When it comes to certainty and the future, there’s death, taxes and…

the never-ending expectation of conference commissioners that the broadcast revenue gusher will keep flowing.

The easy hot take given these circumstances is that the sports media rights bubble will pop, and the money college leagues make from selling the broadcast rights to football and basketball will peak just before the Big Ten, Pac-12 and Big 12 deals expire in the middle of the next decade. The revenue that has fueled huge coaching salaries, a facilities arms race and angst over the size of the cut the majority of the labor force receives will slow or fall. Power 5 athletic directors will have to—gasp—manage money responsibly instead of simply relying on the next media rights bump to cover any overspending.

The reality is more complicated and less certain. Like newspapers before them, ESPN and Fox will grapple with disruption to their business model and ultimately may have to remake themselves if they want to continue to thrive in the new media landscape. But reflexively forecasting doom assumes television networks are the only entities that will bid on sports rights in the future*. That is almost certainly not going to be the case. “I really see a time when there are going to be a lot of players in the marketplace and there are going to be a lot of distribution methods,” Big 12 commissioner Bob Bowlsby said. “The unknown is how much is it all worth? I don’t think there’s anyone who legitimately knows what it’s going to be worth.”

*Don’t get hung up on the television-versus-Internet delivery issue. No, streaming isn’t as reliable on May 8, 2017, as cable or satellite service. Buffering remains a problem. But by May 8, 2023, the differences could be negligible.

Bowlsby is correct. No one knows. Not him. Not Big Ten commissioner Jim Delany. Not SEC commissioner Greg Sankey. Not Apple CEO—and Auburn grad—Tim Cook. The only thing we do know is that there is a limited number of major college football and basketball games available for sale and there is a built-in demand for them. How much that demand is worth depends on how many companies wind up bidding. “I don’t think anyone knows exactly what the landscape will look like or what health ESPN or Fox will have in 2023 when we’re negotiating or how significant a player a Twitter or a Facebook will be,” Pac-12 commissioner Larry Scott said. “My sense is that there will be more competition. There will be more and different types of players. And there will still be very limited and highly valuable sports properties.”

Commissioners and ADs look at tech giants as the white knights that could allow their leagues to keep growing revenues, but the question is whether a Google, an Apple, a Netflix or a Hulu would even want to get into the live sports business. If they did, it would be unwise to assume they would overpay simply because their market capitalizations dwarf those of the players in the marketplace now. The money could stay flat or drop even if the tech companies join the fray, but the leaders of college sports hope the competition for a limited resource might drive up the price. “Long-term, I’m very bullish on the value of premium sports rights,” Scott said. “I see more competitors. And frankly, competitors with bigger market cap than ESPN or Comcast or DirecTV. Some of these companies we’re talking about are huge by comparison. If they decide that sports is a vertical they want to get involved in in a big way, that’s good news for the Pac-12 or the NFL.”

Larry Scott sure knows how to drop words that make him sound like he’s got everything under control.  But notice that the key word in the last sentence of his quote is the first one.  Nothing’s happened yet.

What these guys are banking on, without any concrete evidence that it will come to fruition, is that if more capitalized competition arrives, it’s bound to spend even more money than ESPN and Fox already are, because… well, I’m not exactly sure why.  Maybe Big Jim can explain that to us.

Or these companies might kick the tires on sports rights and decide they don’t need them. Remember, they’re already wildly successful without live sports. This is the gamble Delany took when the Big Ten opted for six-year deals for its Tier 1 and Tier 2 rights. “There’s no doubt we’re in a disruptive environment,” Delany said. “There definitely is money and interest on the sideline. It really hasn’t emerged very much yet, but I’m sure that there is—whether it’s Apple or Google or Hulu or any number of companies.”

Delany is betting that demand for Big Ten football will be so valuable that the revenue from the next deals will outpace these deals. But he also has a hedge; the Big Ten Network’s deal with Fox runs until 2032. On the other end of the spectrum is the ACC, which allowed ESPN to lock up its rights until 2036 in return for getting a conference network that is scheduled to launch in 2019. “If you go shorter, you take out a little more risk,” Delany said. “But you also have a little more upside.”

In other words, these guys don’t have a fucking clue.

ESPN’s recent move to clear out a lot of talented journalists/reporters is more than just serving notice to shareholders that it has a plan to deal with its current numbers crunch.  It’s also a realization that the real value is in live content.  We tune in to watch games; for the most part, we’re indifferent to “The Sports Reporters”.  That’s where Mickey’s expense has to focus, then.

But here’s the thing.  If the WWL continues to pare down its operational expenses by whacking out everything other than sports broadcasts and still finds itself bleeding profit margin, there’s only one conclusion left to draw, and it’s that the overall business model isn’t what it used to be.  If that’s the new normal, to think that a shrewdly operated company like Apple, which makes massive bank as easily as we breath, is going to come in on a white horse and throw stupid money around to pull Larry Scott’s nuts out of the proverbial fire is a pipe dream.

… Every league is feeling it as the cable networks hemorrhage subscribers. An industry that has become accustomed to economic growth now has to grapple with the very real possibility of flat revenue or less revenue in the near future. Of course, the possibility is just as real that some deep-pocketed newcomers could swoop in from Silicon Valley and keep the money flowing. “We could be right, or we could be wrong,” Delany said. “History will tell us.”

Hey, if it blows up in their faces, at least Delany’s already written the epitaph.

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13 Comments

Filed under College Football, ESPN Is The Devil, It's Just Bidness

13 responses to “When it comes to certainty and the future, there’s death, taxes and…

  1. Scorpio Jones, III

    Gosh, maybe it would be wise to have a reserve fund. 😀

    Like

  2. doofusdawg

    Yep… like I attempted to say the other day… the expansion of football internationally is the holy grail for the next level of investment and growth. Once one of these cash laden tech giants figures out how to make it an international sport then look out. The global market is the only thing that gets their attention.

    I had no idea the success that the NBA has had with this . Can football be accepted as well… probably not… for a multitude of reasons.

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  3. ASEF

    If I had the time, and I don’t, I’d juxtapose some of these quotes with public statements from the guys and gals at Enron, Worldcom, et al.

    No, conferences don’t report to shareholders (or taxpayers or…), so we won’t have a massive accounting scandal implosion from trying to prop up the edifice with phony numbers. But same end result, probably.

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  4. I’m frugal McGarity, and the reserve funds sponsors this message.

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  5. Argondawg

    “History will tell us” is not a model to build a business on. Is it possible that ESPN gets to a point when it just can’t live up to its contracts? What then? Does ESPN get spun off and essentially goes bankrupt? They are losing subscribers at an astonishing rate and I am pretty sure this was not forecasted when they signed all these mammoth deals.

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  6. tesslibrarian

    Hulu is going to start offering live tv, including sports channels. Their offerings for Athens include sports: all the ESPNs, all the Fox Sports, NBC golf, SECN. Their local network offerings are slim, and no CBS (but there is CBS Sports Network).
    https://www.hulu.com/live-tv

    I’m really tempted to give this a try, though my husband works from home and has the highest speed connection available; it would depend on how much we’d actually cut from our bill if we de-bundled.

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    • PTC DAWG

      It’s still 40 bucks, and still requires you get internet access elsewhere…not sure where the great savings are…

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      • tesslibrarian

        It’s half of what we pay for cable from Charter. The only thing we’d be missing from channels we normally watch is BBC America.

        My guess is ESPN is using this as a testing ground for their own streaming service, similar to HBO Go/Now. They’d probably charge per channel, but if it was something you could subscribe/cancel/subscribe like other streaming services, then it may still be worth it.

        The CBS online stream of their game of the week is pretty good, if you have a decent connection. I’ve watched two of the last three games in hotel rooms in Paris, but I doubt we’ll have European levels of connection in the US any time soon.

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      • Paul

        I turned in my cable boxes and got rid of the “phone line” they bundled it all together with. Kept the high speed internet. It more than cut my bill in half. So, even after I spend a little to add Hulu and Sling (during football season only) I’m still saving $50 to $70 a month. I’ll take that. Plus, I think unbundling is happening fairly soon so I believe my choices will expand in the near future. However, I do believe that once unbundling happens all the contracts the SEC and others have signed become worthless. No way the financial model ESPN is currently built on survives. I could be wrong, but I think it all falls apart a whole lot faster than most people imagine.

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        • Gaskilldawg

          Your savings analysis is based upon cancelling Hulu and Sling after the football season. What is the savings for people such as me who want to watch during the basketball season?

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          • Paul

            The $70 is what I save before I add Sling. It costs $20. So when I add Sling I only save about $50. If you want to keep Sling all the time you’ll still save about $50 a month. At least I do anyway. Your mileage may vary.

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