You could be forgiven if you missed the news if you were still in a Cleveland Cavaliers championship haze, but some awfully big sports business news dropped this morning. The Big Ten reportedly agreed on the rest of their media rights deal, selling the second half of the package to ESPN for an average of $190 million a year. That brings to the entire worth of the six year deal, with Fox as the other major partner, to $2.64 billion dollars. That easily triples their previous TV deal, and once money from BTN is added to the mix, there's a real chance Big Ten schools could be clearing $50 million, a year, just from TV.
Such a huge TV deal doesn't just have far reaching implications for the Big Ten and member institutions, but for the rest of college athletics, the TV industry, and more. Let's take a closer look at what this deal means, and what questions it could potentially raise.
Big Ten schools are even more rich. How will they spend the money?
Big Ten schools were already doing pretty well when it comes to money, thanks to an advantageous TV deal, enormous brands, and far-flung alumni. But now everybody could be looking at an additional $20 million dollars, if not more, a year, just from their TV money. That's an enormous sum. What will they do with it?
The obvious answer would be to sink it back into facilities or the athletic department, but for a few of the top programs in the conference, like Ohio State or Michigan, there may be legitimate questions on what else you can spend the money on. How much do you benefit if your already palatial estate is now a teensy bit more palatial?
There are certainly programs that have a lot of room to grow in terms of their athletic facilities or coaching salaries, like Purdue and Rutgers. But for others, especially in an era where even more attention is being focused on student welfare, what's the best place to put the money? Do they start other programs? Certainly more Big Ten schools should have the money needed to launch lacrosse, hockey, or other sports. Do they give it back to the university general budget? Do they slash student activity fees?
In a perfect world, the new surplus is used on new sports, new athletic opportunities, or the general budget, but administrator creep is probably more likely. We'll see if political pressures force a change in behaviors over the course of this deal.
So much for the Big 12 expanding to dry up ESPN money
A few weeks ago, CBS reported that the Big 12 may be motivated to expand to as many as 14 teams in order to limit the amount of money ESPN could throw at the Big Ten. If the Big 12 could limit a Big Ten TV deal, they'd decrease the expected revenue gap between the two conferences, and hypothetically, put the Big 12 in a more competitive position.
We expressed some very healthy skepticism about this idea, thanks to the expected timing of the two deals, the marketplace and Big 12 expansion candidates. And now, it appears that we were right. Any Big 12 expansion decision isn't likely to happen until near the end of the summer, before the Big Ten deal is finalized. That conference may go ahead and decide to expand, but it won't be because of a goal to close a revenue gap with the Big Ten. That's almost certainly a futile endeavor.
The Big Ten could potentially make even more money relatively soon
One underrated aspect of this deal is that it's relatively short term, only six years. That means the Big Ten goes back to market before the Big 12, SEC, Pac-12, or any other power conference or entity in the college football marketplace. The value of their current deal, even in the face of challenging industry headwinds, shows that live Big Ten programming is still an exceptionally valuable TV property.
What if, over the course of these six years, the Big Ten uses their financial windfall to become even better at football? What if the ability for new bidders, from Hulu to Facebook to Youtube, matures, allowing for a more competitive bidding process? What if the Big Ten has expanded membership in the next six years (not an impossibility)? This industry can change significantly in the next six years, but there is reason to be optimistic that the Big Ten could take another huge bite from the proverbial apple again soon, securing financial security for all conference programs in the years to come.
Is this Jim Delany's last ride?
Love him or hate him, it's hard to deny that Jim Delany has been a highly effective advocate for the Big Ten's interests during his tenure. BTN, a controversial and risky move at the time, has paid off massively. The conference expanded twice, giving it footholds in massive and important markets, another significant western brand, and now, landed another huge TV contract. Not every move he's made has been perfect, but structurally, the Big Ten is in far better shape than many power conference peers.
So the question is, what's next? Delany is 68 years old right now. He'll be 74 when this media deal expires. There likely isn't much of an opportunity to expand again until near the end of this TV deal. Are there other big mountains to climb? Will he still be commissioner when it's time to go back to the negotiating table? If not, he's already left a heck of a legacy, not just with the Big Ten, but with college sports as a whole.
What does this mean for TV rights as a whole?
The headlines over the last several months focused on ESPN's financial struggles. With more and more people dumping their costly cable TV packages, how would channels like ESPN or Fox be able to shell out massive TV deals for live sports? Had the bubble already burst?
That speculation continued as ESPN reportedly lowballed the Big Ten a bit for the first half of the media rights, and as Conference USA watched their TV revenue crumble, as the conference was ravaged by expansion.
My thinking is that the TV bubble isn't popping, exactly. Live sports programming from major brands is still extraordinarily valuable, and the Big Ten, paced by Ohio State, has some of the biggest brands in the sport. The next rounds of negotiation might be tougher for the Sun Belt, or the MAC, but for the biggest conferences, I think they'll still find ways to be financially competitive.
The last few years were dominated by talk about the importance of TV markets, as opposed to actual brands. I think we're in for a bit of a course correction on that.
No matter what way the industry winds blow though, the Big Ten should be set up for stability. And that's nothing but good news for Ohio State and their fans.
Unless, of course, they don't get FS1.