Tuesday, March 15, 2011

Big 12, FOX and Revenue

The Big 12 and FOX Sports Media Group and rumored to be close to a new pay tv rights agreement that would pay the conference anywhere between $60 million to $70 million.  My guess is those games will air on FSN affiliates and F/X.  By the movement of Colorado & Nebraska to other conferences, and the existing terms of the deals to remain the same, the Big 12 will gain roughly a 20% increase in revenue per team in 2011-12 without doing anything because ABC and FSN did not change the terms of their existing agreements.  But does the new agreement get the big three of Texas, Oklahoma and Texas A&M close to the number of $20 million in conference distribution?

Depends on how you crunch the numbers.  From a pure TV standpoint, today the Big 12 receives $60 million from ABC/ESPN for football on ABC, which includes the Texas-Texas A&M game if it airs on ESPN, and men’s basketball.  It then receives $19.5 million from FSN for football on FSN, which includes all other football games sublicensed to ESPN, and all other sports (women’s basketball, baseball, etc.).

The Big 12 divides up its TV revenue with an appearance based model. 50% of the money received is distributed to all conference members equally (the conference office might get a cut too). The rest of the money is distributed based on the number of appearances a school makes on TV within the conference’s TV agreements. From one ESPN article, TV appearances in football & men’s basketball are used to determine how to split the other 50%.

Since men’s basketball is included, a school like Kansas, who doesn’t appear on ABC in football as much as Oklahoma or Texas, can make up some ground through men’s basketball. We know that football drives these deals, but how much? If we say football is a base of 1, is men’s basketball .4 (ie. rights for a men’s basketball game are worth 40% of a football game)?

What also needs to be determined is if the existing revenue sharing/appearance fee model will change in any form.  Since the TV money has been equally divided, does that mean that a football game on FSN is now worth approx 3x as much as it is under the existing contract?  If the Big 12 pays $300K for a OOC game on FSN and $150K for a conference game, can we make the leap that the Big 12 will distribute $1 million for an OOC game and $500K for a conference game just to keep the appearance pool revenue at 50% of the FSN contract?  Or at least make changes to the amount that teams receive for playing on ABC?

The numbers make my head dizzy. In short, each of the big three would make slightly more than $12.5 million total from ABC/ESPN and FSN using 2010’s TV appearances in football & men’s basketball, plus the shared revenue from the TV deal.  I also included an “offset” since Nebraska & Colorado made TV appearances in 2010.  That offset was divided equally among the remaining ten teams in my projections, but since the offset is from appearances, it won’t make it to everyone’s bottom line.  I'm also making a boatload of assumptions with my numbers.  Please don't take them as gospel, my statistics background involves a couple courses in college.  But that is roughly a 75% increase in total TV revenue since the ABC deal isn't being reworked, over 300% just from FOX.

So if we’re at $13 million, how can we get to $20 million for these guys? NCAA credits from men’s basketball and bowl payouts then get lumped in. Some of that money is also distributed in favor of the teams who make the tournament and who goes to a bowl game.

In my opinion, its going to be close.

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