Here at MrSEC.com, we like to lay out scenarios for you. With 20 years of television experience and contacts, we feel we’ve got a pretty good grasp on how television execs will view expansion and that should — along with our sources from across the SEC — also give us a good grasp on how/why expansion works as it does.
That’s why we told you in July of 2010 to “mark it down” that Texas A&M was destined to join the SEC. That’s why we wrote last May that Missouri would be an attractive expansion target for business reasons… long before anyone else discussed Mizzou. It’s why when headlines were made this week regarding the possible removal of the two-team cap from the BCS bowls we shrugged our shoulders and pointed — again — to what we wrote last May.
Are we always right? No. But our logic — according to the television, rights agency, school and conference sources we have — is usually pretty accurate. (Probably because we’re, ya know, talking to people at the network, rights agency, school and conference levels.)
Take the talk of an SEC Network. That topic fell off the radar when the SEC inked its deals with ESPN and CBS, but we’ve continued to say that depending on the league’s contracts, the formation of a network remained a possbility.
Today, the website OutkickTheCoverage.com is beating that drum rather loudly and we’ve received a few emails asking us for our take on the matter. Well, we happen to agree with them… since we wrote of that very possibility on May 19th, 2010:
“… a full-scale renegotiation of the deals with CBS and ESPN might not be necessary at all…
Let’s say the SEC keeps its current deals with CBS and ESPN in place. The league could then take all of its new inventory (as well as the tape delay rights to all of its other games) and create its own SEC Network. Two years ago, the Big Ten Network looked more like a headache than a gold mine. The SEC chose not to launch its own channel. But things have changed and the Big Ten Network now brings in more than was initially projected. It also figures to keep growing. Now, if an SEC Network aired two live football games per week, coaches shows, and game replays in the fall… and then did the same during basketball season, do you think SEC fans would call their local cable operators demanding access? I do.
The bottom line is this: Expansion does NOT rest on the SEC having to renegotiate more money from CBS and/or ESPN.”
Again, that was from May of last year. We’ve hit on that point numerous times in the last few weeks as well.
So today, OutkickTheCoveage is tackling that topic.
To create a network, the SEC would have to ask each SEC school to turn over its Tier 3 rights to the league. Schools like Florida and Alabama have bigger Tier 3 rights deals than schools like Ole Miss and Mississippi State, but it’s likely all the schools would agree to such a request if they saw that everyone’s dollars would go up in a league-packaged deal.
If the SEC stops expanding at 14 schools — and we’ve been saying for several weeks that that is what our sources have told us is the league’s goal — that would equal 14 former Tier 3 games that could be put on a new SEC Network. That much is obvious. But depending on the wording of the league’s contract with ESPN, there could be even more inventory available.
(Read closely, we’re about to dig into some math.)
Currently there are 48 in-conference SEC games a year (12 teams x 8 league games = 96 games / 2 two teams per game = 48). In addition, each school then plays 4 more non-conference games which equals another 48 games.
So CBS and ESPN have the rights to 96 total football games per year. ESPN gets the bulk of those games, some of which they sell off to other networks (CSS, FSN).
Now, was the SEC’s contract with ESPN all-inclusive (meaning it simply said “all league games”) or was it specific (meaning it stated “96 games”)? If it was all-inclusive then the league would have at most — with a 14-team league — 14 games to package together and use on a SEC Network.
If the contract specifically said “96 games,” however, then the league would get all of the additional games created by expansion (2 new teams x 4 non-conference games = 8 total games + 12 existing schools’ Tier 3 games = 20 games + 8 additional in-conference games involving new schools = 28 new games of inventory… if our math’s correct). That would be enough for a double-header per week on a new SEC Network.
Everything depends on the wording of that contract. And that’s not even counting the additional basketball inventory that could be created.
Speaking of wording, we believe the SEC gave up the right to its own network when it inked its deal with ESPN in Summer 2008. According to a statement from ESPN, “The SEC agreement can not be reopened and there are no outs.”
If that’s the case, it’s time to deduct some points from Mike Slive’s score. No outs? Rule #1 in business: Never a sign a contract with no outs.
Having said that, we’d bet that’s simply ESPN’s opening stance. Slive has suggested that there are look-ins built into the existing SEC-ESPN deal. What we’re probably looking at is a negotiation.
Slive: We want more money for our expanded league.
ESPN: Tough. You’ve got no out clause.
Slive: Why don’t we all remain friends and look for other options?
Bing, bang, boom the door is opened for an SEC Network run in partnership with ESPN. The SEC gets more money. ESPN gets more inventory to sell… and thus more money as well.
Moving on, yesterday OutkickTheCoverage also suggested that no one forget that Comcast/NBC is now a potential bidder for SEC rights as well. Well, here’s what we wrote back on September 20th:
“And don’t forget, NBC is now looking to become a bigger player in the college sports scene, just as Fox has done. Fox has its own network of regional channels. NBC has the same through its merger with Comcast which was approved earlier this year. If current SEC partner ESPN balks at forking over more dough to the SEC and fails to make a good-faith offer, Slive could conceivably — depending on his contract with CBS — take the SEC inventory to NBC to see what that network might offer for it.”
Regarding a potential SEC Network, we wrote:
“If the SEC did launch a network, it would find that cable distribution revenue is much more stable than ad-sales-based revenue via the networks. The more households the SEC could reach, the more money it would make. To heck with on-field performance or game-by-game ratings. Subscribers would pay a monthly fee to their cable operators — again, think of a potential partnership with NBC/Comcast — and a piece of that would go straight into the SEC’s coffers.
Were talking about ifs here, but if the SEC has a mind to join other leagues in the conference-owned channel game, the more eyeballs the better. That’s why Texas &M is so valuable. There are approximately eight million cable households in the Lone Star State. Awesome. Unfortunately, that’s why a school like West Virginia — located in a state with a total population of less than two million people — probably wouldn’t be as attractive to the SEC.”
At this point, it’s all in the legalese. Slive and the SEC’s presidents wouldn’t be expanding now if a) everyone else weren’t expanding and b) there weren’t more money to be grabbed. He knows the cash is out there and you can bet he’s got an idea of how to get at it.
Slive will likely go to CBS and ESPN — and ESPN’s got the bigger deal ($150 million per year compared to CBS’ $55 million per year) — and ask for an increase in pay.
The networks will balk and say a deal is a deal. According to a senior sports VP at one of the big three networks who we spoke to, ESPN would likely have to make some sort of good-faith offer if there is any room for negotiation at all. (ESPN says there isn’t, but Slive has said those “look-ins” do exist.)
It’s certainly possible that the SEC and ESPN could reach an agreement to ball up the league’s new inventory and launch it with a new network. (Seeing how much trouble ESPN has had getting the Longhorn Network into homes, it would probably be better for the SEC if they could partner with NBC/Comcast instead.)
But here’s one more possibility that you’ll read here first…
Depending on the language of the SEC’s deal with ESPN, the league might be able to simply slice off the new inventory created by adding one or two schools and sell it as yet another tier of broadcast rights.
CBS would get its Tier 1 rights as planned. ESPN would get the Tier 2 rights it signed up for initially, too. And — let’s say for kicks — NBC/Comcast would get the 14 to 28 new games created by expansion. If Texas A&M or Missouri (or West Virginia, etc) were involved, that game’s rights would go to the new partner.
Likely? No. But possible.
First, we’d have to get our hands on the ESPN-SEC contract to see just how possible. Second, ESPN would probably play ball with the SEC on a new network long before it let someone else grab a portion of the SEC’s pie.
But two things appear evident as we close this post:
1. If the SEC is looking for new cash, starting its own network would look to be a good way to do it (as we’ve been writing for a year-and-a-half now).
2. When it comes to SEC and expansion… you’ll read it here first.