RE: SEC to officially announce network deal in April
Thoughts:
1. Coverage is great for advertising, both direct and indirect, but there is much more. Carriage fees play a HUGE role in coverage. Just because one network had trouble getting coverage at one fee doesn't mean that a similar network couldn't get carriage to a reduced fee. Therefore every argument that begins with "[insert network here] couldn't get carriage, so there is no way that [insert second network here] will get carriage" is stupid, unless a fee is specified.
2. Payouts are misleading. Payouts can be tweaked depending on the content that is aired. Someone said that the SEC can expect $1,000,000,000 over ten years, which ends up being $100,000,000 per year, or $7,142,857.14 when it's cut 14 different ways. To put that in perspective, the BTN pays out something like $8,000,000 per school per year now, and the ACC has something like $6-8,000,000 in school-retained 3rd tier rights for most schools (WF and pals are low and UNC and pals are high). However, the BTN airs some premium programming and that $6-8,000,000 ACC number encompasses ALL remaining 3rd tier rights. That means that if the SEC isn't airing as much "good" content as the B1G is, and if SEC schools retain rights that aren't surrendered to the SEC Network, then it is a very good media deal relative to the other conferences. If not, then it isn't.
3. Networks redistribute wealth and that usually makes conferences stronger and more marketable. For example, the B1G, arguably the most solid conference, shares all TV revenue equally and even shares "excess" gate revenue. However, the old Big XII and the old BIG EAST, the two least stable/successful conferences, both had unequal revenue distribution. None the less, it is important to remember that networks do not create value in and of themselves. The material would just otherwise be sold by the individual schools. The payouts are great, but it's important to keep the costs in mind. It isn't all new profit. Indirect benefits from being in a stronger conference aside, top performing schools would actually be better off without a conference network. In fact, short term market inefficiencies aside, most of the increases in payouts from a conference network are derived from either a reduction in transaction costs which is the result of negotiating one set of contracts instead of 12-15 sets of contracts, and an assumption of greater risk. Out of the two, an assumption of greater risk leads to the larger payout, but it's a dangerous game to play. As long as times are good, a network is great because is adjusts to improving market conditions where a conventional media contract would not. That's why the BTN has been successful. However, when times are not great, then the increased assumption of risk is very bad because the network adjusts to weakening market condition where a conventional media contract would not.
4. I expect the SEC network to have great carriage and be very profitable. It will be very good for schools like Vandy, 'Ole Miss, and MSU who tend to be free riders. It will be significantly less generous to schools like Alabama who tend to pump money into the conference.
(This post was last modified: 03-19-2013 06:40 PM by nzmorange.)
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