Category Archives: Television

DISH Will Carry Longhorn Network and SEC Network

SEC NetworkDISH has reached a wide-ranging deal with The Walt Disney Company, which includes Longhorn Network and SEC Network. The channels are headed to your DISH lineup in time for college football season this fall if you have the America’s Top 120+ and higher packages.

Longhorn Network, which launched in 2011, will see its distribution numbers double with the DISH deal, and DISH is the first nationwide provider to announce it will carry SEC Network. AT&T U-Verse has also committed to carrying the SEC Network, but the cable company is currently available in just 22 states to 5.5 million subscribers.

Both Longhorn Network and SEC Network will be available to DISH subscribers both at home and on-the-go, allowing fans to view live and on-demand content on their computers, tablets and mobile devices.

Longhorn Network features more than 175 athletic events a year, including at least one University of Texas non-conference football game each year. Last year, LHN aired three games: two non-conference games against New Mexico State and Ole Miss, and one conference game against Kansas. LHN also airs coaches’ shows and pre- and post-game coverage, along with events from 20 sports, academic and cultural programming.

SEC Network launches this August and will air more than 1,000 live events, including three football games each Saturday. In addition, more than 100 men’s basketball games, 60 women’s basketball games, 75 baseball games, and 50 softball games and events from other SEC sports will be featured on SEC Network for the 2014-2015 school year. SEC Network will also air a College GameDay-like show on Saturday mornings called SEC Nation, which will feature Tim Tebow as an analyst.

In addition to the other new offerings, DISH subscribers will also get access to WatchESPN for the first time with the new deal, along with ESPN Goal Line and ESPN Buzzer Beater. ESPNEWS, ESPNU will also launch in high definition on DISH with the new agreement, and ESPN Classic will be offered as a video-on-demand channel. In addition, the new deal gives DISH subscribers a host of Disney and ABC on-demand products.

Kristi A. Dosh is an attorney and founder of BusinessofCollegeSports.com. Her latest book on the business of college football, Saturday Millionaires, is available now. Visit SaturdayMillionaires.com for retailers and a sneak peak at the first chapter! Follow her on Twitter: @SportsBizMiss.

The Future of Sports on Television

Last week, I had the pleasure of attending SportsBusiness Journal’s Sports Media & Technology conference in New York City. There was some really interesting conversation on multiple panels about the future of live sports on television, so I wanted to summarize here in case you missed all my live tweeting from the event. Although not all of the discussion is applicable to college sports, I thought it was worth sharing. Here are the highlights from each panel or speaker:

Michael White, Chairman, CEO & President, DirecTV

  • Talks for NFL Sunday Ticket have been “constructive,” said White. He’s optimistic they get a deal done. On a later panel, NFL Media’s Brian Rolapp would say they continue to talk, but he would decline to give a percentage chance the deal will get done when asked to do so.
  • White says he doesn’t see any significant trend in “cord cutting,” noting paid television subscribers down just 100,000 last year. (However, a media analyst would say on a later panel –
  • Going forward he’s not sure subscribers will continue to support a model where they’re essentially taxed for sports programming because it’s included whether they want it in their package or not.
  • That being said, White later expressed that he wasn’t sure a la carte pricing would work. He thinks it would best be discussed for channels that want more than $1/month/subscriber.
  • In reference to Pac-12 Networks and CSN Houston (neither of which are currently carried by DirecTV, White said the days are gone where you can gain additional subscribers by adding a channel. I’d note that’s different from the discussion of whether you lose subscribers over failing to carry a network.
  • As it relates to CSN Houston not being carried by DirecTV, White said they divided up the potential viewing area into zones, with Houston being Zone 1 (those fans most likely to watch the channel). DirecTV’s research showed just 25 percent of subscribers in Zone 1 would pay for CSN Houston. White says they offered to carry CSN Houston a la carte, but that the network wasn’t amenable.
  • White was asked about a new low-cost package Comcast is offering that does not include ESPN (which, if you’re unfamiliar, costs distributors $5.47/subscriber/month). White said he doesn’t think they’d have many takers, which means clearly his earlier remark about subscribers being taxed for sports programming they don’t want does not apply to ESPN.
  • Currently, DirecTV customers do not have access to WatchESPN. White says this is because ESPN wants a significant increase in fees to add it into the current contract. Subscribers expect to get it for free, so White says DirecTV will wait until it’s current contract is up “in a couple of years” with ESPN to address adding WatchESPN.

Ali Rowghani, COO, Twitter

  • No doubt, this most interesting thing that came from the Twitter COO was his statement that in the future you would be able to change your television channel directly from a tweet. When I tweeted this out, many of you wondered why exactly you would need this. Based on the rest of the conversation, which centered around Twitter integrating with live sports content, I would say it would give you the ability to change your channel from a tweet that perhaps alerted you to a comeback happening in a game. It would be much faster than seeing the tweet, looking for your remote, finding the channel airing the game, etc. I like the idea.
  • Being an avid Twitter user, I also found it interesting that Rowghani said one of Twitter’s main goals is to simplify, because it’s still inaccessible to the mainstream audience. Being that I’m on Twitter constantly and follow many people who integrate Twitter with their sports-watching experience, I was a little surprised by this. His example, however, was that a Vikings fan should be able to get on Twitter and get the best content about the Vikings. Obviously, right now if you just glanced at #Vikings you’d get content from a wide range of users who may or may not be adding anything substantive to the conversation. That being said, Rowghani repeatedly said Twitter doesn’t want to become a content editor.
  • Interesting stat Rowghani gave: 75 percent of conversation on Twitter around a television show is consumed within one hour of the show airing.
  • Rowghani also talked about the growth of Twitter Amplify. If you don’t know what that is, check this out.

Sports Media Headlines of the Day: Perspectives from the Top

Bill Daly, Deputy Commissioner, NHL; Lenny Daniels, Executive Vice President & COO, Turner Sports; Paul Fichtenbaum, Editor, Sports Group, Time Inc.; Brian Rolapp, COO, NFL Media

  • One of the major themes of this panel was that the internet isn’t ready for live sports from the major professional sports leagues just yet.
  • NFL Media’s Rolapp said, “Television remains the most consistent way to get our product out.”
  • In terms of someone like Netflix or YouTube getting involved in live sports, NFL Media’s Rolapp said they’d have to figure out how to structure a subscription model.
  • There will always be live games on NFL Network, said NFL Media’s Rolapp.
  • Turner EVP & COO Daniels says he expects their partnership with the NBA to continue for, “many years to come.” He also emphasized what Turner is doing to help the NBA grow it’s business. Very integrated partnership.
  • If you’re a content producer, Time Inc.’s Fichtenbaum says to embrace mobile. He says at any one time 50 percent of people reading stories are doing so on mobile devices.
  • NHL deputy commissioner Daly revealed the NHL is focused on the opposite of everyone else – they’re looking at television and mobile experience, because they feel the in-arena experience is already unique. I totally get it though, because I can’t watch the NHL on television, but I love it live.
  • The entire panel agreed we’ll see more sites like Bill Simmons’ Grantland and Peter King’s Monday Morning Quarterback.

Richard Greenfield, Managing Director, Media & Technology, Analyst, BTIG

  • Greenfield says the NFL is in a tough position – they can stay with DirecTV, a 20-year league partner, and perhaps accept a little less than they could get from Google, or they can go with Google where the platform might not be as efficient but they’d make more money.
  • In reference to comments that the internet isn’t reliable enough yet for something like NFL Sunday Ticket, Greenfield says two years (time left on DirecTV deal) is plenty of time to address. As a consumer who tries to watch games on WatchESPN and CBSSports.com on a somewhat regular basis already, however, I have to say that it’s not just about the platforms making the experience bug-free, it’s also about where you’re accessing the internet and the bandwidth and reliability you’re getting on your end. I can tell you trying to stream games from those platforms in hotel rooms is rarely a good experience.
  • Greenfield praised the Pac-12 Networks app and said it is the future of how content reaches consumers. He went on to say he absolutely thinks leagues will provide an increasing amount of content directly to consumers.

The Sports Bubble: Will the Media Rights Bubble Burst?

David Bank, Managing Director, Global Media and Internet Research, RBC Capital Markets; Reagan Feeney, Vice President, Content, DirecTV; Doug Perlman, Founder & CEO, Sports Media Advisors; Steve Raab, President, SNY; Mark Silverman, President, Big Ten Network

  • Bottom line: no one on the panel thought there was a sports bubble on the brink of bursting. Raab of SNY said growth rate may slow, but he doesn’t anticipate decrease, and Silverman of Big Ten Network agreed.
  • DirecTV’s Feeney explained their dilemma is serving both sports and non-sports fans, which can be tough when new sports channels demand to be available on certain tiers.
  • When asked about DirecTV not carrying Pac-12 Networks and CSN Houston, DirecTV’s Feeney talked more generally about looking at whether fans are served in other ways. For example, if only 10 percent of games are available on a new network, does it really need to be carried or can fans be served effectively with the 90 percent available on other networks? In other words, if you’re starting a new network, it’s important to stock it with games fans can’t live without.
  • Big Ten Network’s Silverman says the role of the network in realignment has been overstated. He went on to say that no one would argue that Big Ten Network’s value is “massively more” with the addition of Maryland or Rutgers.

Want to relive more of the conference? I’ve created a story on Storify with all my tweets from the various panels and interviews, which you can view here.

 

Kristi A. Dosh is an attorney and founder of BusinessofCollegeSports.com. Her latest book on the business of college football, Saturday Millionaires, is available now. Visit SaturdayMillionaires.com for retailers and a sneak peak at the first chapter! Follow her on Twitter: @SportsBizMiss.

SEC Network: It’s Official

They did it again! The Southeastern Conference proved once more that they are the conference to beat with the announcement of the SEC Network. As many know the new network had been silently in the works for a while, and as SEC Commissioner Mike Slive put it today, “Goodbye Project X, and hello SEC Network.” Slive was joined by President of ESPN, John Skipper, to announce that come August 2014 the new network will make its grand debut.

SEC partnered with ESPN for a 20-year agreement extending through 2034, the longest agreement in sports. “The SEC Network will provide an unparalleled fan experience of top quality SEC content presented across the television network and its accompanying digital platforms,” Slive said.

“We will increase the exposure for all 14 of our institutions, and we will showcase the incredible student-athletes in our league.”

The new multiplatform network will air SEC content 24 hours a day and seven days a week, including over 1,000 live events its first year, 450 televised and 550 shown digitally. It will also show 45 live SEC football games annually (including three per week) and more than 100 men’s basketball games, 60 women’s basketball games, 75 baseball games and other events from the league’s 21 sports. Not just that, but programming will also consist of studio shows, original content such as SEC Storied, spring football games, signing day and pro days coverage.

The SEC is following in the footsteps of other conferences with networks such as the Big 10 and Pac-12 but is doing it with a little more finesse. What makes this deal so unique from the others (besides ESPN’s name being attached) is that the league partnered with its primary rights holder, ultimately allowing more movement through the distributors. “This is not a regional network,” Skipper said. “This is a national network.”

“We’re confident this is a new and unique opportunity, nothing like this has been done before,” Skipper said. “[T]he level of distribution we’ll have at the beginning, the quality of the production, the amount of the games that we’ll have, the sort of integration with digital platforms, is taking this to a whole new level”

AT&T U-Verse, the fastest growing television provider in the U.S., has been secured as the networks first national distributor.

CBS will continue to have the first pick of SEC games each week, but will no longer have an exclusive window at 3:30 p.m. as it has in past years. After CBS chooses its game, the decision on what will air on SEC Network versus other ESPN platforms will be made by a “content board.”

Slive declined to answer any questions on the financial details when asked about specifics of ownership percentages but did say, “both ESPN and SEC are happy.”

ESPN affiliate sales and marketing will oversee the network’s day-to-day operations. The network will originate from ESPN’s Charlotte, N.C., offices with additional staff located at the company’s Bristol, Connecticut headquarters.  Staff announcements and additional details will be made in the coming months.

Follow Mackenzie on Twitter @KenzieThirkill

NCAA Tournament Viewership Up

From IMG College

The NCAA Tournament is off to its best start in viewership in 23 years.  A highly entertaining mix of marquee names, scrappy underdogs, the overlooked, and the schools no one saw coming is bringing a 6.3 average rating to the tournament – the most viewers since the event expanded to its current format.

On Sunday, across all networks (CBS, TBS, TNT and truTV), NCAA Tournament coverage averaged a very strong 7.6 overnight – the best average for the first Sunday of the tourney since ’93.  Highlights as reported by Sports Business Daily:

  • Kansas’ win over North Carolina on CBS led all weekend games with a 7.3 overnight Nielsen rating (+14% from comparable 2012 game)
  • Indiana’s win over Temple earned a 7.2 overnight (+20%)
  • Ohio State’s last-second win over Iowa State earned a 5.4 overnight in the early Sunday CBS window (+26%).
  • Florida Gulf Coast’s win over San Diego State earned a 2.8 overnight on TBS – the top-rated cable game of the weekend.

Each of the day parts across all four CBS/Turner networks showed a gain in viewers. Of note:.

  • The first daytime window (12:00-2:45pm) drew it highest rating since ’02.
  • The first primetime window (5:15-9:15pm) had its highest rating since ’91.

‘Old’ Big East TV Deal Reduced After Catholic 7 Bolt

By: James Maddox

Conference realignment has recently taken college athletics by storm and you can expect a completely different look for quite a few teams starting with the 2013-2014 season.

Early last week, ESPN’s Brett McMurphy broke the news that the conference formerly known as the Big East will have their new TV contract with ESPN reduced by approximately $4 million due to the ‘Catholic 7’ leaving and taking the conference name with them. The ‘old’ Big East initially inked a $130 million contract but it dropped to $126 million over 7 years after the news broke regarding the Catholic basketball schools. This is drastically less than the 9 year, $1.17 billion offer from ESPN that was rejected by the Big East nearly two years ago.

According to ESPN.com Sports Business Reporter Kristi Dosh, founder of BusinessofCollegeSports.com, the yet-to-be-named former Big East conference will earn approximately $20 million annually combined for football and basketball from 2014-2020. The conference is also currently in talks with to renew their CBS contract, that would entail a minimum of 14 men’s basketball games featuring Big East teams on the network per season at a rate of $2 million annually. CBS first broadcasted Big East games in 1981. (UPDATED 3/26/13, 2:19 p.m.: The former Big East has announced a deal has been reached with CBS for at least 12 games a year through 2019-2020.)

Looking at the table below you can see the conference formerly known as the Big East looks completely different from its establishment in 1979. The conference has struggled to survive as members have defected for new opportunities and lucrative TV deals. Before the ‘Catholic 7’ (non-football playing schools) departed, the conference struggled to retain members that had not even arrived yet. TCU was expected to join the Big East before signing with the Big 12; similarly, Boise State and San Diego State decided to stay with the Mountain West Conference after prior talks with the Big East. 

Conference Members

School

Entrance Year

Sports

Cincinnati

2013

All

Connecticut

2013

All

Houston

2013

All

Louisville1

2013

All

Memphis

2013

All

Rutgers2

2013

All

Southern Methodist

2013

All

South Florida

2013

All

Temple

2013

All

Central Florida

2013

All

East Carolina

2014

Football*

Tulane

2014

All

Navy

2015

Football

1 = Louisville has officially joined the Atlantic Coast Conference and will be a participating member starting in 2014

2 = Rutgers has officially joined the Big Ten Conference and will be a participating member starting in 2014

*(UPDATE: 3/26/13, 2:19 p.m.: ESPN’s Brett McMurphy is reporting that East Carolina will be admitted as a full member, and Tulsa will also be admitted as a full member.)

 

All of this plays a large role in the ‘old’ Big East’s recent TV contract. A clause in the contract with ESPN protects the network from any potential financial losses due to future defections, meaning the deal can be terminated if teams continue to leave. To strike a deal with the conference, ESPN had to match the offer set by NBC Sports Network. According to ESPN’s McMurphy, the contract divides the league into two groups: Group A (consisting of Connecticut, Cincinnati, Houston, and Temple) and Group B (all other members). The stipulations are as follows: 

-If two group A programs leave, the deal can be terminated

-If one group A program and one group B program leaves, the deal can be terminated

-If two group B programs leave, the deal can be renegotiated 

The fact that the deal was reduced by $4 million after the announced departure of the ‘Catholic 7’ shows that the reality of the situation is serious.

Accordingly, this all places an enormous amount of pressure on conference commissioner Mike Aresco, whom has taken the disastrous situation of Big East realignment with stride. “You can’t have any regrets. I knew it was going to be a challenge,” Aresco stated in a recent interview with CBS Sports. “The reality is that a lot of people felt that a break like this was inevitable. Our job was to navigate our remaining schools through these tough times.” 

Prior to this new deal, the former college basketball powerhouse known as the Big East locked in a 6 year, $200 million deal with ABC/ESPN and CBS ending this year. According to collegesportsinfo.com, this averaged an annual revenue of approximately $3.18 million for football schools and $1.56 million for non-football schools. It is quite evident as to why the ‘Catholic 7’ departed for greener pastures. It is also evident that the soon-to-be renamed Big East is not the force it once was. 

Mountain West Stable, For Now

The Mountain West appears to have won a large victory with the recent additions (or not losses if that’s how you choose to look at it) of Boise State and San Diego State.  That may in fact be the case.  However, there is also the possibility that in its quest for stabilization and increased stature, the Mountain West endangered itself by giving away crucial member equality in order to re-acquire Boise State.

Reports indicate the Mountain West has or will (among other things): 1) re-negotiate its television contract with CBS Sports Network which will allow teams on national television (i.e. Boise State) to make more money through bonuses, 2) sell Boise State’s home games in a separate package, and 3) allocate half of BCS (and future equivalent) bowl game revenue to the participating team (i.e. Boise State) before splitting it among the remaining conference members.

From the quotes of Big East commissioner Mike Aresco, it sounds as if Boise State wanted to stay in the Big East if it would match the Mountain West’s offer.  Smartly, Mr. Aresco and the remaining Big East schools’ (bonus points if you can name them) presidents said thanks, but no thanks.  In a time when it must feel like everything is crashing down around them, the Big East brass found a line they wouldn’t cross.  Good for them. Let’s face it, Boise State to the Big East wasn’t exactly the perfect mix of chocolate and peanut butter.  So for the Big East to grant unprecedented perks to a school 2,600 miles removed from the conference office didn’t make a whole lot of sense.  Navy Athletic Director Chet Gladchuck even went public with his disdain for the proposed deal, saying:

“What Boise State wanted was outrageous and unprecedented. It was not palatable to any of the other Big East institutions,” Gladchuk said. “In the final analysis, Boise wasn’t worth it. There is zero television interest in Boise along the Eastern seaboard. What it tells me is the Mountain West was desperate. Clearly, the Mountain West was willing to make whatever concessions necessary to keep Boise in the fold.”

But surely it made sense for the Mountain West to do whatever was necessary to bring Boise State back under its tent, right?  Maybe, maybe not.  The money grab that is conference realignment also has an undercurrent of trying to create and/or maintain stability and long-term viability.  As mentioned earlier, the Mountain West seems to have stabilized at 12 members.  But when gross member inequality is part of a league’s structure, there can be problems.

Example:  When the Big 12 was formed in the mid-90s, its structure was similar to how the Mountain West is currently proceeding.  Most notably, it did not share bowl and television revenue monies equally among the members.  Rather, the participating teams were first entitled to a larger share.  This obviously funneled most of the revenue toward the traditionally successful programs, and smaller amounts to everyone else. (Berry Tramel of The Oklahoman wrote about this structure in 2010.) As time passed the Big 12 and its membership experienced the difficulties of operating a conference successfully when there’s a sense that a few schools are driving the bus and collecting the checks, and the rest are just passengers along for the ride.  Ultimately, that and other issues led to the departure of 1/3rd of the Big 12’s schools (Nebraska, Colorado, Missouri, Texas A&M), and a near collapse of the conference entirely.

Whether the Big 12 leadership decided the original structure was a mistake, or that times had changed and therefore the structure needed to change with it, the powers that be agreed to a more (though not completely) equal distribution of revenue in the summer of 2011.  It also put a stake in the ground on stability by having each member grant its television rights to the conference for a long period of time (initially six years, but recently extended to 13), essentially removing the largest incentive to other conferences who may wish to come poaching in the future (the importance of this “grant of rights” was well articulated by Mat Winter in a BusinessofCollegeSports.com post last month).  I have not read or heard anything along the lines of Boise State or the other Mountain West schools making similar commitments.

So while the Big 12 (barely) escaped the inequality trap and the Big East has avoided it for now, the Mountain West may have fallen right in it.  Sure, Utah State and San Jose State are excited to be new members in a league which just got considerably stronger.  And the other Mountain West schools no doubt see the tremendous value Boise State brings to all of them.  But give those non-Boise State presidents and athletic directors a few years of conference meetings looking over financials, and watching the revenue flow into the conference and out to Boise State.  Give them a few years of conference meetings observing how decisions are made.

The camaraderie that exists today may not continue very long.  And without a grant-of-rights or similar level of commitment, Boise State is for all intents and purposes a perpetual free agent, available to accept the next best conference offer that comes along.  The Mountain West’s current and future members no doubt wanted to make decisions which ensured stability over the long-term.  And while the league certainly got immediately stronger with the addition of Boise State, it may be that the deal they made guarantees the long-term will be anything but stable.

Follow Daniel on Twitter: @DanielHare

Grants of Television Rights, Not Increased Exit Fees, Are The Solution To Realignment Frenzy

A number of Division I conferences have recently increased the fees a member school must pay when it withdraws from the conference.  These fees are commonly referred to as exit fees.  The ACC is one of the conferences that recently increased its exit fees.  And its exit fee provision has been receiving a lot of attention lately because of Maryland’s departure to the Big Ten.

The ACC actually increased its exit fees twice in the span of a year.  The ACC first upped the fees from around $12-14 million to $20 million in September 2011 when it announced it would add Syracuse and Pittsburgh.  The fees were then upped again this September after the conference added Notre Dame (in all sports except football and hockeyl).

The ACC’s current exit fee calls for a withdrawing member to pay an amount equal to three times the conference’s total operating budget at the time of withdrawal.  Based on the ACC’s 2012-13 operating budget, this equates to an exit fee of more than $52 million.  It is this amount that the ACC is seeking in its lawsuit against Maryland for the school’s move to the Big Ten.

When the ACC and other conferences increase their exit fees, the general thinking is that it further discourages members from leaving the conference.  But, because of how courts analyze the legality of these exit fee provisions, increasing the amount of the fee can actually increase the chances of the exit fee provision being deemed unenforceable.  So, instead of discouraging schools from leaving, it can actually embolden them to do so.

In legal terms, conference exit fees are known as liquidated damages.  Liquidated damages provisions are commonly added to contracts.  They set the amount a party to the contract must pay in the event it breaches the contract.  Liquidated damages provisions are useful because they theoretically save the parties the time and expense of litigating the amount of damages caused by the breach.

But, the amount of liquidated damages specified in a contract cannot be randomly selected.  Courts will generally only enforce liquidated damages provisions if (1) the anticipated damages in the event of a breach are difficult to ascertain at the time of contracting, and (2) the amount of liquidated damages is a reasonable estimate of the actual damages that would likely be caused by a breach.  If a liquidated damages provision does not meet this test it is deemed a penalty and is unenforceable.

Assuming that the ACC’s liquidated damages provision fulfills the first element of the test, it is questionable whether it would meet the second element.  The requirement to pay three times the conference’s operating budget does not appear to be related in any way to the actual amount of damages the ACC would suffer if a member withdraws.  It just seems like an easy way to ensure that the exit fee continues to grow without having to continually vote on it.  This makes it look like a penalty.

And the actual number that results from this provision, $52 million, is not a reasonable estimate of the ACC’s actual damages.  For example, Maryland’s departure will not result in the ACC’s tv deal being reduced by $52 million.  A good argument can be made that the ACC actually suffered no damage when Maryland left.  Maryland’s departure allowed the conference to add Louisville.  And the general consensus is that the ACC is now stronger athletically as a result (at least in the two sports that matter for tv revenue purposes, football and men’s basketball).

This is consistent with recent realignment history.  Over the past two years the Big 12 lost Nebraska, Colorado, Texas A&M, and Missouri.  Yet, after adding TCU and West Virginina, the Big 12 signed the most lucrative tv deal in the conference’s history this year. (The one exception to the no damage upon withdrawal argument would be the Big East.  The defections in that conference have definitely hurt the value of its tv rights).

When a liquidated damages provision is determined to be invalid, the party attempting to enforce the provision is allowed to instead seek its actual damages from the breaching party.  But, as discussed above, conferences often suffer minimal damage when a member withdraws, either because the member added little value to the conference or because the conference quickly replaces it with a new member of equal value (at least in tv executives’ eyes).

As a result, exit fees often leave conferences in a tough position.  They have to be high enough to discourage a member from leaving the conference.  But, if they are too high they could be declared an invalid penalty.  And, if the exit fees are invalid, the conference would then have to prove its actual damages, which are usually much less than the amount of the exit fee.  As a result, exit fee disputes have always settled without a court deciding the validity of the liquidated damages provision.  Recent examples include the Big 12 settling with Nebraska, Colorado, Texas A&M, and Missouri for less than the mandated amount of exit fees.

So, what is the solution to the problems with exit fees?  Grants of television broadcast rights.  In these agreements, all of the conference members grant their television broadcast rights to their athletic contests to the conference for a certain period of time.  If a member leaves the conference during that time, the conference retains the member’s television rights.  Because the value of a school to a conference is the television revenue it can help generate, a grant of rights agreement makes the members essentially worthless to another conference that is looking for new members.

While grant of rights agreements do have potential issues (sovereign immunity issues being the biggest), they are not subject to a subjective test like liquidated damages provisions.  Thus, they are much more likely to hold up in court as valid contracts.

Currently, only the members of the Big Ten, the Pac-12, and the Big 12 have executed grant of rights agreements.  Other conferences that want to ensure stable membership would be wise to insist on their members signing similar agreements.  (Yes, even the mighty SEC should have its members sign grants of rights).  If the ACC had one in place, Maryland likely would not be joining the Big Ten.

Moving Perks: TCU to the Big 12

Mere weeks ago, many were drafting eulogies for the Big 12, as Texas A&M announced its departure from the conference to join the SEC.

However, with TCU’s acceptance of an invitation to join the conference on October 10, the Big 12 not only gained a tenth member, but arguably reclaimed some stability.

TCU is presently a member of the Mountain West Conference and was set to join the Big East next summer.  However, in announcing that it will join the Big 12 in 2012, TCU effectively exited the Big East before ever competing within the conference.

TCU’s move to the Big 12 presents several incentives which will be enjoyed by the university and conference.

1.  Money

a.  For TCU

As noted above, TCU was set to join the Big East next summer.  That being said, its 11th hour switch to the Big 12 does not come without financial consequences.  Reports indicate that TCU will have to pay the Big East a $5 million exit fee.

Most would balk at the thought of a school shelling out $5 million to swap out its conference affiliation.  However, the size of the Big East’s exit fee and TCU’s willingness to pay it signals just how much the school expects to gain financially by joining the Big 12.

Last week, the Big 12′s members voted to distribute revenue earned from its television contracts equally amongst its members.  Presently, the Big 12 is a party to a first-tier television rights contract with ESPN worth $480 million.  Next year kicks off the start of a 13-year second-tier television rights contract with Fox worth $1.17 billion.

The Big East’s first-tier television rights contract with ESPN expires in 2012 and is worth $200 million.  The Big East is also party to a second-tier television rights contract with CBS worth $54 million.

Thus, while for some it may seem preposterous that TCU was willing to fork out $5 million to exit a conference it never played a game in, its Board of Trustees arguably realized the television revenue earning potential the school could reap through Big 12 membership.

b.  For the Big 12

Although some believed the Big 12 to be on its deathbed several weeks ago, the conference’s extension of an invitation to TCU was not one made out of pity for the university.

Rather, the Big 12 clearly realized the money-making potential TCU brings to the conference.  TCU is located in Fort Worth, Texas, which is less than forty miles away from Dallas.  Dallas is home to the fifth-highest rated TV market.  This ranking makes Dallas the highest-rated TV market for all of Texas.  By adding TCU to its conference roster, the Big 12 enters this fruitful market and can use this to negotiate future TV contracts.

2.  Geography

Along with providing the Big 12 with a connection to the fifth-largest media market, geography likely factored heavily into both TCU and the Big 12′s decision to join forces.

a.  Recruiting

It is no secret that Texas is a hotbed for high school football talent.  Securing a fourth Texas school into its conference gives all Big 12 members a significant advantage over other conferences in recruiting this talent.

Big 12 college coaches can lure Texas recruits to play for them by promising them the ability to play before their family and friends in their hometown.  With four Big 12 teams being located in Texas, a recruit who signs with a Big 12 team will play at least four games a season in his home state.  Additionally, schools like Oklahoma are a short drive away from TCU.  Thus, non-Texas based Big 12 schools can likewise use the addition of the Fort Worth-based TCU to the Big 12 as a recruiting tool.

b.  Costs

As noted above, TCU was set to join the Big East.  While likely a small factor when considered in the grand scheme of things, the university’s athletic department will incur much lower travel expenses by moving to the Big 12.  Four of the ten Big 12 schools are located in Texas.  When forced to travel outside of Texas, TCU will visit Oklahoma, Missouri, Iowa and Kansas.  Had TCU remained in the Big East, it would have to travel on a frequent basis to places like Connecticut, Pennsylvania, New York, Wisconsin, Washington D.C. and New Jersey to compete.  Staying closer to home undoubtedly curbs travel expenses.

3.  Football

TCU has had well-documented success on the gridiron in recent years.  Last season, the Horned Frogs went undefeated in football and won the Rose Bowl.

The Big East has a storied history as a basketball powerhouse.  In fact, its basketball teams perform so well, that it is one of the only conferences which earned more money from its basketball teams than its football teams.

For the period between July 2009 to June 2010, TCU’s football revenue was $20,609,361.00.  The average football revenue for Big East teams was $18.8 million, while football revenue for Big 12 teams was $35.4 million on average.  Thus, although TCU’s football revenue is less than its new Big 12 peers’, it was larger than teams in the Big East.  By moving to the Big 12, TCU has arguably set itself on good footing to earn even larger amounts of money from one of the biggest revenue streams in college sports.

All in all, it appears that TCU’s move to the Big 12 is a win-win situation for the university and the conference.

How Much Does A&M Stand To Gain From SEC Move?

This writer gained some new friends in College Station (that's me in the middle of the maroonmayhem.com gang)

Aside from a chance to exit the shadow of the Longhorns, Texas A&M also stands to gain some revenue from its move to the SEC.

For the 2009-2010 school year, A&M received $10.17 million from the Big 12. Included in that figure is $841,381 for bowl game expenses, so A&M’s actual Big 12 share was $9.33. Each member of the SEC that year received $17.42 million.

Texas A&M expected to receive $12.71 million for the 2010-2011 school year, $1.48 million of which was for bowl expense reimbursement. Its $11.23 million Big 12 share (exclusive of bowl money) paled in comparison to the SEC’s $18.33 million per member.

According to A&M’s budget for this school year they expect to receive a conference distribution of around $15.83 million from the Big 12. Reports immediately following the announcement of A&M’s acceptance into the SEC today stated ESPN would be increasing rights fees to allow SEC members to receive at least the same compensation they would have received prior to A&M’s addition. That means A&M will see a minimum bump of $2.5 million, and closer to $3.4 million if the SEC repeats last year’s over 5% increase in overall conference monies to be distributed.

Aside from any conference buyout, A&M may also experience some additional travel costs as they join the SEC. However, don’t expect it to decimate the additional revenue they’ll be receiving. An open records request of Nebraska shows an increase of $1 million in travel costs following the school’s move from the Big 12 to the Big Ten.

In speaking with Aggies during my recent visit to College Station, the real value in this move isn’t in conference distributions, its in the ability to build a national brand for the school. As part of the Big 12, A&M was “one of the Texas schools.” In the SEC, they’ll be the Texas school. There’s a lot to gain from this move if the Aggies capitalize on the opportunity.

Note: I should note that I didn’t compare the estimated revenue members of the Big 12 have been projected to make beginning next season under the new FOX deal. That’s because I firmly believe the SEC will have an improved contract after a fourteenth member is added. I’ll wait until the time comes for a comparison.

Is Longhorn Network Roadblock to Texas Joining Pac-12?

Smoke is pluming over Norman like the aftermath of an atomic bomb. And where there’s smoke, there’s usually fire.

Multiple reports are surfacing that Oklahoma is on the verge of joining the Pac-12. The next logical question is: What about Texas?

It was widely reported that University of Texas didn’t join the Pac-12 last year because it wanted to form its own network. We now know that the Pac-12 was planning regional networks across its footprint. A school with its own network didn’t fit into those plans.

The seemingly obvious choice for Texas is to go independent. Texas can control its own destiny. The last time numbers were released, Texas took home $11.8 million for the 2008-2009 school year in conference distributions. Texas’ share of LHN revenue for the 2011-2012 school year will be $10.9 million, increasing by 3% each year thereafter.

According to the LHN contract, ESPN would have the right of first refusal to all television rights held by the conference if Texas became an independent, which is currently rights to all but one home football game. If Texas is getting $10.9 million a year for one, and possibly two, home football games (and some other sporting events that essentially have nothing to do with the dollar figure put on this contract), it’s safe to assume they could make up what they’re losing in conference distributions by contracting with ESPN for the remainder of their home games.

Two other issues arise with independence: scheduling and no automatic BCS berth. Scheduling is a tough one for sports outside of football, but they could simply join another conference for every sport except football. No longer being in a conference with a BCS bowl berth isn’t much of an issue either. They’re the Longhorns. It’s not like they’ll be left out if they have a record deserving of BCS bowl inclusion.

Let’s say independence isn’t appealing, however. Could the Longhorns join another conference? The Pac-12 perhaps?

There’s been a lot of speculation that Texas would be precluded from joining the Pac-12 because of the Longhorn Network. After all, the contract has been signed and the network is on the air.

I pulled out my copy of the Longhorn Network contract (obtained by Twitter user @spadilly via open records request and posted on Midnight Yell) and here’s what I found. First, the entire agreement is subject to the rules and regulations of any conference of which Texas is a member. Not surprisingly, there’s also a provision that covers Texas going independent or changing conferences. Here’s what it says in terms of Texas joining another conference:

…in the event that UT determines during the Term to become a member of an athletics conference other than the Big 12 Conference or not to participate in any athletics conference, UT agrees to continue to grant and provide (or cause IMG to continue to grant and provide) to ESPN the Television Rights set forth in this Agreement.

What exactly are these Television Rights? Let’s look at just football for the 2012 season and beyond:

With respect to the college football season commencing in 2012, and each season thereafter during the Term, UT will use its best efforts to provide ESPN all play-by-play and commentary rights for a minimum of one (1) regular season and/or post-season intercollegiate men’s varsity home football game and will provide ESPN all play-by-play and commentary rights for the Annual Spring Football Game.

The provision goes on to say the parties have a “mutual desire” that LHN televise no less than two home football games per season. For this discussion, that essentially means nothing.

What does the rest mean? Basically, it means Texas is only contractually obligated to allow LHN to air the Annual Spring Football Game. Texas has to use “best efforts” to supply LHN with one home football game. Essentially, however, if they can’t…well, they can’t. No harm, no foul.

For all other sports, the provision begins, “As permitted by Conference regulations and agreements…” And that means…you guessed it, no obligation.

There is also a termination provision that gives ESPN the ability to terminate the contract if a “material portion of the material athletic events” cannot be provided under the terms of the agreement. There are a few sections of the contract that were redacted before the contract was provided pursuant to the open records request, but none of the provisions I see specifically require Texas to pay any sort of fee or penalty upon termination.

The practical effect of all this is that LHN will have nothing to air if Texas goes to the Pac-12, absent some sort of concession by the conference. Since ESPN and the Pac-12 are already partners, ESPN would likely be a part of the discussion before Texas is added and everything would be worked out by mutual agreement. I do not believe the Pac-12 would allow Texas to keep LHN.

I think LHN would morph into the Pac-12’s Texas regional network. Either the Pac-12 could make an exception to their policy of solely owning its regional networks and work out a joint ownership arrangement with ESPN, or perhaps the Pac-12 could purchase LHN (which would likely mean facilities and receiving an assignment of any agreements with cable/satellite providers) from  ESPN.

The bottom line is that the Longhorn Network will not prevent Texas from joining the Pac-12 if that’s what all the parties involved want.

This article offers the personal observations of Kristi Dosh, and does not represent the views of her law firm or its clients. Any information contained herein does not constitute legal advice. Consult your own attorney for legal advice on these matters.