep options open … so as long as no other conference is moving to take UConn, they can sit and wait)
• It’s hard to find a partner who adds the required $35-45 million. Consider Missouri: about 2 million cable households, BTN currently gets ~$0.20, that would increase to Midwest standard $0.90, or $0.70/month * 12 * 2 million = $17 million – well shy of B1G needs. The only partners who would pull their weight are in other top leagues and won’t move until 2025 at earliest.
B12 and Fox-ESPN
• Don’t place much value on the northeastern markets – travel costs are as much a negative as the northeast exposure is a positive
• Like the ACC, marginal value of TV content and advertising is the major revenue source. Heavy winter-spring sports inventory works against UConn here. Both Fox and ESPN have pro inventory in that season.
• Therefore the B12 values football mainly, though B12 is a top basketball conference
• Strategic value: If the B12 is to be a permanent national league, it would benefit from BYU (national Mormon audience), UConn (untapped New England – New York market), UCF-USF (major Florida markets)
• However, the Fox-ESPN media contract means two networks have to approve B12 expansion. ESPN would lose value from its AAC contract with any raid of UConn/Cincy/UCF/USF, so they will refuse to pay for any B12 expansion. With a de novo contract negotiation, ie the new contract to be negotiated in 2025, a “Big14” with BYU-UConn-USF-UCF might be just as valuable or more valuable per school as the current B12 configuration, due to major markets and a conference championship game. But until the current contract expires, the B12 has no way to capture that value. Without additional TV revenues, the top schools will oppose expansion because it dilutes their revenue.
• Stability issues. If it expands, the B12 is competing with other national leagues (B1G, SEC, Pac) with second-tier properties and the top schools (Texas, Oklahoma, Kansas) would have to consider jumping to a stronger conference. Expansion may be destabilizing. The weaker B12 schools are likely to oppose expansion in the belief that if the league expanded, it would become an unattractive league to the top schools and they would jump at the expiration of the GoR to B1G, SEC, or Pac.
• Thus, the current best option is for the B12 to remain a regional league, so that revenue generated by the top (Texas, Oklahoma, Kansas) properties is not diluted among many schools, and travel costs are low, regional interest high.
Summary - Status of UConn
• B1G might move when a partner is available, but a partner is unlikely to be available before 2025 … or if its strategic goals for the northeast are of overwhelming importance, it might add UConn as a #15 and wait for 16. B1G is most likely to want to keep options open. Assessment: 10% chance of adding UConn in the 2015-2016 tv negotiations, 50% chance of adding UConn in 2025 when partner is available.
• B12 unlikely to move until 2025 when a new media contract is negotiated … but then all options will be considered, including dissolution. Assessment: 10% chance of adding UConn in 2025.
• ACC has little reason to move, except strategically to pre-empt B1G expansion. Assessment: 20% chance of adding UConn in 2015-17 due to strategic threat of B1G and/or state of Connecticut influence on ESPN; 50% chance of adding UConn c. 2025 when new TV contract negotiated.
Overall odds: 20% chance of getting a P5 add by 2017, 50% chance of P5 add circa 2025.
Decision metrics of the major conferences and their TV partners in regard to UConn:
ACC & ESPN
• ACC has sold everything to ESPN
• ESPN – richest content inventory. Cares about marginal value of content – given what I already have, what content adds new viewers?
• Winter sports add little value since there is a ton of winter and spring inventory (pro and college basketball, hockey, baseball, soccer)
• Football adds a lot of value because it is the only fall college sport
• So ESPN values basketball at a low level; values football highly, and ESPN’s valuations are the ACC’s valuations.
• UConn is therefore undervalued by ACC-ESPN; what UConn offers does not add the required $20 mn+ marginal value to the ACC, and ESPN has obtained most of UConn’s value from the AAC for $2 mn per year, so ESPN in particular has little motive to support a UConn to ACC move.
• Wildcard: the state of Connecticut might have influence with ESPN and be able to get ESPN to help UConn as a favor to the state.
B1G & BTN
• B1G values winter sports much more than ESPN because it has no pro sports inventory, so it needs college sports to fill its winter and spring programming
• UConn is a national winter sports brand that will draw additional viewers throughout the BTN footprint, increasing fee strength everywhere. UConn men and women basketball teams alone bring 6-10 $2 mn national games per year
• The B1G values markets because of its cable subscriber model; UConn has proven with SNY it delivers huge subscriber revenue in Connecticut. Based on SNY revenue, Connecticut alone could bring the BTN $2/mo * 12 months * 1.4 million cable households = $34 million per year, plus an extra $0.10 in NYC and southern New England for about $0.10/month * 12 months * 5 million cable households = $6 million per year
• UConn draws in New York and New England; it also gives Penn State, Michigan, Ohio State chances to play in New England and doubles the chances to play near NYC; it gives B1G the chance to claim it is NYC’s college league and New England’s college league.
• When you factor in all these considerations, even if the B1G doesn’t exploit its pricing power in Connecticut fully, UConn adds at least $35-45 mn per year to the B1G and pays for itself.
• However … the B1G is so rich, just paying for itself is a neutral consideration. B1G schools make $35-45 mn per year with or without UConn. Money will not be the decisive consideration.
• Three factors will decide: strategic goals (such as penetrating the northeast and becoming the northeast’s premier league – UConn wins here), culture and academic fit (this is where AAU matters and size matters, UConn loses on this criterion); and influence on other additions – would UConn’s presence in the B1G improve or degrade its chances to bring in other desirable schools like UVa, UNC, Kansas, Oklahoma, Texas? (this hurts UConn in the short term because uncertainties about other schools motivate the B1G to wait and keep options open … so as long as no other conference is moving to take UConn, they can sit and wait)
• It’s hard to find a partner who adds the required $35-45 million. Consider Missouri: about 2 million cable households, BTN currently gets ~$0.20, that would increase to Midwest standard $0.90, or $0.70/month * 12 * 2 million = $17 million – well shy of B1G needs. The only partners who would pull their weight are in other top leagues and won’t move until 2025 at earliest.
B12 and Fox-ESPN
• Don’t place much value on the northeastern markets – travel costs are as much a negative as the northeast exposure is a positive
• Like the ACC, marginal value of TV content and advertising is the major revenue source. Heavy winter-spring sports inventory works against UConn here. Both Fox and ESPN have pro inventory in that season.
• Therefore the B12 values football mainly, though B12 is a top basketball conference
• Strategic value: If the B12 is to be a permanent national league, it would benefit from BYU (national Mormon audience), UConn (untapped New England – New York market), UCF-USF (major Florida markets)
• However, the Fox-ESPN media contract means two networks have to approve B12 expansion. ESPN would lose value from its AAC contract with any raid of UConn/Cincy/UCF/USF, so they will refuse to pay for any B12 expansion. With a de novo contract negotiation, ie the new contract to be negotiated in 2025, a “Big14” with BYU-UConn-USF-UCF might be just as valuable or more valuable per school as the current B12 configuration, due to major markets and a conference championship game. But until the current contract expires, the B12 has no way to capture that value. Without additional TV revenues, the top schools will oppose expansion because it dilutes their revenue.
• Stability issues. If it expands, the B12 is competing with other national leagues (B1G, SEC, Pac) with second-tier properties and the top schools (Texas, Oklahoma, Kansas) would have to consider jumping to a stronger conference. Expansion may be destabilizing. The weaker B12 schools are likely to oppose expansion in the belief that if the league expanded, it would become an unattractive league to the top schools and they would jump at the expiration of the GoR to B1G, SEC, or Pac.
• Thus, the current best option is for the B12 to remain a regional league, so that revenue generated by the top (Texas, Oklahoma, Kansas) properties is not diluted among many schools, and travel costs are low, regional interest high.
Summary - Status of UConn
• B1G might move when a partner is available, but a partner is unlikely to be available before 2025 … or if its strategic goals for the northeast are of overwhelming importance, it might add UConn as a #15 and wait for 16. B1G is most likely to want to keep options open. Assessment: 10% chance of adding UConn in the 2015-2016 tv negotiations, 50% chance of adding UConn in 2025 when partner is available.
• B12 unlikely to move until 2025 when a new media contract is negotiated … but then all options will be considered, including dissolution. Assessment: 10% chance of adding UConn in 2025.
• ACC has little reason to move, except strategically to pre-empt B1G expansion. Assessment: 20% chance of adding UConn in 2015-17 due to strategic threat of B1G and/or state of Connecticut influence on ESPN; 50% chance of adding UConn c. 2025 when new TV contract negotiated.
Overall odds: 20% chance of getting a P5 add by 2017, 50% chance of P5 add circa 2025.