Frank the Tank Summer Mailbag Part II: Ice Bucket Challenge, SEC Network, O’Bannon Lawsuit and Big East Stature in Autonomy

Every once in awhile, there’s a bandwagon worth jumping onto, so I’ve taken the Ice Bucket Challenge (you can see my son dousing me with my daughter filming here on YouTube) and made a donation to the ALS Association. I challenge all of the readers here to do the same. Also, if you haven’t done so already, please watch this great ESPN piece on former Boston College baseball player Pete Frates, who inspired the Ice Bucket Challenge. Onto some of the last mailbag questions of the summer:

This is referring to a list of “Winners and Losers” from the great Mr. SEC regarding the SEC Network. Generally, I agree with his overall premise: the SEC Network is going to be extremely successful and fill the coffers of the likes of Ole Miss and Mississippi State as well as the Alabamas and Floridas of the world. I’m actually more optimistic about SEC TV ratings than Mr. SEC (which he listed as a “loser”) since many of the SEC Network games will be ones that would otherwise have been in the old ESPN Regional syndication package or as part of individual schools’ third tier rights deals similar to how the BTN largely took the Big Ten’s old ESPN Regional syndication package to a national audience. The BTN hasn’t really impacted the national ratings of the best Big Ten games (and instead expanded the audience for lower tier games), so I’d expect the same with the SEC.

On the other hand, ESPN has been using a bit of puffery when it states that the SEC Network is “available” in 90 million homes. Being “available” is quite different than actually being subscribed to in those homes – the SEC Network could be “available” in a home but such home may not be able to receive it on a basic tier or without having to buy a sports pack. A network only gets a fee if it’s actually subscribed to in a home instead of being merely available. For example, the mothership ESPN itself is has nearly 100 million actual subscribers, so it’s getting $5.00 or more per month for every single one of those households. (That’s why ESPN is very literally the most powerful media company on Earth today, and that’s saying something considering that it’s part of the ubiquitous Walt Disney Company that has been eating my credit card over the past several months with a spring break trip to Disney World, buying Disney Princess, Frozen, Marvel and Star Wars toys for my kids’ birthdays, etc.)

To be sure, the BTN is just as guilty of trumpeting of the artificially high “available homes” number in many of its press releases. There will inevitably be a lot of comparisons between the SEC Network and BTN, but at the end of the day, they have similarly-sized geographic footprints where their networks are carried on basic cable on very high rates and then will be carried at lower rates and/or on sports packs outside such footprints. The SEC Network essentially gets the SEC back on more of an even TV revenue playing field with the Big Ten… at least until the Big Ten enters into brand new first tier/high second tier national TV deals in a couple of years that most observers believe will completely blow away any other college sports deal signed up to this point.

l received several questions about the Ed O’Bannon case, where the NCAA was found to be in violation of antitrust law for prohibiting players from receiving compensation for the use of their names, images and likenesses (i.e. video games, apparel, etc.).

My general feeling over the past several years is that the NCAA has been unbelievably and incredibly misguided and naive about student-athlete compensation issues. Regardless of fans’ feelings on either side of the debate about whether student-athletes should be paid, it continues to boggle my mind from a practical standpoint that the NCAA’s argument has essentially been reliant on tradition (“It has always been done this way!”) with an all-or-nothing zero sum approach. The problem is that once you find even isolated examples where players bring more than “nothing” in terms of market value, the entire crux of the argument breaks down in front of a judge. That’s exactly what occurred in the O’Bannon case.

Still, if the NCAA looks at the O’Bannon ruling from a rational practical standpoint, it’s actually a positive ruling for them where the judge allowed for a trust fund cap of $5,000 per year. Of course, the NCAA won’t look at it that way – it will continue to make the all-or-nothing zero sum argument on appeal because it doesn’t have any sense to take what was essentially a compromise ruling and run with it. Now, the NCAA opens itself up on appeal to the argument that even the $5,000 trust fund cap shouldn’t apply and there ought to be unlimited compensation available to student-athletes, which could very well happen with the liberal and labor-friendly U.S. Circuit Court of Appeals for the Ninth Circuit.

I’ve been fairly upfront on this blog that I’m an ardent free marketer when it comes to college sports: conferences and schools should be free to make whatever arrangements that are best for them to maximize revenue and, in turn, student-athletes should be able to seek compensation commensurate with their free market value from such conferences and schools in the same manner. (Antitrust economist Andy Schwarz had an excellent breakdown of college athlete compensation issues on Deadspin earlier this month. I’m firmly on the side of “Team Market” as opposed to “Team Reform”.) Even if you personally don’t agree with me (and based on the comments on previous posts, I know that many of you don’t), the reality is that the O’Bannon case is only the start of the college sports world heading in that market-based direction.

The Big East won’t ever end up as part of the Power 5 conferences from an NCAA autonomy perspective. FBS football is such a dominant and driving force with respect to NCAA autonomy issues that having the Big East (or any other non-football league) as part of the “cartel” is a non-starter. The Big Ten and SEC don’t want conferences that aren’t dealing with football to have any say over what are largely football-driven decisions. That being said, the Big East isn’t really any worse off than the Group of 5 non-power FBS conferences within the NCAA structure itself. The marketplace is really where the Big East can distinguish itself – the league (despite low ratings) have an excellent TV deal with Fox that pays it more for only basketball than what any of the Group of 5 conferences (including the American Athletic Conference that has the remnants of the old Big East football league) are getting paid for TV rights for both football and basketball. The Big East also has a new non-conference challenge set up with the Big Ten next season, which indicates that it is considered to be a power conference for basketball purposes. It’s not an easy world out there for leagues that aren’t part of the Power 5, but the Big East may very well be the healthiest of any of them despite not playing any FBS football.

Enjoy the last days of a “Fancy”/”Rude” summer* and be sure to take the Ice Bucket Challenge if you haven’t done so already. Only one more week until the college football season starts!

(* You won’t be able to make it through this list of top songs from each summer for the last 20 years without either laughing uproariously at or being mortified about what we were listening to back in the day. There are some badly dated duds every year, but I have fond memories of the summers of 1992, 1997 and 2007.)

(Video from YouTube)

Frank the Tank Summer Mailbag: Power 5 Conference Autonomy, Conference Realignment, Playoffs and More

It has been a long summer hiatus here, so it’s great to be back! Let’s get to the piled-up mailbag with questions on power conference autonomy, TV rights, conference realignment, the college football playoff system and more:

After many months of procedural wranglings and committee meetings, the NCAA Division I Board of Directors finally approved the autonomy of the five power conferences (Big Ten, SEC, ACC, Big 12 and Pac-12) to pass rules in a number of subject areas (such as full cost of attendance coverage for athletes and liberalization of athlete/agent contact rules) today. There’s no real set criteria for another conference to join that group outside of the “Power 5” letting them in. For practical purposes, the free market is really the driver in terms of determining power: if a non-power “Group of 5” conference could obtain TV revenue and bowl tie-ins on par with the Power 5 leagues, then it could argue that it a “high resource” league (as the NCAA has termed it in the past) that ought to have the same type of autonomy. However, even if a Group of 5 conference were able to achieve that (which is virtually impossible considering how much difficulty the post-2006/pre-2011 Big East had in keeping up with the other power conferences in terms of revenue and exposure despite having a better slate of bankable football brands compared to the entire rest of the current Group of 5), there’s no provision to mandate a move-up without the good graces and approval of the Power 5. (Good luck with that!)

As we have seen in conference realignment, individual schools might move up to power status (see TCU and Utah), but leagues as a whole don’t move up at all (and if anything, they are much more likely to get stripped of their most valuable assets by the Power 5 and then get relegated). I’ve pointed out this simple statistic many times before on this blog: in the first year of the BCS system (1998), there were 63 total schools in the power group of the 6 AQ conferences plus Notre Dame, while in the first year of the new CFP system (2014), there will be 65 total schools in the power group in the Power 5 plus Notre Dame. That’s only a net change of 2 total schools added to the power group over the past 16 years with one conference (the old Big East) getting demoted. Simply put, there won’t be any mass addition of an entire conference to the power level. Whoever wants to be a power school going forward is going to need an invite from the Power 5 because none of the Group of 5 conferences will move up on their own.

As of now, the only conference that will be negotiating a new TV deal in the near future is the Big Ten, whose current Tier 1 deal with ABC/ESPN expires in 2016-17. The other four power conferences have deals that stretch out for the next decade. It’s extremely doubtful to me that the Big Ten will act again prior to their new TV deal with the grant of rights agreements that are in place within the Big 12 and ACC, which are where the primary targets for Jim Delany (i.e. Texas, North Carolina, Virginia, maybe Kansas, maybe Oklahoma, maybe Georgia Tech) are located. Hypothetically, schools that aren’t under grant of rights arrangements such as the SEC members (i.e. Missouri, Vanderbilt) and UConn could be targeted by the Big Ten, but I don’t see anyone leaving from the SEC at all with their own gushers of TV money coming in (more on that in a moment) and UConn, for all of its strength as a basketball brand, doesn’t have the football value (either in terms as a program itself or, what a lot of realignment observers have missed, the strong football recruiting territory that Rutgers and Maryland have in their respective home states) that drives expansion or, somewhat less importantly, AAU membership on the academic side. (I do believe that if there’s a legitimate marquee football brand available that doesn’t have AAU membership, such as Oklahoma, then the Big Ten will consider them no matter what else they might say publicly.) The Big Ten has achieved its financial goal of getting into the New York City and Maryland markets for Big Ten Network carriage, so it would literally take a Texas-sized footprint addition to make it worth it for the conference to expand for TV territory alone. National name brands for football for the Tier 1 contract are going to be more important in the near-ish future for the Big Ten, and those types of schools simply aren’t available today.

In response to Question #1, I believe the Big 12 will end up expanding to 12 within the next 5 years and that will be all of the changes that we’ll see to the power conferences. Now, it won’t be because they’ll be “forced” to do so by the other power conferences or that the new College Football Playoff system starts punishing the league for not having a conference championship game (as Dennis Dodd has recently suggested). Instead, we’re simply living a world where each conference needs to diversify its portfolio of markets for long-term strength and the Big 12, by FAR, is the least diversified at all. I suggested last fall in The Big 12 Expansion Index that Cincinnati and BYU were clearly the two best candidates for the league and nothing has changed my view of the landscape since then.

For Question #2, I’d put the odds of the powers-that-be changing the CFP system to an 8-team playoff prior to the 12-year contract being completed at about 60% yes/40% no. No matter what platitudes that the conference commissioners and university presidents might be putting out there, we’re inexorably heading toward a postseason system where all 5 power conference champions will automatically have a shot at the national championship… and the best way to do that is to grant them 5 auto-bids with 3 at-large slots. (How the Group of Five would be represented, if at all, is an open question.) Personally, I favor using the Rose, Sugar, Orange and Fiesta Bowls as the quarterfinal sites using traditional conference tie-ins and then go on from there. This protects the bowl system (which should never be underestimated as a driving force since its the contractual mechanism that allows the power conferences to maintain their access and control advantages) and, in my opinion, continues to provide a balance of maintaining the importance of the regular season (which wouldn’t be possible at all in a 16-team playoff), rewarding concrete objective on-the-field accomplishments without the use of polls or committees (conference championships), creating massive stakes for all of the conference championship games (as they’ll become de facto playoff games in their own right) and still allowing enough at-large slots to reasonably include all of the teams that have a legitimate case to play for the national championship. This type of system would be such easy money for the powers-that-be just for the playoff portion (not to mention the boost in rights fees that each league would receive for their respective conference championship games) that it makes little financial sense for anyone not to do it. However, the historical glacial pace of the college football world to enact postseason changes is the reason why I only put this at 60/40 within 12 years instead of the 90/10 that it would be in virtually any other business.

Depends on what you mean by “watering down” the conference. In the short-term on-the-field, these aren’t sexy additions for football. Maryland has an excellent men’s basketball history, while Rutgers is non-existent in that sport. However, from a revenue perspective, they’re massive home runs by getting the BTN onto basic (or widely-enough distributed packages that are de facto basic) cable packages in the New York City and Washington, DC markets. Only adding the state of Texas can compete with that market-wise. At the same time, this is a critical move for the long-term for the Big Ten’s recruiting territory for both athletes and regular students. The states of New Jersey and Maryland are specifically the two top non-Sun Belt state producers of FBS football recruits that are not already in the Big Ten. (Meanwhile, New York State and all of the New England states are among the worst producers of FBS football talent in the country whether looking at sheer numbers or on a per capita basis.) At the same time, New Jersey and Maryland are among the best producers of Division I basketball talent regardless of region (with Maryland actually coming out #1 in the country on a per capita basis – that state is to basketball players as Texas and Florida are to football players). Nebraska is the large national football brand name that the Big Ten couldn’t pass up, but bringing in Rutgers and Maryland is what can enable to conference to maintain the necessary demographics to continue to be strong two, three or four decades from now.

I have some more mailbag questions that I’ll get to next week regarding the SEC Network and divisional alignments. If you have any other questions in the meantime, feel free to leave them in the comments section here or contact me on Twitter at @frankthetank111. Enjoy the weekend!

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