A while back I wrote a well received five part article on strategies the Big East should consider to retain their status among the BCS Automatic Qualifier Conferences.
Well that world is gone.
This is the first in a series of four articles on the Big East in the post-BCS world.
This Bleacher Report series will start the investigation where it absolutely must—by looking at the current state of Big East TV negotiations and trying to answer the difficult question "What is the Big East's sports product worth?"
From there we will look at potential problems likely inherent in negotiating a TV deal today.
The second installment will deal with finding the right media and membership strategies for today.
The third will deal with naming the Big East's most powerful assets to impact the Post BCS power structure and the final installment will have my recommendations for expansion candidates to meet the demands of the post-BCS world.
Where are the Big East TV negotiations today?
The Big East has reached the end of a 60 day exclusive negotiation window with ESPN.
The latest reports were that the Big East did not appear likely to make a deal with ESPN in that period. We have heard nothing since.
The Big East is free to take their product to the open market. As this series will cover, that is probably a very good idea for reasons far more important that opening up the league to competitive bids or even better—opening the door to shared dual bids for Big East content.
What will be the value of the new TV deal?
For months now, there have been contradicting reports of what the Big East is likely to yield from TV networks for their sports offerings.
This is an important question to try to answer as the Big East moves forward in the post-BCS world.
The Big East's current plan for the immediate future is to land a fat TV deal and a 14th football member. It seems very likely that they hope to use the TV payouts from their deal to entice one or more of their preferred target schools—BYU, Air Force or Army.
To understand the Big East's position today, it is good to look back at the articles written over the last year on the subject of the Big East's next TV deal.
A chronology of articles and links on the Big East's TV negotiations
The Big East turned down an offer that would have yielded $11 million per team from ESPN in 2011.
Current Big East members make $5.625 million, with non-football members making $1.5 million.
On May 24, 2012, CBS' Brett McMurphy laid out the "likely" high and low numbers in a very well written article. He quoted former CBS sports President Neil Pilson who predicted the payout for the Big East would exceed $130 million, yielding about $8.66 million per full FBS member, $6.5 million per football only member, and $2.16 million per non-football member. Industry sources told CBS.com that the number could be a lot lower—closer to $60 million suggesting payouts of $4 million, $3 million and $1 million respectively.
One would suspect that the difference in opinion comes from perspective. Pilson was likely weighing factors like which networks are desperate for content and the number of likely serious bidders.
The insiders mentioned are likely numbers crunchers who are looking at the media valuations of each Big East school—something that seems confirmed by the following quote from the article, "All of the schools they added are coming from the Mountain West and Conference USA, so how will they now suddenly be worth more in the Big East?" the source said. "Name me two or three Big East Conference games of national interest." (The annual payouts for the MWC at the time was $11.7 million annually. CUSA netted $16 million annually from TV broadcasts.)
On May 30, it was reported that SDSU was assured by their TV consultants that the value of a football only membership in the Big East was worth at least $6.4 million. (That would seem to suggest the minimum TV valuation of a full membership in the Big East in the ballpark of at least $9.6 million.)
On My 30, Memphis AD R.C. Johnson went on record with his predictions after hearing presentations to the Big East from NBC and ESPN. At the time Johnson hoped ESPN and NBC would both pay for some Big East content and that the Big East all-sports members might receive a combined $10 million a year (down from the $13 million a year he had hoped for in April). He mentioned NBC had hoped to put on triple headers with the Notre Dame game anchoring their Saturday sports broadcast content.
On May 31 The U-T San Diego asked Navigate Marketing what the Big East's sports content was worth. At the time, navigate pinned the value of Big East sports at $167 million based on "the hot market for college sports deals". This would yield payouts of about $11 million per all sports member, $7.8 million per football only member, and $3.2 million per Olympic member. Navigate Marketing predicted that an Air Force or BYU football only addition surprisingly would not significantly increase the per school payout.
On August 2, Dick Weiss reported rumors that NBC had thrown out a number for Big East Broadcast rights. Weiss reported the numbers mentioned in order to partner Big East content with Notre Dame football on NBC were $10 million per football member and another $4 million per Basketball member. Weiss appeared to publicly encourage the Big East to name a strong commissioner with media ties in the article.
On August 14, the leadership of the Big East hired CBS Executive VP Mike Aresco as their commissioner, likely to help them secure the most lucrative TV deal possible with their current schools.
On September 19, ESPN's Brett McMurphy reported that the Big East is looking to add BYU or Air Force as their 14th member. A source in the Big East was quoted as saying the following about the Big East's candidates, "They'll crawl back once the TV deal is done."
The value of Big East sports
So what is the value of the Big East Sports content? Well, that is a loaded question, but you've read this far so I should at least try to answer it.
The valuation experts seem to be saying the content should be worth $4 million per full sports member. That seems to imply what a sensible offer would be to ensure an optimal profit.
That certainly seems low, but given the contracts of Conference USA (a little less than $2 million per school each year) and the Mountain West (about $800,000 per school), two FBS conferences with comparatively little demand from networks for their content, it may be reasonable.
However, value is based on demand and what the market will bear as much or more than what experts deem a product is perceived to be worth.
Pilson and Navigate (and perhaps likely SDSU's hired consultants) appear to have been predicting based on market conditions which would likely include what they considered likely competition between broadcasters for those rights. That range was from about—$9.6 million to $11 million for a football playing all sports member. The number NBC allegedly threw out—$10 million for such a member—fits nicely in that range.
Three months ago, that would have been the answer.
Now the problem is those predictions were all based on the Big East of a few months ago.
Today that range is likely a fair bit lower.
A rapidly deteriorating asset?
Hiring a top negotiating team was smart, but it doesn't change the fact that the product those negotiators are selling seems to have seriously devalued in the early part of the two month exclusive ESPN negotiating window.
When Aresco took the Big East job he said there was "almost no gap" between what fans are referring to the Big Five (the Pac-12, SEC, Big Ten, Big 12 and ACC) and the Big East.
Since the opening of the ESPN negotiating window, a huge gap has been forming (many of the issues will be covered more in depth in the next article in this series).
Notre Dame has left the Big East and it appears the Big East is losing their slot in the Orange Bowl.
As noted earlier, Navigate Marketing had the Big East valued at $11 million per school (but that was with Notre Dame in the fold).
Even though they were not full members, the loss of Notre Dame is likely a huge blow to the valuation of the Big East. There are only two Catholic schools in the FBS ranks—Boston College and Notre Dame. Boston College has strong support in the Boston DMA and Massachusetts, but Notre Dame is a national brand.
Almost 24 percent of the US population identify themselves as Catholic. A lot of those sports fans live in the large markets in the northeast that the Big East has traditionally dominated.
Additionally, if a conference wanted to re-brand itself as a national conference, having one of the best national brands out there in the fold certainly would have helped. Losing Notre Dame absolutely hobbles those efforts of the Big East.
In the Northeast, the Big East still has a lot of strong Catholic member schools located in those big markets, so they aren't going to lose all relevance or all of their Catholic viewers up there, but it is in open question if Notre Dame viewers will increasingly tune out of non-Irish Big East games in favor of non-Irish ACC games. That could make the ratings of say a UConn-Louisville football game or a Providence-Villanova basketball game notably lower in future years than they were in 2012.
And that is not to mention the loss of large fan bases for schools like West Virginia, Pitt, and Syracuse.
It makes looking at even the historic ratings earned by long standing members of the Big East suspect on the negotiating table in ways that likely were not predicted by the more optimistic forecasters.
Notre Dame's move to the ACC helps the negotiating position of both ESPN (who has the ACC's TV rights) and NBC (who has Notre Dame's football TV rights). The move undermines the value behind NBC's plans for Big East football and gives ESPN the rights to Notre Dame basketball—when you consider fan bases and markets, that may have been the most valuable asset left in the Big East.
The Orange Bowl appears poised to replace the Big East with ND or the highest ranked school from the SEC or Big 10.
Instead the BE will play in another bowl that will likely offer a smaller payout. It is also possible the bowl will feature a Pac-12 or Big 12 runner-up against a representative of the "group of five" have not conferences (the BE, CUSA, MAC, MWC, Sunbelt) and not the Big East specifically.
Historically, have not conferences have gotten paid by networks on the have not scale. Now those conferences have not had the kinds of negotiators the Big East has available to them, but it still should be a concern to the conference that they may not be selling an optimal (or really an optimized) product.
Better questions for today
The answer to the question, "How little profit or even how much of an annual loss on that content would NBC or ESPN be willing to eat in order to keep the Big East from another broadcaster?" is a question that could easily distort the resulting payouts regardless of the valuation of the content.
Another good question is "Would multiple broadcast companies be willing to split the content to yield the Big east more money?" as is the case with the Pac-12 and Big 12 content.
Either situation could spike those numbers much much higher.
Recall that the Pac-12's content was initially valued by AJ Maestas of Navigate Marketing at $175 million per year before he adjusting his numbers up to $220 million just prior to the Pac-12 deals being signed (They were eventually given $225 million per year by Fox and ESPN). Presumably a portion of the increase to $225 million per year was to lock up those rights long term, because two networks decided they had to have that content and were willing to share (and possibly overpay for their halves), and because the Big 12-Fox TV deal had just set a higher market rate.
As of November 1, the Big East is through ESPN's 60 day exclusive negotiation window with the conference. The Big East will be free to negotiate deals with NBC and other suitors as well as ESPN.
Perhaps a more fundamental question may be how much in demand is the Big East sports content?
Isn't it a red flag that a Deal was not met with ESPN?
It could imply ESPN was low balling the Big East in the exclusive negotiation period, has little interest in competing on the open market, and intends to let the Big East content walk.
ESPN may feel they have extracted most of the value from the conference. Boston College's AD is on record stating that the ACC raided the Big East of Pitt and Syracuse at the direction of ESPN.
The Big 12 landed West Virginia in part to ease concerns by it's broadcast partners—Fox and ESPN—over the Big 12's own lost members.
If the Big East had a solid offer of a deal worth $10 million per full member from NBC and ESPN wanted to keep the Big East, $11 million per full member would seem a reasonable amount. Now that would be the same offer that ESPN offered the old Big East.
To be able to lose their best assets and get the same deal out of ESPN would be seen as a grand slam by Big East fans. It would silence the critics at all Big East schools.
While I understand that Aresco and Bevilacqua understand the networks and are some of the best negotiators in the business, does anyone believe that if such an offer was made in the ESPN exclusive negotiating window that the Big East membership would not have voted to take it? (Frankly it also begs the question whether NBC's $10 million offer still on the table?)
If ESPN is not a serious bidder for the Big East's content—that is, if there are only one-two serious bidders instead of two-three—it seems likely the offer or offers the Big East will receive will reflect the perceived valuation of their content more than the optimistic consensus appears to have predicted.
If they sign at that low price to get a deal done quickly (in an effort to prop up the conference), that reinforces the public perception that the Big East is seriously devalued. It creates yet another hurdle for the conference in rebuilding fan viewership and maintaining recruiting as they try to reinvent the conference as a strong national-wide brand with sports competitive at the highest level.
How money and the membership interact
I think the current Big East lineup—based on historic expansion strategies developed when the Automatic Qualifier conferences existed—is not optimized for today's environment.
It is not optimized for the open market.
The Big East has been fishing for a national brand or at least a major multi-regional brand to join the conference as it's 14 football member. On the surface that seems to be an effort to glue the conference's diverse offerings together into a more coherent and palatable product for the networks. That does seem to imply the membership recognizes the conference is somewhat lacking in appeal to a broadcaster.
I believe the current lineup was not that great for a broadcaster to start and has been devalued quite a bit in the last 60 days.
Further as is frequently the case with larger conferences, the Big East appears to be sliding along on legacy positions. They appear to be working to meet goals agreed upon by it's membership months ago.
Those were goals to manage life in that world. These strategies look suspect today.
One of the biggest drawback of a larger conference membership is that it is time consuming and emotionally draining to reach consensuses on big issues—like expansion.
New Commissioner Mike Aresco had the following to say about expansion.
"At this point, the feeling is we don't need to expand in basketball. There's no need to. ... We're not looking to raid conferences or take teams from conferences. I have talked about adding a 14th team in football. I don’t think there's any doubt when we go to divisional play in football, we'll have 12 teams initially next year, when Navy comes in we’ll have 13 teams. So we'll want a 14th team. I've mentioned that. But in terms of basketball, I think we're pretty stable. Seventeen basketball schools work fine."
I think that is legacy thought and that Commissioner Aresco should rethink that position with fresh eyes.
There is a feeling here of a conference membership wanting to take the easiest path forward. Kind of a "Let's land a TV deal the member schools can deal with and then let's see if there is still a desire to expand" position.
I think this would be a major strategic mistake.
Big memberships never want to expand. Meeting a pacifying short term goal will only reinforce that.
There are more important things than this TV deal
A broadcast company will offer the Big East a deal in the next few months. The money will be tolerable to the member schools or possibly a little better than that. That is a given.
I worry the Big East membership is pushing too hard on this front to get something done today.
Expansion by more than one school is needed in the Big East to meet the conference's other more important goals. Signing a deal today could further harden the position of the membership against larger expansion.
The bigger picture question appears to be whether there will be a "Big Five" or a "Big Six" at the top of the FBS ranks. Doing whatever it takes to remain in the "haves" should be the primary goal of the Big East strategically at this moment...not just landing the best deal the Big East can land today.
The current plan seems to assume that meeting the specific goals—getting a good TV deal and hopefully landing BYU or Air Force (or Army)—will meet that larger goal.
I think that is a lazy mistake by the conference membership. It appears far more likely that signing such a deal freezes the Big East as kings of the have nots.
To meet the larger goals, I think the Big East needs to ensure ESPN remains a serious bidder for Big East content. To me, that suggests a larger expansion should pre-date securing a TV deal.
Discussing the problems with the current plan as well as strategy on how to achieve this larger goal will be the focus of the next Bleacher Report in this series.
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