NORTHWESTERN COMMAND – The ACC’s decision to expand to the Northeast never made a lot of sense to us at Northwestern Command.
Football as we know is what drives television ratings and dollars. College football power has been shifting South and West for decades. The SEC has become a college football power and ratings-driver despite lacking major markets, because, it produces must-see games that carry national interest and ratings.
The ACC’s decision to add Pittsburgh and Syracuse did not make much sense to us as it watered down the football product and did not bring elite brands to the conference. It did not make much sense unless there was a key caveat: was the ACC serious about starting its own television network and would such a network be viable?
As the Sports Business Journal reported on Tuesday, the ACC is indeed exploring the idea of creating its own Big Ten-style Network. Something we’d heard being whispered about for awhile.
Why is the ACC interested? Per SBJ:
Sources also say there continues to be angst among the conference’s presidents and athletic directors over the league’s ability to keep up with its peer conferences financially. The Big Ten lured Maryland, a charter member of the ACC, away from the conference with its future media revenue projections. The Big Ten’s numbers, buoyed by the growth of its channel, showed that each school’s revenue will rise to more than $40 million by 2020, compared with $24 million in the ACC.
This past year, the Big Ten led all conferences with a per-school payout of $24 million, compared with the ACC’s payout of $13 million… Maryland administrators cited the Big Ten Network as a main drawing card for its decision to leave the ACC for the Big Ten, which it is expected to join in 2014.
Conference networks, much like the MLB and NFL Networks in the pro game, might very well be the future of how we consume live sports. Conferences/leagues seem to be more and more interested in controlling their own live events.
One big reason is subscription fees.
For every household the Big Ten Network is able to add in the Maryland/DC and New Jersey markets, it will earn $1.25 per month for the network. Think about the millions of households in those geographic areas and you understand why the Big Ten was interested in middling programs like Maryland and Rutgers. Why can ESPN buy whatever live event it wants? Sure it rakes in advertising, but ESPN also takes in $5 per month in subscription fees from folks like you and me.
If the ACC could get a network on cable platforms in New York and Pittsburgh — and to Notre Dame-rich markets across to Northeast – it could generate tens of millions of dollars in subscriptions fees. That’s the dream for those in Greensboro. That is why, I imagine, the ACC now has a Northeast footprint.
Networks offer growth potential. Contracts with ESPN offer set rates ($17 per year per program in the ACC) that will probably seem undervalued in just a few years.
So the ACC is smart to explore this.
But there are two problems:
First, the ACC Network is not going to have as wide an audience as the NFL or MLB Networks or even the Big Ten Network. There will be battle to land such a network on cable platforms. An ACC Network is probably appealing to Time Warner in North Carolina but would it be attractive to cable providers (and customers) in New York or Pittsburgh? I have my doubts. Even Texas and ESPN are having trouble distributing the Longhorn Network in Texas.
Second, the ACC negotiated away its first-, second- and third-tier rights in its 15-year deal with ESPN. In essence, the ACC controls very little of the football and basketball games it needs to drive folks to its network. (Many have thought the ACC needlessly bargained away its third-tier rights in its latest agreement, third-tier rights being the games ESPN passes on to distribute nationally or regionally.)
The ACC, as I understand it, would have to negotiate with ESPN to get the required games back and why would ESPN be interested in giving up property it already owns?
ESPN would represent a major voice in any channel launch and it is believed to be lukewarm on forming one, according to sources close to the discussions. ESPN currently has a contract to pay the ACC $3.6 billion over 15 years — averaging $240 million a year — for the conference’s media rights. It then sublicenses a syndication package to Raycom Sports, which, in turn, sublicenses some rights to Fox Sports Net.
To start a channel, the ACC believes that it needs something along the lines of 30 to 35 football games a year. Plus, it wants the rights to re-air games. It remains to be seen how many basketball games the conference would seek for a channel, but the Big Ten Network, by comparison, airs live more than 40 football games, 105 men’s basketball games and 55 women’s basketball games each season.
The ACC would draw its inventory of live games either from ESPN’s inventory — primarily the games that air on ESPN3 — or Raycom’s syndicated package.
I think it’s smart for the ACC to explore launching its own network. I think in the future more broadcast rights will be controlled by conferences and leagues and live events will also be distributed more and more through digital networks and not necessarily cable. The ACC has been building up its digital network.
I think it’s smart to explore. The Big Ten and SEC figure to hold greater and greater media advantages over the ACC, which needs to be smart in its future media strategies.
I think it’s smart to think about, but I’ll be curious to see in the short term if this is really a viable possibility.