I doubt anyone is surprised to hear that CBS has been able to bump its ad prices for SEC telecasts up 10% over last year (h/t MrSEC.com). But the fine print might surprise you.
… Buyers say there will be a lot of college football games to advertise in this season, especially with Fox adding primetime games to its schedule. But CBS’ SEC package has a limited number of high-rated games with top-ranked teams and the threat of a potential sellout is pushing agencies to do business now and pay CBS’ price. [Emphasis added.]
Get that? It’s not the new teams and the new markets driving the increase. It’s the teams that were already conference members, highly ranked this season – like Alabama, LSU, Georgia and South Carolina – that are.
Now maybe there’s added value we’re not seeing yet. But that CBS is already getting a premium without even knowing what the final product looks like should tell you everything you need to know about how badly Mike Slive and his crack team of negotiators undervalued the conference when it struck those deals with CBS and ESPN. And – no offense to everyone at Missouri and Texas A&M – what an awkward move the conference had to make with expansion to correct its error.
Gee, I wonder how the SEC will do with the next set of broadcast deals. A sixteen-school conference may be just around the corner.
In Slive’s defense, I think they underestimated the impact that DVR would have on the value of live sporting events more than they undervalued the conference.
Mike Slive is a buffoon. The fact that the SEC had to go through this ham-fisted round of nonsensical expansion just to correct the errors he made in negotiating the league’s TV deals is inexcusable. The Pac 12 made him look like a clown. So now, because he got used by the TV networks and the other leagues, we get Missouri and Texas A&M. Yay.
I’ve certainly seen sports commissioners fired for less.
Maybe they’ll use contraction to open up negotiations next time. We can dream.
Senator, it’s true that the returning highly ranked teams are the showcase TV offerings. What’s different? The SEC has more markets now that are (presumably) interested in watching those showcase games. Who gives a rip if every TV in Birmingham is watching Alabama this week? They were already watching. But…..the people in Dallas and Houston and San Antonio, where there are lots of Texas A&M fans who now have more of an interest in the SEC West because their team is in the mix, will have more reason to watch than before. And, one anticipates, they WILL watch in greater numbers.
The SEC didnt add teams because they needed better teams to put on TV. They added teams because they needed more eyeballs to watch the teams they put on TV. Or, that’s the theory.
More eyeballs = more ad revenue. It’s simple math. So, it was the need for new markets, regardless of the pitch from the sales puffery/hucksterism/outright lies of the weasels at CBS and the ad agencies. Who believes anything that comes out of an ad exec’s mouth, anyway?
You hit the reason for A&M as part of the expansion. There are a great deal more anti-Texas viewers craving to watch good competition than you can shake a stick at who will watch a good UGA team in the correct year.
Tru’dat 81. Also, those eyeballs following T A & M to CBS reduce the eyeballs tuning into the Big 12 broadcasts. Thus, CBS picks up more viewers and takes viewers away from ABC of Fox or whoever the competitor is.
The CBS contract is a national one. It’s not adding any new markets; it’s just, as you say, hoping more people in existing markets will tune in. Maybe there are all kinds of folks who will suddenly be interested in watching the Cocktail Party, who knows?
But here’s the thing – CBS doesn’t even know yet what games it will be broadcasting. For 2012, the only thing we know for sure is that some of the product will be watered down, in the sense that there are less cross-divisional marquee games available. In spite of that, ad rates are up significantly.
you are correct in your statement that it’s not adding any new markets from a strictly factual standpoint. It might have been more accurate for me to say the SEC is INTERESTING more markets (the big cities in Texas, Kansas City, St. Louis) by adding those 2 teams. It’s also denying them to the competition. However you slice it (and isn’t that what lawyers do with words?), adding A&M and Missouri to the SEC mix presumably made the SEC more interesting to the people who live in Missouri and Texas, and thus more likely to tune in to whatever the SEC game of the week happens to be. Mo eyeballs, mo money, dog. Whatever they say, that’s what the bottom line is.
I’m not arguing that expansion won’t bring in more money.
I’m arguing that the networks would be getting more money even if the conference hadn’t expanded.
I guess that’s the part where we disagree. The networks only get more money through the sale of more ads, especially if they up the rights fees. The only way to up the rights fees is to deliver more eyeballs. The only way to deliver more eyeballs is to interest more people. You can make a pretty good argument that the 2011 season SEC footprint market was at or near saturated. Everyone who cares is already watching the games, or going to the games, and it’s pretty obvious everyone affiliated with Alabama, LSU, UGA, UT, Florida and Auburn already cares (fans of Vandy and UK will never care enough to matter). People outside the 2011 SEC footprint may care if the CBS game is this week’s Game of The Century, but the hardcore people in Texas are watching games that impact A&M or Texas. Kansas City and St Louis fans are watching Big 12 games because that’s where Missou plays.
In 2012, the SEC game of the week may not be the absolute stellar matchup of 2011 on a week to week basis, though that is arguable. However, more people in more places will care about the SEC game of the week because now they have a rooting interest in the SEC. That prediction of more eyeballs allows the networks to jack up ad rates. Games are a bridge for beer and car commercials. The suits in Manhattan dont care if Alabama and Auburn have played for 100 years. They care about how many people will watch whatever they put on. If a Vassar -Randolph Macon field hockey tilt would draw another point higher in the ratings, they’d roll the Tide right out the door.
It’s all about the money. If the soulless weasel bean counters in NYC think there’s more money this way, they could be wrong, but they’ll have a big stack of statistics and demographics and market research to back their guess up. I’m guessing they’re correct.
That’s not true. It’s all about supply and demand. If the networks think the product is more valuable, they’ll pay for it.
If the only way to up the rights fee is through increased viewership, how did the SEC get the bump it did when it negotiated the last round of contracts? There was zero expansion then.
the simple answer is the last round of contracts was based on…say it with me…..higher atings than the previous contract anticipated. The SEC is a huge success on the field? Great. That translated into more viewers. More viewers than you anticipated makes the current deal a bargain, and gives competing network bidders room to make money at a higher bid. Simple labor economics: more efficient delivery of the product (eyeballs per ad dollar) means a bigger pie to split. You offer more cash to the piemakers, and you put the rest of extra cash in your shareholders pockets. Win win. If you know anything about Cap Cities/Disney, it’s that they dont believe in losing money.
So, why expansion? Because the pie can grow faster with more eyeballs in places where the SEC had no footprint than it can within the footprint. Sure, Jethro in Dallas or Sven in Kansas City, MO might have tuned in occasionally to watch a big SEC game, but now that their teams are in the SEC? They’re going to be much more interested in the league as a whole.
You’re right about supply and demand. Demand for TV shows in measured in…say it with me….ratings, eg, people watching games. Eyeballs. You can simply say mo eyeballs, mo money. That’s all the demand is. Oh, wait, you say, there can be “Corporate Partners”!!!! Corporate Partners sign up because people will see the ads for said CPs.
People try to make it complicated. Oh, it’s rivalries, oh, it’s history, oh, it’s fairness, oh, it’s geography. All that matters are ratings. The SEC football season is a TV show, like Modern Family, or Justified. It appeals to a desireable demographic, and it delivers tons of eyeballs in said demographic. It appears that in 2012, it will deliver them at a record pace and over a wider footprint. Games are a bridge for ads, just like stories in the New York Times (which is why the Times is leaking cash like a sieve) or Time Magazine. The snoots there can pretend it’s all about journalism, their finely crafted writing, blah blah blah, but the truth of the matter is that they exist as a vehicle for the delivery of ads. Take away the ad money, and they wont have enough cash to scribble editorials on the back of an envelope with a number 2 pencil.
I dont endorse the laissez faire view of college football, but it is what it is. It’s all about the Benjamins, yo. Why else would the likes of Mike Adams pay it any attention?
I said Cap Cities/Disney, which of course is ESPN, but the same is true for CBS. And I know you didnt mention Corporate Partnerships specifically, but the only way to really increase a tv deal is by better ratings. Nothing else matters, unless you pull a CBS/Masters prestige deal, which I submit CBS isnt losing any money on. Their shareholders would kill them. You just have to quit thinking like someone who cares about college football, and think like a ruthless corporate suit who only cares about money. Or Mike Adams (really, the same thing).
+1
Isn’t this a little revisionist history? At the time, the deal dwarfed any other conference’s TV deal and gave the SEC a huge leg-up in revenues.
Don’t have any problems with the original terms of the deal. But not leaving a way to adjust the terms if the market changed significantly was a shortsighted move in light of the length of the contracts. Especially when you consider the egos of the gentlemen in whose name the contracts were struck.
Or are you endorsing conference expansion as a prudent method of contract modification?
I would endorse it as seems to have worked in every other conference thus far.
One downside to “leaving a way to adjust the terms” kis the other side would likely want that also. By not having that term CBS is locked in and now the SEC can use conference expansion to modify the contract.
Seems like a win-win.
Any competent lawyer with some experience drafting contracts and leases could put together a satisfactory provision – something like a base payment with adjustments for inflation, together with the conference receiving a percentage of any increase in ad rates, for starters – that would do the trick without having to turn the conference upside down.
There’s also the more radical step of forming a conference controlled network, as the Big Ten and Pac-12 have done.
As for your “every other conference” observation, what other conferences have expanded in order to terminate their broadcast agreements?
I think you’re looking at this as the TV pie expanding incrementally, and the SEC and TV weasels are looking at this as the TV pie expanding exponentially outside the 2011 SEC footprint. I guess time will tell.
The SEC has won the last six national titles and currently has five teams in the preseason top ten in most polls. Wouldn’t you say that adds value to the conference broadcast rights, sans broader geographic footprint?
I agree with what you are saying about the SEC product, but do not think you fully appreicate the expansion of eyeballs. Do you honestly believe the average Mizzou fan was watching UF v. UGA before being in the SEC. I think they were likley watching a Big 12 game. Now I bet they will watch the SEC game.
Personally if UT is playing UK on one channel and ND is playing UM on the other I watch the UT game and only change during commercial, blow out, or to watch the end. I would bet most people are like that if they are fans of a school in a conference.
it only adds value to the extent it makes more people watch the games. There probably isnt much room for ratings growth INSIDE the 2011 footprint. Could people in Alabama or Louisiana or Georgia or Florida care more rabidly? Everyone in Arkansas who has access to electricity already watches, right? There’s probably some chance for growth, but not that much. For BIG growth, which translates into bigger money, you need more people watching the games. Hard core fans outside the south? Probably have a good bit of them already. But, if you’re an A&M fan, why would you care about the SEC game of the week? You’re following the Big12 in your spare tv time, not the SEC.
Me, I hate conference expansion. But, when you look at it as a money grab, it makes sense. Whether it works out like the bean counters anticipate, we’ll see. The premise they operate under is sound, though, if you only care about money, and that’s all they care about. Just be glad field hockey isnt taking America by storm.
Sorry I was not clear. I meant other conferences have changed the shape of their product and it resulted in their new big shiney TV contracts.
Also your argument seems to assume that only one side would have the competent lawyer who can adjust the contract in a way beneficial for the SEC. The counter to this would be the TV networks would also have competent lawyers who could put conditions in the contract that if x, y, or z happen then the contract decreases over time. As I have not really read any details about what went on behind closed doors when the contract was made I am nort sure what was or was not put out there and what concessions each side might have made.
As far as the more radical step I thought the SEC was against that due to the risk of having to front all the costs and not having a guaranteed cable provider to place the media on. Just what I read on some blog so probably totally off base