(This the second part in an on-going series examining the possibility of SEC expansion from a business perspective.)
How did we get here?
What is it about Spring 2010 that’s led to possible seismic changes on the college sports landscape? What’s the rush to expand the conferences? Is it an attempt to beat the end of the Mayan calendar in 2012?
To make things as simple as possible, there are basically three factors that have led college presidents and conference commissioners to start drawing up new maps and contemplating new marriages.
The first has nothing to do with 2010, either. In fact, it actually began in 1992.
1. Conference Championship Games
In the late 1980s, then SEC commissioner Harvey Schiller had an idea. As he tells it he was thumbing through the NCAA rule book when he first realized that his conference could hold a football championship game. Well, it could IF his league had at least 12 teams in it.
So Schiller and SEC presidents started whispering about the possibility of expanding the league and creating a newfangled title game that they believed would be a sure cash windfall.
NCAA president Walter Byers wasn’t pleased when he heard the rumors of what was being discussed down in Birmingham. “What the heck are you doing?” he asked Schiller. “That (rule) was not meant for you. It was meant for hockey, volleyball and soccer (and smaller divisions) where they have 12 or 14 or 16 schools.”
“But that’s not what the rule book says,” Schiller told him. As the ex-commish recently related to Paul Finebaum of The Mobile Press-Register, the conversation went south from there to the point that Byers called the SEC’s commish an SOB and told him there would never be an SEC Championship Game.
But just a few short years later — in December of 1992 — there was such a game. And college football hasn’t been the same since.
The new title game set aside the SEC as a trendsetter league, a pioneer. It resulted in added exposure for the league. It also produced the buckets of cash that were initially expected… and then some.
Last year, the conference raked in $14.3 million for it’s 2008 title game. In early June we’ll learn that the league made even more from last December’s Alabama-Florida match-up.
Other leagues have taken notice. Two other BCS conferences (the Big 12 and the ACC) have jumped on the bandwagon, but have yet to record the same amount of success as the SEC’s title tilt.
Now the Big Ten is eyeing expansion partly in hopes of creating their own title joust. As coaches in that league have pointed out in the past months, the Big Ten virtually disappears from the college football scene in early December. A championship game would change that. It would also put some more sacks of money in Big Ten coffers, which has never been more important than it is now.
2. The Economy
According to Bloomberg.com, “Declining gifts and massive investment losses caused the nation’s college university endowments to suffer their worst year (from July 2008 to June 2009) since the Great Depression.”
The average loss was reported to be 18.7%. Endowments actually spent more than they earned for that fiscal year. And while the past year’s numbers should look better, there’s no question that schools are feeling a bigger pinch than ever before.
If you’ve read the front page of your local paper (if you still have a local paper), you know that your Hometown U. has probably been faced with massive spending cuts, a reduction in courses offered, salary freezes, hiring freezes and worse.
If you read you’re sports page, you also know that coaching salaries — both for head coaches and assistants — have been on the rise.
Schools need more cash. They don’t just want it, they need it. To get it, they’ll do whatever they feel they have to do. Even toss out traditions.
The NCAA recently expanded the size of its men’s basketball tournament to 68 teams. It had toyed with actually expanding to 96 and that remains a possibility somewhere down the road.
The NCAA has also given a thumbs up to two new bowl games this season.
Do the math. More tournament bids and more bowl bids mean more dollars pouring into the bank accounts of the nation’s biggest conferences.
With more bids available (and possibly even more available in the future), wise conference heads realize that the more bids a league lands, the more cash comes in to be spread around evenly.
How do you increase the odds of landing more bowl and tournament bids? By adding more teams to your conference (and by taking them away from someone else’s conference).
Whether it’s bowl bids, tournament bids, television deals or — on the academic side — bigger and better research funds and grants, bigger conferences mean bigger bucks.
TV deals are the third accelerant at play in the drive for expansion.
Less than three years ago, the Big Ten launched the Big Ten Network. Its early troubles were too numerous to count, but the biggest issue was the league’s inability to land the channel on major cable carriers.
While the Big Ten was trying to get their network off the ground, the SEC used the idea of starting its own network as leverage in its negotiations with CBS and ESPN.
Having seen the troubles faced by the Big Ten, the SEC chose to make CBS and ESPN its “official” networks. The two nets apparently bought the league’s bluster about an SEC network, too, as they agreed to jaw-dropping new deals.
CBS inked a 15-year deal with the league that nets the SEC $55 million per year. ESPN then backed up a Brinks truck and signed a separate 15-year agreement to the tune of $150 million per year.
That’s more than $200 million dollars every year coming into the SEC.
Tally that and it’s $3 billion coming into the SEC over the life of the two mega-deals.
And talk about timing. Shortly after the SEC signed its record-crunching contracts, the US economy hit the skids. Had the league’s contracts been up for renewal a year or two later, it could have been the SEC that was left to get creative.
The Big 12, ACC and Pac-10 are now in that boat. They’ve had their own talks with the nation’s networks about new deals, but no one is seeing numbers that come close to approaching the SEC’s landmark agreements.
That’s why those three leagues are contemplating starting their own networks.
Some, like the Big 12 and Pac-10 have talked about partnering up in their next round of television negotiations. Any network landing the football and basketball rights to a Big 12 / Pac-10 joint venture would tie up 33% of all the television households in the United States. One contract, one third of the TV homes. There’s not a network out there that wouldn’t jump at that deal.
There has even been talk of the ACC and Pac-10 working together to launch their own channel. Imagine ACC games in primetime at 8pm on the East Coast and Pac-10 games in primetime at 11pm on the West Coast. All on one channel.
Just as the SEC’s deals sent shockwaves across the sports horizon, so has the success of the Big Ten Network. Since its initial struggles, the league’s channel has boomed to bigger success than anyone — including Big Ten officials — had projected.
A co-ownership deal with Fox (51% Big Ten, 49% Fox) has helped. Landing on more cable carriers has helped, too. Adding more markets to the mix would likely push the network even further from red to black to pure, deep green.
Last year, Big Ten schools made about $9 million each from the league’s deals with ABC and ESPN. They pulled in another $7 to $8 million from the Big Ten network. Those numbers should grow this year.
If the Big Ten can add markets like Kansas City, St. Louis and New York City to its network’s roster, it might be able to land on even more cable carriers. Cable carriers who already clear the network might be willing to move the channel onto better cable tiers as well.
Over the next few days, we’ll continue our series by looking at some of the unfounded fears of expansion and what the SEC’s goals should be if it does expand. We’ll take a school by school look at the expansion candidates both in athletic, financial and academic terms. Finally, we’ll show you what we believe to be the league’s best case scenario.
Keep in mind that might mean doing absolutely nothing.
But before we can get to the finish line, it’s important to know why all of this is starting and why it’s starting now.
The answer to that — as you can see above — is as easy as 1-2-3.
(To read Part One of our series, click right here.)