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SBJ/20080825/This Week's News
ESPN pays $2.25B for SEC rights
Published August 25, 2008
ESPN will pay the Southeastern Conference a staggering $2.25 billion over the next 15 years — about $150 million a year — for the conference’s TV rights, giving the network all of the SEC’s content that was not taken by CBS, industry sources confirm.
The deal effectively ends any conversation of a conference network, and it knocks Raycom Sports (formerly Lincoln Financial and Jefferson Pilot) out of the SEC’s distribution business for the first time since 1986, when JP Sports began distributing SEC basketball.
Combined with the 15-year, $55 million a year that the SEC will receive from CBS for the over-the-air package of games (SportsBusiness Journal, Aug. 18-24), the conference will bring in an average of $205 million annually in media rights beginning in 2009-10 and running through fiscal 2025.
That’s nearly three times what the SEC had been receiving in TV revenue as part of its current deal, which runs out next spring. That amounted to around $70 million per year.
SEC athletic directors met in Orlando last week to finalize the deal, which is expected to be announced later this week.
What won’t be announced next week, though, is a forthcoming agreement between ESPN and Comcast that will initially put ESPNU in about 7 million Comcast homes. That deal could be finalized in the coming weeks and could potentially give ESPNU full digital basic distribution of around 14 million homes on the country’s biggest cable operator. ESPNU, which is in 25 million homes, previously had failed to gain carriage on Comcast, but this deal eventually could push it to reach about 40 million homes, a critical threshold for advertising, industry sources say.
ESPN’s syndication arm, ESPN Regional Television, will handle syndication to local broadcasters throughout the Southeast. It also will make regional cable packages available to cable channels, such as Comcast/Charter Sports Southeast and Fox RSNs.
“These extraordinary numbers reflect the continuing increase in value for major college sports,” said Neal Pilson, a TV consultant and former CBS Sports president. “We’re seeing significant increases in value at the conference level and we’re also going to see it for the BCS in the near future. As we’re seeing with the Olympics, sports have a built-in, not recession-proof, but recession-resistant quality. There’s a resiliency in terms of audience and ratings.”
ESPN’s aggressive bid is part of a strategy to secure high-quality programming for its networks and broadband platforms, while keeping the SEC from launching its own cable channel that eventually could compete with ESPN.
And Raycom, which had been in talks with the SEC to the end, likely lost out because it was not able to match the size of ESPN’s bid or the number of platforms it can use.
The SEC’s total payout to its schools in 2007-08 was $63.6 million after the conference’s cut. TV revenue is distributed among the 12 universities and the league; each school received about $5.3 million this past fiscal year. Under the new deal, that annual number could leap to as much as $15 million per school, which is just shy of the projected average revenue Big Ten schools get from their TV deals each year.
It is difficult to make an apples-to-apples comparison between the two conferences because of the incongruity of the length of the deals and their escalating values. But the Big Ten Network could annually pay its schools an average up to $10.2 million each over the 25-year term of its deal with the Big Ten. The deal started this past year with a payment of $6 million to each school and the number could escalate each year, depending on the network’s revenue.
The Big Ten Conference’s 10-year deals with CBS and ESPN will produce an average of $9.3 million for each school.
“By not going with a channel, the SEC gave more value to its broadcast and cable partners,” Pilson said. “You don’t have the dilution of audience. And 15 years out, it’s hard to know what the marketplace will look like, but the SEC will be taking another bite of the apple” at that time.
ESPN’s package of games will include the SEC basketball tournament finals, which previously were televised by CBS. ESPN also is expected to offer an expanded package of regular-season basketball games across its networks.