Logic of Realignment Won’t Be Clear For a Decade
CNBC Sports Business Reporter
In October, a week after its chancellor agreed to explore leaving the Big 12, the University of Missouri produced a 45-page document, outlining the pros and cons of going to the Southeastern Conference (SEC).
In the report, which the Associated Press said it had obtained, Missouri said it could earn as much as $12 million more per year from an new TV deal in the SEC compared to the deal it had in the Big 12.
The Big 12 asked to see the report, and asked Missouri to show them who did the study and how they came up with the number. Missouri wouldn’t.
In fact, the school, once it started to explore the option of going to the SEC, cut off its communication with the Big 12 and its member schools. In this age of information, where confidential documents almost always see the light of day, Missouri’s report, at least in entirety, strangely never even surfaced.
Missouri’s study is indicative of many schools that felt like they had to move. Texas A&M was out the door to the SEC, motivated primarily by Texas’ Longhorn Network deal with ESPN. That’s despite the fact that the network’s success was far from a slam dunk (and still isn’t), and that the move cost the school its rivalry game with Texas. The excuse was that the Big 12 was falling apart and they had to go to safer ground. Months later, Florida State, unhappy with its new ACC deal that only bumps TV revenue up $4 million a year, wants to go to the Big 12. Go figure.
While the moving schools want to convince their fans that what they did was the right move, the truth is, they don’t know the answer.
Let’s do some math.
The 12 schools in the SEC earned an average of $17 million a year from its 15-year deals with ESPN and CBS. This was signed in 2008, right before the economic meltdown. And let’s remind you, the SEC was ready to do an SEC Network then, and didn’t, because they got the money that they wanted.
Now the big money is supposedly in ESPN and CBS reopening the deal, but what people forget is that those two networks aren’t going to pay more for most of the games they already bought—and allow the conference to start its own network. So let’s come up with a total annual rights fee for the SEC.
With the Pac-12 getting $250 million a year in rights fees, let’s say the SEC goes from making $205 million a year in its current deal to $325 million a year on a new or extended deal. Divide that by 14 and you have $23.2 million a year. Under a soon-to-be-announced contract with ESPN, the Big 12—which Missouri and Texas A&M left—will see its teams make $20 million a year.
Is making (a hypothetical) $3.2 million more a year worth it to Missouri and Texas A&M? Don’t forget, those schools' exit from the Big 12 already cost them a net of $9 million. One could make the argument that given the competitive landscape of the SEC, whose teams have won the last six national titles, an amount of $3.2 million is pocket change when schools have to consider how much tougher it will be to win. If they can’t win with as much frequency, ticket sales suffer. When ticket sales suffer, sponsorships suffer and donations suffer.
“When a company is acquiring another company, they give them more money than they’re worth to draw them in,” said Lee Berke of LHB Sports, a sports consultancy firm that is working with Oklahoma, TCU and Pitt on TV programming strategy.
“These (realignment) deals were done with the promise of something down the road, and momentum and emotion are difficult concepts to build a business on. When alums and boosters and trustees are involved, much of this business analysis is downgraded to the back of the envelope and it may take years to figure out if you are happy or not when the first blush fades,” Berke said.
It’s not an easy equation to figure out. For example, what’s the value of tradition?
Sure, playing Florida, Arkansas, Alabama and Georgia could fill the stands at Missouri, but for each one of those you have Kentucky, Ole Miss, Mississippi State and Vanderbilt. And when no one in your office in Kansas City went to any one of those schools, and you can’t talk water-cooler trash to them, the interest in the games isn’t nearly as high.
Fans get upset when realignment is brought up. They think that people who talk negatively about it, as I sometimes do, have an agenda. That’s not always the case. The people who have more of an agenda are those who have made these moves who are already saying that it was done in the best interest of the university. They don’t know if that’s true. I don’t know if that’s true. We’ll probably have the best answer a decade from now.
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