Perspective from the Big Ten and some much needed clarifications

[SEIOWA CLONE]

First Michigan is overrated and Penn State isn't far behind. Second, There is Alabama then the rest of the SEC. Let's not act as if every team in the SEC is god.

As for the $80 million, it wasn't random. The B1G went from $33 million (2016) to the current $54 million and will the current TV deal at $65 million per team on the most recent deal. That money was from network broadcast and nothing from streaming. Former B1G commish Delany had the foresight to see streaming as the next step in making money, and that's why he did a short deal. The B1G is not held hostage to one network when negotiating a new media deal. This is why some pundits think the upper 70s to $80 million is realistic if you are looking at cable and streaming together. They will likely set another scenario for expansion around the new deal to add value and increase each team's payout. The SEC will get their huge payout, too, and in the end, it will be the SEC and B1G standing tall over everyone else. I just think there will be no super conference.

But people that stream are no longer cable customers, you are just replacing one media form for another. I really doubt you are really gaining many new subs to view the content.
The genius of the system was not the person that is paying to stream the content, it was forcing those that did not watch it to pay. We know that if a state was within the footprint that BTN was roughly $1.00 a month, and if outside the footprint it was $.10 a month. What we do not know is what BTN is charging for its streaming service other the BTN+ is $80 dollars a year or $10 dollars of month.
But only fans interested of the content is going to pay that charge, and that is not where the huge money is at. The Hulu + live sports package is $44.99 a month, but that would include all basic programing and all the sports, NFL, NBA, MLB, and the NHL along with college sports, so they are getting less money from streaming from the cord cutters as they were from cable, when it was on the basic package.

 

[cubuffsdoug]

Some pundits?

and you’re saying that Oklahoma Georgia LSU Florida and even Texas don’t have the National appeal of Ohio state, and more than either Michigan and penn st?

content will still matter. There’s going to be more in the Disney package.

I never said those schools didn't have national appeal. I think perception outways most views on teams. For example, Auburn won a national championship less than 10 years ago, but they are second fiddle to Alabama in every way. So they are not viewed as being on par with Alabama, and it's the same way for Michigan in how people see them against Ohio State. Texas has won crap since George Washington was president.

Anyway, my focus was on potential earnings. SEC will be negotiating with one network (ESPN), and you lose leverage when demanding bigger and bigger payouts. The SEC doesn't have CBS to run to for additional money. Disney is a giant but can't print money just because they say so. ESPN will have to decide whether we carry other conferences or go all-in with the SEC? If ESPN wants to satisfy the SEC financially, they may need to cut ties with other conferences to have the money everyone expects the SEC to earn. The Big 12 is the first of those casualties. ESPN had the SEC cherry-pick the two programs, then had another (lesser) conference like the AAC make it known they would love to have the remaining teams. If there are fewer than 6 Big 12 teams, then conference does not exist anymore. ESPN has freed up money to give to the SEC. ESPN did a similar thing with the old Big East to create chaos when the Big East didn't accept their contract offer.

ESPN doesn't like losing and will destroy others if they can't have it. ESPN directed the ACC to scoop up certain Big East teams to add value to the ACC and make it worthwhile to ESPN to pay for it. ESPN is trying to decrease the size of the power conferences while locking out the other Networks. They want to force the hand of the CFP Governance and everyone else. As long as the other conferences negotiate with the remaining networks and streaming services, that is a problem for ESPN's overall plan. That means those conferences have value and control the CFP Governance, which has no intention of letting ESPN control the CFP, NY6 games, and the number of playoff teams.

 

[cubuffsdoug]

But people that stream are no longer cable customers, you are just replacing one media form for another. I really doubt you are really gaining many new subs to view the content.
The genius of the system was not the person that is paying to stream the content, it was forcing those that did not watch it to pay. We know that if a state was within the footprint that BTN was roughly $1.00 a month, and if outside the footprint it was $.10 a month. What we do not know is what BTN is charging for its streaming service other the BTN+ is $80 dollars a year or $10 dollars of month.
But only fans interested of the content is going to pay that charge, and that is not where the huge money is at. The Hulu + live sports package is $44.99 a month, but that would include all basic programing and all the sports, NFL, NBA, MLB, and the NHL along with college sports, so they are getting less money from streaming from the cord cutters as they were from cable, when it was on the basic package.

BTN charges the cable system $1.10 if they are within the footprint of the B1G, and outside of the B1G footprint is $.40. Also, you and others fail to realize a similar system of charging streaming services is in place. BTN is part of the sports package for YouTube TV, Sling, etc. I don't know the numbers, but it was a late addition to the B1G media deal within the last few years. The original media deal started in 2016 for the B1G without streaming services being a part of it.

Take a close look at Hulu TV, Sling, or even YouTube TV. It's not much different than cable in what they offer you. The reason why it doesn't cost as much as cable is because they don't have built fees to cover the cost of maintaining the system. Cable pays for the equipment (cable box, repair people, fiber-optics line, etc.) that supplies your home. They are passing that cost onto the customer. Streaming services have less overhead, therefore you pay less. The actual cost of carrying the leagues/conferences is not that expensive. The streaming services are getting their cut, and so are the leagues.

 

[BCClone]

I think you allowed yourself to inject some Big 12 flavor into calculating the payout for the SEC.
How do you know the B1G will increase payouts annually in the range of 5%, but the SEC will see increases in the neighborhood of 50% with the addition of OU and UT. The SEC will deal only with ESPN (& ESPN+) for payouts. ESPN made sure of that by getting the SEC to drop its deal with CBS. The B1G could do like pro sports and split their new deal across a few platforms to maximize its earnings. You can earn more by breaking up the product across competing media platforms than by selling your entire product to one source.

SEC giving ESPN everything they want is not in their best interest. If ESPN doesn't gain control of the CFP and NY6 games, then all of these moves were for nothing. CFP Governance has indicated they plan on letting the contract run out and hit the open market for competitive bids. ESPN could lose the CFP and NY6 games, then what?

The Big ten may try this but if ESPN thinks the addition of OU and UT in the SEC covers them well, they may not be very interested in bidding on the big ten games and the big ten may be limited in who their partners are; meaning they may not get as strong of a payout as originally thought. This is where we need netflix, amazon, and the like to step in and start the streaming services to create competition. CBS not pushing hard to hold the SEC game, may signal that they are willing to have a cheaper option or possibly no game at all.

 

[RustShack]

The Big ten may try this but if ESPN thinks the addition of OU and UT in the SEC covers them well, they may not be very interested in bidding on the big ten games and the big ten may be limited in who their partners are; meaning they may not get as strong of a payout as originally thought. This is where we need netflix, amazon, and the like to step in and start the streaming services to create competition. CBS not pushing hard to hold the SEC game, may signal that they are willing to have a cheaper option or possibly no game at all.

CBS didn’t want to overpay. They also didn’t know Texas and Oklahoma were in the cards, like ESPN did.

 

[SEIOWA CLONE]

BTN charges the cable system $1.10 if they are within the footprint of the B1G, and outside of the B1G footprint is $.40. Also, you and others fail to realize a similar system of charging streaming services is in place. BTN is part of the sports package for YouTube TV, Sling, etc. I don't know the numbers, but it was a late addition to the B1G media deal within the last few years. The original media deal started in 2016 for the B1G without streaming services being a part of it.

Take a close look at Hulu TV, Sling, or even YouTube TV. It's not much different than cable in what they offer you. The reason why it doesn't cost as much as cable is because they don't have built fees to cover the cost of maintaining the system. Cable pays for the equipment (cable box, repair people, fiber-optics line, etc.) that supplies your home. They are passing that cost onto the customer. Streaming services have less overhead, therefore you pay less. The actual cost of carrying the leagues/conferences is not that expensive. The streaming services are getting their cut, and so are the leagues.

The difference is in the amount of money that is being paid back to the Big 10. The Hulu sports pak is like $10.00 a month and that money goes to pay every sport professional and college. So there is no way that the Big 10 is getting $1.00 out of that money.
As we move from cable to streaming, the Big 10 will not be able to get the same money they were getting from cable, because they will not have the ability to charge everyone in the state a $1.00 whether they watch or not, with streaming it might be like you said with outside the foot print $0.40 cents. So cities like NY, Chicago and Washington that bring in massive amounts of money will be cut down to a third of what they were bringing in.

So the switch will be from the casual and never viewer to the hard core sports fans, but there are less of them out there, so you will have to charge them even more to make anywhere near what the league was getting a few years ago.
As cable companies lose subs. they are going to be forced to either switch programs like BTN off basic cable or increase the price they charge to the customer, causing even more of them to cut cable and move to streaming.

 

[Ace000087]

AAU, Tier 1 Research, $1.1B+ endowment, Land & Space Grant, 61.5K stadium, 34K students... ISU totally fits the B1G mold. If we were already in the conference no one would even argue our membership. The fact we have grown so much athletically and academically in the past 2 decades with out being in the B1G is telling. If ISU gets demoted to the effing American it would be a disservice to college football and public education. You can't tell me Wake Forrest, Washington State, Oregon State, Boston College, etc. deserve to be P5 and we don't.

 

[Cyclones1969]

I never said those schools didn't have national appeal. I think perception outways most views on teams. For example, Auburn won a national championship less than 10 years ago, but they are second fiddle to Alabama in every way. So they are not viewed as being on par with Alabama, and it's the same way for Michigan in how people see them against Ohio State. Texas has won crap since George Washington was president.

Anyway, my focus was on potential earnings. SEC will be negotiating with one network (ESPN), and you lose leverage when demanding bigger and bigger payouts. The SEC doesn't have CBS to run to for additional money. Disney is a giant but can't print money just because they say so. ESPN will have to decide whether we carry other conferences or go all-in with the SEC? If ESPN wants to satisfy the SEC financially, they may need to cut ties with other conferences to have the money everyone expects the SEC to earn. The Big 12 is the first of those casualties. ESPN had the SEC cherry-pick the two programs, then had another (lesser) conference like the AAC make it known they would love to have the remaining teams. If there are fewer than 6 Big 12 teams, then conference does not exist anymore. ESPN has freed up money to give to the SEC. ESPN did a similar thing with the old Big East to create chaos when the Big East didn't accept their contract offer.

ESPN doesn't like losing and will destroy others if they can't have it. ESPN directed the ACC to scoop up certain Big East teams to add value to the ACC and make it worthwhile to ESPN to pay for it. ESPN is trying to decrease the size of the power conferences while locking out the other Networks. They want to force the hand of the CFP Governance and everyone else. As long as the other conferences negotiate with the remaining networks and streaming services, that is a problem for ESPN's overall plan. That means those conferences have value and control the CFP Governance, which has no intention of letting ESPN control the CFP, NY6 games, and the number of playoff teams.

Do you even have any idea who owns ESPN? Because in this ramble, it doesn’t seem like it.

and winning has nothing to do with appeal, because no one in the big 10 has won anything, other than Ohio State. Texas is the biggest brand, that’s why they make the most money. Oklahoma, Georgia, LSU, and Florida are all huge college football brands. So you know that’s twice as many as the big 10 has.

it’s not 2010 anymore. You’re sad for trying to Hawkeye talking point this topic.

 

[BCClone]

The difference is in the amount of money that is being paid back to the Big 10. The Hulu sports pak is like $10.00 a month and that money goes to pay every sport professional and college. So there is no way that the Big 10 is getting $1.00 out of that money.
As we move from cable to streaming, the Big 10 will not be able to get the same money they were getting from cable, because they will not have the ability to charge everyone in the state a $1.00 whether they watch or not, with streaming it might be like you said with outside the foot print $0.40 cents. So cities like NY, Chicago and Washington that bring in massive amounts of money will be cut down to a third of what they were bringing in.

So the switch will be from the casual and never viewer to the hard core sports fans, but there are less of them out there, so you will have to charge them even more to make anywhere near what the league was getting a few years ago.
As cable companies lose subs. they are going to be forced to either switch programs like BTN off basic cable or increase the price they charge to the customer, causing even more of them to cut cable and move to streaming.

I’m guessing with streaming that the big 10 gets the out of footprint amount since it’s kinda hard to charge someone who may move around.

 

[Ace000087]

Stadium Capacity:

Michigan - 107K
Penn St - 106K
Ohio St - 104K
Nebraska - 87K
Wisconsin - 80K
Mich St - 75K
Iowa - 70K
Iowa State - 61K
Illinois - 60K
Purdue - 57K
Indiana - 52K
Minnesota - 52K
Rutgers - 52K
Maryland - 51K
Northwestern - 47K

 

[cubuffsdoug]

Do you even have any idea who owns ESPN? Because in this ramble, it doesn’t seem like it.

and winning has nothing to do with appeal, because no one in the big 10 has won anything, other than Ohio State. Texas is the biggest brand, that’s why they make the most money. Oklahoma, Georgia, LSU, and Florida are all huge college football brands. So you know that’s twice as many as the big 10 has.

it’s not 2010 anymore. You’re sad for trying to Hawkeye talking point this topic.

I know who owns Disney. My wife used to work for them as a media rep. Also, I get it that you are speaking from a position of need. Iowa State needs a landing spot, so your views will be different.

 

[Cyclones1969]

I know who owns Disney. My wife used to work for them as a media rep. Also, I get it that you are speaking from a position of need. Iowa State needs a landing spot, so your views will be different.

So then you know that all of your 2010 talking points are stupid, then? Right?

 

[SEIOWA CLONE]

I’m guessing with streaming that the big 10 gets the out of footprint amount since it’s kinda hard to charge someone who may move around.

That is my point, the Big 10 is making killer money within the footprint, not outside it, and with cord cutting that will hurt their bottom line within the footprint.
As people switch from cable, that dollar a month they were charging everyone, goes down to the 40 cents or so, and looking at Hulu rates, you had to pay extra to get the sports pak, it was not on the basic programing, so that is cutting into the numbers even more.
This idea that the Big 10 within 18 months of signing a new deal will be at 80 million a schools is fantasy land thinking at best. 2020 $54 million per school, 2027 $80 million per school is what the guy is saying. That is not going to happen, without picking up teams like USC and ND.

 

[AuH2O]

That is my point, the Big 10 is making killer money within the footprint, not outside it, and with cord cutting that will hurt their bottom line within the footprint.
As people switch from cable, that dollar a month they were charging everyone, goes down to the 40 cents or so, and looking at Hulu rates, you had to pay extra to get the sports pak, it was not on the basic programing, so that is cutting into the numbers even more.
This idea that the Big 10 within 18 months of signing a new deal will be at 80 million a schools is fantasy land thinking at best. 2020 $54 million per school, 2027 $80 million per school is what the guy is saying. That is not going to happen, without picking up teams like USC and ND.

Right, it’s not just cord cutting, it’s been a big shift toward stripped down packages that don’t include sports channels.

 

[Cloneon]

But people that stream are no longer cable customers, you are just replacing one media form for another. I really doubt you are really gaining many new subs to view the content.
The genius of the system was not the person that is paying to stream the content, it was forcing those that did not watch it to pay. We know that if a state was within the footprint that BTN was roughly $1.00 a month, and if outside the footprint it was $.10 a month. What we do not know is what BTN is charging for its streaming service other the BTN+ is $80 dollars a year or $10 dollars of month.
But only fans interested of the content is going to pay that charge, and that is not where the huge money is at. The Hulu + live sports package is $44.99 a month, but that would include all basic programing and all the sports, NFL, NBA, MLB, and the NHL along with college sports, so they are getting less money from streaming from the cord cutters as they were from cable, when it was on the basic package.

This! It happens everywhere. The last thing you (third person) bought? Did you need or want everything you bought? But, somehow, the marketers, have managed to con you into believing you want it. Grocery store quantities: never for two; always for three. Automobile, really? Need everything? New fangled refrigerators? Did you really need it to tell you what you need to buy? Do you really need the latest update to Windows or Office? No. I'll bet there are features, you'll never use. Or even know exist. But somehow MS has convinced you you need them. Sports viewing packages? Do I really need to go into the complete waste of money those are just to see ISU play? The list is endless.
In the 80's I calculated my need for CDs. Try to follow this because it's a centerpoint for what's happening. If you double your library, you halve the number of times you listen to a song. Therefore your price per song listened to goes up exponentially. It was only a matter of time before 'streaming' took that logic out. The same will go with ALL content. Eventually, someone will figure out how to make everything dynamic PPV (ie commoditized). The only people losing money on that will be the marketers of 'packaged' products. And that day can not come soon enough. It's like a microcosm of anti-trust with customers.
Ok. Gotta tell myself to breathe .

 

[isucy86]

I think you allowed yourself to inject some Big 12 flavor into calculating the payout for the SEC.
How do you know the B1G will increase payouts annually in the range of 5%, but the SEC will see increases in the neighborhood of 50% with the addition of OU and UT. The SEC will deal only with ESPN (& ESPN+) for payouts. ESPN made sure of that by getting the SEC to drop its deal with CBS. The B1G could do like pro sports and split their new deal across a few platforms to maximize its earnings. You can earn more by breaking up the product across competing media platforms than by selling your entire product to one source.

SEC giving ESPN everything they want is not in their best interest. If ESPN doesn't gain control of the CFP and NY6 games, then all of these moves were for nothing. CFP Governance has indicated they plan on letting the contract run out and hit the open market for competitive bids. ESPN could lose the CFP and NY6 games, then what?

How do you know the B1G will increase payouts annually in the range of 5%, but the SEC will see increases in the neighborhood of 50% with the addition of OU and UT.

The 50% figure is to arrive at the average value over the 10 year agreement. So in essence that equates to slightly over 4% annual bump.

SEC giving ESPN everything they want is not in their best interest. If ESPN doesn't gain control of the CFP and NY6 games, then all of these moves were for nothing. CFP Governance has indicated they plan on letting the contract run out and hit the open market for competitive bids. ESPN could lose the CFP and NY6 games, then what?

I think the SEC would debate aligning themselves with ESPN isn't in their best interest. They were able to increase the previous 2:30CT game with CBS from $55M to over $300M annually. Seems to me that ESPN wants to brand themselves as the place to catch SEC football. I imagine they view the SEC deal & playoff rights as 2 separate financial transactions.

 

[usedcarguy]

Two points about streaming that's being left out of the conversation. One that it affords the opportunity to sell sports packs outside the traditional footprint. A Michigan fan in California would never be in a market where the B1G network was forced into a household. Yes, there would be no net gain in consumers if the move was from say Directv or Dish to streaming, but there certainly would be from traditional cable consumers. The big question is how much does that add versus how much they lose by not forcing cable subscribers to subsidize in the existing footprint. IMO it's a net sum gain. It's the number of eyeballs that determine if a network is worth $.10 per month in a package or $2.00.

The other is that streaming is moving the consumption of content to an on demand model. This reduces the value of such content to advertisers who now have to look elsewhere to reach consumers. Live events are where that money is going, and is the reason why the numbers being talked about in the next B1G GoR deal are in that $75-80M range. Advertisers are driving this rocketship in revenue, not subscribers.

And if you think the money is crazy now, just wait until digital advertising melds with live events. What's a company like Dominos going to pay when they can serve an ad during a live event which allows a consumer to click on an ad and order a pizza? This is why the smoke that's beginning to surface about Amazon being a new entrant into the marketplace is such a big deal. They'll be able to sell you team apparel or groceries. Yes, a school like Texas will still have far more value than ISU, but the pot of money is going to be big enough that there will be a diminishing rate of return for their extra revenue. The poorest billionaire on a street is still a billionaire. If we can't get into the B1G or PAC12, it's not necessarily the end of the world. We just need to hang on for long enough for technology to boost our value.

 

[cyIclSoneU]

And if you think the money is crazy now, just wait until digital advertising melds with live events. What's a company like Dominos going to pay when they can serve an ad during a live event which allows a consumer to click on an ad and order a pizza? This is why the smoke that's beginning to surface about Amazon being a new entrant into the marketplace is such a big deal. They'll be able to sell you team apparel or groceries.

There are so many opportunities for Amazon to gain value from an athletic conference partnership, in more than just TV rights ways. You mentioned a good one. Another would be having their team stores on Amazon, so with one click during an ISU game, you just bought an official Nike Cyclones sweatshirt with 2-day shipping.

I live in a city with a Whole Foods (owned by Amazon). Lots of ISU fans don't. We could both be watching the same game on Prime, and I get an ad offering me a pizza from Whole Foods, while you get one offering Dominos. One click if I've already saved my preferred order, and I get the confirmation that it'll be here in an hour while I'm watching Hunter Dekkers throw a TD pass.

 

[usedcarguy]

This! It happens everywhere. The last thing you (third person) bought? Did you need or want everything you bought? But, somehow, the marketers, have managed to con you into believing you want it. Grocery store quantities: never for two; always for three. Automobile, really? Need everything? New fangled refrigerators? Did you really need it to tell you what you need to buy? Do you really need the latest update to Windows or Office? No. I'll bet there are features, you'll never use. Or even know exist. But somehow MS has convinced you you need them. Sports viewing packages? Do I really need to go into the complete waste of money those are just to see ISU play? The list is endless.
In the 80's I calculated my need for CDs. Try to follow this because it's a centerpoint for what's happening. If you double your library, you halve the number of times you listen to a song. Therefore your price per song listened to goes up exponentially. It was only a matter of time before 'streaming' took that logic out. The same will go with ALL content. Eventually, someone will figure out how to make everything dynamic PPV (ie commoditized). The only people losing money on that will be the marketers of 'packaged' products. And that day can not come soon enough. It's like a microcosm of anti-trust with customers.
Ok. Gotta tell myself to breathe .

I kinda touched on that in my post. Essentially, all of this is just technology removing inefficiencies from the marketplace. The advertising money is still going to get spent, because their ultimate goal is to get consumers to justify making an expenditure.

In regards to what this means for college athletics going forward, branding at least at the conference level if not beyond is going to be of utmost importance. It's that branding that's going to get you as a consumer to become interested in a game for which you otherwise would not be interested. It's why ESPN is trying to do what it's doing with the SEC, and also why it's damaging to the college football ecosystem.

 

[SEIOWA CLONE]

This! It happens everywhere. The last thing you (third person) bought? Did you need or want everything you bought? But, somehow, the marketers, have managed to con you into believing you want it. Grocery store quantities: never for two; always for three. Automobile, really? Need everything? New fangled refrigerators? Did you really need it to tell you what you need to buy? Do you really need the latest update to Windows or Office? No. I'll bet there are features, you'll never use. Or even know exist. But somehow MS has convinced you you need them. Sports viewing packages? Do I really need to go into the complete waste of money those are just to see ISU play? The list is endless.
In the 80's I calculated my need for CDs. Try to follow this because it's a centerpoint for what's happening. If you double your library, you halve the number of times you listen to a song. Therefore your price per song listened to goes up exponentially. It was only a matter of time before 'streaming' took that logic out. The same will go with ALL content. Eventually, someone will figure out how to make everything dynamic PPV (ie commoditized). The only people losing money on that will be the marketers of 'packaged' products. And that day can not come soon enough. It's like a microcosm of anti-trust with customers.
Ok. Gotta tell myself to breathe .

Wow, I have no clue if what you just said has anything to do with media packages.

Under the big 10 media deal, the money is NOT made from those that actually watch the games, its made off those that are being charged whether they watch it or not. Why did they pick Rutgers to expand into too? Not because of the school and their winning tradition and fan base, it was because by picking them, that allowed the conference to charge every person in New York City, that has cable a dollar a month. I am charged for it here in Iowa whether I watch or not.
In your example, you actually have to purchase the product, but BTN got around that, by being on basic cable. IF you had cable, you paid money to BTN. That was the genius of the system, that allowed the money to flow in.

Now with streaming, that flood of money, starts to slow down. People that are not interested will not purchase the added sports pak, therefore less money into the conference. Once they go down this path, and we are going down this path, then the size of your teams crowds and fanbase give you a good idea of how many people are willing and able to purchase the product. Hardcore BTN fans are buying, but for everyone of them, there are dozens of other people that will not. Under the old system, those dozens would have had no choice but to pay into the system, now they do, and they are not doing it. If they were then BTN+ would not be $80 dollars a year, or $10 bucks a month, they would have kept it at roughly the same price as basic cable costs, at a dollar or two.

BTN knows all of this, and that is why they are trying to transition to putting more games on BTN+ thereby forcing people to purchase it, even if that means for only one month. NBC and ND is doing the same thing this coming season, putting one game on their streaming service to see how large of a crowd they can draw and if there is going to be enough money there in the future to do it more often.