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SBJ/June 26 - July 2, 2006/This Weeks News
Inside the Big Ten talks
Published June 26, 2006
By the time Big Ten Commissioner Jim Delany and executives from Fox retired to Carlucci’s for an Italian dinner on the night of April 20, both parties sensed that they were about to create a groundbreaking new network.
|The Big Ten Channel expects to carry about
35 football games each season.
In forming a network around the Big Ten, Delany envied what he saw in National Geographic — a network that strengthened an existing brand, translated that to television and controlled content.
“That was the model,” Delany said.
A process that started conceptually two years ago culminated last week with the formation of the Big Ten Channel, which is expected to launch in August 2007 as a 20-year joint venture between the conference and News Corp.’s Fox Cable Networks. While the Mountain West Conference was the first collegiate conference to form its own regional network with CSTV, the Big Ten intends to go national with programming that will include football, men’s and women’s basketball, Olympic sports and academic content such as lectures and commencements.
A new 10-year deal with ABC Sports/ESPN, announced simultaneously and believed to be worth nearly $100 million, continues to give those networks the first pick of the conference’s football and men’s basketball games, but the Big Ten Channel expects to carry about 35 football games and more than 100 men’s basketball games each season.
“This is the next step in the evolution of collegiate rights agreements,” Fox Sports Networks President Bob Thompson said.
The Big Ten’s search for a partner took many different paths from the time Delany introduced the channel concept to the conference’s presidents and chancellors two years ago. As the league talked to cable networks and MSOs within the past year, the concept began to take shape. At first, a Comcast or Time Warner seemed to make sense because they could facilitate distribution, and as word spread within the industry the Big Ten also was approached by venture capitalists and private equity firms.
Fox was not among those involved until Fox Sports COO Larry Jones ran into Delany at a Bowl Championship Series retreat in January. Jones had heard that the Big Ten was shopping for a partner and he seized the opportunity to pitch Fox.
Discussions ensued, and a few months later Fox’s heaviest hitters were in the Big Ten offices for the April presentation. Fox’s team included News Corp. President and COO Peter Chernin, Fox Networks Group President and CEO Tony Vinciquerra, Thompson, Jones, FSN COO Randy Freer, Executive Vice President David Rone and Senior Vice President Mitchell Chun.
They emphasized Fox’s assets in building and launching a network. Six cable networks have been launched with a viewership of at least 20 million, Thompson said, and Fox was behind four of them: Fox News, National Geographic, Fuel and Speed. The Big Ten Channel will launch on DirecTV’s Total Choice package, which is in 15.4 million homes. Fox’s regional sports networks also give it a presence in the Big Ten’s footprint of eight states, and that offered an efficiency to the operations of the Big Ten Channel.
“We buy everything from $5 million production trucks to tapes in volume, and the Big Ten can piggyback off that,” Thompson said.
Perhaps the most underrated aspect of the deal was what went unsaid: Delany and his 11 presidents and chancellors had to reach a comfort level with Fox Sports. The basis for that comfort level started months before when Fox won the rights for the BCS, which required the network to win the confidence of the BCS conference commissioners.
“A certain level of familiarity breeds a comfort level,” said Kevin O’Malley, a TV consultant for the Big Ten. “Fox created some very good relationships with the commissioners and that can breed more business for you.”
After that April meeting, Fox and the Big Ten sped forward with negotiations. Purdue University President Martin Jischke, chairman of the Big Ten board of directors, said there remained other options, but Fox had become the clear front-runner. By the time Fox and the Big Ten began hammering out negotiations, the process moved rapidly, in part because Delany’s due diligence had provided him with a clearer picture of the model he wanted. A deal was executed in less than two months.
Despite its rapid progress, it wasn’t without its hurdles. Thompson said creating a 20-year partnership “was difficult. It’s two different worlds, Fox and a conference.”
But Delany was driven by the idea of diversifying the Big Ten’s partnerships, which worked in Fox’s favor. The Big Ten has been with ABC for 40 years and with ESPN since 1979, and while those long-standing relationships had served the conference well, the commissioner craved more control.
As important as anything to the presidents, Jischke said, was that the Big Ten wasn’t exposed to risk. Fox will shoulder the startup costs, while the conference and Fox will form a limited liability company, which hasn’t yet been named, and that company will pay the Big Ten a guaranteed escalating rights fee each year. Big Ten officials expect to receive an additional $7 million to $8 million per school annually in revenue from the two new TV deals over the next 10 years.
The LLC will be based in the Chicago area, where Fox will open and staff the office. Advertising will be handled by National Advertising Partners, an arm of News Corp. Revenue will primarily stream from two sources: advertising and subscription rates, which have not been revealed. Sub rates in the Big Ten’s eight footprint states likely will be higher than in the rest of the country.
“Within their region, they have a lot of strength,” TV consultant Mike Trager said. “The issue will be other regions. They might be able to establish a quasi-national footprint because you’re dealing with popular schools and a popular conference. They’re very strong; they’ve got a reach into states where their schools are not. Of the conferences to pull this off, the Big Ten probably has the best chance.”