BTN, DirecTV, ND, and Greed (Part 1)

As the Big Ten expansion carousel goes round and round for another turn, I find myself engaging in the same arguments and listening to the same rebuttals.  It’s to be expected, as neither the Big Ten, nor any of the schools presumably targeted for expansion are saying much.

With no new information to feast on, there’s nothing but speculation chew around like yesterday’s cud. 

Through all of the back-and-forth banter, I keep hearing four recurring themes: the Big Ten Network (BTN) set this all in motion, DirecTV is providing the vehicle, Notre Dame is the linchpin, and everyone involved is just plain greedy. 

The problem with these themes is that there’s a plethora of information being past back and forth, and very little supporting evidence to back it all up.  How much of it is believable? 

More importantly, one item that tends to get glossed over is why it even matters in the first place. 

That’s why I’m revisiting this subject yet again.  Not only is this the most important (and interesting) potential development for college football, but it deserves a little clarity, if I can at all provide it.

In this first segment, I’m focusing only on the Big Ten Network (BTN) and DirecTV.  In future installments, I’ll address Notre Dame and the “greed factor”.

The Big Ten Network and what it means to expansion

In August of 2007, the Big Ten Conference, in conjunction with Fox Sports, launched the Big Ten Network.  It’s sole purpose is (duh) to provide programming that specifically centers on the Big Ten conference, its member schools, their athletics, and their academics.  Pretty straight forward, right?

I’ll talk about DirecTV and their relationship here in a little bit, but it’s important to note right away that they were one of only a couple (along with AT&T U-Verse) carriers to pick up the BTN at inception.  That relationship has been hugely beneficial to the BTN.

Most of the carriers are regional, centered in and around the home states of the member schools.  The details of the various deals struck between the BTN and cable/satellite carriers are sketchy at best and usually unreported officially.  (For the record, I generally hate Wikipedia, but I posted that link because this one does have a good list of resources where you can find the official information.)

It is estimated however, that all carriers together reach over 42 million households across the country.  That is a total combined by the carriers: DirecTV, Dish Network, Insight Communications, Vorizon Communications, Comcast Cable, Charter Communications, and Time Warner Cable, among many more localized carriers.

That’s an enormous number!  That’s 42 households that don’t even have to like the Big Ten or any of its schools.  They get the network thanks to the package they have with the provider they have subscribed to.

Expanding can increase that exposure by tens of millions, depending on who the candidates really are.  New markets can open in exactly the same manner. 

The digital TV revolution and where the money is

In the good ol’ days of television, the viewing was free.  Networks made their money from advertisers and how much they could ask from those advertisers was based on how many people were actually tuning in to their product.  It was a constant battle between networks to provide the very best programming so they could suck in the most viewers and thus be able to demand the most money from advertisers.

Subscription-based programming has been around since 1972 when HBO was first created by Charles Dolan and Gerald Levin of Sterling Manhattan Cable.  It changed the way television was brought to the United States.

Subscription-based programming doesn’t rely on advertising (though most carriers also incorporate advertising for extra income).  Subscribers to their packages pay a set rate for their desired “package” that includes the networks they want to see.  The carrier makes money even on the additional channels that the subscriber doesn’t watch which are still parts of the package.

That’s where Big Ten Commissioner Jim Delany may have made his most brilliant move.  By getting his network added to the most widely selected packages, the BTN generates revenue even through subscribers that don’t necessarily follow college sports or may even dislike the Big Ten conference.

What that means to the expansion debate

I’ve heard time and again that the New York (Syracuse)/New Jersey (Rutgers) market isn’t that great of a draw for the Big Ten because their sports fans are more interested in the myriad of professional sports teams in the region.

There’s likely a fair measure of truth to that.  What with the Yankees, Mets, Giants, Jets, Rangers, and Nicks (did I forget any?) all in the area, there’s little room for college athletics, especially when the most local schools aren’t exactly national powerhouses. 

From a financial standpoint, it doesn’t really matter to Delany if Rutgers or Syracuse ever really competes for a conference title.  The conference as a whole can still benefit from them being a part of it just by getting a fraction of the available television sets to have the BTN somewhere on the list of channels. 

It doesn’t matter if very few of the population of New York or New Jersey actually watch the BTN.  The fact that it’s part of their cable/satellite package means they’re paying for it.

In March 2008, The Sun reported that census estimates had New York City’s population at 8.275 million people.  For Delany and the Big Ten Conference, that’s 8.2 million potential “viewers” that don’t have to watch a single game on the BTN in order to pay for the BTN.  And that’s only in NYC.  That says nothing about the rest of the state of New York (estimated in 2009 at 19.5 million people).

Adding just Syracuse alone would allow the Big Ten to negotiate cable deals throughout the state of New York, tapping into the nearly 20 million “viewers” that aren’t currently receiving the BTN via DirecTV.  Once again, that’s 20 million people that don’t even have to care about the Big Ten.  If Delany can convince those cable companies to carry the BTN, all of those people will pay for the BTN (am I getting through yet?). 

DirecTV as the vehicle that helped loose the monster

From the very beginning, DirecTV has been aligned with the BTN.  They, along with the now defunct AT&T U-Verse agreed to carry the BTN on its opening night.  Since then, AT&T U-Verse has folded into Comcast and I’ll talk about that in just a second (or five).

What is so big about this deal is that DirecTV didn’t force the BTN to reside on one of the highest tiers of its programming packages.  They allowed the BTN to appear on their Total Choice Package – their most broadly distributed package. 

Instantly, on the very first night it aired, the BTN was nationwide.  Every single subscriber – whether they lived in Ohio or Texas – that had the Total Choice package had the BTN and was paying the BTN and thus the Big Ten conference. 

At the time the BTN was unleashed on the world, it was estimated that there were around 15.4 million Total Choice subscribers in the U.S. 

The 10-cent/70-cent argument

I’ve seen this argument a number of times (and have admittedly used it once or twice), and I think it deserves at least a mention here.

Supposedly, DirecTV is giving the BTN 10 cents for every subscriber to their Total Choice package that lives outside of the Big Ten footprint while giving 70 cents per subscriber for those that live inside the Big Ten footprint.

At one time, I thought I had a link to that very fact, but now I can’t find any information confirming it.  In fact, every link I find regarding DirecTV and their deal with the BTN states that the details were never disclosed.  Therefore, I can neither confirm nor deny that this is the case.

If there is any truth to it (and I invite someone to please direct me to a link confirming or denying it), bringing New York into the fold via Syracuse could mean a very nice pay raise for the BTN from an area they’ve already “broken into” of sorts. 

If even two million of the 20 million New York viewers subscribed to DirecTV Total Choice, the BTN would be looking at a revenue increase of $1.2 million per month.  If each Big Ten school really was paid $22 million by the conference, Syracuse pays its own way just by the population of the state in which it resides.  And that’s not even taking into account the additional cable deals that the BTN would obviously pursue!

It also has huge implications if the Big Ten brings aboard someone like Notre Dame who has a gigantic national audience.  Indiana University and Purdue have already taken care of the state of Indiana for that 70 cents-per-subscriber rate, but would having Notre Dame open the door for grabbing 70 cents for every subscriber nationwide? 

The implications are staggering from a financial standpoint. 

More importantly

Even if the 10-cent/70-cent deal isn’t true, DirecTV still opened the doors for the BTN to tap into an enormous audience that may not even want them.

When the BTN was negotiating with Comcast (who incidentally is paying 70 cents per subscriber), they hit a few snags, initially.  Comcast originally wanted the BTN to be on a sports-only tier of their programming.  In other words, they wanted to provide it only to the people who actually wanted it. 

The BTN had a little leverage, though.  They’d already struck that major deal with DirecTV where their product was presented much more readily – to people who may not know yet that they wanted the BTN.  It was a sticking point (along with the fact that the BTN wanted $1.10 per subscriber and Comcast didn’t want to pay that much) that kept the two in negotiations for a while.

Finally, Comcast caved and added the BTN as part of its expanded basic tier.  Once that happened, Time Warner and others gave in to the BTN with the same kind of deal (though the amount per subscriber has never been published). 

DirecTV opened the door for the BTN to kick others right through.

What’s the point?

Well, if you haven’t figured it out by now, I guess there’s no getting through.  Money is driving this train, not competition.  The Big Ten has an enormously lucrative product in the BTN, and bringing aboard the right schools via expansion could increase that revenue flow exponentially. 

In fact, certain programs could not only pay for their way to the Big Ten through television deals, but could pay for another program or two as well.  In a sense, bring aboard the right school or two up front, and anyone else they decide to add could just be icing on the cake. 

The Big Ten would love to be the best conference in America in every way possible.  There’s only so much they can do on the competition front, though.  That’s up to the Athletic Directors and coaching staffs of the individual institutions.

What Jim Delany can do is make sure that the Big Ten is the most profitable conference in America, and thus give every institution the best opportunities in their athletic and academic ventures. 

People can’t forget that the landscape of American entertainment has changed dramatically in the last thirty years.  Ad-based programming is used more as a cushion now than a means of survival.  More and more people are turning to cable and satellite for their television programming, meaning the BTN can dig its way onto your television screen – possibly without you even knowing its there.

Before you start debunking one school’s chances over another based on how many people would care to watch the BTN, think about how many cable/satellite subscribers out there could be had by the BTN whether they care or not.

Just for kicks, here’s one last exercise for your (okay, my) entertainment.  If you subscribe to DirecTV, hit the “guide” button.  Now punch in the number 610.  See the letters BTN at the side?  Now hit “select”.  Is there anything there, other than a screen saying you need to subscribe to get this channel?  If you’re a DirecTV subscriber, chances are, you’re watching something right now. 

Did you ask for it?  Neither did I (even though I’m a Big Ten fan), and I don’t have a Big Ten team in my state.  That’s the power the BTN has and the power it wants to expand.