http://www.addictedtoquack.com/2011/5/5/...v-contract

BE should look at this deal VERY VERY carefully. What BE can monetize on:

BE Football
BE Men Basketball
UCONN women basketball program (I know UCONN got some local deal going on so I am not sure UCONN is willing to give this up)
Olympic sports on Big East Network

pac-12 is able to keep 36 games for conf network
BE FB has 47 total [minus FCS]

(05-30-2011 03:01 AM)SF Husky Wrote:  BE should look at this deal VERY VERY carefully.

Yes, but let's be clear as to what we mean by "look at": What is should NOT mean is merely mimicking what the Pac12 did.

For example, i can think of two things other conferences did differently from the Pac 12 that might work better for us:

1) We shouldn't necessarily draw the conclusion that expanding to 12 football teams is the right move, because the Big 12 showed you can cash in immensely by not moving to 12 teams and having a title game. The Big 12 is getting almost as much money as the Pac 12, and, they stand to make even more because their tier I rights come up for negotiation in just 4 years.

1a) The last point feeds into another factor: If possible, we should sell our tier I rights for a shorter period of time rather than a longer one. Given how fast sports-rights are rising in value, the SEC and ACC, and maybe even the Big 10, are probably regretting being tied-in to 12-15 year contracts that now look like great deals for their networks but not-so-great ones for themselves. Sure, it might cost us, but a 5-7 year deal might be better than a 10-15 year deal.

And this leads to another reason to hold off on expansion for now: If we haven't expanded when we sign our new deal next year, we can sign a long-term deal, but have a clause in the contract that allows us to renegotiate if we do expand. Thus, if market rates continue to skyrocket, expanding to 12 teams would allow us to renegotiate and capture those higher fees. But one way or the other, we should have some mechanism for capturing a rising tide of rights-fees if the market continues to grow.

Moral: expanding to 12 in the short run isn't necessarily best; a title game isn't necessarily best, and a long-term deal isn't necessarily best.

2) One thing i like about the SEC deal compared to the Pac 12 deal is that SEC schools retain their local media rights. As part of its new network, the Pac 12 is requiring its schools to end their local media deals so they can be combined at the conference level. That might be best for them, but the Big East has a lot of teams in major metro areas where local rights fees can be substantial (e.g., the main reason MLB teams like the Yankees and Red Sox are so rich is that they have far bigger local media deals than the 'small market' clubs').

Also, IMO another advantage of keeping local media rights is that it provides an incentive for each school to be entrepreneurial in terms of strengthening its product and marketing locally, since, let's face it, even local fans are more likely to watch a winner. The Pac12/BigTen approach is more 'socialistic', and might breed complacency since everyone gets the same money regardless of performance. For schools that already have enormous local followings and 'market saturation', such as the Big 10 schools, this might be best. But, Big East schools tend to be in big markets but without necessarily strong market saturation (e.g., USF doesn't 'own' Tampa, Rutgers and Uconn don't 'own' NYC, Pitt doesn't 'own' Pittsburgh, etc.). This situation seems to call for more entrepreneurial incentives.

Overall, we should remember that the Pac12 didn't cut its great deal by simply imitating what other conferences had done, so we shouldn't merely imitate the Pac12 either ....

(05-30-2011 10:08 AM)quo vadis Wrote:  

(05-30-2011 03:01 AM)SF Husky Wrote:  BE should look at this deal VERY VERY carefully.

Yes, but let's be clear as to what we mean by "look at": What is should NOT mean is merely mimicking what the Pac12 did.

For example, i can think of two things other conferences did differently from the Pac 12 that might work better for us:

1) We shouldn't necessarily draw the conclusion that expanding to 12 football teams is the right move, because the Big 12 showed you can cash in immensely by not moving to 12 teams and having a title game. The Big 12 is getting almost as much money as the Pac 12, and, they stand to make even more because their tier I rights come up for negotiation in just 4 years.

1a) The last point feeds into another factor: If possible, we should sell our tier I rights for a shorter period of time rather than a longer one. Given how fast sports-rights are rising in value, the SEC and ACC, and maybe even the Big 10, are probably regretting being tied-in to 12-15 year contracts that now look like great deals for their networks but not-so-great ones for themselves. Sure, it might cost us, but a 5-7 year deal might be better than a 10-15 year deal.

And this leads to another reason to hold off on expansion for now: If we haven't expanded when we sign our new deal next year, we can sign a long-term deal, but have a clause in the contract that allows us to renegotiate if we do expand. Thus, if market rates continue to skyrocket, expanding to 12 teams would allow us to renegotiate and capture those higher fees. But one way or the other, we should have some mechanism for capturing a rising tide of rights-fees if the market continues to grow.

Moral: expanding to 12 in the short run isn't necessarily best; a title game isn't necessarily best, and a long-term deal isn't necessarily best.

2) One thing i like about the SEC deal compared to the Pac 12 deal is that SEC schools retain their local media rights. As part of its new network, the Pac 12 is requiring its schools to end their local media deals so they can be combined at the conference level. That might be best for them, but the Big East has a lot of teams in major metro areas where local rights fees can be substantial (e.g., the main reason MLB teams like the Yankees and Red Sox are so rich is that they have far bigger local media deals than the 'small market' clubs').

Also, IMO another advantage of keeping local media rights is that it provides an incentive for each school to be entrepreneurial in terms of strengthening its product and marketing locally, since, let's face it, even local fans are more likely to watch a winner. The Pac12/BigTen approach is more 'socialistic', and might breed complacency since everyone gets the same money regardless of performance. For schools that already have enormous local followings and 'market saturation', such as the Big 10 schools, this might be best. But, Big East schools tend to be in big markets but without necessarily strong market saturation (e.g., USF doesn't 'own' Tampa, Rutgers and Uconn don't 'own' NYC, Pitt doesn't 'own' Pittsburgh, etc.). This situation seems to call for more entrepreneurial incentives.

Overall, we should remember that the Pac12 didn't cut its great deal by simply imitating what other conferences had done, so we shouldn't merely imitate the Pac12 either ....

Agreed on going to 12 might not be the best idea if right teams are not available.

On the local media rights, I also agree it might be worth it for schools to manage it themselves.

In UCONN's case, I know we get paid $8M per year from IMG. Additionally, we get paid another chunk of change from CPTV for UCONN women's games not picked up by ESPN and other national outlets. Those have added huge chunk of revenue to UCONN that are not available to many other schools. IMG portion is much higher than the TV dollars we get from BE right now.

(05-30-2011 03:01 AM)SF Husky Wrote:  UCONN women basketball program (I know UCONN got some local deal going on so I am not sure UCONN is willing to give this up)
Olympic sports on Big East Network

Women's basktball and olympic sports are not really worth much (as a conference) on a national scale. Those are better to be monetized individually by the few programs that can. Now, if there were a Bi Geast network, then yes of course you put them on there, but I am also not sure a Big East network is the best way to go. I think there is another more unique ways to monetize Big East third tier rights, with much less risk (depending on who the primary rights holder is).

(05-30-2011 10:08 AM)quo vadis Wrote:  1) We shouldn't necessarily draw the conclusion that expanding to 12 football teams is the right move, because the Big 12 showed you can cash in immensely by not moving to 12 teams and having a title game.

Let's take that a step further, use that to show that going to 12 teams should not tbe the primary plan, but should be the alternative plan whereas you have to prove it is the right move, instead of concentioanl wisdomw which says it is the other way around. People forget that we get many of the benefits of 11 and 12 teams other conferences get in terms of footprint, population base, and exposure due to the 8 non- football playing members (who don't share football money) who are nonetheless members of the conference

(05-30-2011 10:08 AM)quo vadis Wrote:  1a) The last point feeds into another factor: If possible, we should sell our tier I rights for a shorter period of time rather than a longer one. Given how fast sports-rights are rising in value, the SEC and ACC, and maybe even the Big 10, are probably regretting being tied-in to 12-15 year contracts that now look like great deals for their networks but not-so-great ones for themselves.

I'll tell you what I tell my clients all the time: if you like a deal, take it, and don't worry about what the future rates may be. Just as easily, a technological shift could make sports on TV less profitable down the line, and then you are locked into a long term deal that pays you above market (see Rodriguez, Alex and O'Neil, Shaq for details). Maybe if you have enough clout, you can do what the NCAA did, and have a seller's opt-out clause, but that is a close as you want to get. Also, you want to make sure your contract is not obscenely back-loaded, because since you often renegotiate before the end of a contract, you may have a contract where you never receive the money you are promised.

(05-31-2011 10:43 AM)adcorbett Wrote:  People forget that we get many of the benefits of 11 and 12 teams other conferences get in terms of footprint, population base, and exposure due to the 8 non- football playing members (who don't share football money) who are nonetheless members of the conference.

Agreed, the burden of proof should be on those advocating expanding to 12 football teams, not the other way around. And, yes, it seems like some football schools think the b-ball only schools drag us down without due regard for the benefits. They do raise our conference profile in a lot of ways, and yet get none of the big football dollars for doing so.

Quote:I'll tell you what I tell my clients all the time: if you like a deal, take it, and don't worry about what the future rates may be. Just as easily, a technological shift could make sports on TV less profitable down the line, and then you are locked into a long term deal that pays you above market (see Rodriguez, Alex and O'Neil, Shaq for details). Maybe if you have enough clout, you can do what the NCAA did, and have a seller's opt-out clause, but that is a close as you want to get.

I agree and disagree. On the agreement side, my discussion did seemingly omitted the risk we'd take with a shorter deal in that if the rights fees escalation is a bubble and that bubble bursts, then we'd have been much better off being locked in to a longer deal that pays us more than what we'll now get when we renew in that burst-bubble market. Point conceded. That's one benefit of the "hold off on expansion" take, in which we have a clause that allows us to renegotiate if we add members. That way we can control whether the contract is re-opened or not, depending on future market conditions.

Where i disagree is in not thinking about the future. To me, we have to think about the future, because we are in a competitive environment, whereas in many cases, personal clients aren't. For example, if i'm a financial adviser and have a client that is thinking about buying a house with a 5% fixed mortgage , and he can clearly afford that and otherwise thinks it's a very good deal, but fears that rates will drop to 4% right after he signs, and he buys at 5% and then his 'fear' is realized, what cost has he incurred? Nothing really, except the irritation of knowing someone else is now buying a similar house at a lower rate than he did. But someone else getting a better rate doesn't hurt the value of his house, it doesn't make it any less comfortable, etc.

Similarly, if Peyton Manning is thinking about signing a new deal for $15m a year and thinks that's more than fair, but fears Tom Brady will then sign for $17m after him, and that's what actually happens, what has Peyton lost? Nothing, except the ego-bruise of not being the #1 paid QB. But it's not like Brady making more than him will hurt his ability buy luxuries, put his kids through expensive colleges, etc. Brady's $17m doesn't de-value his $15m in any material sense. And yet even so, athletes like Manning often include clauses in their contract saying that if any QB signs for more than them, their salary gets raised to that level!

But our Big East case is different: If our TV rights are currently $5m a year and we get offered $15m a year, which raises us from 6th among the AQ conferences to 3rd and we think that's great, but fear that the conferences ranked 4th-6th will then sign for more than us, that's is not merely an ego-fear. It has material consequences, since if they do sign for more than us, they can use that extra money to hire more expensive coaches, build better facilities, send more scouts and assistant coaches on recruiting trips, invade our 'footprint' with more marketing exposure, etc. IOW's, build better programs that will beat us on the field, such that our $15m is de-valued by their $20m. It isn't worth as much in terms of the competitive positioning.

So i don't think we can look at our deal without comparing how it stacks up with the deals of other conferences, and without an eye on what is likely to happen in the future ...

I shouldn't say you never worry about the future. What I mean is, don't worry so much about what the value of a contract may be in the future, and let that decide what to do now. You cannot control that, and if the current number makes you happy, and the timing is right, take it and don't look back.

Yes, there is the issue that rights fees could increase in the future, but if so, you are back in the same position of being the last one to renegotiate, and thus still in the catbird seat of getting the last deal. And if the new contract makes you the highest paid, or one of the highest paid for the next five years before anyone else renegotiates, and locks you into more money in the future, that gives you a long time of guaranteed income to build your brand. Plus, a long term contract helps secure the conference.

The two best positions to be in are first (allows for innovation), and last (allows you to correct errors made by your predecessors).

(05-31-2011 03:24 PM)adcorbett Wrote:  Yes, there is the issue that rights fees could increase in the future, but if so, you are back in the same position of being the last one to renegotiate, and thus still in the catbird seat of getting the last deal.

I'm not sure i agree with this notion of the Big East getting the last deal. Who's to say when the "cycle" started? We could think of ourselves as now being up first in the new cycle.

It's arbitrary where we say the cycle started. Whoever is up next is the new first and new "last" ...

(05-31-2011 04:14 PM)quo vadis Wrote:  

(05-31-2011 03:24 PM)adcorbett Wrote:  Yes, there is the issue that rights fees could increase in the future, but if so, you are back in the same position of being the last one to renegotiate, and thus still in the catbird seat of getting the last deal.

I'm not sure i agree with this notion of the Big East getting the last deal. Who's to say when the "cycle" started? We could think of ourselves as now being up first in the new cycle.

It's arbitrary where we say the cycle started. Whoever is up next is the new first and new "last" ...

I guess in the sense that there are clusters, where the ACC, SEC, Pac-12 and Big 12 all have deals that go into the mid-2020s. Technically, the last ones in the "cycle" are the Big Ten (all rights outside of BTN games) and Big 12 (first tier rights) when their new deals start in 2016 and then likely extend into the 2020s like the other conferences. After that, there's a 5 or 6 year gap before another new BCS conference contract comes up for renegotiation.

Cable sports deals are by their nature long-term. The way that they're profitable for cable networks is to leverage them in order to negotiate higher subscriber fees. You can't really do that with short-term deals (or at least it's very hard), which is why we see so many deals go for 10 years or more.