Realignment, expansion and TV deals have been college football’s weapons of mass destruction as conferences arm themselves to the teeth in a desperate grab for the revenue collegiate athletics creates. Another major blow was struck on Thursday when ESPN and the Southeastern Conference announced a joint venture that will give the SEC their own 24-hour-a-day TV network.
Following in the footsteps of the Big Ten and Pac-12, the SEC Network (officially known as the SEC ESPN Network) will launch in August of 2014, and a 20-year extension with ESPN will put hundreds of football games and tens of thousands of other sporting events on the ESPN family of networks and the SEC Network itself through 2034. And, while the financials weren’t disclosed, the deal does figure to, once again, make the SEC the most powerful financial entity in college athletics.
There’s no doubting the wealth of the conference as a whole ties directly to the seven straight national championships they’ve won on the gridiron, and as football continues to set the course for college athletics, the SEC Network should be incredibly football-centric. However, the overall structure of the network itself and its ability to generate mass appeal will drive its general success.
The Big Ten Network famously had distribution issues to begin with; however, it’s now in more than 52 million homes, and the conference’s recent addition of Rutgers and Maryland were viewed by many as a ploy to dip into large television markets. That’s because in the cable business, forcing your way into paying subscribers homes is more profitable than ratings themselves.
For example, this New York Times report cited research firm SNL Kagan as claiming the Big Ten Network had subscriber revenue of $234.4 million compared to just $41.5 million in ad revenue. Although, the Big Ten Network isn’t profitable as of 2010 IRS filings.
In order for the SEC Network to be a financial success, they’ll have to immediately pull 25-30 million subscribers from member states and then gradually force themselves into wider national markets. AT&T U-Verse is already on board, citing the networks incredible pull in area’s like Birmingham, where a staggering 92% of people watched at least one SEC football game last year.
Eventually the network will have to prove that it has appeals broader than just the Southeast to develop a subscription base that supports such a large-scale investment by ESPN, who is rumored to own 100% of the equity. Of course, the folks at ESPN know a thing or two about distribution, as ESPN alone currently account for the largest subscriber fee of any single channel on every American cable bill.
The hope is that with the College Football Playoff coming in 2014, the SEC’s dominance of the sport will make the SEC Network a must-have. If the SEC is putting a team, or even two, regularly into the four-team tournament, that will obviously give broader national appeal to their 24-hour network.
Of course, the worry for any network like this is that it will only truly appeal regionally. The Big Ten and Pac-12 Networks are still in their relative infancy, so there’s not really a working blueprint for success in this regard. Meanwhile, the University of Texas’ Longhorn Network (also owned and operated by ESPN) is so specific that it is having an EXTREMELY difficult time breaking into the marketplace. In fact, not even 20% of Austin residents currently have LHN.
However, as mentioned, the SEC’s position atop the college football totem pole makes the prospects of an all SEC television network a much more intriguing option for big-time distributors like Comcast and DirecTV. And make no mistakes about it, the network will likely be heavy on football content; however, its ability to provide live sporting events of all kinds throughout most given days also makes it coveted.
In an era where people record shows or watch them online so they can blow through the commercials out of sheer convenience, live television, specifically live sports, force consumers to endure. The SEC Network plans on airing 450 live events on its actual airwaves alone in its first year and 550 more digitally.
Overall, there are a couple things that really stand out about this deal to me.
One is that ESPN allegedly owns all the equity in the network itself. That’s rather contrary to the Big Ten, which owns roughly half of its network, and the Pac-12, which owns all of their network. However, upon further examination, it makes relative sense.
Like I said, the business model for a regional conference building a national network hasn’t been proven, and as 100% owners ESPN incurs all the risk. Meanwhile, the SEC has extended what is assumed to be a MASSIVE rights deal for 20 years that will pay each of its member institutions tens of millions of dollars every single year without any liability in the success of the network itself.
If the SEC Network becomes a raging success, the conference misses out on an opportunity to cash in by not holding on to at least SOME equity. However, if the network isn’t profitable, or if it is marginal, they still can count on that big yearly check from Bristol.
The other thing that stands out in this deal–and I suppose this is on a somewhat-related note to the equity share–is how much confidence ESPN has in this network. The Worldwide Leader has a pretty good track record of cracking distribution and making money, and while skeptics will point to the Longhorn Network as cause for concern, the SEC has much broader appeal and a LOT more programming to offer than a network based around one school.
It’s hard to gauge exactly how good or bad each side has it until we see the specifics on the numbers, but it’d be hard for me to imagine both sides won’t make out relatively well. The SEC Network won’t be something Disney and ESPN (a $40 BILLION entity) engorges its profits on, but if they continue to be the most dominant college football conference with the most rabid fanbase, it’ll turn into a steady source of income for Bristol.
Meanwhile, those television rights checks to each member institution in the SEC stand to get quite a bit fatter in the coming years.
My only question is, how long before I can get the SEC Network in Chicago?