(05-15-2015 03:05 AM)33laszlo99 Wrote: Okay, I’m not a business major, but you've done a good enough job explaining that If the B1G makes $8 million from the BTN, maybe they could have gotten $7.9 by just offering the content to an established broadcast company. They incur less effort and less financial risk. Am I right so far? But remember, this isn't just generic investing for maximum return. It’s investing in an existing enterprise (college athletics) in order to exploit that enterprise to its fullest.
The conference does, in fact, know how much they made by parceling out those games in the past, before the BTN existed. There are only a precious few TV slots on autumn weekends for college football games. The big broadcast companies buy media rights that allow them to select the most attractive games on the schedule from each conference for a particular week. The overwhelming majority of the games, obviously, don't make the cut. The broadcasters bid huge amounts of money to get the choice of the games. That part of the business is the same now as it was before. Here's what is different. In the past (pre BTN) the leftover games could only hope to be picked up by a local or regional broadcaster. The money wasn’t great and the audience wasn’t very broad. With the BTN, the league can broadcast some of these games, although, in truth, many of them are still consigned to local broadcast. Advertising revenue (less than spectacular) is now part of the equation. That is the monetary value of the BTN
But the BTN is now available to the rest of the various athletic teams, who traditionally never appeared on TV. The expanded exposure of all athletes in this conference enhances recruiting and improves the experience for the participating students. These are non-monetary, but still valuable.
The SEC saw clear value in the BTN and rushed to emulate it. That is a testament to its value. Now comes the ACC. Your arguments may be more germane here. The reticence shown by ACC leaders tells us that they may see more risk and less opportunity. They are reeeaaally dragging their feet. I get the feeling that the final product for the ACC will look nothing like the BTN, SECN or PAC Networks.
I'm going to repeat a lot of what I've already said, but I don't want anything out of context, because there are several nuances to my argument. So, if I seem redundant, bear with me. Also, I may not have been incredibly clear. I would rather have a conference network than not. My point is simply that the benefits are much harder to measure than most claim and they are almost certainly much smaller than most claim.
The BTN was ground-breaking and a game-changing move because of its timing, not because it is an inherently better delivery method.
1) The BTN established a credible threat to entry into the network space, which caused ESPN (who dominated the market at the time) to pay rates which were based on the content's intrinsic value, as opposed to the content's value in the next best media format.
2) The BTN happened to take on more risk right before an unexpected boom in popularity. Since the BTN floats with popularity, that was a wind fall.
However, factor #1 is no-longer necessary. It caused everyone's rights to adjust, as everyone now has that threat (and the market is much more competitive). And, factor #2 is by definition unpredictable and can swing both ways. As such, if the BTN was launched in today's competitive environment, I don't think that it would have been seen as ground-breaking.
On a similar note, given high speed internet and cable proliferation, and general advancements in telecommunications, I don't think that the added content is a big deal. Sure there is probably a shave more, but it's marginal stuff. Virtually every conference has at least an internet-based digital network (even smaller ones like the SoCon) which are able to accommodate much of the extra programming, especially given the boom in sports channels, both on cable and on the internet (i.e. ESPN3). If we were still in the 90's you would have a strong point, but times have changed. There is simply near limitless capacity for P5 content, with or without conference networks.
That said, going back to my early statements, I do agree that conference-owned networks do have value. They are an efficient vehicle by which a conference can control its image/manage its message, they probably have academic advantages (I'm guessing in the form of internships if nothing else), and they have the potential to create a long-term relationship with a television partner who is incentivized to make relationship-specific investments for the conference.
Unfortunately, the first two factors (message and academics) are small potatoes in my opinion and the third factor (relationship-specific investments) are dramatically overstated. Networks, like ESPN, already have all the conferences locked into long-term relationships (12-20 years). Because of the time value of money, that is a significant chunk of the conference's total media value. Having the rights to tier 3 content from year 21 to the end of time really doesn't create much more of an incentive to talk up a conference when the network already owns the next 20 years of tiers 1-3 content.
After those factors are taken into account, I don't really see any gains that aren't pretty well balanced out by opposing forces. Conference-owned networks might have higher expected values but they also involve more risk. Those two forces could very well net out (depending on one's risk tolerance). Conference-owned networks *might* be better at extracting carriage fees (they *might* also be worse - pending elasticities), but that advantage comes at a price of a loss of exposure. Conference networks may generate more revenue in most years, but they have high upfront costs in year 0, and that is the most important year because of the time value of money.*
If the market cooled, which it very well might - it has been growing very fast for a very long time and that can't last forever, then the conferences without networks will look smart. If the market booms unexpectedly, the conference with networks will look smart. Since humans tend to overlook risks during good times and assume that the good times will last forever, investors tend to take massive risks until the market sours and then they get very conservative (see banks leading up to the "Great Recession" and shortly afterwards). The SEC/Pac could very well be going down that path (I left the B1G out because their timing was dramatically different, so they're a special animal). Like I said earlier, I think that conference-owned networks are a net gain and should be pursued, but I hesitate to use the B1G, SEC, and Pac 12 as proof that they're a good idea. The B1G launched their network in a special circumstance. It opened up the market for everyone and once the initial investment cost was incurred, it's cheaper/more profitable to let it run than shut it down and sell the content through other means. And, the SEC/Pac might be jumping off a cliff.
Ultimately, time will tell. However, I think that the fact that the Pac doesn't appear to be tangibly more profitable than either the Big XII or the ACC (despite a hefty upfront investment cost) is evidence that conference networks aren't inherently better means of delivering content and extracting value from viewers/subscribers.
*Having money sooner is better than money later because A) you can invest it and make a return on that investment while you would otherwise be waiting, and B) it is a sure thing, whereas a promise to get paid in the future has an inherent risk of default.
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ACC Commish Comments on the ACC Network..
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