Big time college sports: Something is happening around here, what it is ain’t exactly clear
By Evan Weiner - The Daily Caller 05/04/10 at 2:17 AM
If you’re curious as to why your cable or satellite television bill will go up, this column is for you. The people who bring you the National Collegiate Athletic Association’s Men’s Basketball Tournament, the event also known as March Madness, will also be bringing you a higher cable or satellite television bill. But you probably won’t have the rate hike explained to you by your local television provider. The NCAA just got a bump TV contract renewal for one of the crown jewels of American sports – March Madness –and a significant amount of that money will come from the people who pay the bills for cable Internet and wireless video.
There is something happening here, but what it is ain’t exactly clear, to quote Stephen Stills. Big-time college sports is yet again evolving, with the new contract serving as merely a jumping off point. The only certainty is that the cost of delivering college sports to the consumer will be going up, whether it is on cable, satellite TV, or broadband.
The winds of change in big-time college sports will be steered by the jet stream of the recently concluded NCAA-CBS/Turner Broadcasting (Time Warner) agreement that will see the over-the-air network, CBS and the cable/broadband/wireless distributor Turner Broadcasting, showing the Division I Men’s Basketball Championship between 2011 and 2024 on their delivery systems. The distributors, CBS and Turner Sports, will pay the NCAA members about $10.8 billion over the life of that contract. All the tournament games will be shown live across four national networks, beginning in 2010.
CBS Sports and Turner Broadcasting will help out on the NCAA’s corporate marketing program.
The good news for college basketball fans, consumers, alumni and gamblers (Like it or not, the gambling community makes up a sizeable portion of audience that follows so-called student-athletes playing games for colleges) is that all of the games will be available on television at the same time. The bad news is that people with no interest in the games will subsidize the $10.8 billion contract, which means they will be unknowingly subsidizing big time college sports to the tune of $740 million annually through 2024.
The new good news for the big-time college programs, as well as the smaller schools in Division II and III,is that they will get a chunk of that $740 million to underwrite their entire intercollegiate sports program, from football to fencing in both men’s and women’s sports. College sports is a financially losing proposition for most schools, with a handful of exceptions, like Michigan and Missouri. It costs an awful lot of money to run full sports programs, even if the students receive just a scholarship and a chance to get an education if they so desire.
The NCAA released a statement trying to clarify what the $10.8 billion will do by pointing out that “approximately 96 percent of the revenue generated from this new agreement will be used to benefit student-athletes through either programs, services or direct distribution to member conferences and schools. Further, the agreement ensures student-athletes across all three NCAA divisions will continue to be supported in a broad range of championship opportunities, access to funds for personal and educational needs, and through scholarships in Divisions I and II.”
Only football and basketball are sports moneymakers for college and universities that have decided to swim in the very deep end of the pool.
Just how will CBS and Turner Sports pay the actual bill? Sumner Redstone’s CBS has to hope that there will not be a deep recession anytime in the next 14 years which will scare advertisers away from the TV, because over-the-air TV has just one revenue source to cover the bills — sponsorship or marketing partners — while Turner Broadcasting (Time Warner) has a dual revenue stream, user fees and advertising.
Most of the money needed to pay off the cable/satellite TV bill will come from consumers. Although Time Warner will never give exact figures as to how much they charge consumers for TNT, TBS or truTV, those numbers are believed to be a dollar a subscriber for TNT (which has sports content like the National Basketball Association), fifty cents for TBS (which has a Major League Baseball deal in place, a $310 million, seven year agreement which started in 2007 and ends in 2013 for a package of 26 Sunday games during the season and the first round of the playoffs) and about a dime for the ratings-challenged truTV, which used to be the ratings-challenged Court TV.
Those rates will go up and will be passed onto the consumer. Someone has to pay the freight, and it will not be Redstone or Time Warner. They will play with other people’s money.
Time Warner is actually footing the bill, with CBS paying Time Warner back as much as $670 million a year. CBS will show the Final Four until 2015 and then the over-the-air network, CBS and the dual revenue cable company Time Warner, will alternate coverage on an annual basis.
CBS does own College Sports TV or CSTV, which is a digital cable channel, which will not be part of the CBS-Turner Broadcasting-NCAA deal. CSTV has coverage of NCAA Division’s I, II, and III, that features over 35 men’s and women’s college sports, in addition to nine NCAA championships. CSTV has multi–media and marketing rights for the Mountain West Conference, the Atlantic 10 Conference, Conference USA, the Big West Conference, the Historically Black Colleges and Universities and Navy athletics. CSTV is another source of revenue for college programs, but it is not the plum that schools are after.
Conferences want to own a network, like the New York Yankees YESNetwork or the Boston Red Sox-Bruins New England Sports Network or the New York Mets SNY (which is partially owned by Time Warner and Comcast) or the Cablevision New York Knicks-Rangers-Madison Square Garden Network or the Chicago Bulls, Cubs, White Sox, Blackhawks ownership with Comcast of the Chicago Sports Net. Or Stan Kroenke Altitude Sports Network, which features Kroenke Colorado Avalanche, Denver Nuggets and Colorado Rapids sports franchises.
That is where the real money can be made.
There is something happening here, but what it is ain’t exactly clear.
Just how much will consumers have to pay once 2016 rolls around, and will Congress take a look at big-time sports events migrating to cable, along with lesser events? Time Warner will be renewing a good many of the company’s carriage agreements with multiple system operators (MSOs) like Comcast, Cablevision and Cox. Will Time Warner, which is also a multiple system operator, hold up the major and minor MSOs and demand more money from them because of the major investment in college sports? Will the other MSOs say yes and pass the added cost to consumers?
While Time Warner figures out strategy to maximize revenues on this deal, the big-time college conferences may be in an “expansion” mode. The Southeast Conference is eyeing “expansion” just in case. The “just in case” scenario will be played out if the Big Ten (which has a cable TV network with Comcast, the country’s largest MSO) decides to add a number of schools to reach 16 and go beyond the Midwest.
There is a lot of money available from the Big Ten moves east (perhaps Rutgers or Pittsburgh) or south or west from cable TV. The Southeast Conference isn’t hurting for capital as it has a $3 million, 15-year deal with CBS and ESPN for football games. The old argument of why expand because our new partners will take a share of the TV deal will certainly come up at the next SEC meeting in May. This SEC is not the Security and Exchange Commission. It is a college conference looking for more money.
College conferences have been adding schools because of the possibility of more money for the last decade. The Atlantic Coast Conference poached Big East schools and took Miami, Boston College and Virginia Tech, which annoyed Connecticut officials, and the state sued to first block the ACC’s actions and then to get some money for damages. The Big East went after other conference schools to replace the ones that defected. It caused a realignment of conferences.
The Big Ten kicked the tires and thought about adding Rutgers and then Pittsburgh. So far, there is just talk that the Big Ten will go from 11 schools to possibly 12, 14 or 16. To do that, the conference would have to poach possible Big East schools like Rutgers or Syracuse or Pittsburgh or convince Notre Dame to drop being an independent (Notre Dame has a deal with NBC, an entity that will merge with Comcast. Comcast is partners with the Big Ten on a cable TV network) or perhaps go after Missouri of the Big 12 Conference. The college to change conferences will trigger an avalanche of moves, all done for TV revenue, most of which will come from cable TV consumers, whether they like sports or not or watch sports or not.
Something may happen here, but what it is exactly ain’t clear. Big time college sports business is changing or evolving, and because of that it is not out of the question that NCAA officials, over-the-air and cable TV executives and college presidents and chancellors, along with conference commissioners and athletic directors, will be hauled down before Congress to explain the real business of college sports and how “super conferences” could be formed because of TV opportunities. Congress has given big-time college sports a lot of anti-competition protection over the years, including a tax-exempt status.
Evan Weiner is an author, radio-TV commentator and lecturer on “The Politics and Business of Sports” and can be reached at firstname.lastname@example.org
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