The Realignment Landscape from a UConn Perspective

[pj]

I've written these things in bits and pieces in a variety of threads, I thought I'd bring everything I believe together in one place.

Decision metrics of the major conferences and their TV partners in regard to UConn:

ACC & ESPN
• ACC has sold everything to ESPN
• ESPN – richest content inventory. Cares about marginal value of content – given what I already have, what content adds new viewers?
• Winter sports add little value since there is a ton of winter and spring inventory (pro and college basketball, hockey, baseball, soccer)
• Football adds a lot of value because it is the only fall college sport
• So ESPN values basketball at a low level; values football highly, and ESPN’s valuations are the ACC’s valuations.
• UConn is therefore undervalued by ACC-ESPN; what UConn offers does not add the required $20 mn+ marginal value to the ACC, and ESPN has obtained most of UConn’s value from the AAC for $2 mn per year, so ESPN in particular has little motive to support a UConn to ACC move.
• Wildcard: the state of Connecticut might have influence with ESPN and be able to get ESPN to help UConn as a favor to the state.

B1G & BTN
• B1G values winter sports much more than ESPN because it has no pro sports inventory, so it needs college sports to fill its winter and spring programming
• UConn is a national winter sports brand that will draw additional viewers throughout the BTN footprint, increasing fee strength everywhere. UConn men and women basketball teams alone bring 6-10 $2 mn national games per year
• The B1G values markets because of its cable subscriber model; UConn has proven with SNY it delivers huge subscriber revenue in Connecticut. Based on SNY revenue, Connecticut alone could bring the BTN $2/mo * 12 months * 1.4 million cable households = $34 million per year, plus an extra $0.10 in NYC and southern New England for about $0.10/month * 12 months * 5 million cable households = $6 million per year
• UConn draws in New York and New England; it also gives Penn State, Michigan, Ohio State chances to play in New England and doubles the chances to play near NYC; it gives B1G the chance to claim it is NYC’s college league and New England’s college league.
• When you factor in all these considerations, even if the B1G doesn’t exploit its pricing power in Connecticut fully, UConn adds at least $35-45 mn per year to the B1G and pays for itself.
• However … the B1G is so rich, just paying for itself is a neutral consideration. B1G schools make $35-45 mn per year with or without UConn. Money will not be the decisive consideration.
• Three factors will decide: strategic goals (such as penetrating the northeast and becoming the northeast’s premier league – UConn wins here), culture and academic fit (this is where AAU matters and size matters, UConn loses on this criterion); and influence on other additions – would UConn’s presence in the B1G improve or degrade its chances to bring in other desirable schools like UVa, UNC, Kansas, Oklahoma, Texas? (this hurts UConn in the short term because uncertainties about other schools motivate the B1G to wait and keep options open … so as long as no other conference is moving to take UConn, they can sit and wait)
• It’s hard to find a partner who adds the required $35-45 million. Consider Missouri: about 2 million cable households, BTN currently gets ~$0.20, that would increase to Midwest standard $0.90, or $0.70/month * 12 * 2 million = $17 million – well shy of B1G needs. The only partners who would pull their weight are in other top leagues and won’t move until 2025 at earliest.

B12 and Fox-ESPN
• Don’t place much value on the northeastern markets – travel costs are as much a negative as the northeast exposure is a positive
• Like the ACC, marginal value of TV content and advertising is the major revenue source. Heavy winter-spring sports inventory works against UConn here. Both Fox and ESPN have pro inventory in that season.
• Therefore the B12 values football mainly, though B12 is a top basketball conference
• Strategic value: If the B12 is to be a permanent national league, it would benefit from BYU (national Mormon audience), UConn (untapped New England – New York market), UCF-USF (major Florida markets)
• However, the Fox-ESPN media contract means two networks have to approve B12 expansion. ESPN would lose value from its AAC contract with any raid of UConn/Cincy/UCF/USF, so they will refuse to pay for any B12 expansion. With a de novo contract negotiation, ie the new contract to be negotiated in 2025, a “Big14” with BYU-UConn-USF-UCF might be just as valuable or more valuable per school as the current B12 configuration, due to major markets and a conference championship game. But until the current contract expires, the B12 has no way to capture that value. Without additional TV revenues, the top schools will oppose expansion because it dilutes their revenue.
• Stability issues. If it expands, the B12 is competing with other national leagues (B1G, SEC, Pac) with second-tier properties and the top schools (Texas, Oklahoma, Kansas) would have to consider jumping to a stronger conference. Expansion may be destabilizing. The weaker B12 schools are likely to oppose expansion in the belief that if the league expanded, it would become an unattractive league to the top schools and they would jump at the expiration of the GoR to B1G, SEC, or Pac.
• Thus, the current best option is for the B12 to remain a regional league, so that revenue generated by the top (Texas, Oklahoma, Kansas) properties is not diluted among many schools, and travel costs are low, regional interest high.

Summary - Status of UConn
• B1G might move when a partner is available, but a partner is unlikely to be available before 2025 … or if its strategic goals for the northeast are of overwhelming importance, it might add UConn as a #15 and wait for 16. B1G is most likely to want to keep options open. Assessment: 10% chance of adding UConn in the 2015-2016 tv negotiations, 50% chance of adding UConn in 2025 when partner is available.
• B12 unlikely to move until 2025 when a new media contract is negotiated … but then all options will be considered, including dissolution. Assessment: 10% chance of adding UConn in 2025.
• ACC has little reason to move, except strategically to pre-empt B1G expansion. Assessment: 20% chance of adding UConn in 2015-17 due to strategic threat of B1G and/or state of Connecticut influence on ESPN; 50% chance of adding UConn c. 2025 when new TV contract negotiated.

Overall odds: 20% chance of getting a P5 add by 2017, 50% chance of P5 add circa 2025.

 

[UConnJim]

I think you left out one important point: ND's impact on ACC football. With 4 spots for the playoff, ND could end up taking a spot and the ACC is possibly left out, or they beat the top ACC team that would otherwise grab a spot. If this happens, it will create big problems within the ACC.

Imagine this: ND knocks off FSU next year and ND is one of the 4 teams in the playoff and no ACC team makes it in. Or, FSU loses to ND at home, wins the ACC Conf championship game, but doesn't get one of the 4 spots.

One other scenario. Imagine a 1 loss ND not making the playoff as the selection committee seems biased to select conference champions instead. Does ND then think they need to join a conference?

ND is a destabilizing force in the ACC until they become a full football member. And, if the become the #15 football member, UConn is available.

 

[pj]

I think you left out one important point: ND's impact on ACC football. With 4 spots for the playoff, ND could end up taking a spot and the ACC is possibly left out, or they beat the top ACC team that would otherwise grab a spot. If this happens, it will create big problems within the ACC.

Question: If ND gets into the playoffs, do the playoff revenues go to Notre Dame or the ACC? It's possible the ACC might regard Notre Dame in the playoffs as a victory for the ACC, ie ND represents the ACC and the ACC gets the money. Remember there are 5 major conferences so the ACC won't have a playoff team every year. ND being good enough to get in could help them.

 

[UConnJim]

Question: If ND gets into the playoffs, do the playoff revenues go to Notre Dame or the ACC? It's possible the ACC might regard Notre Dame in the playoffs as a victory for the ACC, ie ND represents the ACC and the ACC gets the money. Remember there are 5 major conferences so the ACC won't have a playoff team every year. ND being good enough to get in could help them.

ND is not part of the ACC for the revenue share. They get their own payout if they make the semis or an access bowl. Among the P5 conferences, it looks like there will be revenue sharing based somewhat on performance, so getting teams in the playoff will be a factor, although the P5 variation in payouts shouldn't be that great. I don't think the playoff money factor will be that great, but the prestige factor of getting teams in the playoff will be very large.

At least one conference will be left out of the playoff this year. It will be interesting to see how that conference and the media reacts!

 

[Sea Goat]

I've written these things in bits and pieces in a variety of threads, I thought I'd bring everything I believe together in one place.

Decision metrics of the major conferences and their TV partners in regard to UConn:

ACC & ESPN
• ACC has sold everything to ESPN
• ESPN – richest content inventory. Cares about marginal value of content – given what I already have, what content adds new viewers?
• Winter sports add little value since there is a ton of winter and spring inventory (pro and college basketball, hockey, baseball, soccer)
• Football adds a lot of value because it is the only fall college sport
• So ESPN values basketball at a low level; values football highly, and ESPN’s valuations are the ACC’s valuations.
• UConn is therefore undervalued by ACC-ESPN; what UConn offers does not add the required $20 mn+ marginal value to the ACC, and ESPN has obtained most of UConn’s value from the AAC for $2 mn per year, so ESPN in particular has little motive to support a UConn to ACC move.
• Wildcard: the state of Connecticut might have influence with ESPN and be able to get ESPN to help UConn as a favor to the state.

B1G & BTN
• B1G values winter sports much more than ESPN because it has no pro sports inventory, so it needs college sports to fill its winter and spring programming
• UConn is a national winter sports brand that will draw additional viewers throughout the BTN footprint, increasing fee strength everywhere. UConn men and women basketball teams alone bring 6-10 $2 mn national games per year
• The B1G values markets because of its cable subscriber model; UConn has proven with SNY it delivers huge subscriber revenue in Connecticut. Based on SNY revenue, Connecticut alone could bring the BTN $2/mo * 12 months * 1.4 million cable households = $34 million per year, plus an extra $0.10 in NYC and southern New England for about $0.10/month * 12 months * 5 million cable households = $6 million per year
• UConn draws in New York and New England; it also gives Penn State, Michigan, Ohio State chances to play in New England and doubles the chances to play near NYC; it gives B1G the chance to claim it is NYC’s college league and New England’s college league.
• When you factor in all these considerations, even if the B1G doesn’t exploit its pricing power in Connecticut fully, UConn adds at least $35-45 mn per year to the B1G and pays for itself.
• However … the B1G is so rich, just paying for itself is a neutral consideration. B1G schools make $35-45 mn per year with or without UConn. Money will not be the decisive consideration.
• Three factors will decide: strategic goals (such as penetrating the northeast and becoming the northeast’s premier league – UConn wins here), culture and academic fit (this is where AAU matters and size matters, UConn loses on this criterion); and influence on other additions – would UConn’s presence in the B1G improve or degrade its chances to bring in other desirable schools like UVa, UNC, Kansas, Oklahoma, Texas? (this hurts UConn in the short term because uncertainties about other schools motivate the B1G to wait and keep options open … so as long as no other conference is moving to take UConn, they can sit and wait)
• It’s hard to find a partner who adds the required $35-45 million. Consider Missouri: about 2 million cable households, BTN currently gets ~$0.20, that would increase to Midwest standard $0.90, or $0.70/month * 12 * 2 million = $17 million – well shy of B1G needs. The only partners who would pull their weight are in other top leagues and won’t move until 2025 at earliest.

B12 and Fox-ESPN
• Don’t place much value on the northeastern markets – travel costs are as much a negative as the northeast exposure is a positive
• Like the ACC, marginal value of TV content and advertising is the major revenue source. Heavy winter-spring sports inventory works against UConn here. Both Fox and ESPN have pro inventory in that season.
• Therefore the B12 values football mainly, though B12 is a top basketball conference
• Strategic value: If the B12 is to be a permanent national league, it would benefit from BYU (national Mormon audience), UConn (untapped New England – New York market), UCF-USF (major Florida markets)
• However, the Fox-ESPN media contract means two networks have to approve B12 expansion. ESPN would lose value from its AAC contract with any raid of UConn/Cincy/UCF/USF, so they will refuse to pay for any B12 expansion. With a de novo contract negotiation, ie the new contract to be negotiated in 2025, a “Big14” with BYU-UConn-USF-UCF might be just as valuable or more valuable per school as the current B12 configuration, due to major markets and a conference championship game. But until the current contract expires, the B12 has no way to capture that value. Without additional TV revenues, the top schools will oppose expansion because it dilutes their revenue.
• Stability issues. If it expands, the B12 is competing with other national leagues (B1G, SEC, Pac) with second-tier properties and the top schools (Texas, Oklahoma, Kansas) would have to consider jumping to a stronger conference. Expansion may be destabilizing. The weaker B12 schools are likely to oppose expansion in the belief that if the league expanded, it would become an unattractive league to the top schools and they would jump at the expiration of the GoR to B1G, SEC, or Pac.
• Thus, the current best option is for the B12 to remain a regional league, so that revenue generated by the top (Texas, Oklahoma, Kansas) properties is not diluted among many schools, and travel costs are low, regional interest high.

Summary - Status of UConn
• B1G might move when a partner is available, but a partner is unlikely to be available before 2025 … or if its strategic goals for the northeast are of overwhelming importance, it might add UConn as a #15 and wait for 16. B1G is most likely to want to keep options open. Assessment: 10% chance of adding UConn in the 2015-2016 tv negotiations, 50% chance of adding UConn in 2025 when partner is available.
• B12 unlikely to move until 2025 when a new media contract is negotiated … but then all options will be considered, including dissolution. Assessment: 10% chance of adding UConn in 2025.
• ACC has little reason to move, except strategically to pre-empt B1G expansion. Assessment: 20% chance of adding UConn in 2015-17 due to strategic threat of B1G and/or state of Connecticut influence on ESPN; 50% chance of adding UConn c. 2025 when new TV contract negotiated.

Overall odds: 20% chance of getting a P5 add by 2017, 50% chance of P5 add circa 2025.

PJ - impressive presentation - well thought-out. However, I think your percentages for UConn are understated for a few reasons:

1. In the B1G vs. ACC dynamic, UConn really completes the out-flanking of the ACC in the Northeast. With UConn, the B1G would have the flagship schools of PA, MD, NJ and CT locked up. To the north and east of that line, the ACC pickings (and consequently the defense of the market) are slim. - BC, Syracuse and Pitt.

2. UConn does help in NYC now - the B1G knows that Rutgers doesn't do it and the B1G would be vulnerable to an ACC move to grab UConn to help it in the NYC market. (Enough about TV sets and Rutgers - they just don't bring NYC to the B1G.)

3. UConn brings "watchable" content for the BTN. Take a look at UConn's hockey east schedule - lot of games at the XL center and also Harbor Yard in Bridgeport. Nice bone to the B1G NYC alumni to play some games at Harbor Yard or even the Garden. Lots of possibilities with hockey that Rutgers can't provide. And the opportunities in hoops? Enough said.

4. Has football really driven the bus with respect to the B1G and the ACC expansion to date? You will have a tough time convincing me that Syracuse, Pitt, Maryland and Rutgers must have been added because of football prowess. (Even Louisville has been allegedly football worthy for only a short period of time.) No question, now football is a key and we have to improve. But has it become a key, because these conferences have added the above and now need to strengthen football? Because the recent additions haven't done that and, further, only Louisville and sometimes Syracuse have helped in hoops.

So UConn is more attractive sooner than later. I am not sure what the percentages should be and recognize I am speculating on the head of a pin, but I think we have better than a 50% chance short term. (Admittedly, some of the above BS is driven my conviction that 10 years in this gulag will kill us.)

 

[OkaForPrez]

@pj @upstater

I've seen you both make financial cases for UConn's media contributions. How do your opinions reconcile and how have they been adjusted since the BTN inked deals in the NYC Metro. What info about the BTN curent deal are you waiting on for more information as it relates to your assumptions of our value?

Thanks.

 

[upstater]

@pj @upstater

I've seen you both make financial cases for UConn's media contributions. How do your opinions reconcile and how have they been adjusted since the BTN inked deals in the NYC Metro. What info about the BTN curent deal are you waiting on for more information as it relates to your assumptions of our value?

Thanks.

1. I never assumed the B1G is looking at UConn because I don't see UConn as a good fit right now, mainly because of football.
2. We don't know anything about the BTN's current deals in New York. On other boards, someone has shown that at least one of the deals is for BTN on a sports tier, not on Extra.

 

[freescooter]

Question: If ND gets into the playoffs, do the playoff revenues go to Notre Dame or the ACC? It's possible the ACC might regard Notre Dame in the playoffs as a victory for the ACC, ie ND represents the ACC and the ACC gets the money. Remember there are 5 major conferences so the ACC won't have a playoff team every year. ND being good enough to get in could help them.

A related scenario, I suspect is Notre Dame gets one ACC spot and an unbeaten/1 loss Big team gets upset in its conference championship game thus being forced out to a non-factor Baylor or Ok State type B-12 type team. That in fact is the scenario we should be hoping for. It would force the B-12's hand to expand, no "championship game" league is going to stand by for long after its best team loses out to a B-12 team that didn't have a championship game. Will not happen after the first year. That scenario starts the whole merry-go-round back up. Whatever we want, we want the process to start again. There are really only a few schools out there that are going to be taken and we're one. But without something to force the process, we're not one!

 

[pj]

@pj @upstater

I've seen you both make financial cases for UConn's media contributions. How do your opinions reconcile and how have they been adjusted since the BTN inked deals in the NYC Metro. What info about the BTN curent deal are you waiting on for more information as it relates to your assumptions of our value?

Thanks.

The BTN deal terms in NYC have not been disclosed. Whatever they are, I am sure adding UConn would improve them. My $0.10 per subscriber estimate is not aggressive. It could be more than that.

I think the value is fairly simple: Nationally televised football and basketball games added, $2-4 mn each; some extra BTN value in New York and New England; and BTN in Connecticut. This last is a big one because BTN with all UConn games could be somewhere between ESPN2 ($2/month, $34 million per year) and ESPN ($5/month, $85 million per year) in value in Connecticut. BTN could argue that they are worth at least $2/month, with SNY as a precedent, and that cable networks should ask for cuts from ESPN for losing UConn games, rather than try to drive a hard bargain for BTN. Cable networks would get a lot of cancellations if they didn't carry UConn men's & women's basketball and football, not to mention the rest of the BTN. This means that however the B1G estimates UConn's national value, they could get enough out of Connecticut to make UConn a positive financial addition.

 

[whaler11]

You don't pay for yourself with $40 million to the BTN. The league doesn't own the network outright and they only get a percentage of the revenue. Fox owns 51%.

You need to make up the national revenue as well. Unless you are worth more in negotiations on the Tier 1 deal than they currently average you start underwater.

 

[Marty Jackson]

You don't pay for yourself with $40 million to the BTN. The league doesn't own the network outright and they only get a percentage of the revenue. Fox owns 51%.

You need to make up the national revenue as well. Unless you are worth more in negotiations on the Tier 1 deal than they currently average you start underwater.

are new schools getting a full share?

 

[whaler11]

are new schools getting a full share?

No but you don't get judged on that.

 

[Dooley]

I don't buy UCONN being stuck in the AAC until 2025. Once football is restored (and that WILL happen), the momentum train will leave the station and gather energy from our basketball programs in the winter. It wasn't that long ago that UCONN had all sorts of positive press after the dual championships. All UCONN needs is a competitive football program with an attendance boost.

As for academics, those BILLIONS are still being spent to expand faculty/student enrollment, campus infrastructure, and research. The state of CT knows how important UCONN is to the state's economy.

Finally, I have a very hard time believing that UCONN would invest so much money in a new football coaching staff, raising Kevin Ollie, paying Geno top dollar AND securing BILLIONS of dollars from the state of CT if it felt like it was going to be in the AAC for another decade. If they really felt that they were going to stay in the AAC, I would guess that the first thing done would be to throw all of the university's credit cards in the freezer and close all bank accounts.

 

[OkaForPrez]

Finally, I have a very hard time believing that UCONN would invest so much money in a new football coaching staff, raising Kevin Ollie, paying Geno top dollar AND securing BILLIONS of dollars from the state of CT if it felt like it was going to be in the AAC for another decade. If they really felt that they were going to stay in the AAC, I would guess that the first thing done would be to throw all of the university's credit cards in the freezer and close all bank accounts.

Either this, or the revenue shortfall between the P5 and the AAC is not as big a deal as is commonly believed here and in the general CR community.

 

[Hoophound]

Either this, or the revenue shortfall between the P5 and the AAC is not as big a deal as is commonly believed here and in the general CR community.

It is. We have exit fee money coming and we need to invest in the programs to have a shot at getting out of the AAC. We'll spend for a few years, but after that you'll see one of three things:

1. An invite elsewhere.
2. A much better AAC contract keeping us competitive.
3. A surrender by our administration and drastic cost cutting.

 

[Rappin'Rodney]

are new schools getting a full share?

Each new school has the same potential to receive a full share. It's simply a function of how quickly the new school will be able to contribute it's slice of total fixed costs to the BTN. Once they're fully paid-in, they get a full share.

 

[WestHartHusk]

Each new school has the same potential to receive a full share. It's simply a function of how quickly the new school will be able to contribute it's slice of total fixed costs to the BTN. Once they're fully paid-in, they get a full share.

That is an oversimplification. Maryland gets full share sooner than Rutgers because they had an alternative while Rutgers did not - it wasn't some math formula about payback periods.

 

[Rappin'Rodney]

That is an oversimplification. Maryland gets full share sooner than Rutgers because they had an alternative while Rutgers did not - it wasn't some math formula about payback periods.

It's not an oversimplification, it's a basic time value of money calculation. Who-gets-a-share-sooner is only limited by each school's access to funds to invest, and the extent to which each school chooses to invest those funds in the BTN.

 

[Dooley]

Is it a silly idea if UCONN offered a longer probation period until it received a full B1G share? Would give the football program some time to get up to snuff and expand the stadium.

 

[Dooley]

Either this, or the revenue shortfall between the P5 and the AAC is not as big a deal as is commonly believed here and in the general CR community.

If the next AAC contract can get them MUCH closer to $20M/yr, then it would certainly make our purgatory sentence much more manageable. The schedules will continue to struggle a bit, but at least UCONN could fend off the hiring vultures whenever they begin to circle for Ollie or Diaco.

 

[upstater]

That is an oversimplification. Maryland gets full share sooner than Rutgers because they had an alternative while Rutgers did not - it wasn't some math formula about payback periods.

I don't know what the dynamics are with Maryland but both Penn State and Nebraska took the same 7 years that Rutgers did to get full shares. So... PSU definitely had options.

 

[NickyNewark]

It's not an oversimplification, it's a basic time value of money calculation. Who-gets-a-share-sooner is only limited by each school's access to funds to invest, and the extent to which each school chooses to invest those funds in the BTN.

Everyone gets the same except Md's is frontloaded and RU's evens out in the end! I think they both start at around 50% and go up in around 10% increments for 5 or 6 yrs when both receive full shares in the 6th yr!?! Md due to exit fee was I believe loaned or given 20M which was recorded as "traveling expense's" but really to help offset the exit fee Md had to face as they were in the stronger position conference wise but no mistaking Md was what the B1G was waiting for to give the waiting spot RU thought they were going to get if ND accepted earlier during the anounced search team findings! They only started MD negotiations after ND turned down the offer I believe in around "10". I know I heard rumblings around "09" or so recruits were told they might end up finishing the college careers in the B1G. Maybe someone who has better info on the details can enlighten us?

 

[Fishy]

Maryland negotiated a front-loaded deal - they'll get $32M after their first season and also will be given a travel subsidy to help them adjust to the additional costs of being in the Big Ten. Rutgers received no such concessions.

Rutgers was Maryland's plus-one - they were not getting the invite without Maryland.

 

[Adios]

If the next AAC contract can get them MUCH closer to $20M/yr, then it would certainly make our purgatory sentence much more manageable. The schedules will continue to struggle a bit, but at least UCONN could fend off the hiring vultures whenever they begin to circle for Ollie or Diaco.

If Diaco succeeds, Burton may find a way to keep him around. You never know.

 

[Hoophound]

If the next AAC contract can get them MUCH closer to $20M/yr, then it would certainly make our purgatory sentence much more manageable. The schedules will continue to struggle a bit, but at least UCONN could fend off the hiring vultures whenever they begin to circle for Ollie or Diaco.

I have been hoping for 10 million if everything goes perfectly, I expect 6-8. I don't think 20 is remotely possible unless the AAC somehow wins multiple football national championships in the next few years. A non P5 conference isn't getting paid that kind of money unless it becomes a P6.