Fantastic article in The Athletic about the upcoming conference TV deals. And can this please be the end of "the ACC is our best option" posts?
The future of Power 5 TV contracts: The next windfall is only a few years away
By Stewart Mandel
49
“The cavalry is coming.”
That’s the message Navigate Research CEO A.J. Maestas would like to convey to major college athletic departments currently staring down the dual abyss of a global pandemic and deep-cutting recession. Though all signs point to an on-time 2020 football season, schools may lose tens of millions of dollars in ticket sales due to empty or reduced-capacity stadiums. And there is no certainty things will be back to “normal” by fall 2021.
But as long as there are football games being televised, big paychecks from the likes of ESPN, FOX and CBS are going to keep pouring in. Annual TV revenue flowing to the Power 5 conferences has skyrocketed by more than 300 percent over the past decade.
But the truly good news for at least four of the Power 5 conferences, if they can just weather the storm: Another huge spike is headed their way on the other side of this crisis. That’s because, over a three-year span beginning in 2023, the Big Ten, Pac-12, SEC, Big 12 and College Football Playoff all have TV rights deals coming up for negotiation.
“If you have a longer vision on the future of collegiate athletics and what the revenue model will look like,” said Maestas, “then you would see COVID as a blip on the long-term radar, as opposed to a catastrophic long-term change.”
Historically, new TV contracts have generated huge increases in the first year of a new deal. Despite the current economic downturn, analysts believe the demand for those rights will be just as flush as ever. Case in point: On Saturday, the New York Post reported that Turner and Major League Baseball agreed to extend their postseason deal, which expires in 2021, with an increase from $350 million a year to “the $500 million per year range,” a roughly 40 percent bump over the length of the deal.
“I don’t think that the current short-term issues, whether it’s pandemic-related or recession-related, are going to be substantive contributing factors,” said Chris Bevilacqua, a prominent TV sports consultant who’s worked with several major conferences. “These (sports rights) are all long-term deals. They’re all very valuable rights — especially college football.”
The Southeastern Conference provided a hint of things to come in December, pre-pandemic, when Sports Business Journal reported that ESPN was nearing a deal to steal away CBS’ long-held SEC Game of the Week package. CBS since 2009 has been paying a grossly undervalued $55 million a year on average for some of the most-watched games of the season. ESPN will reportedly raise that to around $300 million on average, beginning in 2024.
The Athletic recently asked Navigate, a data-driven consulting firm, to provide estimates for the next round of Power 5 TV deals to get a better sense of the revenue increases that might be forthcoming. It’s admittedly hard to forecast what the business climate will look like so far ahead of time, but it’s reasonable to expect that circumstances will be more favorable for the bidding networks than they are today.
Based on historical patterns, and the increasing importance of live events for traditional broadcast networks and cable networks, the Big Ten, SEC, Pac-12 and Big 12 can expect to see increases in the range of 45 to 65 percent within the next five-to-six years compared with what they’re making currently. The ACC, which signed a 20-year contract with ESPN in 2016, would initially see a more modest bump.
Though seemingly dramatic, those numbers fall in line with long-term trends that see TV rights deals across most sports garner a 20- to 50-percent spike in the first year of a new deal, followed by two- to three-percent annual escalators over the life span of the contracts. Navigate did not attempt to predict how long the next contracts will be.
“When we take a step back and look what these numbers mean, it’s essentially saying that each conference over the next 10 years has an average growth rate from their media rights of around six percent,” said Matt Balvanz, Navigate’s Senior Vice President for Analytics. “When we look at how those rights have historically grown, it aligns with history. It also aligns with what several consulting companies and others in the media have said.”
With new TV deals come corresponding increases in conferences’ annual payouts to their members — which primarily comprise media rights, but also football and basketball postseason revenue. The Pac-12, whose outdated ESPN/FOX contract (which began in 2012) has frustrated league members, could see its payouts rise from $31.3 million last year to an estimated $46.2 million by 2025. Granted, by then the league may lag even farther behind the Big Ten (from around $50 million per school currently to an estimated $70 million by 2024) and the SEC (from $44.6 million in 2019 to $66 million in 2025).
All of which could be seen as a windfall for Power 5 athletic departments bracing for potential shortfalls in the coming year or two — that is, if they believe such optimistic projections are attainable.
“If I’m struggling financially and I know that in two or three years I’m going to get X, well, that can affect how I operate,” said former Big East commissioner Mike Tranghese, a recent advisor to the SEC. “But, if you’re going to negotiate, there’s no guarantee what you’re going to get. You may think you know, but who knows what the economy is going to be in three years?”
Several factors will determine whether the next wave of contracts prove as fruitful as Navigate and others predict — starting with the impact of COVID-19 on the companies most likely to be bidding. ESPN, by far the biggest investor in college sports rights, is owned by Disney, whose business — which includes theme parks, cruises and movie studios, all of which were shut down — has been significantly impacted. Disney reported a $1.6 billion hit to its business in Q2. Its amusement parks in Florida and California will begin reopening next month but, with limited capacity, could continue to lose money.
It’s hard to say whether a short-term downturn will impact the ability of Disney, FOX Corporation, ViacomCBS or Comcast/NBC to commit to long-term investments stretching into the next decade. However, sports programming itself should begin recouping its losses as soon as the games return.
“For Disney specifically … in a model where all sports are still happening on live TV, and maybe people are social distancing, or it takes a couple years to get back to normal, (live sports) might be the one area where they could see some obvious profit to continue to be made,” said Balvanz.
There’s some concern that the NFL’s next round of contracts, which come up after the 2022 season, will leave the networks cash-poor for other deals shortly thereafter. The king of sports television currently has annual deals worth a combined $5 billion with NBC, CBS, FOX, ESPN and DirecTV, and all will make it their top priority to retain them. It’s believed the SEC negotiated its new ESPN deal years in advance specifically to get out ahead of the NFL.
More optimistically, the NFL’s negotiations could provide a blueprint for the college leagues. Pac-12 commissioner Larry Scott, whose deals come up two years later, told the Mercury News earlier this year he views the NFL deals — expected to be finalized next year — as “an inflection point.”
“I know there’s been some thought that the NFL might suck all the money out of the marketplace, but college football is among the most valuable live sports programming across the U.S. television landscape,” said Bevilacqua. “So I don’t think the NFL doing big deals is a negative. I think it will be a real indication of how valuable live sports rights are.”
Meanwhile, cord-cutting continues to chip away at the traditional pay-TV model. In 2011 — the year before the Big 12 and Pac-12 began their current contracts — ESPN peaked at 100 million cable subscribers. Today that number is closer to 80 million. Streaming service ESPN+, launched in 2018, has already gained nearly eight million subscribers, but it mostly shows on-demand programming and lower-profile events.
“The cable industry has been a godsend for college athletics,” said Tranghese. “The question is, as the number of cable households, whether it’s ESPN or Fox, goes down, what happens to their ability to pay that top dollar?”
However, cord-cutting was well underway a few years ago when ESPN and FOX ponied up an average $440 million a year combined for the Big Ten’s Tier 1 and 2 rights, providing its schools a roughly 40-percent spike in revenue distribution when the deal commenced in 2017. In opting for a relatively short, six-year deal, then-commissioner Jim Delany made a bet on the marketplace being even more lucrative come 2023.
That deal has proven particularly fruitful for FOX’s broadcast network, which created its “Big Noon Kickoff” franchise last year to showcase massive games like Oklahoma-Texas and Ohio State-Michigan.
“Live appointment-based viewing is rare, where you get big audiences that are really meaningful,” said Maestas. “And that’s what is holding together the traditional bundled TV pay model. If you’re FOX betting on the network’s success, you need news or sports.”
There’s also the possibility tech companies like Amazon, Apple, Google or DAZN will enter the marketplace by the time conferences begin negotiating their next deals. Amazon, for one, already owns streaming rights to the NFL’s “Thursday Night Football” package as well as select matches for England’s Premier League and Germany’s Bundesliga.
Apple recently hired Amazon’s head of sports video, James DeLorenzo, to head up sports content for its Apple+ streaming service, signaling an interest in adding sports rights. Pac-12 Network president Mark Shuken raised eyebrows in April when he told Sports Business Journal that Apple has expressed interest in acquiring the league’s Tier 1 rights.
Commissioners like the Pac-12’s Scott might be drooling. Beyond opening the door to new platforms, more bidders entering the college sports TV market would drive up the price. However, media analysts remain skeptical that a conference would actually place its top-tier games on an exclusively streaming entity.
“Those tech players, flush with cash, are closer to becoming threats and bidders,” said Maestas. “However, I would bet that it ends up in the hands of legacy players. This is just one other thing to be in for the tech companies, and it’s the end all be all for the networks.”
“I don’t think their delivery system is ready for 25-30 million live concurrent users with no buffering and minimal latency,” said Bevilacqua.
The next round of TV deals are likely to widen the chasm between college sport’s haves and have-nots — not just Power 5 vs. Group of 5, but the Big Ten and SEC vs. the other three autonomy conferences.
Networks such as ESPN and FOX don’t have limitless amounts of cash, and they’re also stretching it amongst far more than just a few college conferences. Between now and 2024, deals will come up for the NFL, Major League Baseball (ESPN’s package), the NHL and UEFA Champions League.
If either or both networks felt the need to pull back on college sports, it wouldn’t likely come at the expense of either the Big Ten or SEC, both of which consistently drive big audiences. But for the Big 12 or Pac-12, it could mean lower-than-expected bonanzas. Three of the six most-watched games last season involved Big Ten teams. Four of the top seven involved SEC teams. However, the Big 12 showed up in just two of the Top 10, while the Pac-12 and ACC had none in the top 12.
“It’s not rocket science. It all comes down to leverage,” said Tranghese. “You look at the power conferences, some of them have more leverage than the others.”
Estimated media revenue for each P5 conference, 2020-26
Dollar amounts in millions. First year of a new deal in green.
CONFERENCE 2020 2021 2022 2023 2024 2025 2026*
Big Ten
$687
$707
$728
$750
$930
$958
$1,102
SEC
$607
$625
$644
$663
$683
$888
$1,023
Pac-12
$392
$404
$416
$429
$443
$515
$626
Big 12
$364
$375
$386
$398
$410
$422
$574
ACC
$383
$398
$414
$431
$449
$468
$584
* First year of a new CFP contract with eight teams.
Source: Navigate Research
The ACC is in a particularly precarious position. In 2016, the conference locked itself into a 20-year deal with ESPN that includes the recently-launched ACC Network. Right now, its average annual TV revenue is on par or better than that of the Big 12 and Pac-12, but the conference could be left far behind once those two get new deals. The new cable network is projected to bring in $7 million-$10 million per school, but unless the league adds new schools or the contract allows for a renegotiation after a certain period (known as a “look in”), there’s no obvious cause for an impending spike like the others.
Navigate’s projections have the ACC’s revenue distributions reaching $46 million per school by 2026, compared with $82 million for the Big Ten, $75.5 million for the SEC, $61.4 million for the Big 12 and $55.4 million for the Pac-12.
Those numbers also account for a new College Football Playoff contract. Consensus appears to be growing for an expansion to eight teams beginning in 2026. Based on that assumption, Navigate estimates CFP revenue jumping from $446 million per year in 2020 to $1.04 billion in 2026, nearly all of which gets distributed among the FBS conferences.
But 2026 is a long way’s away — an eternity for schools just trying to balance their 2020-21 budget amidst the uncertainty of COVID-19. Oregon State athletics recently announced 23 layoffs and other cost reductions to cut next year’s budget by $8-$10 million. Other schools have asked their coaches and top administrators to take pay cuts. Non-revenue sports teams could be in jeopardy depending on the extent of forthcoming losses.
Were college athletic departments a for-profit corporation, perhaps they could stomach going into the red for a couple of years knowing there’s a huge revenue influx coming shortly thereafter. But that’s not how universities operate.
“I don’t think anybody is interested in going into debt or borrowing,” said Tranghese.
Navigate’s Maestas hopes schools will at least maintain some long-term perspective and avoid making too-drastic cuts that cause long-term damage to their programs. They’ll want to be in the best possible shape once those new TV dollars start rolling in.
“I’m a buyer of collegiate athletics long term,” he said. “… There’s a very positive solution on the other side of this.”
(Top illustration: The Athletic)
The future of Power 5 TV contracts: The next windfall is only a few years away
By Stewart Mandel
“The cavalry is coming.”
That’s the message Navigate Research CEO A.J. Maestas would like to convey to major college athletic departments currently staring down the dual abyss of a global pandemic and deep-cutting recession. Though all signs point to an on-time 2020 football season, schools may lose tens of millions of dollars in ticket sales due to empty or reduced-capacity stadiums. And there is no certainty things will be back to “normal” by fall 2021.
But as long as there are football games being televised, big paychecks from the likes of ESPN, FOX and CBS are going to keep pouring in. Annual TV revenue flowing to the Power 5 conferences has skyrocketed by more than 300 percent over the past decade.
But the truly good news for at least four of the Power 5 conferences, if they can just weather the storm: Another huge spike is headed their way on the other side of this crisis. That’s because, over a three-year span beginning in 2023, the Big Ten, Pac-12, SEC, Big 12 and College Football Playoff all have TV rights deals coming up for negotiation.
“If you have a longer vision on the future of collegiate athletics and what the revenue model will look like,” said Maestas, “then you would see COVID as a blip on the long-term radar, as opposed to a catastrophic long-term change.”
Historically, new TV contracts have generated huge increases in the first year of a new deal. Despite the current economic downturn, analysts believe the demand for those rights will be just as flush as ever. Case in point: On Saturday, the New York Post reported that Turner and Major League Baseball agreed to extend their postseason deal, which expires in 2021, with an increase from $350 million a year to “the $500 million per year range,” a roughly 40 percent bump over the length of the deal.
“I don’t think that the current short-term issues, whether it’s pandemic-related or recession-related, are going to be substantive contributing factors,” said Chris Bevilacqua, a prominent TV sports consultant who’s worked with several major conferences. “These (sports rights) are all long-term deals. They’re all very valuable rights — especially college football.”
The Southeastern Conference provided a hint of things to come in December, pre-pandemic, when Sports Business Journal reported that ESPN was nearing a deal to steal away CBS’ long-held SEC Game of the Week package. CBS since 2009 has been paying a grossly undervalued $55 million a year on average for some of the most-watched games of the season. ESPN will reportedly raise that to around $300 million on average, beginning in 2024.
The Athletic recently asked Navigate, a data-driven consulting firm, to provide estimates for the next round of Power 5 TV deals to get a better sense of the revenue increases that might be forthcoming. It’s admittedly hard to forecast what the business climate will look like so far ahead of time, but it’s reasonable to expect that circumstances will be more favorable for the bidding networks than they are today.
Based on historical patterns, and the increasing importance of live events for traditional broadcast networks and cable networks, the Big Ten, SEC, Pac-12 and Big 12 can expect to see increases in the range of 45 to 65 percent within the next five-to-six years compared with what they’re making currently. The ACC, which signed a 20-year contract with ESPN in 2016, would initially see a more modest bump.
Though seemingly dramatic, those numbers fall in line with long-term trends that see TV rights deals across most sports garner a 20- to 50-percent spike in the first year of a new deal, followed by two- to three-percent annual escalators over the life span of the contracts. Navigate did not attempt to predict how long the next contracts will be.
“When we take a step back and look what these numbers mean, it’s essentially saying that each conference over the next 10 years has an average growth rate from their media rights of around six percent,” said Matt Balvanz, Navigate’s Senior Vice President for Analytics. “When we look at how those rights have historically grown, it aligns with history. It also aligns with what several consulting companies and others in the media have said.”
With new TV deals come corresponding increases in conferences’ annual payouts to their members — which primarily comprise media rights, but also football and basketball postseason revenue. The Pac-12, whose outdated ESPN/FOX contract (which began in 2012) has frustrated league members, could see its payouts rise from $31.3 million last year to an estimated $46.2 million by 2025. Granted, by then the league may lag even farther behind the Big Ten (from around $50 million per school currently to an estimated $70 million by 2024) and the SEC (from $44.6 million in 2019 to $66 million in 2025).
All of which could be seen as a windfall for Power 5 athletic departments bracing for potential shortfalls in the coming year or two — that is, if they believe such optimistic projections are attainable.
“If I’m struggling financially and I know that in two or three years I’m going to get X, well, that can affect how I operate,” said former Big East commissioner Mike Tranghese, a recent advisor to the SEC. “But, if you’re going to negotiate, there’s no guarantee what you’re going to get. You may think you know, but who knows what the economy is going to be in three years?”
Several factors will determine whether the next wave of contracts prove as fruitful as Navigate and others predict — starting with the impact of COVID-19 on the companies most likely to be bidding. ESPN, by far the biggest investor in college sports rights, is owned by Disney, whose business — which includes theme parks, cruises and movie studios, all of which were shut down — has been significantly impacted. Disney reported a $1.6 billion hit to its business in Q2. Its amusement parks in Florida and California will begin reopening next month but, with limited capacity, could continue to lose money.
It’s hard to say whether a short-term downturn will impact the ability of Disney, FOX Corporation, ViacomCBS or Comcast/NBC to commit to long-term investments stretching into the next decade. However, sports programming itself should begin recouping its losses as soon as the games return.
“For Disney specifically … in a model where all sports are still happening on live TV, and maybe people are social distancing, or it takes a couple years to get back to normal, (live sports) might be the one area where they could see some obvious profit to continue to be made,” said Balvanz.
There’s some concern that the NFL’s next round of contracts, which come up after the 2022 season, will leave the networks cash-poor for other deals shortly thereafter. The king of sports television currently has annual deals worth a combined $5 billion with NBC, CBS, FOX, ESPN and DirecTV, and all will make it their top priority to retain them. It’s believed the SEC negotiated its new ESPN deal years in advance specifically to get out ahead of the NFL.
More optimistically, the NFL’s negotiations could provide a blueprint for the college leagues. Pac-12 commissioner Larry Scott, whose deals come up two years later, told the Mercury News earlier this year he views the NFL deals — expected to be finalized next year — as “an inflection point.”
“I know there’s been some thought that the NFL might suck all the money out of the marketplace, but college football is among the most valuable live sports programming across the U.S. television landscape,” said Bevilacqua. “So I don’t think the NFL doing big deals is a negative. I think it will be a real indication of how valuable live sports rights are.”
Meanwhile, cord-cutting continues to chip away at the traditional pay-TV model. In 2011 — the year before the Big 12 and Pac-12 began their current contracts — ESPN peaked at 100 million cable subscribers. Today that number is closer to 80 million. Streaming service ESPN+, launched in 2018, has already gained nearly eight million subscribers, but it mostly shows on-demand programming and lower-profile events.
“The cable industry has been a godsend for college athletics,” said Tranghese. “The question is, as the number of cable households, whether it’s ESPN or Fox, goes down, what happens to their ability to pay that top dollar?”
However, cord-cutting was well underway a few years ago when ESPN and FOX ponied up an average $440 million a year combined for the Big Ten’s Tier 1 and 2 rights, providing its schools a roughly 40-percent spike in revenue distribution when the deal commenced in 2017. In opting for a relatively short, six-year deal, then-commissioner Jim Delany made a bet on the marketplace being even more lucrative come 2023.
That deal has proven particularly fruitful for FOX’s broadcast network, which created its “Big Noon Kickoff” franchise last year to showcase massive games like Oklahoma-Texas and Ohio State-Michigan.
“Live appointment-based viewing is rare, where you get big audiences that are really meaningful,” said Maestas. “And that’s what is holding together the traditional bundled TV pay model. If you’re FOX betting on the network’s success, you need news or sports.”
There’s also the possibility tech companies like Amazon, Apple, Google or DAZN will enter the marketplace by the time conferences begin negotiating their next deals. Amazon, for one, already owns streaming rights to the NFL’s “Thursday Night Football” package as well as select matches for England’s Premier League and Germany’s Bundesliga.
Apple recently hired Amazon’s head of sports video, James DeLorenzo, to head up sports content for its Apple+ streaming service, signaling an interest in adding sports rights. Pac-12 Network president Mark Shuken raised eyebrows in April when he told Sports Business Journal that Apple has expressed interest in acquiring the league’s Tier 1 rights.
Commissioners like the Pac-12’s Scott might be drooling. Beyond opening the door to new platforms, more bidders entering the college sports TV market would drive up the price. However, media analysts remain skeptical that a conference would actually place its top-tier games on an exclusively streaming entity.
“Those tech players, flush with cash, are closer to becoming threats and bidders,” said Maestas. “However, I would bet that it ends up in the hands of legacy players. This is just one other thing to be in for the tech companies, and it’s the end all be all for the networks.”
“I don’t think their delivery system is ready for 25-30 million live concurrent users with no buffering and minimal latency,” said Bevilacqua.
The next round of TV deals are likely to widen the chasm between college sport’s haves and have-nots — not just Power 5 vs. Group of 5, but the Big Ten and SEC vs. the other three autonomy conferences.
Networks such as ESPN and FOX don’t have limitless amounts of cash, and they’re also stretching it amongst far more than just a few college conferences. Between now and 2024, deals will come up for the NFL, Major League Baseball (ESPN’s package), the NHL and UEFA Champions League.
If either or both networks felt the need to pull back on college sports, it wouldn’t likely come at the expense of either the Big Ten or SEC, both of which consistently drive big audiences. But for the Big 12 or Pac-12, it could mean lower-than-expected bonanzas. Three of the six most-watched games last season involved Big Ten teams. Four of the top seven involved SEC teams. However, the Big 12 showed up in just two of the Top 10, while the Pac-12 and ACC had none in the top 12.
“It’s not rocket science. It all comes down to leverage,” said Tranghese. “You look at the power conferences, some of them have more leverage than the others.”
Estimated media revenue for each P5 conference, 2020-26
Dollar amounts in millions. First year of a new deal in green.
CONFERENCE 2020 2021 2022 2023 2024 2025 2026*
Big Ten
$687
$707
$728
$750
$930
$958
$1,102
SEC
$607
$625
$644
$663
$683
$888
$1,023
Pac-12
$392
$404
$416
$429
$443
$515
$626
Big 12
$364
$375
$386
$398
$410
$422
$574
ACC
$383
$398
$414
$431
$449
$468
$584
* First year of a new CFP contract with eight teams.
Source: Navigate Research
The ACC is in a particularly precarious position. In 2016, the conference locked itself into a 20-year deal with ESPN that includes the recently-launched ACC Network. Right now, its average annual TV revenue is on par or better than that of the Big 12 and Pac-12, but the conference could be left far behind once those two get new deals. The new cable network is projected to bring in $7 million-$10 million per school, but unless the league adds new schools or the contract allows for a renegotiation after a certain period (known as a “look in”), there’s no obvious cause for an impending spike like the others.
Navigate’s projections have the ACC’s revenue distributions reaching $46 million per school by 2026, compared with $82 million for the Big Ten, $75.5 million for the SEC, $61.4 million for the Big 12 and $55.4 million for the Pac-12.
Those numbers also account for a new College Football Playoff contract. Consensus appears to be growing for an expansion to eight teams beginning in 2026. Based on that assumption, Navigate estimates CFP revenue jumping from $446 million per year in 2020 to $1.04 billion in 2026, nearly all of which gets distributed among the FBS conferences.
But 2026 is a long way’s away — an eternity for schools just trying to balance their 2020-21 budget amidst the uncertainty of COVID-19. Oregon State athletics recently announced 23 layoffs and other cost reductions to cut next year’s budget by $8-$10 million. Other schools have asked their coaches and top administrators to take pay cuts. Non-revenue sports teams could be in jeopardy depending on the extent of forthcoming losses.
Were college athletic departments a for-profit corporation, perhaps they could stomach going into the red for a couple of years knowing there’s a huge revenue influx coming shortly thereafter. But that’s not how universities operate.
“I don’t think anybody is interested in going into debt or borrowing,” said Tranghese.
Navigate’s Maestas hopes schools will at least maintain some long-term perspective and avoid making too-drastic cuts that cause long-term damage to their programs. They’ll want to be in the best possible shape once those new TV dollars start rolling in.
“I’m a buyer of collegiate athletics long term,” he said. “… There’s a very positive solution on the other side of this.”
(Top illustration: The Athletic)
