Fox v ESPN

[bhawk326]

I've heard that the reported increase in revenues for the Big 12 is going to come from a restructuring of their current TV contract with ESPN an entire year before the contract expires. Could this possibly be ESPN's way of trying to prevent Fox from becoming an equal or even stronger partner in college football to them?

Fox benefited the most by Texas joining the Big Ten (they already own 49% of the BTN) or the Pac-16 (my guess is they would own 49% of their network due to FSN already having a deal with the Pac-10). Also, it has been widely reported that the bidding war between Fox and ESPN over the rights to ACC sports caused the doubling of their contract. Could ESPN have looked at the landscape of realignment and seen a weaker position for themselves if they allowed it to happen instead of overpaying now for the rights to retain Big 12 football even though they had another year of the current contract?

Since reports are now coming out that each team can explore forming their own network (read: Texas getting the Longhorn network, no other team or the conference getting one) and they will likely eliminate their championship game, only a large increase in the ESPN contract (at least doubling it) would seem to allow for the projections that the conference is publishing.

 

[CAARHawk]

Beebe is a nutcase, so it is hard to take him at his word.

One thing that is important to remember is that we are talking about two completely different business models.

ESPN is a content contract company. What this means is that ESPN owns their entire network and then contracts for the content.

Fox's college football model is a shared ownership model. They do not pay for content, but split revenues.

The Fox model is better for the college if you have a high demand for the content to be on basic cable. However, it can be problematic if there is not that demand. See the MWC's cable network The Mountain for instance. It has not generated a profit to this date. The MWC would actually be better off with a limited contract with a content contract company, even if they paid a fraction of what the major conferences receive.

The thing about a content contract is that you are not talking about generating new income via basic cable. ESPN is already basic cable. You are talking about generating advertising income and protecting market share. The decision to make in this situation is whether the market is worth protecting and at what cost?

Prior to USC melting down, it looked like the Pac 16 value was going to be too much for ESPN to match. However, that value was downgraded by about a third when the USC sanctions came down, seriously.

While that does not mean that the Pac Ten deal is dead, it does make the SEC look a lot better for schools like A&M that identify with the other SEC institutions. It also made it possible for ESPN to come back in to the talks, as the price top play dropped considerably.

Bebbe talks about a contract of up to 13-15 million per. The Fox projections for the Pac 16 were about 5-10 million more until the USC information hit. In order to keep their market share ESPN might pay a little more. Because these contracts aren't like the content ones you sign every few years. If a team converts from a content model to a partner model, that contract is not coming up again.

 

[bhawk326]

CAARHawk, thank you for the insight as always. I recognize the business model differences and while I am not as knowledgeable about the subject as you, I am still uncertain the revenue generated for ESPN (advertising) would allow for an over doubling of the Big 12 contract. I think more likely they are trying to prevent the encroachment of Fox. As you pointed out, the Fox model is more attractive to colleges even if it's not always in their best interest (ex: MWC).

With how the renegotiations seem to be unfolding for the Big 12 TV contract, as well as how they already have gone for the ACC, do you see Fox being a winner either way? Remember that it has been reported that the Big 12 will allow each team to start its own network allowing for Fox to have a hand in starting the Longhorn Network without having to have a Big 12 Network which may not be as financially beneficial for the investment.

Also, do you see Fox being able to work its way into a national network to compete with ESPN within the next 10 years. By having deals with the NFC, MLB and an expansion in college football does this seem like a viable option? If they already have pre-existing deals with regional networks could this make it easier for them to have a national network to compete in the contracts market with ESPN in the future?

 

[bhawk326]

Also, where did you hear about the specifics of USC devaluing the conference so significantly? While I wouldn't doubt the impact, I was surprised that you stated there was a third drop.