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Volume 22 No. 35

Media

Big 12 ADs were hoping for $20 million a pop for the conference’s three championship football games, but instead the league’s new deal with ESPN pays only $40 million total for the games in 2019, 2021 and 2023.
Photo: ap images

Negotiations for the Big 12’s complicated deal with ESPN did not seem so complicated when the two sides first sat down more than a year ago.

The Big 12 was trying to sell the rights to three college football games — its championship games in 2019, 2021 and 2023 — and ESPN was one of the few media companies that wanted to buy them. ESPN already owned rights to the games in 2020, 2022 and 2024. It should have been an easy deal, but the two sides could not get close on price.

The Big 12 wanted around $20 million for each game. ESPN wanted to pay much less. It became clear pretty quickly that they couldn’t come to terms on money, so they had to get more creative.

That’s where streaming rights came into play. ESPN had embarked on a strategy of buying as many rights as it could for ESPN+. It was particularly interested in college sports, believing that schools’ rabid fans are more likely to buy a $5 monthly subscription to the streaming service.

In those early talks more than a year ago, the idea of ESPN picking up streaming rights never was broached. Over time, however, after the April 2018 launch of ESPN+, it became apparent that the streaming service could provide a solution to bridge the gap on price.

One complicating factor, as always seems to be the case with the Big 12, was that the conference’s multimedia rights were not as unified as other college conferences in the power five. Texas has Longhorn Network with ESPN and Oklahoma has Sooner Sports TV with Fox, providing the conference’s two biggest brands with outlets for all of their games, including Olympic sports.

What’s in the deal?

The timeline and financial breakdown of the Big 12’s enhanced media agreement

 In September 2012, ESPN and Fox Sports agreed to a combined 13-year, $2.6 billion deal that averages $200 million per year. ESPN’s payout amounts to $100 million per year.

 In October 2016, ESPN restructured its deal, paying for the rights to four football championship games at a cost of $30 million per game — an inflated price that helped get rid of a pro rata clause that would have forced it to pay a higher rights fee if the conference expanded.

 In April 2019, ESPN paid $40 million for the streaming rights to a minimum of 50 events per school plus three football championship games that Fox decided not to carry. Together, the 2016 and 2019 deals amount to an average of $22 million per year for the six total games from 2019 through 2024. All told, ESPN now is paying the Big 12 an average of $122 million per year.

The other eight schools in the Big 12 — Baylor, Iowa State, Kansas, Kansas State, Oklahoma State, TCU, Texas Tech and West Virginia — cobbled their own local deals together so that any live events not carried by ESPN or Fox still would be available on TV or online.

ESPN’s main competitor for those three championship football games, Fox Sports, eventually passed on them in January, citing scheduling conflicts and money concerns. ESPN was left as the only serious bidder, which meant that they had to get creative to reach a deal that would make both sides happy.

Knowing that Texas and Oklahoma’s rights were tied up, ESPN opted for a package with the other eight schools.

Conference officials also were rethinking how they handled streaming rights. Commissioner Bob Bowlsby started referring to the inventory of more than 10 football games, 60 men’s basketball games and Olympic sports as “the last beachfront property.” He meant that they were the last handful of live events available in the five biggest conferences.

The other power five conferences have their own branded channels to carry Olympic sports and some football and basketball.

“I think aggregation probably makes some sense,” Bowlsby said at SBJ’s Intercollegiate Athletics Forum in December. “We’ve frankly tried to keep our powder dry because the technology world is changing so rapidly. … But we have a lot of inventory that’s valuable and, at some point in time, we will probably aggregate and activate around.”

ESPN ultimately paid $40 million for the three football games, but when combined with previous deals between the network and the conference, the overall average for the championship games is $22 million (see box).

Athletic directors in the Big 12 expected the football title games, its marquee event, to pull in more revenue. Expectations, according to multiple ADs, were that the games would fetch something more along the lines of $60 million total rather than $40 million.

Still, the ADs sounded optimistic last week about the prospect of a Big 12-branded presence on ESPN+. Conference officials long had discussed the potential of a Big 12 digital network that could stream all of those third-tier games. ESPN+ provides a solution for that.

For the Big 12 to aggregate those live events for ESPN+, the eight schools had to take back the rights to them from their multimedia rights holder, Learfield IMG College. To complete that phase of the deal, Learfield IMG College will now begin to negotiate the terms for returning that inventory to the schools. In some cases, it could result in a reduction in the annual guarantee paid to the school, or the school could provide additional marketing assets.

Separately, sources say, Learfield IMG College has agreed to begin selling corporate sponsorships for the Big 12. The Big 12’s marketing rights add even more heft to the college rights that Learfield IMG College already owns. One of the company’s highest priorities is to increase its national sales, and Big 12 rights provide more valuable inventory for national sales chief Andrew Judelson to leverage.

Under David Zaslav’s leadership, Discovery has been making big bets on sports programming internationally.

But when the 21 Fox Sports-branded regional sports networks came on the market last year, Zaslav stayed on the sidelines. The RSNs seemed like an easy — and expensive — way for Discovery to get a sporting foothold in the U.S. market. After all, it used a similar strategy in Europe seven years ago when it bought an existing sports channel in Eurosport.

“We just felt like it’s a very treacherous market,” Zaslav said on stage at the CAA World Congress of Sports earlier this month.

“We just felt like it’s a very treacherous market,” said Discovery President and CEO David Zaslav.
Photo: tony florez

Zaslav went on to express more skepticism than I was expecting over the future of RSNs and the cost of U.S. sports rights. Those costs — from broadcaster retransmission consent fees to cable network affiliate rates — have created a market where multichannel television in the United States regularly exceeds $100 per month. In many international markets, the cost of multichannel television is as low as $15 per month, he said.

“We look at it, and we say, ‘It’s near the end. It’s near the end,’” he said. “Sports is always going to be extremely powerful. But all these regional sports networks, a couple of years from now, can all that continue? Can you force every customer to pay for sports? I don’t think so. I think that you’ve already started to see skinny bundles without sports. Regional sports networks have been dropped.”

Zaslav highlighted his U.S. channels, all of which are relatively inexpensive for distributors to carry. “Right now, we’re seen as the friendly person to put on every platform with great content,” he said.

“On the one hand, sports has never been more powerful. But in some areas, it’s been used financially to such an extent that it’s tipping over.”

In a later interview at the conference, Fox Sports President Mark Silverman was not nearly as bearish about the future of the RSNs as Zaslav, although his company opted not to get involved in the bidding process to buy them back from Disney.

Silverman said the RSNs were too big an entity for the scaled-down new Fox.

“The decision was made, ‘We want to be leaner. We want to be smaller. We want to be more opportunistic,’” he said. “Having that massive amount of additional elements to your company makes it difficult to achieve that. It remains to be seen. People have been calling for the demise of a lot of things and things tend to happen a lot slower than people tend to think. There’s a lot of strong viewership in a lot of these markets for the RSNs. I’m not convinced that there’s any short-term demise ahead of the RSNs at all.”

John Ourand can be reached at jourand@sportsbusinessjournal.com. Follow him on Twitter @Ourand_SBJ.

The NFL dipped its toe into the “Big Data” waters last year when it hired Iwao Fusillo from American Express to be senior vice president for data and analytics.

Now, the league is touting marketing results from its new approach and officially filed for a patent to cover how it uses analytics to gain key insights.

“It’s a generally known trend that sports and entertainment don’t have the same level of sophistication [that] financial services, health care or telecom has in data and analytics,” Fusillo said. “Most sports and entertainment companies are satisfied by taking a more traditional focus on game attendance, meaning ticket purchases and merchandise purchases as a measure of fan engagement, and they stop there.”

Since Fusillo came on board, he has structured the NFL’s data and analytics into three areas: marketing to fans, making the game safer to play, and programming linear, digital and social media.

On the marketing side, Fusillo started to pull information for television and digital viewership, in addition to game attendance and merchandise purchases, to figure out the best ways to get fans to sign up for Game Pass or fantasy.

“We believe this is a first in being able to pull all of those insights together both for the NFL and more broadly across any of the sports leagues,” he said. “In the 2018 season, which was our first season using this new method, we saw significant uplift in our marketing effectiveness — in fact, a doubling of response rates in the direct marketing arena. If you look outside the sports and entertainment industry, it’s almost unheard of to see a doubling of response rates. Usually direct marketers are fighting for 10 to 20 percent improvements.”

Results were even gaudier when the league partnered with individual clubs, Fusillo said. “The average return on investment when we partnered with clubs with this new capability was north of 300 percent,” he said.

On the media side, Fusillo’s team is collaborating with colleges such as Queen’s University in Canada on various projects. “We are using TV viewership data and a number of other data points that we have here at the NFL to figure out how to best rank different programming options for the different windows,” he said.

Fusillo launched an NFL Punt Analytics Competition at the Super Bowl and an NFL Big Data Bowl at this year’s combine to come up with ways to improve player safety and develop different ways to play and coach the game.

“If you think about financial services, health care or telecom, every interaction that a corporation has with its consumers is directly recorded,” he said. “In sports and entertainment, some interactions are recorded, a ticket purchase, a merchandise purchase. Others that are extremely important to our industry are not recorded at an individual level, like TV viewership and digital streaming.

“The uplift that we did for the 2018 season was quite significant. But we are filling in, particularly around ticketing, merchandising and viewership, even more insights than we have today. In two seasons’ time, we’ll be quite world class at this.”