SBJ/March 14-20, 2011/MediaPrint All
On the verge of collapse just months ago, the Big 12 is nearing a cable agreement with Fox that will more than triple the conference’s revenue over its current contract.
The Big 12 and Fox are close to finalizing a long-term deal that will pay the 10-team league more than $60 million a year, well up from the $20 million it now receives from its cable contract, industry sources say.
Fox, meanwhile, has been in discussions with eight of the league’s schools about establishing a conference-specific channel for a handful of football games, up to 60 basketball games and Olympic sports. The channel would not include programming from the University of Texas, which has partnered with ESPN on a new Longhorns channel, or the University of Oklahoma, which is planning its own channel, as well.
Kansas is among the eight Big 12 schools talking to Fox about a college sports channel to carry their events.
Talks have centered on having Fox flip one of its three Fox College Sports national channels, which are carried on cable sports tiers. Whether the channel could be called the Big 12 Network remains to be seen because only eight of the 10 schools in the conference would be participating. The conference office would have to rule on whether the name could be used in such a venture.
The athletic directors at the schools that would make up such a channel were updated about the negotiations by Learfield executives during last weekend’s Big 12 basketball tournament in Kansas City.
The two arrangements — Fox’s cable deal with the league and Fox’s potential channel with the eight teams — are separate conversations, sources say. Fox’s cable deal with the Big 12 must be completed first so that the network knows how much content is available for a conference channel. The conference office is not involved in the talks about a channel for the eight schools.
“The conference continues to work diligently on our future television rights agreement,” said Big 12 spokesman Bob Burda, but he offered no details on the progress of the talks. Fox executives had no comment on the deals because they have not been signed.
The two developments signify a stark turnaround from last summer, when the Big 12’s future was in doubt as Texas, Oklahoma and others talked about joining an expanded Pac-10.
At the time, one of the Big 12’s marquee schools, Nebraska, had fled for the Big Ten, and another, Colorado, had defected to the Pac-10. Rumors swirled that the six schools in the Big 12’s south division were headed out west, which would have meant the end of the 15-year-old conference, which was created out of the old Southwest and Big 8 conferences.
Commissioner Dan Beebe salvaged the league by promising growth in TV revenue and allowing schools to retain a substantial portion of their media rights, which cleared the way for Texas to start its own network. Once the Longhorns committed to staying, everyone else did, too.
Now the additional revenue from the new Fox cable agreement will be shared by 10 schools, not 12, which would expand each school’s piece of the pie.
The Big 12’s current cable contract with Fox runs through the 2011-12 academic year and will pay the league $20 million in the final season. Terms of the new deal will drive revenue above $60 million and potentially close to $70 million annually for the league.
The conference also has a network broadcast contract with ABC/ESPN worth $480 million over eight years that runs through 2015-16. It was first thought that the Big 12 would extend its cable agreement to 2016 to make it concurrent with the ABC/ESPN contract, but now sources say that the Fox extension will go beyond 2016 and could go out as long as 10 years, to 2022.
The network and cable deals combined will bring an average of close to $130 million a year into the conference to share with the 10 teams, putting the Big 12 only slightly behind the ACC, which recently struck a deal for $155 million a year with ESPN.
If Fox follows through on its talks to create a conference channel for those eight schools, it would aggregate what’s known as the third-tier rights from those schools. The third-tier rights are the games that are not picked up as part of the network or cable contracts, so they drop to the third tier.
Most schools turn over their third-tier rights to their rights holder, like Learfield and IMG College, which televises those games locally or regionally via TV or online and uses them to generate ad revenue.
Under terms of the new cable agreement with Fox, each school will be permitted to retain the rights to at least one home football game and a handful of men’s basketball games. That means a new conference channel would have the rights to a minimum of eight football games total. In men’s basketball, anywhere from six to 13 games per school typically fall into the third tier of rights.
Kansas is considered to have the most valuable assortment of third-tier rights because of its historically strong basketball program and national following.
But while a new channel would significantly boost exposure and potentially aid recruiting for the eight schools, it is not expected to provide a financial windfall. Those schools already are being paid for their third-tier rights in their multimedia contracts with Learfield and IMG College.
By flipping an existing Fox College Sports channel, Fox would save on development and facility startup costs, and would start with a national distribution footprint of between 10 million and 20 million homes. However, the network would either have to pay Learfield and IMG College to obtain programming rights or negotiate a partnership position for them in the channel. The other option would be to create a syndicated network of over-the-air channels within the Big 12 footprint. Bill Byrne, the Texas A&M athletic director, is on the record as supporting the creation of a channel. “I prefer an offering in the form of a Big 12 Network for our fans,” Byrne wrote in his January blog on the school’s athletic website.
A new channel could send repercussions through the league on several fronts, including scheduling. Most of the third-tier football games are against nonconference foes in September. To provide more balanced programming, those games would need to be scattered throughout the season, which means the conference schedule would have to accommodate nonconference games in October and possibly November.
The schools also would have to work with the conference on how conference games are distributed. If Texas plays Texas A&M in volleyball, does the home team get the rights to the game? Can it be simulcast on both the conference channel and the Longhorns’ channel?
And what about the name of a conference channel? Can it be called the Big 12 channel if all 10 of the league’s schools are not involved?
Those are details that need to be ironed out, but it’s clear now that talks are getting more serious and that the idea of a conference channel for eight schools has significant support.
Turner executives say the NCAA tournament, which tips off Tuesday, already is paying off for the company, underscoring why it agreed to pay a bigger share of the 14-year, $10.8 billion rights fee than CBS. Turner’s college basketball package helped it persuade DirecTV to begin carrying truTV in high-definition, and Turner’s overall sports schedule helped it complete carriage renewals with several cable operators, including Comcast. Turner’s president of sales, distribution and sports, David Levy, sat down with staff writer John Ourand last week to discuss how the tournament is helping his company’s business.
Levy: We closed the Comcast deal in late December with no fanfare. We didn’t argue in the press. Both sides sat down at the table, and we found the right mix of what we both needed. DirecTV had not been carrying truTV in high-def. We’ve been working with [DirecTV executive vice president] Derek Chang for a couple of weeks to launch in high-def. Now, DirecTV is going to carry all the games in high-def. Eventually, they’ll carry the entire channel. But the games will definitely be up.
Will you eventually have to authenticate people who use March Madness on Demand to make sure only cable subscribers can access those games online?
Levy: It’s a little early. That might start happening as TV Everywhere starts developing. Let’s say there is a point where TV Everywhere is fully distributed. You’re still going to get it for free. As long as you are a cable, satellite or telco subscriber, and you get TNT, TBS, truTV or CBS, you get it for free. TV Everywhere is probably past the early stage and is in that next phase. Now we have to get this thing up and running.
Do you want to put more sports on truTV?
Levy: I would like to see it built up. TruTV’s a top-10 cable network that skews to a male audience. Those are facts people don’t even realize. Here we are sitting with a male-skewing top-10 cable network. It would only make sense that we would put sports properties on there.
But it’s not a destination for sports fans. NBA fans know where TNT is, and MLB fans know where TBS is.
Levy: The NCAA tournament is going to have a lot of people finding truTV — people that never knew where truTV was. Being able to put the crème de la crème of the sports business — March Madness — on that property is a huge opportunity. Look at how much exposure that brand will get over the next month. Good or bad, it’s a lot of quality exposure. For the next 14 years, it’s only going to get better. If I add more properties to that, it’s only going to get more relevant.
What will you consider a successful tournament for truTV this year?
Levy: We’re not looking at ratings for individual networks. It’s hard to compare to CBS last year because it’s a totally different product. We’re going to look at the aggregation of all the different impressions. If that is higher than what CBS did last year — which we assume it will be — then that’s a success. If truTV is less than CBS, that won’t surprise me. If all four networks are less over the full day, that might be surprising.
“The pessimism and agitation of 2009 has been replaced by guarded optimism in 2010.”
Well, this year, the “guarded optimism” of 2010 has been replaced by unfettered joy in 2011. TV networks are experiencing the hottest ad sales market veteran sales executives have ever seen.
The market for live sports shows no signs of abating, underscoring the value advertisers increasingly are placing on all sports programming.
It doesn’t matter which sport is being televised. The NFL sold out earlier than ever. The NCAA tournament has been sold out for weeks. The NBA is posting gaudy ad sales numbers.
Even NASCAR, which is in the middle of a multiyear ratings drop, has benefited from advertisers’ appetite for sports. Fox sold out the Daytona 500 and says its pace for the rest of the season is ahead of last year.
Fox says demand is high for the All-Star Game, and ESPN is pacing ahead of last year for the State Farm Home Run Derby.
Despite those numbers, the ad market for MLB games is as strong as it’s ever been.
“We’re back to getting good increases for our products,” said Neil Mulcahy, Fox Sports executive vice president of advertising sales. “The law of supply and demand is in our favor right now.”
Last year, the big ad sales story was the return of the auto category, which dropped off drastically during the height of the recession.
This year, autos are still spending. And other categories, especially the financial and insurance ones, are showing similar strength.
The real story isn’t who’s spending but why advertisers are picking live sports to get their message out.
“We’re getting a lot of interest because of the live aspect of our games,” said Kyle Sherman, executive vice president of ad sales for Fox Sports Net, which handles national ad sales for all RSNs that carry MLB games. “Advertisers also like our ratings consistency. They know what they are buying. It’s an attractive, safe-harbor place to be.”
This year Fox expects to enter the season with its schedule about 90 percent sold. There is considerable interest around the All-Star Game in Phoenix, MLB’s annual midseason highlight, which advertisers see as the only big event they can buy all summer.
“Demand is that high,” Mulcahy said. “Demand for the All-Star Game, in particular, is crazy right now. We’re fielding more questions about the All-Star Game than we ever have.”
ESPN also is pacing ahead of last year, particularly for its biggest event, the Home Run Derby.
It has retained key sponsors, with Taco Bell back as presenting sponsor of “Sunday Night Baseball,” State Farm returning as title sponsor of the Home Run Derby and Chevy back as the presenting sponsor of the Sunday-night edition of “Baseball Tonight.”
TBS says it is 60 percent to 70 percent sold in the second quarter, and on pace to sell out the regular season. Turner executives say they are showing double-digit revenue growth over last year.
On the local level, Fox Sports Net says it is pacing 20 percent over last year, reporting that its biggest growth areas have been with men’s grooming and retail/big box stores.
Unfettered joy, indeed.
John Ourand can be reached at email@example.com. Follow him on Twitter @Ourand_SBJ.
Alabama is one of about 175 official athletic sites on the college network.
The deal, building off Thought Equity Motion alliances struck last year with the NCAA and the ACC to create online archives the NCAA Vault and the ACC Vault, calls for the company to organize and digitize the video libraries for schools in the CBSSports.com College Sports Network. The historical content, primarily memorable highlights from football and basketball, will then be offered to consumers, typically as part of broader, fee-based content subscription packages.
“We’re charged to be the eyes and ears in the digital realm for the schools in our network, and this is definitely an area where we see a tremendous amount of upside,” said Rob Schupler, CBSSports.com senior vice president of university sales and marketing.
Financial terms were not disclosed. Schools in the CBSSports.com College Sports Network include Alabama, North Carolina, Notre Dame, Penn State and Texas.
The online legacy content should start to become publicly available this fall. Individual schools’ participation in the Thought Equity Motion archival work will be voluntary.
“This is going to be very similar to what we did with the NCAA,” said Dan Weiner, Thought Equity Motion vice president of marketing and products. “We’re looking to use our tools to help our partners preserve and unlock the value of their content.”