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The New SEC-ESPN Partnership Is About Much More Than A TV Network

trees in forestFor more than a year the sporting world has been talking about a potential SEC/ESPN-owned television venture known as the SEC Network.  Or as SEC types once called it: “Project X.”

Since May of 2010, we’ve been pointing to the possibility of an SEC-owned network (though some sites that launched well after 2010 would have you believe they were the first to cover the topic).  Money has always been the driving factor behind such a channel.  And now the talk all revolves around how much cash the network could bring in for the league and its teams.

But the SEC’s new deal with ESPN is about so much more than just the new SEC Network.

As we showed you yesterday, The SportsBusiness Daily reported on Monday that the SEC has bought back all of its third-tier television rights from groups like IMG, Learfield Sports, and CBS Collegiate Sports Properties.  In addition, the conference also bought back its digital rights from XOS Digital, the group currently behind the SEC Digital Network and SECSports.com.

Moving forward, ESPN will be allowed to sell all of those rights together.  Instead of XOS Digital selling this chunk, IMG selling that chunk, and ESPN selling another chunk, now the league will have an ESPN sales force packaging all its products.

That aspect of the deal — even more than the new SEC Network alone — will fill the conference’s coffers like never before.  The television network will be a big part of it, to be sure, but it’s the ability to bundle television, digital (internet), and syndication rights together that is at the heart of this new SEC/ESPN coupling.

In the past, the SEC has taken the easiest approach to making cash — it’s held out its hand.  If a Learfield or an XOS or an IMG offered the most money for some portion of the league’s multimedia rights, Mike Slive smiled, said “thanks,” lit a cigar with a hundred dollar bill, and then put the rest of the loot in the bank.  Every spring the league’s presidents would convene in Destin, grab a nice fat check from the league office, and then return home feeling pretty doggone good about things.  As they should have.

But now the SEC has gotten even wiser.  ‘Tis better to package everything together, they’ve realized.  Better for sales, better for league revenue, better for the future.

Consider the following scenario.

An ESPN/SEC sales rep sits down with the decision-makers at Jaguar (yeah, we watch “Mad Men”).  The rep lays out a sales menu for the Jaguar officials to consider:

 

“Buying into the SEC football/television package on the ESPN properties used to cost 20 widgets.  Becoming a sponsor of the SEC’s online content once cost you 20 widgets, too.  Placing ads all over the SEC Network would have cost you 20 widgets, as well.  But now you can become an official, full-fledged partner of the Southeastern Conference — America’s top sporting league! — for just 50 widgets.  You can have it all for less than the price of buying all those options a la carte in the past!”

 

Now, this is just an example and you’ll need to trust us on the fact that most companies do not buy everything on the menu.  So by packaging everything together ESPN and the SEC should be able to sell out more of their inventory, with greater ease, and make more money in the process.  All by honestly telling clients that they can now get more SEC exposure at a lower price overall.

The new one-company-handles-it-all approach also helps to clean up some of the mess created by having multiple companies selling different pieces of the SEC’s pie.  When several companies were out selling the SEC a la carte, a certain amount of toe-stepping was inevitable.  How could XOS sell its product without stepping on IMG’s toes and vice versa?  How could Learfield Sports sells its product without stepping on ESPN’s toes and vice versa?  What if two different groups targeted the same client — Jaguar — with two different SEC advertising packages?  Think Jaguar would buy both?

Instead of a muddled mess, the new simplified strategy will ensure that no sales opportunities and no potential revenue streams are missed.

MrSEC.com spoke yesterday with a source who works for one of the entities listed above.  In his words: “People are going to be so wowed by the trees that they’ll miss the forest.”

His meaning: The new television network will get all of the attention, but the bundling of the rights packages is where the real treasure is buried.

One group selling everything.  A sales force that can sell the SEC’s rights — TV, digital, etc — as a bundle or, if it chooses, a la carte (without the worry of spare change falling through the cracks as rival companies clumsily trip all over one another).

You want to talk about money?  That’s where the money is.  Sure, the SEC Network is going to be a cash cow.  But eventually the cable/satellite bubble will pop and viewers will be able to pick and choose the networks they want without having to buy a provider’s bundle.  When that happens, the SEC will still have the ability to move, shift, slide, and shimmy it’s way into whatever media universe comes next.  All because the SEC has taken back its main media rights and it will allow just one group to sell them.

Brilliant.

 


9 comments
BonzaiB
BonzaiB

I don't watch Mad Men, but good scenario.

Kudo's to Mr Pennington again. The best analysis I have read on the topic.

DanHogan
DanHogan

2 Questions for you:  How will the two parties handle dividing revenues from non-tv components?  Does this mean ESPN will now start to get some revenue from SEC online advertisers?  Do they now share responsibilities for maintaining digital content?

How does this model compare to the Big Ten Network?  The Pac-12 Nets? 

RoadTrip
RoadTrip

This is a WOW moment in time for sure. Will be interesting to see how conference expansion works out now. With this project as a model the dream 60-70 team elite division for CFB may be just around the corner.

louciaccia
louciaccia

This is definitely true.  50% of the Big 10 network revenues come from advertising, not carriage fees.  Maybe the average fan doesn't realize it, but people that follow it closely do.  I'm interested to see how the revenue sharing breaks out for that.  This type of synergy definitely helps advertising sales across all platforms.

If you keep in mind that only a portion of network revenue, maybe not more than half, comes off subscriber fees, and the rest will be generated by advertising revenue, it adds a little blurriness to the issue of what expansion candidates might be viable (just like tiny Nebraska was the B1G's choice over larger states).

cajunliberty7
cajunliberty7

Who said Slive did not know what he was doing?  To follow Slive who sits on his front porch in the cool breeze with several shots of Evan Williams 23 in his hand, slowly drawing on a Opus X A, contemplating his next money move with the cash cow which is the SEC.  Knowing his job is secure, he is now looking to build a legacy, become a tycoon, an icon, and he is well on his way.

I am looking forward to the other sports, such as Olympic sports, especially track and field.  I can no longer travel as I once did, so this will  help me keep informed and entertained.  Miss the best college track coach of all time Pat Henry, who just took his national championship ways from LSU to A&M and kept it going there.

Will be interested to see the SEC expand to two additional teams and revise the cross divisional play to a completely rotational basis with several key protections to protect inter-state historical rivalries.

cajunliberty7
cajunliberty7

@DanHogan 

If, as it is being proposed at the present time, that ESPN becomes the marketer of these ad revenue sources, then it would get a management fee while some other company would actually provide the service.  ESPN may also receive some ads as part of its management terms to place online.  They do presently share "responsibilities for maintaining digital content."  Slive has made another very smart move to buy back the piece meal contracts they had out there, and allow the whole package to be bid on by ESPN, increasing value and maybe some of those companies currently providing the services will win the bids that ESPN lets out and still maintain the same service for the SEC, time will tell.

AllTideUp
AllTideUp

@louciaccia  

This is one of the reasons I've felt that FSU would still be a money-making addition to the SEC despite not adding cable households to the footprint.  We'll see what comes to fruition.  

louciaccia
louciaccia

@AllTideUp @louciaccia I think they would bring value.  But I certainly see others as higher choices, because they bring brands AND new markets.  But if you can't get UNC and a Virginia school, what next?  Probably hold tight at 14 until you think you can. But I don't buy that FSU is a money loser, just probably not the biggest possible home run.  I mean, do we really think the SEC would reject Texas if they wanted in?

Trackbacks

  1. [...] the first time a conference will launch a network with its primary media rights partner.”  As we wrote in mid-April, this deal is about much more than just a television channel.  ESPN and the SEC will now be able to [...]

  2. [...] there’s the overall partnership with ESPN to take into consideration.  As we wrote on April 16th, the SEC Network is just one part of much larger partnership.  As was pointed out again and again [...]

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