Bob Johnson founded BET, yet he couldn't keep his regional sports network, C-SET, from faltering. Paul Allen co-founded Microsoft with Bill Gates, yet his ACSN had no chance. The Big Ten is one of the most powerful college conferences in the country, but unless they get real in the next couple weeks with the price that they're charging for the Big Ten Network, this operation will be in the graveyard within the next three years.
Let's go through what the facts are. The Big Ten Network has a joint venture with Fox . They've essentially taken many of the football and basketball games that you would have found on ESPN-Plus in the past and awarded them to their own network. They're also putting in a bunch of the non-revenue, Olympic sports (Read: Boring to most of the population) to make it possible to have good filler for a 24-hour schedule.
There's nothing wrong with the idea of it all. There's just a slight problem with the parties and their valuation as to how much this is worth.
You see, Fox and the Big Ten Network want to charge $1.10 cents per month to viewers in the Big Ten states and 10 cents per month to viewers outside the area. The problem with this is, that they insist that this should be placed on the expanded basic tier in the region and digital basic tier outside the region. This means that everyone gets it and everyone pays for it.
What’s wrong with this? Look at the ratings for football and basketball for the ESPN-Plus games. Data shows that, even in the local markets, at best only 12 percent of the population is watching the games. So why should people who don’t watch, have to pay? Well, that’s why when this network launches in eight days, it will only be in 16 million homes. Because many of these carriers refuse to charge all their customers for the Big Ten Network because they can’t charge viewers without raising their price. It’s a basic rule of business. When costs go up on the supply side, more needs to be charged at retail.
Unlike some people, I have no problem with the Big Ten taking some of the non-essential games for themselves. But I do have a problem with the conference essentially taxing people who wouldn’t watch it.
If you study the history of league network start-ups, you’ll notice one thing. They’re all overvalued from the very first day. There are usually two reasons for this. One, they never have the best games. They sell the best games to the networks who pay outrageous rights fees. Two, they often insist on putting the channel on the basic tier so that they can default their way to profitability.
That’s not working these days--just look at the NFL Network and that’s the most powerful property in American sports today.
So here’s my advice for the Big Ten Network. I know you did the financials. You came up with the $1.10 and the 10 cents for a reason. Join the networks that you belong with like other college programming packages and CSTV, and do what you have to for it to make sense on the sports tier. And do it quick. You’re going to get more traction during the football season than the basketball season.
And one more thing. Realize that the technology is getting better and better for fans to avoid you. I’m a Northwestern fan. My area doesn’t have the Big Ten Network, which is broadcasting the first three games. I’m OK with that. I’ll be loading my little live stat box on ESPN.com while listening to the WGN Radio call.
Questions? Comments? SportsBiz@cnbc.com
