The other side of the cord-cutting mountain

Sure, it’s been interesting to focus on ESPN’s trials and tribulations as its subscriber base shrinks, but let’s not lose sight of what Mickey spends a boatload of that money on.

At some point that could force the market to correct itself and the money that grew and grew for each media rights deal could finally come back down to earth. That would have far-reaching implications across sports including potentially in college football. Television money, particularly from ESPN, has dramatically changed the college football landscape over the last decade. It was the engine behind conference realignment, exploding coaching salaries and ostentatious facilities upgrades. It is the defining reason the gulf between the Power 5 and Group of Five keeps growing wider.

The major question is what happens when ESPN and other TV networks decide they don’t want to keep upping the ante each time a rights deal comes up for renewal?

Just look to Conference USA for how that could play out.

No conference has been impacted worse by the ramifications of television money than Conference USA over the last 15 years. In 2005, Louisville, Marquette, Cincinnati and Texas Christian were all members of the conference only to leave for greener pastures in the Big East. That process happened again and again as bigger conferences looked to bolster their attractiveness for TV money by plundering CUSA. UAB and Southern Miss are the last of the founding members still in a conference that now features schools like Texas at El Paso and Texas at San Antonio.

When CUSA’s TV rights deal expired in 2016, the market had dried up. It wasn’t as attractive as it had once been despite adding several schools in large TV markets and television networks weren’t as needy for inventory. Only a few years after aggressively trying to add live sports TV rights for its fledgling FS1, FOX didn’t even bother trying to re-up with Conference USA. While other conferences saw their rights deals skyrocket in previous years, CUSA received millions less. Its schools went from making $1.1 million annually from TV money to a meager $200,000.

Now, admittedly, it’s a long way from Conference USA to the Southeastern Conference, which has the benefit of monetizing the largest impassioned college football fan base in the country, but who knows where things wind up in a few years?  Judging from this comment, certainly not the conference commissioner.

“Even in the midst of cord-cutting, we’ve seen progression in revenue,” said SEC commissioner Greg Sankey. “I think there’s actually more good news there than there is anything that’s problematic for us.”

Remain calm, all is well.

Here’s the thing — guess which conference’s revenue stream is most closely tied to ESPN’s financial well being?  Ding, ding, ding, we have a winner!

If not the Big Ten, the SEC could be in the most stable position. It is already generating huge money from TV — the league listed $420 million in revenue from TV, radio rights in its 2016 filings — and can always bank on a large, passionate fanbase wanting its product. The downside for the SEC is that it doesn’t own a stake in its network — ESPN maintains 100 percent ownership — and instead agreed to split revenue at a rate believed to be less than 50-50 for the conference and its members. The SEC is the Power 5 conference most tied to ESPN given it leveraged ESPN’s distribution model for massive early success rather than maintain ownership but that is still far more beneficial than detrimental at this point. The SEC Network is the strongest of the three conference networks — its average subscriber cost is more than three times the Pac-12’s — and as long as it keeps showing football games, that doesn’t figure to change.

Now, maybe that works out fine over the long run.  As long as we remain crazy about our football, somebody will pay the conference for access to that… but maybe not as much as now.  If the numbers decline, having that middle man starts looking expensive.

Remember what led to the current arrangement — Mike Slive’s initial inept conference television deal that he had to break by expanding the SEC to fourteen members.  It’s not like the SEC’s broadcast contracting has been shrewdly managed; as I’ve analogized before, it’s more like Jed Clampett accidentally stumbling his way into millions.  So to think that Sankey and his bosses are already on this proactively would be totally against type.

Of course, this may wind up being the reserve fund excuse Greg McGarity’s been waiting his whole career to use.  That’s certainly a comfort.