I fear that the "3.5 million" is just the spread between the per school payout for the Orange Bowl and new BCS and the payout for the old BCS. I hope I'm wrong.

could be...

Something was obviously lost in translation here. The playoffs alone (a well-established dollar amount) comes to $3.7M per team per year - by itself. The Orange Bowl has to be estimated since there are factors such as Notre Dame, but our best guess on that is another $2.8M per team per year. I have no idea where $3.5M comes from... maybe GT gets a reduced cut because the are so bad in basketball...

(02-12-2013 10:50 AM)orangefan Wrote:  As far as the EV being 0, the idea would be that combining this content onto a network would allow better monetization of the content's value through subscription fees than the current distribution, which relies primarily on advertising revenue.

Assuming that there is an efficient market, subscription fees are already taken into account in the form of carriage charges allocated to the programming. For example, nobody would care if they had SNY if SNY didn't have any programming, so their carriage charges would be $0. But, by adding programming, then SNY is able to charge carraiage fees (as well as advertising revenue). Therefore, the added value o fthe programming should already be taken into account. Now, we don't live in an efficient world, but the odds of it being too high (over valued) should be the same as the odds of it being too low (undervalued), so there is still no inherent built-in gain. Any gain from that would come from the conference's ability to spread the fixed costs of negotiating a contyract over 14.3333 different schools instead of one. In theory this would allow the conference to get a top-of-the-line negotiator. In reality, Swofford would be doing the negotiating, and he isn't exactly known for being a fierce negotiator.

(02-12-2013 10:03 AM)TexanMark Wrote:  --does ESPN which still have first option come in and trump NBC...if not, possibly more $$$ for ACC

What do you mean?

(02-12-2013 12:46 PM)nzmorange Wrote:  

(02-12-2013 10:50 AM)orangefan Wrote:  As far as the EV being 0, the idea would be that combining this content onto a network would allow better monetization of the content's value through subscription fees than the current distribution, which relies primarily on advertising revenue.

Assuming that there is an efficient market, subscription fees are already taken into account in the form of carriage charges allocated to the programming. For example, nobody would care if they had SNY if SNY didn't have any programming, so their carriage charges would be $0. But, by adding programming, then SNY is able to charge carraiage fees (as well as advertising revenue). Therefore, the added value o fthe programming should already be taken into account. Now, we don't live in an efficient world, but the odds of it being too high (over valued) should be the same as the odds of it being too low (undervalued), so there is still no inherent built-in gain. Any gain from that would come from the conference's ability to spread the fixed costs of negotiating a contyract over 14.3333 different schools instead of one. In theory this would allow the conference to get a top-of-the-line negotiator. In reality, Swofford would be doing the negotiating, and he isn't exactly known for being a fierce negotiator.

In an efficient market, how many channels would ESPN have? The fact is, they only have 4 (ABC, ESPN, ESPN2, and ESPNU), and 2 of those are limited (ABC doesn't show sports 24/7, and ESPNU isn't on basic cable everywhere). So that's one avenue for revenue growth right there - add another channel.

Also, you guys keep missing the fact that Raycom obviously makes money buying wholesale from ESPN and selling retail to TV stations and cable providers. No, that isn't even a good analogy - more like buying raw ore and selling finished steel (because ESPN doesn't produce games for Raycom). So there is another, bigger revenue opportunity - buy back undeveloped rights, produce the games, and sell the finished product.

(02-12-2013 01:11 PM)Hokie Mark Wrote:  

(02-12-2013 12:46 PM)nzmorange Wrote:  

(02-12-2013 10:50 AM)orangefan Wrote:  As far as the EV being 0, the idea would be that combining this content onto a network would allow better monetization of the content's value through subscription fees than the current distribution, which relies primarily on advertising revenue.

Assuming that there is an efficient market, subscription fees are already taken into account in the form of carriage charges allocated to the programming. For example, nobody would care if they had SNY if SNY didn't have any programming, so their carriage charges would be $0. But, by adding programming, then SNY is able to charge carraiage fees (as well as advertising revenue). Therefore, the added value o fthe programming should already be taken into account. Now, we don't live in an efficient world, but the odds of it being too high (over valued) should be the same as the odds of it being too low (undervalued), so there is still no inherent built-in gain. Any gain from that would come from the conference's ability to spread the fixed costs of negotiating a contyract over 14.3333 different schools instead of one. In theory this would allow the conference to get a top-of-the-line negotiator. In reality, Swofford would be doing the negotiating, and he isn't exactly known for being a fierce negotiator.

In an efficient market, how many channels would ESPN have? The fact is, they only have 4 (ABC, ESPN, ESPN2, and ESPNU), and 2 of those are limited (ABC doesn't show sports 24/7, and ESPNU isn't on basic cable everywhere). So that's one avenue for revenue growth right there - add another channel.

Also, you guys keep missing the fact that Raycom obviously makes money buying wholesale from ESPN and selling retail to TV stations and cable providers. No, that isn't even a good analogy - more like buying raw ore and selling finished steel (because ESPN doesn't produce games for Raycom). So there is another, bigger revenue opportunity - buy back undeveloped rights, produce the games, and sell the finished product.

1. There is no correlation between an efficient market and the number of ESPN channels.

2. You missed a couple. For instance, off the top of my head, isn't there an ESPN legends? And, I'm pretty sure there are others, but I don't have any ESPN channels, so I can't say for sure.

3. I hear Raycom is losing money.

What's wrong with ESPNACC? I think ESPN should show all ACC basketball games on one of their more readily available networks, but maybe a few of the less popular football games with lots of soccer, lax, baseball, softball, track, swimming/diving - that would make for a pretty decent network, if you ask me (which nobody did). Because of ACC soccer, baseball, and especially lax, I think that'd be a lot more interesting than the BTN.

(02-12-2013 02:37 PM)nzmorange Wrote:  1. There is no correlation between an efficient market and the number of ESPN channels.

OK. Tell me, what does economic theory have to say about the #3 highest-rated conference getting paid #5 money? What markets forces are at play?

Quote:2. You missed a couple. For instance, off the top of my head, isn't there an ESPN legends? And, I'm pretty sure there are others, but I don't have any ESPN channels, so I can't say for sure.

meh. I have basic cable but only get ABC, ESPN and ESPN2. The others are small potatoes.

Quote:3. I hear Raycom is losing money.

Really? I had not heard that. Where did you get that from? Of course, if they end up getting out of the business, that could free up lots of games for an ACC network...

(02-12-2013 12:46 PM)nzmorange Wrote:  

(02-12-2013 10:50 AM)orangefan Wrote:  As far as the EV being 0, the idea would be that combining this content onto a network would allow better monetization of the content's value through subscription fees than the current distribution, which relies primarily on advertising revenue.

Assuming that there is an efficient market, subscription fees are already taken into account in the form of carriage charges allocated to the programming. For example, nobody would care if they had SNY if SNY didn't have any programming, so their carriage charges would be $0. But, by adding programming, then SNY is able to charge carraiage fees (as well as advertising revenue). Therefore, the added value o fthe programming should already be taken into account. Now, we don't live in an efficient world, but the odds of it being too high (over valued) should be the same as the odds of it being too low (undervalued), so there is still no inherent built-in gain. Any gain from that would come from the conference's ability to spread the fixed costs of negotiating a contyract over 14.3333 different schools instead of one. In theory this would allow the conference to get a top-of-the-line negotiator. In reality, Swofford would be doing the negotiating, and he isn't exactly known for being a fierce negotiator.

For comparison, ESPN pays the NFL $1.9 billion/year for the MNF package while NBC, pays the NFL $1.0 billion/year for the SNF package. The SNF package gets better ratings, has a better package of games, includes a couple of valuable special edition games (season kickoff and Thanksgiving night) and two playoff games. How is this so? ESPN has a better platform to monetize the value of the MNF package. Specifically, they charge subscribers $6 billion/year before they get a dollar of advertising, while NBC relies primarily on advertising.

I don't believe that FOX makes very much money on its ACC package, probably break even. It's not using its subscriber fees to pay for these rights. Those are going to the pro teams that anchor the network (or into Rupert Murdoch's coffers). Dispersing ACC content to multiple providers diminishes the value to any one provider since only superfans would insist on having FSN or Raycom just to get a couple of games. For instance, I would have needed to subscribe the the TWC sports tier to get the SU-Minnesota football game this year on BTN. I just wasn't going to do that for one game. Three football games plus ten basketball games -- now I'm reaching for my wallet, as are cable systems in ACC home areas. A conference network concentrates the product into an exclusive distribution channel. This provides leverage in the market to demand a subscription fee from interested fans and cable systems in conference home areas since more casual fans will be interested since they get more for their money/lose more if they don't pay.

(02-12-2013 03:07 PM)orangefan Wrote:  For comparison, ESPN pays the NFL $1.9 billion/year for the MNF package. NBC, on the other hand, pays the NFL $1.0 billion/year for the SNF package. The SNF package gets better ratings, has a better package of games, includes a couple of valuable special edition games (season kickoff and Thanksgiving night). How is this so? ESPN has a better platform to monetize the value of the MNF package. Specifically, they charge subscribers $6 billion/year before they get a dollar of advertising, while NBC relies primarily on advertising.

I don't believe that FOX makes very much money on its ACC package, probably break even. It's not using its subscriber fees to pay for these rights. Those are going to the pro teams that anchor the network (or into Rupert Murdoch's coffers). Dispersing ACC content to multiple providers diminishes the value to any one provider since only superfans would insist on having FSN or Raycom just to get a couple of games. For instance, I would have needed to subscribe the the TWC sports tier to get the SU-Minnesota football game this year on BTN. I just wasn't going to do that for one game. Three football games plus ten basketball games -- now I'm reaching for my wallet. A conference network concentrates the product into an exclusive distribution channel. This provides leverage in the market to demand a subscription fee from interested fans, and more casual fans will be interested since they get more for their money/lose more if they don't pay.

I know I watch more SNF games, but I am more excited when my team plays on MNF. I think that's why there is a difference in carriage charges. Advertising revenue is based on the number of people that watch the advertisement and the likelihood that they will buy what they see advertised. Carriage charges are based on the number of fans multiplied by their enthusiasm. Assuming that everyone is like me (which they may or may not be), SNF should get better ratings, but MNF should get better carriage rates. I understand what you are saying about NBC (over the air, thus no carriage charges) v. ESPN (cable, thus carriage charges). Unfortunately, that just explains why one would put programming with specific but intense fan interest on cable, and programming with general but mild interest on the air. However, we are talking about taking programming from one presumably cable platform and putting it on another cable platform. Both are able to charge carriage fees. There isn't an inherent structural advantage.

What you described with your BTN example is interesting, but the programming is already in existence in a consolidated form. Using Syracuse as an example, as I understand it, the programming that would air on the ACC network is currently being aired on SNY and TWSports. Assuming that the ACC buys back programming, the programming for current ACC teams is aired on Raycom. It isn't exactly switching from one game to three games and ten basketball games. Anyway, even if it was, then you are trading advertising bucks for carriage charges, because you are narrowing the appeal, but concentrating fan interest. Now, that may be advantageous, because college sports tend to attract hard-core fans that are willing to pay a good deal of money to watch their team, but, as I mentioned earlier, as far as I can tell, much of the material is already being aired in a concentrated form. It is just being sold by individual schools in the form of retained tier 3 rights, and not by the conference.

This is an unrelated point, but in my opinion, the best way to monetize the content would be to put the games on the air (or low tier cable) in the areas near the universities participating, because there is a general fan interest in those areas, but many of the fans are casual fans, and then put the content on a high tier subscription service nation-wide, so that the fanatical fans across the country can have access to the content for top dollar. Syracuse v. UVA lacrosse may not have general appeal, so the SU v. UVA lax game may not have many random viewers (i.e. casual fans), which will translate into low advertising revenue, but SU and UVA grads/fans nation-wide would pay top dollar to see the game, which would translate into high carriage charges/subscription fees. That can be accomplished with an ACC Network, but it could also be accomplished without an ACC Network (for instance, Disney could fairly easily do that on their own right now). Unless the schools have some competitive advantage when producing the content, I just don’t see any direct financial advantage to having a network. That said, I am strongly in favor of having a network, because I think that it would be great for academics. I just don’t see why a school like FSU would want one. As far as I can tell, any increases in overall wealth are minimal. The biggest thing that it does is more equally distribute money.

(02-12-2013 10:50 AM)orangefan Wrote:  I fear that the "3.5 million" is just the spread between the per school payout for the Orange Bowl and new BCS and the payout for the old BCS. I hope I'm wrong.

My very quick read is that the 3.5 would include the contract bump for ND and the OB. That said I could easily be wrong.

27.5mm divided 14 ways: 1.964mm if ND never makes it

10x the above figure + 2x 4.125mm if they make it twice (the max they are allowed) all divided by 12 (years on the contract): 2.127mm

So taking 1.96-2.13mm out of 3.5mm leaves 1.3-1.5mm in contract adjustment per school from ND which is between the 1 and 2 million figures I have seen rumored/reported. This values their combined 2.5 football ACC road games and all non-fb inventory at 19.2-21.5mm (14x those values) which seems high to me.

Does this seem like it's on the right track to you guys?

(02-12-2013 02:45 PM)Hokie Mark Wrote:  

(02-12-2013 02:37 PM)nzmorange Wrote:  1. There is no correlation between an efficient market and the number of ESPN channels.

OK. Tell me, what does economic theory have to say about the #3 highest-rated conference getting paid #5 money? What markets forces are at play?

The one's that take growth into account. The southwest and the left coast are growing like crazy and the east coast is not. We are #3 right now, but we might not be #3 in 12 years. I'm guessing that an off decade for ACC athletics didn't do us any favors with the ratings either. Finally, I'm not sure that we are #5*. I'm not sure what the Pac-12 airs, but ACC schools might make more than Pac-12 schools, depending on what rights are left. The ACC's contract is $17 million/yr and schools retained $6-8 million in rights on average**. That means that the total media value is between $23-25 million a school. The Pac-12's contract is for $21 million. If they only have $2-4 million leftover in rights, then we are tied at #4, and, if the negotiations with ESPN go as projected, then we could be in a virtual tie for #3 with the Big XII and the Pac-12.

Also, keep in mind that the Pac-12 has a ton of risk that we do not. When times are good (i.e. now) they rake in money. But when times are bad, they take a MUCh harder hit than any of the other conferences. Given that many experts who were consistently erroring in their projections of media contract by being too low are now being too high, I think that the market is cooling. That's bad news for the Pac-12, and I think that they will have increased trouble meeting their projections, and that's on top of the fact that they are already having trouble meeting their projections. In short, I think that their future payouts are overstated.

*I'm not saying that we aren't, but the reporting has been less than clear.
**I don't know if the $6-8 million is an average over the next $12 years, or the value this year. If it's the value this year, then the average over the length of the contract is MUCH higher.

(02-12-2013 02:45 PM)Hokie Mark Wrote:  

(02-12-2013 02:37 PM)nzmorange Wrote:  2. You missed a couple. For instance, off the top of my head, isn't there an ESPN legends? And, I'm pretty sure there are others, but I don't have any ESPN channels, so I can't say for sure.

meh. I have basic cable but only get ABC, ESPN and ESPN2. The others are small potatoes.

That may be true, but we are talking about niche programming, aren't we?

(02-12-2013 02:45 PM)Hokie Mark Wrote:  

(02-12-2013 02:37 PM)nzmorange Wrote:  3. I hear Raycom is losing money.

Really? I had not heard that. Where did you get that from? Of course, if they end up getting out of the business, that could free up lots of games for an ACC network...

Well, that was the conspiracy theory as to why the ACC's contract was lower than some had hoped. The theory goes that Swofford low-balled ESPN with the understanding that Raycom could get a cut of the artifically low price, because his son worked there and they were experiencing rough financial times. I'm not sure if I believe the Swofford helping his son out part, but I would imagine that it's hard to lie about the financial situation of Raycom. However, I haven't seen their financials, but if they are publicly traded, their info is available on the SEC's website via EDGAR if anyone is interested. Either way, unless the ACC is better at developing and airing the content than Raycom, then the content is more valuable to them, so they will out-bid us. If they go under, then we would still have to be better at developing and airing the content than their replacement for it to make economic sense.

Don't get me wrong. I am for the Network because I think that it would be good for academics. I also think that it would look like it generates a profit. But, in reality, I haven't seen any evidence that convinces me that this isn't simply taking money that would be earned by the schools and giving it to the conference to distribute, and thus create an allusion of a higher media payout. In my opinion, the BTN's greatest success isn't the revenue. It's the distribution of revenue. A combo of equal revenue sharing, ticket sales sharing, and now equal tier 1 & 2 + BTN-owned tier 3 revenue sharing has meant that even Northwestern can field competitive teams. That has increased the excitement of the conference in general, because schools like NW have invested that extra money in athletics. It works well in the B1G, because schools like OSU and Michigan are big enough to pay the smaller schools and still remain national powers. I'm not sure if the ACC can copy that. Our big dogs aren't as big.

I have advocated a system that incentivises schools to invest money in revenue sports in the past, and I think that's the best way to build up a conference's financial strength. Swimming and diving is nice, but football and basketball pay the bills. IMO, it's important for schools to remember that.

(02-12-2013 04:36 PM)nzmorange Wrote:  I have advocated a system that incentivises schools to invest money in revenue sports in the past, and I think that's the best way to build up a conference's financial strength. Swimming and diving is nice, but football and basketball pay the bills. IMO, it's important for schools to remember that.

+1
I'd certainly like to see that - maybe share the TV money but let each school keep most/all of its bowl and NCAA tournament "winnings".

(02-12-2013 05:21 PM)Hokie Mark Wrote:  

(02-12-2013 04:36 PM)nzmorange Wrote:  I have advocated a system that incentivises schools to invest money in revenue sports in the past, and I think that's the best way to build up a conference's financial strength. Swimming and diving is nice, but football and basketball pay the bills. IMO, it's important for schools to remember that.

+1
I'd certainly like to see that - maybe share the TV money but let each school keep most/all of its bowl and NCAA tournament "winnings".

+2

I have no problem with shifting part of the 'winnings'....

(02-13-2013 11:56 AM)TIGER-PAUL Wrote:  I have no problem with shifting part of the 'winnings'....

Me either. You should get to eat what you kill.

(02-13-2013 12:51 PM)WNCOrange Wrote:  

(02-13-2013 11:56 AM)TIGER-PAUL Wrote:  I have no problem with shifting part of the 'winnings'....

Me either. You should get to eat what you kill.

I hear that idea is VERY popular in West Virginia.