Friday, February 19, 2010

A Look at College Football TV Window Availability

If conference realignment actually happens in the next 12 months, it will be purely to increase revenue to the participating schools, and more specifically, revenue from TV contracts (see Comparison of Conference TV Contracts). The Pac 10 in particular is about to renegotiate its TV contract, and if expansion allows the conference to make the pie bigger for everyone, then it will likely expand.

We already looked at how much money new schools would need to generate to be considered viable (see Numbers Behind Pac 10 Expansion) from a financial perspective. The other question that must be considered is whether or not the broadcast windows or TV slots are available for the Pac 10 to gain a more favorable distribution package when its current contract expires after the 2010-11 basketball season. With recent contracts by the Big 10 and SEC locking in long term deals with ESPN for prime time spots, there isn’t much remaining.

Time Slot Arithmetic
There are a limited number of “windows” or time slots when games can be shown. In a best case scenario, a dedicated station (like ESPN) would have a maximum of 4 slots on a Saturday (Eastern times: 12 noon, 3:30pm, 7:00pm, and 10:30pm for Pacific starts only) and up to one slot on the other nights of the week. With 13 in a season (or up to 15, depending when you star t and end), the three ESPN channels (ESPN, ESPN2, and ESPNU) each have roughly 13*3=42 ideal Saturday slots, and an additional 13 late slots, for a total of 126 ideal slots and up to 39 late games (although this competes with Sports Center and is too late for most of the country). All of the ideal slots (noon to 7:00pm) are claimed, although only a handful of late games are played (3-5), nearly all by the Pac 10.

The other six national sports channels airing college football games (ABC, NBC, CBS, FSN, CBS College Sports, and Versus) have a similar number of slots. Of those, only FSN uses the late slot, showing about 5 late Pac 10 games per year. ABC and CBS CS have filled all of the first three slots, while NBC only airs 8 Notre Dame games in the afternoon and CBS only airs 14 SEC games also in the afternoon. FSN and Versus each only have about 20 of the potentially 39 ideal slots filled with football games.

Saturday Slate (12 noon, 3:30, 7:00)—About 39 Available Slots
ESPN: 39 (13 Big 10, 13 SEC, 7 B10, 5 SEC, 1 Pac 10)
ESPN 2: 42 (12 Big 10, 12 ACC, 2 CUSA, and 15 mirror games*--11 Big 10, 3 Big 12, 2 Big East)
ESPNU: 41 (13 SEC, 13 ACC, 6 Big East, 6 WAC, 2 MAC, 1 Sun Belt)
ABC: 66 games (16 Big 12, 15 Pac 10, 15 Big Ten, 14 ACC, and 6 Big East), many of which are only shown regionally.
CBS CS: 33-40 (13-15 CUSA, 11-16 MWC, 6 Navy, 3 Army)
FSN: 20 (13 Big 12, 7 Pac 10)
Versus: 18 (8 MWC, 5 Big 12, 5 Pac 10)
CBS: 15 (14 SEC, 1 Army vs Navy)
NBC: 8 (Notre Dame)
ESPN Classic: 2-3 (Option to pick up Big 10 and SEC if necessary)

Saturday Night Slots (10:30pm Eastern)—About 13 Available
ESPN: 3 (Pac 10)
FSN: 5 (Pac 10)

Other nights (ESPN/2)—About 13 Available
Fri: 15 (6 Big East, 6 WAC, 1 CUSA, 1 MAC, 1 Army)
Thur: 13 (4 Big East, 4 ACC, 2 SEC, 1 Pac 10, 1 CUSA, 1 WAC)
[Versus and CBS CS also show 2-3 Thur games each season]
Wed: 5 (2 CUSA, 2 MAC, 1 WAC)
Tue: 6 (3 MAC, 2 Sun Belt, 1 CUSA)
Monday: none, except on Labor Day
Sun: 6 (3 CUSA, 2 Big East, 1 WAC)

There are a couple of key insights from this:
• ESPN, ESPN 2, and ESPNU and ABC are all contractually full, with essentially no more room to add games

• CBS College Sports has contracts to fill its slate, but has opted thus far, not to take all of the games available to it, leaving potentially room to add additional games

• FSN and Versus both are only at about half capacity as far as showing college football games—they obviously must have other content that they are airing, but potentially have room to add additional football games

• CBS and NBC could both add an additional TV slot if they wanted to either at 12 noon or prime time 7pm, since both the SEC games and the Notre Dame games are at 3:30pm. It would not be feasible for the Pac 10 to play in the noon slot, but could potentially fill the evening slot.

• The night/late slots are nearly unanimously available, except where the Pac 10 already fills them, which is likely part of what that conference would like to get away from.

• ESPN only shows one game per night on Thursday and Friday (even with multiple channels available)

• The Pac 10 and Big East have decent deals with ABC, but are clearly the have-nots in the other ESPN programming

Expiring Contracts
Another option is to try to take some of the market share that another conference currently holds. But, given when contracts expire, that is really only possible for slots held by Conference USA and/or the ACC, since those are the only contracts that will come up before the Pac 10 deal does at the end of the 2010-11 season. Here is the rundown:

TV Contract Expiration (last season)
CUSA    2010 (football)
ACC      2010-11 (basketball)
Pac 10    2010-11 (basketball)
Big East  2012-13 (basketball)
ND        2015 (football)
Big Ten  2015-16 (basketball)
Big 12    2015-16 (basketball)
MWC    2016-17 (basketball)
WAC    2016-17 (basketball)
SEC      2023-24 (basketball)

Conclusion: Available Options
In order for the Pac 10 to get better distribution and/or money, there are really only a couple of options:

1. Pick up empty slots with Versus and FSN (where they already are anyway)—Possible but not very lucrative

2. Try to get CBS or NBC to add another window for college football—Difficult but lucrative

3. Convince ESPN to add another channel or start showing more games on ESPN Classic

4. Steal slots from the ACC (12 ESPN 2, 13 ESPNU) or Conference USA (2 ESPN 2, 14 CBS CS)—Possible but not without a fight from the ACC

5. Play on weeknights (either get ESPN to add another game on Thursday or Friday, or fill in on the other days)—Unlikely

6. Start (or partner with another conference) on their own TV station—Challenging but big upside

7. Try to convince FSN and ABC to pay significantly more for the same product--Unlikely

Thursday, February 11, 2010

Numbers Behind Pac-10 Expansion: What It Means to the MWC, Big 12, WAC and CUSA

With the PAC 10’s confirmation earlier this week that it is exploring expansion possibilities, conference expansion rumors have been buzzing. Nearly every scenario eventually drags the Mountain West into it, either directly or indirectly, so it makes sense to take a closer look at what will drive the PAC-10 and whether expansion would involve members of the MWC.

As discussed previously (see conference revenue, and specifically TV revenue, is the primary driver. With the SEC and Big Ten throwing down the gauntlet, other conferences are forced to scramble to keep up or risk getting left looking from the outside in.

The PAC-10 is likely dealing with a number of motivations right now—primarily a new (and more lucrative) television contract, but also increased relevancy on the national stage, an increased ability to gain a second BCS bid, and access to additional rich recruiting fields.

Increased relevancy and opportunity at a second BCS bid would both be helped by going to 12 schools. In two divisions, the schools would no longer have to play all 9 other schools, thus eliminating a number of guaranteed losses and improving the odds that more than one school is highly ranked. When all schools play each other, the conference guarantees at least six losses in conference to its top four teams, while the SEC and Big 12 routinely have two highly ranked, and even undefeated teams at the end of the season squaring off against each other. Easy to do when the teams in the conference don’t all play each other, and even better when the media gives a pass on the issue.

So, even without considering TV revenue, the conference would have to at least look at what it would take (and what it would cost) to get to 12, which is the minimum required in order to host a conference championship game.

But there is the revenue issue. It is unlikely that the conference will expand unless it at least maintains the current levels of revenue for each school. So that means that any new additions will have to add at least the current average revenue per team to the conference coffers. So here is a look at how much additional revenue a new conference member would have to generate:

Relevant Annual Conference Revenue
Current TV Contract                               $53.2M
BCS Payouts (3 yr ave)                           $18.2M
Other Bowl Games (excess of $750K)       $5.1M
NCAA Basketball Credits Payout              $13.4M
FB Conference Championship Game             $0M
Total                                                     $89.9M
Average per Team                                   $9.0M

Each new team added to the conference would have to at least contribute $9.0M to the conference coffers. There will be no expansion unless it gets the conference to 12 teams, so at a minimum there needs to be $18M of new revenue collectively created by the new teams. Here’s where it might come from:

Potential for Increased Revenue after Expansion
Improved footprint of TV contract                ?
1. Better shot at second BCS bid             $1.5M
2. Additional non-BCS bowl revenue        $0.5M
3. Additional NCAA bball bids                 $0.6M
4. Create a FB Championship game        $8-10M
Total                                           $10.3-12.3M
Remaining Gap ($18M min)            $5.7-7.7M

1. Should the conference get a second BCS bid once every three years, they would net an additional $4.5M for an average of $1.5M per year

2. If the conference were able to add one additional bowl game with a payout of at least $1.25M, after assumed expenses of $750K, the conference would have an additional $500K to split each year

3. The Pac-10 currently has 65 credits accumulated over the rolling 6 year period. In order to maintain status quo the conference would have to earn an additional 2 credits per year (one for each game appearance in the tourney). This is unlikely, however, if the conference were able to get one additional credit every other year (more than they already would anyway), they would accumulate three additional credits over the six year span meaning that pay out at roughly $200K each, for $600K total.

4. A football championship game would generate revenue from ticket sales and TV rights. The SEC game earns that league roughly $12-14M per year. The Big 12 is just below that. The ACC hasn’t done as well.   But, with USC playing in most years, a Pac-10 championship game would likely come in just below the current Big 12 and make $8-10M (70K seats at $50 each = $3.5M + $4.5-6.5M for TV rights and sponsorships).

So the million dollar question...
Are there two teams out there that could collectively add roughly $6-8M to the soon to be negotiated Pac-10 TV contract? The new TV deal will almost certainly be more than the current deal regardless of expansion, so any new teams need to be incremental to the already expected increases (which would increase the amount needed to break even, so we will compare with the current deal).

To consider this, we will assume that TV contract values are based on the number of households, and that all households are created equal (although viewer intensity is obviously higher in some markets).

Current Pac-10 Market Households
2. Los Angeles    5.6M 4.9%
6. Bay Area         2.5M 2.2%
12. Phoenix         1.9M 1.6%
13. Seattle           1.8M 1.6%
22. Portland        1.2M 1.0%
66. Tuscon           0.5M 0.4%
119. Eugene         0.2M 0.2%
Total                13.8M 12.0%

So with 13.8M households, and 12.0% of the US, the Pac-10 has a current contract of $53M per year. So for two teams to add an additional $6-8M to that total, together they would need to add roughly 10-15% more households to the footprint (about 1.5-2M), or 750K-1.0M each, just to break even. In order to increase the payout to the conference, it would have to be more.

These are the schools in markets west of the Mississippi that could meet that requirement:

School (Market Rank, City, Households)
Texas (5. Dallas, 2.5M; 37. San Antonio, 0.8M; 48. Austin, 0.7M)
Oklahoma (5. Dallas, 2.5M (some portion); 45. Oklahoma City, 0.7M)
Texas A&M (portions of Dallas and Houston)
TCU (5. Dallas, 2.5M)
SMU (5. Dallas, 2.5M)
Houston (10. Houston, 2.1M)
Missouri (21. St Louis, 1.2M; 32. Kansas City 0.9)
Colorado (16. Denver, 1.5M)
San Diego State (28. San Diego, 1.1M)
BYU (31. Salt Lake, 0.9M; US West/LDS, 1.0M)
Utah (31. Salt Lake, 0.9M)

Las Vegas (42, 720K), Albuquerque (44, 694K), Fresno (55, 579K), Honolulu (71, 433K), Omaha/Lincoln (76, 410K), Waco (89, 340K), Colorado Springs (92, 335K), El Paso (98, 311), Reno (108, 270K), Boise (112, 263K), Topeka (136, 180K), and Lubbock (143, 158K) are all markets too small to increase the value of the TV contract sufficiently.

The San Diego market is likely already covered by the inclusion of USC and UCLA. TCU and SMU are small private schools that have become victims of markets with too much noise for the size of their alumni base, and are not the primary driver of sports in those markets. Houston, although a large school with 37K students, suffers to a lesser degree from the same plight as the Metroplex schools—too much noise from pro sports and living in the shadow of Texas/Texas A&M. Missouri is focused on the Big Ten right now, and seems an unlikely candidate.

From this perspective BYU and Utah could not both be added, since together they do not bring any additional households. It would be one or the other or neither.

The only remaining options are Texas, Oklahoma, Texas A&M, Colorado, and BYU or Utah. The Dallas market is sufficiently large, that despite the overlap, any combination of the above would also work, except for BYU and Utah. Any discussion mentioning other schools is unrealistic, purely from a TV perspective before even getting to any other factors.

Would any of the Big 12 teams leave? Perhaps, if the money was right. The Big 12 includes a rather limited footprint, and a number of very small markets (see above). Outside of Texas, Missouri, and Denver, there isn’t much, and without the state of Texas in particular, the conference would fall apart financially. With that in mind, the upside of the Big 12, unless membership changes are made, is very limited. But still, for a team to leave behind its rivalries and tradition, it would have to make significantly more revenue than it does now—for our purposes, we will say 35% more. Colorado has fewer rivalries and traditions in the Big 12 than the Texas schools, and thus likely has a lower bar, maybe 25%. Here is an estimate of what these schools will receive this year from Big 12 revenue sources (using last year’s allocation % against this year’s projected $136.2M):

Current Big 12 Revenue (Departure Hurdle Value)
Texas            $13.6M (would need $18.4M)
Oklahoma     $13.0M (would need $17.6M)
Texas A&M  $11.0M (would need 14.9M)
Colorado      $10.7M (would need $13.4M)

The Pac-10 currently only brings in $90M or about $9.0M per team. Non-TV expansion benefits would add about $12M or $1.0M per team. A new TV contract without the additional schools could possibly bump up another $2M or so per school before the expansion consideration (assume $75M per year for 10 teams). That would put total revenue at $122, or $10M for each school before considering TV market increases. Enough for BYU or Utah. Not yet tempting for Colorado, and with a ways to go for the Texas schools. So it all comes down to the potential to increase TV value.

Increased TV Value
Texas adds about 4.0M households (29% increase of $21.8M)
Oklahoma adds 3.2M (23% increase of $17.4M alone, or 5% for $3.8M with Texas)
Texas A&M maybe 2.5M (18% increase of $13.6M, alone and 3% or $2.2M with Texas)
Colorado 1.5M (11% increase of $8.2M)
BYU would add 1.9M (14% for $10.4M)
Utah would add 0.9M (7% or $4.9M alone, $0 with BYU)

So which combinations work?

Utah and Colorado: 2.4M new HH (18%), $13.1M new TV dollars, $135M total and $11.3M/team
-This works for Utah, but Colorado would be unlikely (unless there were intangible reasons).

BYU and Colorado: 3.4M new HH (25%), $18.6M new TV dollars, $140.6M total and $11.7M/team
-Again, this works for BYU, but would be unlikely for Colorado.

Colorado and Texas: 5.5M new HH (40%), $30M new TV dollars, $152M total and $12.7M/team
-Likely works for Colorado (as Big 12 w/o Texas is much less), won’t work for Texas

Texas and Oklahoma: 4.7M new HH (34%), $25.6M new TV dollars, $147.6M total and $12.3M/team
-Would be unlikely to work for Texas or Oklahoma (unless there was a massive uneven revenue split)

Colorado and Texas A&M: 4.0M new HH (29%), $21.8M new TV dollars, $143.8M total and $12.0M/tm
-Could work for both Colorado and Texas A&M (more than they get now) but unlikely to be worth the effort unless there was unequal sharing in their favor or significant intangible reasons to do it, since it does not meet the hurdle.

BYU and Texas A&M: 4.4M new HH (32%), $24M new TV dollars, $146M total and $12.2M/team
-Works for BYU, is more than TAMU gets now, but as in the scenario above, unless A&M is unhappy in the current situation, this will likely not meet the hurdle rate for them.

BYU and Utah: 1.9M new HH (14%), $10.4M new TV dollars, $132.4M total and $11.0M/team
-Both BYU and Utah would do this. And, which surprisingly, at the end of the day, might be what it comes down to… which teams would be both qualified and willing. It would not be much of a revenue bump for the conference, but it would be revenue neutral and achieve the relevance and BCS goals.

• BYU, Utah, Texas, Oklahoma, Texas A&M, and Colorado are the only options for Pac-10 expansion that will maintain revenue neutrality or better

• Without making some kind of revenue concessions to the Texas schools, it is unlikely that any of them would come, but given the Texas recruiting grounds, the Pac-10 just might do it.

• Colorado is borderline, but is unlikely to move unless they are currently unhappy or the future alternative in the Big 12 (no Texas) was diminished

• BYU and Utah together (or BYU and a smaller market UNLV or TCU) would work and still maintain revenue neutrality.

• Utah combined with anyone above but BYU (and perhaps UNLV or TCU, not listed) does not increase the pie enough to entice the other partner to join them in the Pac-10

• Unless the Big 12 looks like it is going to fall apart, or the Pac 10 is able to get significantly more than $75M/year for its current lineup (it would have to be at least $100M/year for just the current 10 schools), then it is unlikely that any schools from the Big 12 would leave for the Pac 10

• No WAC teams are in large enough markets to be invited unless BYU is invited (which would be enough by itself and would need another school to get to 12)

• No Conference USA team is likely to be invited as Houston and SMU are the only "western" schools in large enough markets, but are not the primary draws in those markets.  If invited, they would have to be paired with either BYU or Utah, since they do not increase the TV value sufficienlty to get any Big 12 team to join them.

Tuesday, February 2, 2010

Blog Status Update


The first season of this site (in conjunction with Phil link at the top right) has been a success.  We have had over 15,000 visitors since the season began and had several of our links picked up by national sites and forums including ESPN.  In a soon-to-come post, I will recap the most popular articles of the season and provide a bit more detail on the blog visitor demographics.

I just wanted to take a few minutes to clarify the status of the blog during the football offseason.  I will continue to post, but on a more irregular basis, probably every 7-10 days, perhaps with more frequency during spring camp. 

I know that most of you have probably been following the nationally ranked Cougar basketball team over the last several weeks (as I have).   Some of you have asked me if I am going to cover the hoopsters.   Unfortunately, the answer to that question is no, or at least that I am not going to be able to do it.  If there is a reader that is interested in providing regular hoops coverage on here, please contact me.

Finally, I am looking to add 2-3 additional writers for next season to help carry the load and provide more regular content.  Let me know if you are interested and feel free to pass the word along.