The Tier III myth

[Jericho]

First, apologies for posting this in a new thread. There are any number of existing conference expansion threads, but I did not want to bury this info in one of them as it has relevance to any proposed expansion.

As one who's been skeptical of proposed moves by any ACC school to the Big 12 (although admittedly FSU is probably the least committed ACC school there is), something has always bothered me about the numbers thrown around. I am not an expert or an "insider", but I believe I've finally been able to reconcile the doubts I had and paint a more accurate picture of potential expansion.

Those that tout a FSU to the Big 12 move present the financial benefits of such a realignment. Setting aside the fact that no school in recent times has moved for purely financial reasons, I've always had problems of the exact numbers thrown around. With the new ACC deal in place, we have a better picture of exactly what the difference may be.

The new ACC deal pays each school $17 million per year. The new Big 12 deal is not finalized, but it's being floated at about $20 million per year (which I'm sure the Big 12 hopes goes a bit higher when finalized). By adding FSU and one other school, the thought is the Big 12 can add a few bucks per school per year plus the revenue from a conference championship game. This is estimated at anywhere from $2-$5 million. Taking an absolute best case assumption, this would result in possibly $26 million per team per year.

However, those that believe such a FSU move will happen will also tell you about the Tier 3 rights. How the ACC TV deal includes all tiers, where as the Big 12 deal(s) will allow schools to individually sell their Tier 3 rights. They'll also tell you how Texas just got $15 million per year for their Tier 3 rights. We can start by throwing out the Texas number altogether for two reasons: (1) it's widely accepted that ESPN overpaid Texas in an effort to keep the Big 12 together. $15 million is not fair market value; and (2) no ACC school is remotely as popular as Texas.

A better example is Kansas. Reports indicate that Kansas gets $8 million per year for the their Tier 3 rights. Surely FSU could get at least $5 million, if not more for their Tier 3 rights. Right? Well, no. The problem is that Kansas does not really get $8 million per year for Tier 3 rights alone. They get $8 million for their Tier 3 rights and a whole slew of other items, including coaches shows, radio broadcasts, stadium advertising rights, website operation rights, and various other marketing & advertising related enterprises. The actual Tier 3 rights are a small portion of all that. Tier 3 is basically the bottom of the barrel broadcast wise. Big 12 schools do guarantee at least one football game per year, but it's mainly the worst basketball games and all the other "Olympic Sports" no otherwise shown. As a comparion, SEC Tier 3 rights did not see one football game last year. Tier 3 rights are worth maybe $1 - $2 million dollars unless you're some unique superschool like Texas or maybe Notre Dame. So no ACC school is going to rake in big bucks.

The thing is, ACC schools have plenty of rights they can sell outside the ESPN agreement, like coaches shows and radio broadcasts. NC State just reached a deal for $5 million per year on their school's multimedia rights - http://ncstate.rivals.com/content.asp?CID=1343158
And it appears the new ESPN deal allows for certain sports, including some basketball games, to slip through to the individual schools as well. No football games will make it, but there's some content with some value to it. Not all that different from what Big 12 schools are currently selling on their own.

This makes sense logically. If Kansas really got $8 million for just their Tier 3 rights and nothing else, shouldn't they be getting much more for Tiers 1 and 2, which contain the overwhelming majority of football and basketball games? And those two tiers contain all the games that actually matter. If you can get $8 million for the scraps of the basketball schedule and one out of conference football game, shouldn't Tier 2 get at least $10 million? Shouldn't Tier 1 get at least $12 million? And if Kansas can make a minimum of $22 million on Tiers 1 & 2, why is the Big 12 per school allotment only $20 million? Kansas is supposed to be one of the schools no one wants with no viewership, so schools like Oklahoma and West Virginia and so forth should be making so much more. It's because Kansas does not really get $8 million for their Tier 3 rigths.

The truth is that when people throw out these Tier 3 numbers, they are trying to lump in a lot of other non-Tier 3 rights that every school, even ACC schools, still retain. The financial benefit of retaining Tier 3 rights for the Big 12 is pretty minimal, if any benefit at all.

So the truth is, if FSU is going to go to the Big 12, the real difference is going to be almost solely from the new TV deal. And maybe the Big 12 can push that number up from the proposed $20 million. And they should have potential deals to get that number into the mid-20s. But that's about it. The difference in actual $$$ from the two conferences is going to be much more like $6-$8 millon that $15-20 million sometimes thrown around. That does not mean that no school will move, but it decreases the incentive to do so.

 

[jrazz12]

That's very interesting info. Do you have a source or link on this?

Someone posted a link to Tier 3 figures yesterday and I found Kansas' 8 million per year very curious. UConn was about 1.8 million. Do you know if the numbers are reported differently by other schools? I have a hard time believing there's that big of a disparity between us and Kansas considering all the other things UConn has going on (SNY deals, CPTV, WTIC, etc)

 

[UConnJim]

I don't agree. Tier 3 rights (outside of coaches shows, radio, etc.) can be very valuable. Look at UConn women's hoop. Essentially, they sold their Tier 3 rights for over $1 million per year! It really depends on the school, the sports, and the inventory. The ACC deal essentially took the inventory off the table, so the Tier 3 opportunity is very limited.

In the ACC, it would be hard for some of the schools like Wake Forest, BC, and Duke football to gain anything for Tier 3 rights. Not so for schools like UNC, FSU, and Clemson.

Quick guess is that if FSU went to the Big 12, they could increase their revenues by almost $10million per year over the ACC. How? Media rights would be about $5 million higher ($3 million for current contracts, plus an estimated $2 million for conference expansion), conf championship adds another $1 mill., and Tier 3 inventory adds $4 mill.

 

[Jericho]

I don't agree. Tier 3 rights (outside of coaches shows, radio, etc.) can be very valuable. Look at UConn women's hoop. Essentially, they sold their Tier 3 rights for over $1 million per year! It really depends on the school, the sports, and the inventory. The ACC deal essentially took the inventory off the table, so the Tier 3 opportunity is very limited.

I think you just proved my point. UConn got $1-$2 million for Tier 3 rights. Now UConn is pretty unique in that its women's hoops is actually popular. I remembering reading once it was the only women's program that turned a profit. Not sure if that's still true, but UConn has to be an outlier (not to mention the fact women's basketball does not get much coverage on Tiers 1 and 2).

But the fact remains, is FSU going to get $5 million a year for some of its leftover basketball games and maybe one out of conference football game? Most of those leftover games are available from the current ESPN deal from what I understand. Its not like the games ESPN does not show just go into some vast wasteland never to be seen.

 

[WallStreetHusky]

No school has moved for purely financial reasons?? So West Virginia moved to the Big XII for the academics? The natural rivalries? The better basketball? To make it LESS likely to ever reach a BCS bowl?

sorry to be the cynic, but I am just curious why you think WVA split then. And don't tell me stability because a long term financial commitment is what is giving the stability.

All of this movement is a pure money grab, colleges are now under pricing pressures and they can't just charge what they want anymore, so they need to find new revenues sources to find more money, and lo and behold, hello Big XII. some schools are less beholden to the money then others, no doubt, but that is a minority. The stadiums, practice facilities, coaches salaries, schollies, they all need the oxygen that cash provides.

 

[Jericho]

No school has moved for purely financial reasons?? So West Virginia moved to the Big XII for the academics? The natural rivalries? The better basketball? To make it LESS likely to ever reach a BCS bowl?

sorry to be the cynic, but I am just curious why you think WVA split then. And don't tell me stability because a long term financial commitment is what is giving the stability.

All of this movement is a pure money grab, colleges are now under pricing pressures and they can't just charge what they want anymore, so they need to find new revenues sources to find more money, and lo and behold, hello Big XII. some schools are less beholden to the money then others, no doubt, but that is a minority. The stadiums, practice facilities, coaches salaries, schollies, they all need the oxygen that cash provides.

You're oversimplying the situation. West Virginia left because the Big East is an unholy Frankenstein of a conference with football and non-football schools. And it seems clear that many football schools were peeved that the non-football schools had so much power over football matters.

But arguably the biggest reason is level of competition. Back when the BCS started, the Big East was always second tier to the other BCS conferences (except the ACC). And since then its lost Miami, VT, BC, Syracuse and Pitt. And you're telling me West Virginia is not worried that the entire conference loses its BCS status?

The funniest analogy I read was in relation to a Chris Rock joke. Rock tells about the two types of malls - the ones white people go to and the ones white people USED to go to. The name's the same, but all the good stuff left long ago. That's the Big East. They replaced all the teams, but its full of a bunch of squads no one cared about ten years ago. West Virginia did not want to be stuck in the ghetto conference that used to be relevant (football wise). The new BCS system almost assures the Big East does not get guaranteed representation. And for West Virginia, that's a huge recruiting problem.

Sure the money is better in the Big 12. But did Miami leave for more money specifically? No. And Colorado? At the time, the P ac 10 actually made less the Big 12 and by accounts would have been expected to continue making less. And Colorado still didn’t hesitate a second. Texas A&M probably is going to be making less in the SEC (or at least not any more). Some teams that switched may end up making more money. But in none of the situations was it the solr factor or even the primary factor.

 

[UConnJim]

Jericho - I don't think it proved your point. Essentially, UConn women's basketball is getting about $80k per game (also includes coaches show, so hard to figure out exact numbers) for the worst of their inventory of games. I would assume UConn men's basketball would get a similar if not better payday for their Tier 3 inventory. Throw in 3 Tier 3 football games and I would think UConn could get $3 to $5 mill per year in Tier 3 TV rights.

I agree that most schools can not generate great Tier 3 TV revenues, but a school like FSU could, especially if they right the ship in the near future.

 

[nelsonmuntz]

The ACC's Tier 3 captured in the new deal appears to include all sports, which would be a significant give by the ACC. Under the current deal, the individual schools get rights to events if they slip below Tier 1 and Tier 2. Virtually no football does, but some basketball content makes it down, as does Lacrosse and a few other minor sports which do have followings. It appears that will end with the new deal, but I don't know for sure.

The Big 12 also guarantees Tier 3 content for every school for every sport. Whether anyone outside of Topeka is interested in Kansas football is a different story, but I would imagine that FSU could make a bit of money on that.

 

[RS9999X]

The difference in actual $$$ from the two conferences is going to be much more like $6-$8 millon that $15-20 million sometimes thrown around. That does not mean that no school will move, but it decreases the incentive to do so.

It was in writing in the interim conrtract that a B12 expansion to 12 means $2.05 to each team for a championship game.

It's also worth noting the B12 pact is 2 years shorter. To truly compare the averages we would need to add a factor the estiamted media rights in 2026 and 2027 for the B12. By my calcs that's worth $1.25 to $1.5 million per team per year over the life of the contracts.

Then there's the new BCS playoff revenue. I have a paper calc that says B12 bowl distributions will be at least $3 million more per team per year than the ACC. That's a moving target based on the final decision.

Then there' Tier 3 B12TV sports for the cast off games. It's worth something if FSU was to move. Let's call it a $1 mil differential to air a couple local games and other B12 Network "castoff games of the week".

Then there's the question is FSU and/or Clemson accretive to the B12 contract. An extra $2 million per team per year? Not unrealistic.

So here's my take on the differentials if FSU moved:
Base Contract: $3 mil possibly $4 mil based on the ACC league share deduction.
Conference game: $2.05 mil
Tier 3 Castoff games: $1 mil. We know a B12 local "game of the week" is worth something.
BCS and Bowl: $3 mil. The B12 will always place a team. Sometimes 2. And other premium bowls.
Contract length differential: $1.5 mil (B12 goes to market 2 years earlier whihc is huge in inflating avg calcs)
FSU/Clemson accretion to base B12 contract: $2 mil (likely offset by bad news to the ACC contract)
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I don't think $10 mil is unrealistic. $15 would be high.

That's without discussing an ACC draw down renegotiation for losing FSU/Clemson.

 

[nelsonmuntz]

RS,

Another very strong post. Good work.

 

[Hoophound]

RS,

Another very strong post. Good work.

I am pretty sure there will be no draw down. The addition of UConn and Rutgers probably allows the ACC to keep the current deal if FSU and Clemson leave. It would be a good way for ESPN to close the deal and in the end, both sides win. ESPN gets UConn and Rutgers at no additional cost while saving big money on a potential bid for the Big East and the ACC walks away knowing that the loss of FSU and Clemson won't cost them anything if it happens. I doubt this was left undiscussed.

 

[Carl Spackler]

You're oversimplying the situation. West Virginia left because the Big East is an unholy Frankenstein of a conference with football and non-football schools. And it seems clear that many football schools were peeved that the non-football schools had so much power over football matters.

But arguably the biggest reason is level of competition. Back when the BCS started, the Big East was always second tier to the other BCS conferences (except the ACC). And since then its lost Miami, VT, BC, Syracuse and Pitt. And you're telling me West Virginia is not worried that the entire conference loses its BCS status?

The funniest analogy I read was in relation to a Chris Rock joke. Rock tells about the two types of malls - the ones white people go to and the ones white people USED to go to. The name's the same, but all the good stuff left long ago. That's the Big East. They replaced all the teams, but its full of a bunch of squads no one cared about ten years ago. West Virginia did not want to be stuck in the ghetto conference that used to be relevant (football wise). The new BCS system almost assures the Big East does not get guaranteed representation. And for West Virginia, that's a huge recruiting problem.

Sure the money is better in the Big 12. But did Miami leave for more money specifically? No. And Colorado? At the time, the P ac 10 actually made less the Big 12 and by accounts would have been expected to continue making less. And Colorado still didn’t hesitate a second. Texas A&M probably is going to be making less in the SEC (or at least not any more). Some teams that switched may end up making more money. But in none of the situations was it the solr factor or even the primary factor.

FYI - when the BCS started, the big east placed programs in the BCS national championship game in 3 of the first 5 national championship games. In the second BCS national championshig game - a big east team was featured against an ACC team.

14 BCS national champiomnship games have been played, 9 since the last time a big east team was in it. The BCS was founded to create a national championship game.

The big east was hardly a second tier conference - in basketball or football - in anyone's eyes - except a certain media giant, and football certainly wasn't second tier - to anyone except certain membership within the ocnference itself, and it's conference commissioner at the time.

 

[Jericho]

It was in writing in the interim conrtract that a B12 expansion to 12 means $2.05 to each team for a championship game.

It's also worth noting the B12 pact is 2 years shorter. To truly compare the averages we would need to add a factor the estiamted media rights in 2026 and 2027 for the B12. By my calcs that's worth $1.25 to $1.5 million per team per year over the life of the contracts.

Then there's the new BCS playoff revenue. I have a paper calc that says B12 bowl distributions will be at least $3 million more per team per year than the ACC. That's a moving target based on the final decision.

Then there' Tier 3 B12TV sports for the cast off games. It's worth something if FSU was to move. Let's call it a $1 mil differential to air a couple local games and other B12 Network "castoff games of the week".

Then there's the question is FSU and/or Clemson accretive to the B12 contract. An extra $2 million per team per year? Not unrealistic.

So here's my take on the differentials if FSU moved:
Base Contract: $3 mil possibly $4 mil based on the ACC league share deduction.
Conference game: $2.05 mil
Tier 3 Castoff games: $1 mil. We know a B12 local "game of the week" is worth something.
BCS and Bowl: $3 mil. The B12 will always place a team. Sometimes 2. And other premium bowls.
Contract length differential: $1.5 mil (B12 goes to market 2 years earlier whihc is huge in inflating avg calcs)
FSU/Clemson accretion to base B12 contract: $2 mil (likely offset by bad news to the ACC contract)
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I don't think $10 mil is unrealistic. $15 would be high.

That's without discussing an ACC draw down renegotiation for losing FSU/Clemson.

I don't really disagree with anything you stated. In fact your numbers generally match what I was stating. I did not include anything regarding the new BCS structure, as I feel its premature since its still so uncertain right now. And while the length of contract does matter, it's also not something FSU would realize until many, many years down the road (which is also based on speculation of what the rights will be worth down the road). But your post does prove my point. The Tier 3 rights are what, one million dollars?

 

[Jericho]

Jericho - I don't think it proved your point. Essentially, UConn women's basketball is getting about $80k per game (also includes coaches show, so hard to figure out exact numbers) for the worst of their inventory of games. I would assume UConn men's basketball would get a similar if not better payday for their Tier 3 inventory. Throw in 3 Tier 3 football games and I would think UConn could get $3 to $5 mill per year in Tier 3 TV rights.

I agree that most schools can not generate great Tier 3 TV revenues, but a school like FSU could, especially if they right the ship in the near future.

Not sure where you are getting your numbers from, but your estimates just seem particularly high. Even Texas is barely getting $3-5 million for their Tier 3 rights. They were getting $10 million for everything but Tier 3 prior to the LHN deal with ESPN. They now get $15 million (in a sweetheart deal) and assuming everything else remained the same in value, that means Texas got $5 million for their Tier 3 rights. Which by Big 12 rules includes one football game.

UConn does not have Texas' following, they may not even get a football game on Tier 3 (SEC Tier 3 last year did not), they will not get a sweetheart deal from ESPN, and they play in a perceived weaker conference. Those rights are still worth something, even with UConn's unique value of women's basketball, but not very much. And that's the point. Tier 3 brings in very little.

 

[Jericho]

FYI - when the BCS started, the big east placed programs in the BCS national championship game in 3 of the first 5 national championship games. In the second BCS national championshig game - a big east team was featured against an ACC team.

14 BCS national champiomnship games have been played, 9 since the last time a big east team was in it. The BCS was founded to create a national championship game.

The big east was hardly a second tier conference - in basketball or football - in anyone's eyes - except a certain media giant, and football certainly wasn't second tier - to anyone except certain membership within the ocnference itself, and it's conference commissioner at the time.

I realize Carl's post is already going off topic and my response sends it just a little further. But to try and nip this in the bud, my intent is not to slam the Big East. In fact my post was 100% about football and was no way ever intended to apply to the basketball side of things.

But even if some people feel the need to address any perceived slight to the conference name, the simple fact remains that the Big East is not looked upon in the same respect as the SEC, Big 10 or any conference with Texas and Oklahoma. You might call that perception. I tend to call it reality. Even at its height, the Big East was top heavy with teams like Miami and Virginia Tech. Yes, I am aware that both these school made the BCS Championship as members of the Big East. I watched those games. But the fact remains even back then the depth lacked and its only gotten worse with the defections of 75% of the conference.

The point in the above post is that Big East football is not good now. You may want to argue about the perception of the league ten years ago, but that wasn't even the point. The point is that right now the league is littered with Conference USA and Mountain West teams that 10 years ago no one blinked at eye at since they were in non-BCS conferences. No football school (i.e. West Virginia) can be happy about that and certainly would not pass up an opportunity to play with Texas/Oklahoma. The money was only the icing on the cake. The conference members were the attraction. Does anyone really believe that West Virginia would have stayed if the Big East guaranteed to match the $$ that West Virginia would have got from the Big 12?

 

[Rumrunner]

It's my understanding that the ACC's Tier 3 rights inure to the conference as a whole, not ESPN.

 

[Dann]

just sit back and watch fsu makes the move and create the seminole network in fl to rival the longhorn network in texas.

 

[RS9999X]

I am pretty sure there will be no draw down. The addition of UConn and Rutgers probably allows the ACC to keep the current deal if FSU and Clemson leave. .

I agree that would likley be the settlement along with some games, the exit and entrance fees, and at worse an extension. It wouldn't be catastrophic.

 

[WordUpBU]

This was posted on Orangebloods and is from a poster considered to be very credible.

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excellent post from a Rivals Texas poster(Standaddy88) explaining the contracts

"I had heard a lot of estimates but none of them were lower than $15 million and none were higher than $19 million. That means that the estimates were right on target. There is def blood in the water... no estimate I have heard for the Big12 is below 24 million. For the Big12, they currently have $20 million a school... this is a post from the other thread
There are a lot of moving pieces to conference realignment, and even the most knowledgeable posters don’t know all of them. I’ve been lucky enough to have had a number of clients that are directly or indirectly involved with conference realignment on the side of Texas, Oklahoma, ESPN, and others, share a little insight. I’m by no means an expert, but I have a pretty strong understanding of some of the dynamics that you won’t see in print.

First, at this point, everything is a guessing game as to whether the ACC is or isn’t raidable. It’s going to come down to their final TV payout.

Tier 3 Programming & Payouts

Where the ACC is severely limited is that their ESPN contract is for Tier 1, 2, and 3 programming, which leaves no sports programming for teams like FSU, Clemson, and VA Tech to sell to regional and national carriers. Shared Tier 3 payouts isn’t a bad thing if you’re getting a strong payout on Tier 1 & 2. But, when you’re a team like FSU or Clemson, which has a strong following, your “value” is being used to subsidize teams with lesser value. So, your take home is much lower than if you controlled your own Tier 3 rights.

Unfortunately when it comes to Tier 3 payouts, most don’t understand exactly what Tier 3 refers to, how the contracts differ from school to school (and conference to conference), or the various levels even w/in Tier 3 contracts. The numbers most like to throw around aren’t even Tier 3 payouts. Tier 3 refers to ONLY those sporting events which the conference’s network partners have opted not to televise in any capacity. Yet, most of the numbers tossed about included everything BUT actual Tier 3. Most of the ISP, IMG, Learfield Sports, etc contract numbers tossed around are nothing more than payouts for coaches shows, radio broadcasts, stadium advertising rights, website operation rights, and various other marketing & advertising related enterprises.

First things first, think of ISP, IMG (ISP’s parent corp), and Learfield, etc as pimps. They don’t actually provide a service. Rather, they connect universities to various services, and act as the go-between in exchange for a fee (generally a percentage of the take home). Let's use ISP and Florida as an example. ISP negotiated and handled the 10 year/$82M Sun Sports contract for Florida. They also negotiated all of Florida’s radio contracts. They sell the advertising in their stadium, produce their game day programs, establish endorsements for the coaches, manage the Gator’s website, and advertising for it, etc. So, Florida gets $8.2M/yr from a hybrid-Tier 3 package from Sun Sports + another $2M+/- from ISP for advertising and management related services, for a total annual payout in the $10M range. But, not all of that is Tier 3, only a small piece.

One of the other issues is most don’t understand that the true Tier 3 figures teams have gotten in the past are going the way of the dinosaur. Texas reset the bar on true Tier 3 payouts (not to be confused w/ contracts that include “other” services). Most quote Texas as receiving $15M/yr for Tier 3. And, that’s true. But, what made Texas’ deal such a landmark is that is ON TOP of their IMG contract, which pays an additional $9.4M/yr for radio, stadium advertising, game day programs, website rights, etc. Texas is actually getting $24.4M/yr for their all-in package, not $15M. Now, compare that to Florida’s $10M and Florida State’s $6.6M. The reason this is important to note is b/c the numbers discussed for Florida (which are most often mentioned in these discussions) are from 4 years ago. It’s a whole new world from a financial perspective, and when their contract expires in a couple of years, they’ll resign for $15M - $20M for their all-in package (my opinion).

FSU currently gets $6.6M/yr from their ISP package, which includes coaches shows, stadium advertising, radio, etc. The issue with the ACC’s ESPN deal isn’t that it costs a team like FSU the measly $3M-ish difference between what they get and what Florida gets from true Tier 3 production currently, but that it costs FSU a much larger sum that is now available on the market. The SEC doesn’t allow standalone networks like the LHN. That’s what makes the Big XII such a strong entity from the standpoint of true Tier 3 earnings. Oklahoma, for instance, is about to sign the 2nd largest true Tier 3 deal here shortly. A school like FSU should have no problem getting an additional $5M - $8M in today’s market on top of their radio, coaches shows, advertising, etc package they’re getting from ISP (potentially more)…….especially if they can put out a really strong season before signing. And, in the right conference, that amount could increase even more.

Also, the SEC’s TV deal allows for “up to” 1 football game a year for Tier 3 broadcast, but it doesn’t guarantee it. Last year, CBS televised 15 SEC games, and the ESPN network televised the other 75 games. So, no SEC football games made it to Tier 3 distribution. Thus, the Florida deal is not only undervalued from a time/inflation standpoint, but also from an inventory standpoint. There is a big difference between network contracts that leave NO football inventory and the Big XII’s which guarantees at least 1 per team, and allows you to purchase your OOC home games for Tier 3 distribution (the same as how Versus purchases Big XII games from ESPN/FSN for Tier 3 broadcast). Plus, the Big XII’s contracts allow for more basketball games for Tier 3 as well. Texas, for instance, had 12 Tier 3 basketball games last year. The Big XII’s current contracts are only for 59 of the 75 Big XII home football games, which leaves more inventory for sale by every team.

Tier 3 is a much bigger monster than everyone realizes, b/c everyone’s going off of the meager contracts that were signed 2, 3, 4, 5 years ago. And, in the past, ISP, IMG, Learfield, etc largely reached out to regional players for broadcast arrangements. Now, there is an established market (and vision) for larger scale Tier 3 deals………deals that will make the old PPV ways of the past look downright laughable.

Big XII’s Tier 1 & 2 Payouts

It’s been leaked that the Big XII is at the cusp of signing an extension with ABC/ESPN that will pay the conference just shy of $20M/yr for Tier 1 & 2 programming, beginning in 2016. However, that number was leaked with the purpose of driving the price higher, the same as what the Big XII did to drive their FSN contract 50% higher when it was signed in April 2011. With Fox now working to share a split contract with ABC, the number is expected to push closer to $21M for Tier 1 & 2, possibly a smidgeon higher.

Beyond the Big XII’s payout for Tier 1 & 2, I can tell you they were wise enough to build into the preliminary ABC contract an escalator that will increase their payout a fixed amount if at least 2 teams are added to produce a championship game. The exact “per team” increase is dependent upon the total teams added, but will be in the $1.5 - $2.5M range.

In addition, there are out clauses in both contracts that will open them up for renegotiation at market value should the Big XII expand further. Much of what’s said about the Big XII’s contracts as far as certain teams being on the “list”, etc are message board fiction. But, there is, from what I’ve been told, an understanding as to potential ranges with certain teams added to the Big XII. So, while it isn’t in print, it is understood.

ACC’s Payout

Much has been made about the article that estimated the ACC’s payout would be in the $15M/yr range once it’s reworked. I think most at ESPN are expecting that number to be higher, but not nearly high enough to stave off any expansion threats from neighboring conferences. Many have asked why ESPN wouldn’t simply pay them enough to prevent poaching. The answer is, it’ll likely cost them more to prevent it than otherwise. Think about it. In order for the ACC’s 2 y/o ESPN contract to go from $13M/yr to the $25M/yr they’d need to prevent being raided, ESPN would have to increase their annual payout $168,000,000. On the flip side, if the best teams are picked off the ACC and added to the SEC or Big XII, it will not cost them $168M in escalations. And, they still get a huge inventory to broadcast, while cutting out a lot of the weaker teams that don’t draw on TV: ala BC, Syracuse, Wake, Duke (football), Maryland, etc.

Also, ESPN’s contract w/ the ACC is for a fixed amount of inventory. For their contract to increase at a high rate, ESPN has to buy more inventory than they’re getting. And, as it stands, the ACC’s available inventory to sell is only increasing 16.7%. Plus, if football drives the boat (and it does), then to presume that 2 lackluster football teams + 2 years of inflation could drive up a contract $100M+ (which is what would be needed to hit $20M/team), then you would have to kiss the thought of Notre Dame joining a conference goodbye. Because…….if you can get a $100M bump from 2 middling teams & 2 years of inflation, then what is Notre Dame football worth on the open market? And yes, I realize ESPN is getting football, basketball, and baseball, as well as Olympic sports from the ACC, while NBC is getting just football from Notre Dame. But, I think it’s safe to say football at the very least, accounts for 50% of the ACC’s contract (if not 75%). So, even if football is only half of the $100M bump, you’re essentially saying Pitt football is worth $25M/yr. So, what’s Notre Dame football worth then?

That’s why in many respects, the numbers through around for pay increases are absurd, b/c people are saying Pitt & Syracuse are each worth $50M/yr each out of one side of their mouth, but NBC may not want to pay Notre Dame $15M out of the other. SMH.

An Add’l Big XII Angle

Another wrinkle the Big XII has that isn’t set in stone, but has been discussed is the possibility of opting for an 8-team conference slate in a 12-team or 14-team conference. Why would this be beneficial in their pursuit of any high-value ACC teams? B/c when the ACC switched from an 8-game to a 9-game conference schedule, it cost each school 1 home game every other year. At FSU or Clemson, based on attendance, a home game is worth around $8M in terms of gate receipts, concessions, etc. Switching from a 9-game slate to an 8-game slate would afford each school an additional $8M+/- every other year in additional revenue ON TOP of the additional revenue they’d pick up in TV payout.

Plus, it would mean that those teams wouldn’t have to cancel their higher caliber OOC games, like Clemson had to do with Georgia, and is at risk of having to do with Oklahoma State & Ole Miss in coming seasons.

Now, in fairness, the ACC's schedule hasn't definitively cost each team 1 home game every other year. But, in order to continue having the 7-8 home games a year most teams prefer, it means high quality OOC games like Clemson/Georgia have to be axed in favor of scheduling a "buy" game against a cup cake. Just looking at the numbers, it would appear there is about a $3M swing in revenue in switching from a traditional home & home series against a quality OOC opponent to paying a lesser team to come to your house to get whipped.

Adding it All Up

Obviously, we’re talking hypotheticals here, but there is a very real possibility that by switching to the Big XII, a team like FSU, VA Tech, or Clemson would be able to make:

$20M - $25M/yr on Tier 1 & 2
$3M - $10M/yr on true Tier 3 (not including radio, etc)
$1.5M - $2.5M on a CCG
$3M - $8M every other year from an additional home game

When the dust settles on the Big XII’s contracts, most of the teams will be making $25M - $35M annually on true Tier 1 ? 3 payouts. And, that doesn’t include escalations from a CCG or the bump in payout that would result from procuring 2 or 3 high-level teams through expansion.

For the ACC to keep up, they’re going to have to double their current contract, b/c otherwise, it will be very easy to offer FSU, VA Tech, or Clemson a $10M+ increase in annual TV take home.

I’ve heard many say that’s not that big a deal. But in reality, it’s actually a bigger deal than most realize. FSU & Clemson specifically, compete annually against Florida, Georgia, Alabama, Auburn, Tennessee, and South Carolina for recruits. Each of those teams (aside from USC) has a significant edge in attendance at games. Why is that important? Because TV money aside, if you assume every fan in attendance is worth $100 to the athletic department’s coffers, the difference in per home game take home between an FSU and an Alabama, is about $2.4M. Add that up over the course of a season and you’re talking about an $18M shortfall in revenue vs a regional competitor. Now, add an additional $10M - $15M in TV revenue shortfall, and you can see that it won’t be hard to fall behind significantly.

Sadly, IMO, college athletics is looking more and more like professional baseball, where money drives success. But, if that doesn’t change, a program like FSU, Clemson, and VA Tech cannot operate and compete at an annual $30M revenue shortfall to their competitors. At some point, something has to give, b/c coaching salaries are going to push beyond many teams’ ability to compete and pay……as sad as that may be. So, while geography or travel may not make sense, their hand may be forced if (and that’s a big if) the ACC contract does not come back at a competitive rate. And IMO, that will have to be around $25M.

And, before anyone says travel will eat up a lot of the extra $.....the Big XII has an option to offer an adjusted payout based on annual travel miles. So, there are opportunities to make FSU, Clemson and others wholes in that respect."

 

[RS9999X]

The Tier 3 rights are what, one million dollars?

I was restricting the FSU Tier 3 to the football and basketball games that drop down to a local Big-12 channel. As noted in the NC State link and in WVUs recent announcement the other stuff (radio, coaches shows, web sites, non revenue sports, etc) are treated the same and likely a wash between the two conferences based on the way they get bundled and sold to a single vendor.

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“There are three categories of rights that we own,” Oliver Luck explained. “The first and second tier are basically your football games, with maybe one 1-AA exception, and most of your basketball games.

“Those are the most valuable things we own. The member schools take their first and second tier rights and grant them to the conference, which then can bundle them and take them to Fox, ESPN and the other networks and work out a deal.”

That leaves the school with only its Tier 3 rights.

“Our third tier rights are things like maybe one football game against a 1-AA team or a basketball game against Northern Kentucky, most of the women’s games, all the baseball, volleyball and the other sports. It also includes radio rights, signage at the stadium, United Bank or whatever,” Luck said.

Most schools take their third tier rights and sell them to groups like IMG. West Virginia has not yet done that, but is in the process of so doing.
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It reads like the B12 hasn't figured out how to package the Tier 3 revenue sports into a B12 Network yet and each school is left on their own--but that could also be a misreading and the purchaser is really a bundler of somethtng it will package and call the B12 Network when it's all said and done and includes the local content for each affiliate.

 

[Carl Spackler]

and my posts are long? Sheesh. At least I try to make mine readable and interesting. I stopped reading that after about paragraph 3.

 

[Dann]

are you kidding? that may be long but its a lot better read than a wiki link court rulling from 1978. no offense.

it just further some ppl's stance here that the acc is going to blow up. to each his own but i though it was a good read. i lurk ob sometimes and have seen stuff like this before....its all fun to read and understand.

 

[Carl Spackler]

are you kidding? that may be long but its a lot better read than a wiki link court rulling from 1978. no offense.

it just further some ppl's stance here that the acc is going to blow up. to each his own but i though it was a good read. i lurk ob sometimes and have seen stuff like this before....its all fun to read and understand.

funny. I just try to get the light bulb turned on for people. Too many sheep in this world. The ACC is handcuffed to ESPN right now. Nobody is doing anything in the ACC without ESPN pulling the strings. We (the big east) have been in that position before.

 

[Dann]

can we talk about uconns tier 3 stuff here? what do we have and what can we get???
womens bball just signed a deal. isn't the radio contract up soon and were going to make a couple mill off that also? were about to upgrade puck. now hockey east has a contract with nesn right? btw we need to get nesn on tvs in fairfield county but anyway. could uconn sell its not nesn puck games to sny? that would be huge i would think also for the upgrade to be on tv in ct/ny/nj/pa.

 

[Carl Spackler]

can we talk about uconns tier 3 stuff here? what do we have and what can we get???
womens bball just signed a deal. isn't the radio contract up soon and were going to make a couple mill off that also? were about to upgrade puck. now hockey east has a contract with nesn right? btw we need to get nesn on tvs in fairfield county but anyway. could uconn sell its not nesn puck games to sny? that would be huge i would think also for the upgrade to be on tv in ct/ny/nj/pa.

I'm not well versed in any of that stuff dan, so I might be wrong on this, but I believe that the deal that exists right now with SNY for football and men's b-ball, is essentially our tier 2 and 3 rights that have been farmed out by ESPN and/or CBS.

What I am almost sure about, is that the deal with SNY for football and men's b-ball is set to expire at the same time that the entire big east is expiring with both ESPN and CBS.

Was ging to give props to HAthaway, but actually, I"m not sure if UConn really had any part in SNY acquiring football and men's b-ball rights - I think ESPN owns the big east tiers - all of them. Similar to what they've got with the ACC now.