RE: College sports thrive amid downturn
Some great comments, this is the sort of thread that keeps me coming back.
Frank, I like your qualifier of the 1980's because on the face, I agreed until I thought a little more carefully.
First we had apparent busts in the 1950's and 1970's. One was a pretty good economic time, the other not so much. But as JRSec would likely point out, those two busts were not so much related to the economic cycle but the availability of students which went to the health of the underlying institutions. The 1950's bust was driven by the loss of GI Bill students. The 1970's bust was driven by the boomers moving past college age. In both instances there were schools dropping football or choosing to de-emphasize athletics (Southland Conference lost Trinity and Abiline who went non-scholie) but more significantly colleges began failing. Two public colleges and one private in Arkansas failed and had to be absorbed by the UA system to remain viable.
Between 1986 and 1995, four FBS institutions dropped football: Wichita State 1986, Long Beach 1991, Fullerton 1992, Pacific 1995.
And as for sports media rights, the 1990's were far from a boom period. The SEC and Big East joined the Pac-10 and Big 10 in departing the CFA because the CFA failed to deliver the anticipated increase.
Remember this was a period when ESPN was as yet not a huge player, ESPN2 was in a small number of homes and focused on alternate sports because of a lack of rights in the major sports. The Big 8 took the primary value of the SWC because the rights fee offer from ABC was so disappointing. There were only two significant players at this point CBS with the Big East and SEC and ABC with most everyone else other than Notre Dame. ESPN was nibbling the edges.
The collapse of the CFA created three significant shockwaves as the conferences were struggling. The SWC collapse, the formation of C-USA as the southern indies no longer had TV revenue nor access to TV. the hyper-expansion of the WAC which then led to the MWC split.
All three moves directly related to what could at best be described a flat rights fee market with realignment of the mid-late 90's essentially a zero sum game transferring rights fees that had once been paid the left-over SWC, WAC, and southern indies to the power conferences.
The rapid rise of rights fees subsequent to that period comes down to three economic events. 1. The rise of the DVR creating a premium for live content where commercials are not skipped 2. The rise of the rights fee as a revenue source. 3. Alternates to cable, first in the form of DBS satellite and then the emergence of IPTV most notably ATT and Verizon. ESPN secured content of sufficient value that any of the aggregators (cable, sat, IPTV) had to pay the toll or face the loss of consumers to competitors. Most Americans (unless there is a restrictive covenant or peculiar geographic issue) has access to two to four providers. Two DBS (Dish and Direct), a local wired cable provider and possibly and IPTV provider.
Entertainment programmers have embraced a long tail model. Content first runs on an early window exclusive provider (HBO, AMC, NBC, CBS, Fox, ABC), then shortly after first run moves to a pay per episode provider (Apple, Google Play, Vudu), then to DVD, then finally to Netflix, Amazon all you can eat providers for a set period (for example 24 is no longer available on Netflix but is available on Amazon Prime where it is available all-you-can-eat or pay-per- episode or pay per season).
That model simply doesn't work for sports, the question is how many people are willing to forego immediate access to programming from the entertainment providers to catch it later down the stream at a discount and forego live sports subscriptions.
TV ratings would suggest that no more than 30% or the market considers CFB essential programming and it may be as low as 10%-15%.
If the carriage fee model no longer works (and I think it will for some time) then there is a great probability of future flat or falling rights fees. I think the carriage fee model is viable for a significant amount of time because if 10% of current cable/sat consumers say I can wait to watch Walking Dead or Game of Thrones and I don't care about sports, then AMC and HBO carry less value to cable/sat but ESPN and other sports properties become the glue keeping consumers stuck with cable/sat ESPN is no longer worth $5.50 per household it is worth at $6.05 (10% increase) and probably more like $6.60 because the sports consumer is essential to retain. Lose the sports consumer and cable/sat are in deep trouble.
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