SBJ/20100621/This Week's News

How Big 12’s Beebe made the math work

Everything being equal, the University of Texas and its Big 12 Conference brethren wanted to stay put. But with the Pac-10 offering promises of $20 million a year for each team, the math didn’t look so equal.

So how did Big 12 Commissioner Dan Beebe and the conference’s media consultant, Joel Lulla, compete with the Pac-10’s revenue projections when the Big 12 paid between $8 million and $12 million to each of its members this year?

Part of it was addition by subtraction, part of it was simple patience. And by staying in the Big 12, Texas, Oklahoma and the other conference schools retained their local TV rights so they can pursue their own networks, generating additional revenue.

With Colorado exiting the conference for the Pac-10 and Nebraska bolting for the Big Ten, Big 12 members have two fewer teams with which to share revenue.

The Big 12 also convinced the schools pondering an offer from the Pac-10 — Texas, Texas A&M, Texas Tech, Oklahoma and Oklahoma State — that new media contracts in the coming years will significantly boost revenue.

“A lot of what we’re witnessing stems from changes in the cycles of the TV contracts,” said Kevin O’Malley, a media consultant who has worked for the Big East, the Big Ten and previously the Big 12. “What you have is a conference nearing the end of a four- or six-year deal looking at these new 12- and 15-year deals [in the SEC and ACC]. They think they’re being left behind, and it’s produced a lot of alarm and frustration. Perception is being skewed by these very long deals.”

The Big 12’s cable deal with FSN, which runs through 2011-12, pays the conference $20 million annually. Sources say Fox provided guidance to the conference that it would be willing to increase its rights fee to $45 million next year and up to $60 million by 2016. Those were projections, though, and the conference must still go through the formal negotiations.

The conference’s $60 million-a-year contract with ABC/ESPN runs through 2015-16. Beebe received guidance that the conference would get about $100 million for those rights.

Network info convinced the Big 12 that its games
will bring in $160 million a year by 2016.

All told, network guidance convinced the 10-member Big 12 that media deals will bring the conference a total of about $160 million a year by 2016. That would slightly top the $155 million a year the 12-member ACC recently got from ESPN through 2023.

Meanwhile, there was a developing level of skepticism prevalent among the Big 12 schools about the Pac-10 projections. Distributing $20 million a year to 16 schools in the new model meant the Pac-10 would have needed $320 million in total revenue. That’s steeply more than the Big Ten’s distribution of $220 million and the SEC’s distribution of $209 million this year.

Texas officials were told that a Pac-16 cable/satellite channel would net $140 million in profit, industry sources said. Plus, the conference told prospective schools that an expanded conference could net an additional $180 million from broadcast and cable networks,

Pac-10 officials were convinced that a bidding war with ESPN, Fox and Comcast/NBC would push rights fees higher than many analysts believed.

“The Big 12 is a known commodity and we’ve got a fairly good idea of what we can generate,” said Oklahoma Athletic Director Joe Castiglione, who could not speak specifically to the Pac-10 offer. “Looking at that versus the option of a new conference [the Pac-10 plus six new members], you’re dealing with projections and you have to wonder how much is real.”

Media revenue typically makes up between two-thirds and three-fourths of a conference’s total revenue, which also includes money earned from BCS games, bowls, NCAA tournament appearances and conference tournaments.

The Big Ten, for example, is paying each school $19.9 million this year, according to conference members. Close to 80 percent of that figure comes from media deals with ESPN ($9 million per school) and the Big Ten Network ($7 million).

The Big 12, which handed out $139 million to its members this year, won’t be that rich, but its projected total revenue is expected to increase to about $200 million when the new media deals kick in later this decade.

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