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Expounding On Expansion: How We Got To This Point

(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.

3.  Television

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.)

 


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  1. [...] (This is the third part in an on-going series examining the possibility of SEC expansion from a business perspective.)This week the Big Ten conference will be holding its yearly meetings in Chicago.  Expansion will certainly be a topic as officials from the 11 member schools meet, but commissioner Jim Delany has said that no final decisions (or formal offers) will be made.That won’t stop a new wave of “here’s what’s going to happen stories” from appearing across the internet this week.  Your local talk radio station will once again be dominated by expansion talk, too.When it comes to the Southeastern Conference’s future plans, I’ve been surprised to hear so many fears tossed about by fans from the Ozarks to the Atlantic.  And many of fans’ worries and warnings shouldn’t be major concerns at all.Below are five of the most common concerns that we here at MrSEC have heard over the past few weeks.  Let’s examine these fears to see if they’re legit… or just hot air.1.  ESPN and CBS won’t renegotiate their contracts with the SEC, so the league will lose money by expanding.In most cases, contracts written between networks and conferences include language that make it clear that the current deal will remain in place as long as there are no major changes to the conference.  If six teams left the SEC, you can trust that ESPN would be screaming for a new deal.  The alternate holds true as well.But a renegotiation of contracts might not be necessary in the first place.  Let’s say that the SEC expands to 16 teams and lassos Texas, Texas A&M, Clemson and Georgia Tech.  (Those are just four teams chosen at random, not a suggestion.)Now let’s say that the SEC — trying to make sure its schools play against each other more often — goes to a nine-game conference schedule for football (like the Pac-10 and Big Ten) and an 18-game schedule for basketball (like the Pac-10, Big Ten and Big East).Currently SEC squads play a grand total of of 48 non-conference football games (12 teams, four a piece) each year.  They also play 48 conference games head-to-head.  In basketball, the SEC teams currently play 96 games per season against one another.The vast majority of those games (96 football, 96 conference games in basketball) are the property of ESPN and CBS.But if the league grows to 16 teams and expands its in-conference football and basketball schedules, it is creating more inventory to sell.Do the math: 16 teams playing three non-conference football games a year still equals 48 games.  But 16 teams playing a nine-game conference slate adds 24 more games to the league’s schedule.  Instead of having 96 football games to sell per year, the SEC would have 120 games to sell.In basketball, the league would jump from 96 games per year to 144 in-conference contests per season.Now let’s say that CBS and ESPN continue to broadcast the same number of SEC games (for the same price) even after expansion.  That gives the league more inventory — two games per week during football season –  that could be sold off to other networks.The result would be more television money coming into the league, without a renegotiation of the CBS and ESPN deals.Would that new revenue be enough to make expansion worthwhile?  That would depend on how much a network (or networks) would be willing to pay for the final picks of SEC football and basketball games each week.Tooling around the dial on a fall Saturday or winter Wednesday should tell you that someone would be willing to pay.  Even the dregs of the SEC barrel would outdraw mid-level games from other conferences.2.  The league would be too tough and national titles would become impossible to win.Last week, Nick Saban suggested that SEC coaches feel they have to win the national championship twice each season just to claim the BCS crystal football… once by winning the SEC and once by beating the best BCS foe in the country.Many fans seem to agree.  Adding a Texas or a Florida State would make the SEC too difficult and would prevent the league from winning future titles.Of course, that’s exactly what coaches and fans said when the SEC added its conference championship game in 1992.  Since then, the league has catapulted to the unquestioned, unrivaled ruler of college football.Until 2007, no two-loss team had ever been given a shot in the national championship game.  But that year voters (and computers) rewarded LSU for playing in the toughest conference in America and placed the Tigers in the title game.  The Bayou Bengals’ easy victory further proved the league’s dominance.An SEC teams has been voted into the title game for four consecutive seasons, winning each time.  Three of those squads all had a loss on their schedule when they were selected.Obviously, a strong argument can be made that the addition of more powers to the SEC would actually enhance the conference’s odds of winning future titles.The same holds true in basketball.  The 16-team Big East — whether it deserves the praise or not — is considered the top hoops league in America.  Its teams whip up on each other throughout the regular season, yet every postseason the NCAA tournament selection committee rewards the league with a plethora of tourney bids.  The league captured eight bids this past March.3.  Rivalries would be lost.This one, sadly, is true.  But it’s also a common occurrence in college sports.  When the SEC expanded and broke into two divisions in 1992, several great rivalries were lost.  New rivalries took their place.If the yearly Oklahoma-Nebraska tussle can be lost from the college football schedule, any rivalry can be replaced.  Currently the oldest rivalry west of the Mississippi (Kansas versus Missouri) is being threatened by the Big Ten’s possible expansion.The loss of tradition is frustrating, but it’s never been a roadblock for previous expansions in college athletics.  Not even in the tradition-rich SEC.4.  The SEC can’t expand too wide or fans can’t drive from one school to another.In the Pac-10, the University of Washington is located in Seattle.  The University of Arizona is located in Tucson.  That’s a distance of 1,608 miles and a driving time of 24 hours and 11 minutes (if you go by Yahoo! maps).In the ACC, Boston College is located in Chesnutt Hill, Massachusetts and the University of Miami is located in Coral Gables, Florida.  That’s a distance of 1,477 miles and a driving time of 23 hours and 17 minutes.If you want to drive from Colorado to Texas A&M in the Big 12, it’s a 1,070-mile trek that will take you 16 hours by car.The Big Ten is looking at a possible expansion that would stretch it from Nebraska to New York City.  That’s 1,300 miles and 20 hours.In other words, in this day and age, travel is less of a concern than it’s ever been.  Will softball and golf teams have further to travel?  Yes.  But increased revenue — if expansion does increase revenue — should cover the costs.As for the fans, the leagues don’t care.  Presidents, athletic directors and commissioners know that if a product is good enough, someone will fill the seats in a stadium or arena.  It might not be folks from the visiting school, but someone will be there to pay for a ticket.The size of other leagues already proves that.  And for the record, a drive from Gainesville to Fayetteville is 1,034 miles and a 16-hour trip.  It’s not like the SEC hasn’t stretched its boundaries already.5.  Traditionally bad teams will have even less hope of improving in an expanded league.The SEC’s traditional cellar dwellers in football are Vanderbilt and Mississippi State.  Add a Miami to the East and a Texas to the West and you would expect their hopes of improvement to only grow slimmer.But what if the Southeastern Conference decided against two eight-team divisions and instead found a way to work with a four-division alignment?  That idea is already being floated in Big Ten circles regarding that league’s possible expansion.In such a case, the chances for a Vandy or Mississippi State to claim a division title would actually increase, not decrease with expansion.Currently, the Commodores would have to jump five teams to earn an East Division crown.  In a four-team division, Bobby Johnson’s club would need only to best three other teams.How would a four-division set-up work?  We’ll discuss that in a future installment of this series.  As you can see, the five most common worries tossed out by the anti-expansion crowd aren’t necessarily worries at all.  And you can be certain that SEC presidents and athletic directors — if they see a way to 1) secure their long-term strength and 2) secure their long-term financial future — will ignore any and all warnings and press forward with expansion anyway.  IF they see a way to make money.As we explained in Part Two of this series, cash is king.  Any worry a fan might have will take a backseat to dollars and cents… and in most cases, the worries aren’t really much to worry about in the first place.(To read Part One of our series, click right here.  To read Part Two of our series, click here.) [...]

  2. [...] folks.  Academics and politics.(To read Part One of this series, click here.  For Part Two, click here.  For Part Three, click here.  And for Part Four, click [...]

  3. [...] possible SEC expansion, you can find below:Part One — Why The SEC Should Be Working Right NowPart Two — How We Got To This PointPart Three — Unfounded FearsPart Four — If The SEC Is [...]

  4. [...] the SEC guaranteed to remain one of the nation’s two preeminent conferences?  Nope.  2.  How We Got To This Point — We explain how the combination of conference championship games, a weakened economy, and [...]

  5. [...] in Part Two of our “Expounding On Expansion” series, college and university endowments suffered their worst year since the Great Depression between July 2008 to June 2009.Most colleges are simply desperate for more cash and new revenue [...]



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