College Football

Thursday, June 30, 2022 may go down as the day college football as many fans knew it officially died, as that was the day the Big Ten stunned the college football world, as the addition of USC and UCLA to the conference went from being reported by various reporters, initially with the clarification that it wasn’t a done deal, to being officially announced in the space of a few hours. It’s easy to see the move as a desperation bid by the Big Ten in response to the SEC poaching Texas and Oklahoma a year earlier, which created the first sixteen-team “superconference” in college football, crippled the Big 12 and left them in a liminal state where they’re likely to be seen as only barely a power conference at best, and threatened to create a gap between the SEC and other conferences that might be insurmountable. None of the other schools in the Big 12 could bring nearly as much of a brand name or fanbase to any of the other conferences to even be worth splitting the pie more ways, let alone make up the gap to the SEC, and the Pac-12 and ACC seemed to be cohesive enough conferences, with strong relationships between their member institutions, as to be off-limits to be poached by the Big Ten or each other.

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In 2013, a year after financially-struggling Maryland left the ACC for the greener pastures of the Big Ten, the Charlotte News and Observer obtained e-mails that circulated among the leadership of the University of North Carolina, perhaps the single most important school to the long-term survival of the ACC, showing their reaction to the news. Many of the e-mails expressed disbelief at a Sports Illustrated article that claimed that Maryland would make nearly $100 million more in its new conference by 2020, thanks to the Big Ten Network, than it would have made in the ACC, with UNC officials looking for confirmation that Maryland was going to make that much more money (indeed Maryland itself wasn’t aware of it until it started going through realignment talks). But for many college sports fans following the sports media and college sports realignment worlds, the fact that the Big Ten was making oodles more money than any other conference was hardly news, but something that had been widely reported throughout the sports media and had been fueling the current round of realignment from the start. Ordinary college sports fans and bloggers knew more about the financial disparities between the major conferences than the university presidents within them whose job it was to make informed decisions. As Frank the Tank, one of the bloggers most responsible for exposing the implications of those disparities, put it:

It would have been one thing if these were average sports fans just focused on on-the-field results, but it’s quite amazing that university leaders and athletic department officials didn’t seem to be as informed on college sports financial matters as, say, most of the people reading this blog or those that followed the reporting of mainstream media members like Brett McMurphy of ESPN.com, Andy Staples of SI.com and Dennis Dodd of CBSSports.com. It’s an indication of the insularity of many universities and athletic departments and partially explains why the inertia in favor of the status quo is often stronger than many conference expansionistas would like to believe. What we’re seeing is that it takes a real external crisis for the vast majority of power conference schools to take notice of the information that’s out there and consider switching leagues.

I thought of this upon hearing about the ACC’s move announced last week to try to rectify this disparity, which has only grown to their further disadvantage with the launch of the SEC (and Pac-12) Network, yet the circumstances surrounding it have changed considerably since 2012. The sports-network market has always been built on the con of the cable bundle, where people with little to no interest in sports see large chunks of their cable bill get shipped off to pay for sports networks, and recent years have seen one piece of news after another suggesting that bundle is being increasingly undermined. My generation sees little value in the bundle and has increasingly been “cord-cutting” to get their entertainment from sources like Netflix and Amazon, getting away from bloated bundles that exist largely to subsidize sports networks. Investors are increasingly concerned about what the trend means for the sports-network market and especially ESPN, which finds itself caught between the rock of cord-cutting and the hard place of their desire to keep the cable bundle going for as long as possible; no less an institution than Moody’s has predicted the end of the cable bundle and that regional sports networks are looking like an increasingly dicey proposition. Meanwhile, cable companies, blamed for higher prices even as they struggle to keep pace with the rising price of sports networks, have increasingly taken stands against the launch of more and more new networks, as evidenced by the carriage struggles of SportsNet LA and the network formerly known as CSN Houston, with SportsNet LA remaining uncarried even as Time Warner Cable has reduced its price and even in Vin Scully’s final season.

Against this backdrop, the ACC has been the one major college conference with a substantial number of third-tier games still airing on broadcast television through regional syndication on Raycom. Assuming broadcast stations could get their act together and ensure wide coverage without relying on the crutch of retransmission consent (hardly a sure thing), I felt that, for all the ACC may have looked longingly at the SEC and Big Ten Networks and the revenue they make, staying the course could prove to give them a massive advantage in exposure if the market flipped and the SEC Network and BTN found themselves limited to what could be a distinct minority of people willing to pay relatively large amounts of money for them or for bundles including them, especially among poorer recruits, and especially if the ACC made an aggressive move to distribute their syndication package nationwide.

Instead, last week the ACC and ESPN announced an extension of their existing media rights agreement for the next twenty years, with the launch of a new “ACC Network Plus” digital network this fall leading up to the launch of a full-fledged linear ACC Network in 2019. I’d be shocked if the cable bundle still looked anything like it does today by 2036, and frankly I’d be surprised if it still looked viable in 2019. Reportedly, the long delay for the launch is related to the expiration of ESPN’s carriage agreements with cable providers, meaning ESPN would rather hold off on the launch of the ACC Network until it can tie it in with its established linear networks. But the addition of the ACC Network to ESPN’s bundle could be what causes the bundle to collapse entirely and marks the fall of ESPN’s empire.

Cable operators have been chafing under ESPN’s tops-in-the-industry subscriber fees for a long time, with Dish Network chairman Charles Ergen suggesting in 2011, following the signing of an expensive Monday Night Football deal, that certain companies might decide to go without ESPN and market their service as a low-cost alternative for non-sports fans, and in recent years many such operators have been experimenting with sports-free packages that offer a selection of popular channels at a lower price, resulting in ESPN’s carriage falling considerably. But no cable or satellite company has taken the plunge and experimented with cutting ESPN out of their lineups entirely, instead limiting the availability of their sports-free packages to avoid violating their ESPN contracts, and online “skinny bundles” that have won considerable acclaim for being an “alternative to the cable bundle”, including Dish’s own Sling TV, have made themselves part of the problem by including ESPN and other sports networks. For now, pay-TV providers feel they must have ESPN’s high-value programming such as MNF and the College Football Playoff, even though they know it’s almost single-handedly fueling the revolt against the cable bundle, because even as the cost of sports drives people away from the cable bundle, the presence of sports is the one thing keeping people tied to it, because live events, especially sports, are the one thing linear TV does better than the Internet. The power of ESPN explains why the SEC Network, theoretically a channel of regional interest, had the largest launch in cable TV history, avoiding even the carriage battles that bedeviled the Big Ten Network.

But for as much as the SEC Network benefited from the ESPN connection, it may not have been so successful if it weren’t sufficiently valuable in its own right. The SEC and Big Ten have the most passionate fanbases and bring the most value to any sports network by a significant margin over any other conference, even any other college conference; the ACC is strong in basketball, but their football conference tends to consist of Florida State and not much else, both in terms of quality on the field and in terms of schools with passionate fanbases that can attract large audiences, and football is what drives TV deals and conference realignment. What may be more relevant to what the ACC Network has to look forward to is the fate of the Pac-12 Networks, which remains uncarried by DirecTV years after launch; it was thought the DirecTV-AT&T merger would smooth along talks, but instead it seems more likely that AT&T will drop Pac-12 Networks from U-Verse systems once that deal expires than that DirecTV will add them. According to Washington State AD Bill Moos, Pac-12 schools were hoping to receive $5 million a year from the Pac-12 Networks at this point, but instead are only collecting $1.4 million. Unlike the SEC and Big Ten Networks, the Pac-12 went it alone on their network without selling any stake to anyone that might have helped their network gain carriage (or shared in the network’s expenses), but thanks to the CSN Houston and SportsNet LA struggles – not to mention ESPN’s Longhorn Network, which recently eliminated much if not all of its studio programming – cable operators are a lot more confident in their ability to stand up to sports networks than they were in the late 2000s when they challenged the BTN.

They may not have wanted to alienate ESPN’s many loyal viewers over the SEC Network, but the ACC Network won’t bring nearly as much value to the table, and while ESPN may have largely escaped the bruising carriage battles other large programmers have fought, if they overestimate how much cable operators are willing to pay for an ACC Network, at least one large programmer may just decide they’ve had enough of ESPN pushing them around and go to war (especially since even with the wait, ESPN’s carriage deals with Comcast, Charter, and Dish Network still won’t have expired yet by 2019, meaning the ACC Network will have to stand and fall on its own merits with them). Even if they don’t, the resulting hike in people’s cable bills might just be the spur cord-cutting needs to cross a tipping point and cause large numbers of people to dump their cable subscriptions en masse – and that assumes it won’t have done so already. Cord-cutting has come a long way in just the last three years – HBO went from disdaining the possibility of a direct-to-consumer offering to offering one in less time – and there’s no reason not to assume it won’t go even further in the next three. If ESPN escapes any major controversy surrounding the ACC Network, it may only be because the popularity of the cable bundle will have shrunk enough for it not to matter, to the point that ESPN might just decide to make the ACC Network the centerpiece of their own direct-to-consumer offering. Any of these scenarios would likely result in the ACC making substantially less money than they might have planned (or, depending on the structure of the contract, ESPN taking a loss on the enterprise).

ESPN likely knows all this, and tried for a long time to dissuade the ACC from the idea, preferring to let a clause activate this summer that would have substantially increased its payouts to the conference (and which, apparently, will still activate in the interim) than to launch a network that would not only lose money or fail to achieve the conference’s goals, but would accelerate the larger trend ESPN has been trying to slow down or fight off. But all the ACC sees is the boatloads of money the Big Ten and SEC are making, even though they have no chance whatsoever at making anywhere near that much, despite the conference’s consultant, Dean Jordan, claiming that if it “performs even moderately, it’ll put the ACC in a situation where they’ll be very, very competitive financially with the upper tier of the collegiate industry”. The ACC is deluded not only about the changes sweeping the video industry, but about its own value compared to “the upper tier of the collegiate industry”. There may have been a time when ESPN could ask for any price for an ACC Network and gotten the ACC money on par with the SEC, but that time has been long past for several years now.

ESPN President John Skipper points out that 93 of the top 100 TV programs in the ratings in 2015 were sports, compared to 14 just five years ago, and takes that as evidence that live sports is growing more popular and that the insatiable appetite for it will justify an ACC network, not that linear television is growing less popular among people who don’t watch live sports. The ACC is confident that ESPN will “find a way to make this work” no matter how untenable the cable bundle becomes in the interim. But that assumes live sports will maintain their elevated position, that the economics of the video content market won’t recalibrate themselves to favor video-on-demand services and linear television becomes the specific subset of the larger video landscape delivering a specific type of content, live content of all types, that it should be, that the linear market doesn’t greatly and rapidly contract to the level actually warranted by the provenance and popularity of live events that are out there, that conference-specific networks reliant on subscription revenue and showing lower-tier games don’t become an increasingly dicey proposition when they have to stand and fall based on their target audience alone. In that case, the best-case scenario for the ACC could be that the SEC and Big Ten networks become equally untenable, and if that happens they’ll still be in better shape than the ACC. I don’t know if the ACC will ever realize the scenario they passed up, but I do know they could find themselves cursing their foolishness – especially if their decision turns out to be the proximate cause of exposing its own foolishness.

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