The new college football season is finally upon us! Let’s get to some quick hits on college sports business news from the past few weeks:

(1) Sports TV Rights: Bubble or Not? – Even before the broader stock market swoon over the past two weeks, cable companies have been getting hammered by investors due to continued decline of the basic cable model due to cord cutting.

This potentially has a large impact on sports fans, particularly college sports fans, since so many off-the-field issues are directly related to cable rights fees for sporting events that have largely grown unfettered for the past decade. Conference realignment doesn’t happen if the Big Ten Network isn’t formed and becomes enormously successful. Major League Baseball, NBA and NHL franchises are buoyed from attendance peaks and valleys by massive regional sports network deals. The NFL receives more rights fees from ESPN for Monday Night Football and DirecTV for Sunday Ticket exclusivity than from its over-the-air network partners that are showing higher profile games than the former and are actually producing the games for the latter.

This begs the question that has been circulating quite a bit these days: is there a sports TV rights bubble that is about to pop?

It’s a lot more complex question than many observers give it credit for. On the one hand, cord cutting is accelerating with a major complaint being that non-sports fans are having to pay higher cable and satellite bills for sports networks that they do not watch. As a result, cable subscriptions rates are going down, which drags down the subscriber fees that networks such as ESPN depend upon. On the other hand, sports programming is one of the few (if not only) exclusive draws to cable and satellite television in the first place, so the relatively inelastic demand from sports fans is arguably even more important to cable networks than ever. In essence, when push comes to show, cable networks may rather lose the more price sensitive cord cutters than lose the higher paying sports fans.

Even with the impact of cord cutting becoming clearer in recent months, cable networks are still charging ahead with large sports rights deals. In early August, NBC and Comcast ponied up a 100% increase in rights for English Premier League games compared to the last deal that was signed only two years ago. The St. Louis Cardinals similarly just scored a doubling of its rights fees from Fox Sports Midwest on the regional sports network front.

It’s an interesting paradox: sports rights fees are arguably both the largest cause of cord cutting and the largest hedge against cord cutting. A non-sports fan is rightly going to question the wisdom of paying for cable when he or she can get the same lineup through a less expensive combination of Netflix, Amazon Prime and/or Hulu (plus maybe even HBO Now). By the same token, sports fans are more dependent upon cable than ever. Cable is no longer just a repository for surplus niche events, but now is the home (whether in whole or part) of the NCAA Tournament (including the Final Four), the College Football Playoff and nearly all bowls (including the bluest blue blood brand of the Rose Bowl), and MLB, NBA and NHL playoff games. More importantly, sporting events are exclusive and unique – a viewer can get news coverage as easily from an over-the-air network or Internet as he or she can from cable, but an over-the-air Ohio State game is not a replacement for a Michigan game for a Wolverines fan.

As a result, I don’t see complete doom and gloom for ESPN and sports networks in the future. For all of the alarmist articles about ESPN’s supposed impending demise over the past few weeks due to employee shuffling and Disney’s earnings reports, ESPN is still the single most valuable media and entertainment property on Earth. The reason why investors are scared isn’t because ESPN’s revenue and profit levels are bad, but rather that they have set such an insanely high bar financially that anything that deviates from that bar is worrisome. To put it into perspective, ESPN is still averaging about $6.61 per subscriber per month with over 92 million subscribers, which translates into $7.372 billion per year before they sell a single advertisement. That is over $614 million per month in just subscriber revenue (once again, we’re not even talking about the commercials that ESPN sells), which is more than the domestic gross of any movie released by Disney in history (and in fact, more than the domestic gross of any movie in history except for Avatar and Titanic). Just think about that: ESPN is generating revenue from just subscriptions that is more than what Disney grosses domestically from any Marvel, Star Wars or Frozen movie every single month… and once again, before they sell a single advertisement.

To be sure, the incredible amount of money that ESPN is generating that is propping up the entire Walt Disney Company (and national and regional sports networks are similarly propping up companies such as 21st Century Fox and Comcast) is exactly why investors are so spooked by any deterioration of the basic cable model. When Disney has been able to set ESPN on auto-pilot and generate more revenue than a new Star Wars movie without lifting a finger every month, both companies and investors start taking that seemingly endless cash flow for granted.* Still, there’s so much money at stake that cable networks are unlikely to stop investing in sports since they are what will keep such cable networks relevant regardless of whether the industry moves from a basic cable to a la carte or over the top environment. Hence, the Big Ten will still likely rake in massive record-setting cash for college sports deals when it signs its new TV contract(s) over the coming year.**

(* Speaking of Star Wars, Disney just announced that it is building a new Star Wars Land built at both Walt Disney World and Disneyland. I’ll admit that I’ve had schematics created in my head for a Star Wars Land ever since I was 3 years old with a Millennium Falcon ride and fully operational Death Star. So, this is as exciting to me as it is to my uber-Disneyphile sister.)

(** Just my semi-educated guess: look for the Big Ten to split its first tier rights between ESPN and Fox, where the ABC/ESPN package will effectively be the same as today, but the games that are currently on ESPN2/ESPNU/ESPNEWS getting sent over to Fox/FS1 with some provisions for better game picks if they are carried nationwide over-the-air. The BTN contract is locked-in going until the 2031-32 season, so that won’t be changing. I don’t believe that the Big Ten is truly interested in selling all of its rights to solely Fox, as exposure is still extremely important the conference in the same manner as the NFL. In fact, the NFL TV rights model is a good template for what the Big Ten wants to do, which is to ensure that it’s getting exposure and revenue from several of the top media players instead of just one.)

(2) House of the Rising Sun Belt Expansion (and Contraction?) – As much as the college football world is most interested in whether the Big 12 and/or its individual schools (i.e. Oklahoma) will decide to get back into hot conference realignment action, the Sun Belt has made the latest expansion move by adding Coastal Carolina as a new all-sports member. On paper, Coastal Carolina seems like a fairy good addition for a Group of Five non-power conference since it’s a school with a rising enrollment and solid TV market and recruiting location in the Myrtle Beach area. The Sun Belt may also be turning its focus back on being an all-sports conference as Commissioner Karl Benson has hinted at the league dropping football-only members Idaho and New Mexico State. Those two football programs might soon be joining the homeless UMass as independents against their will (unlike Notre Dame, BYU and Army). If that occurs, it’s going to be tough since there isn’t any natural home for those schools and independence is effectively a death sentence for those schools for more than a couple of years. UMass will be hoping for the AAC to lose a school or two to the Big 12, which would then open up a spot for them. In turn, that could open up other spots down the line for Idaho and New Mexico State. As much as the powers that be in college sports probably like the general slowdown in conference realignment, there are several schools out there that want and/or need chaos.

(3) Illini Coaching Dumpster Fire – As many of you know, I’m an Illinois alumnus and fan. I’ve seen enough dysfunction with Illini football over the years that I barely batted an eye when they fired their head coach only a week before the season opener. At a core level, Tim Beckman was a terrible football coach, awful in press conferences, disjointed with the media and, according to the evidence, abusive to his players. The question in my mind isn’t whether Tim Beckman should have been fired, as that was obvious to me after his first season in Champaign. Instead, the question is what the heck did Illinois Athletic Director Mike Thomas ever see in Beckman in the first place? If Beckman had an interview that was anything like his conversations with the media, what possessed Thomas to see anything in him? Let there be no doubt: this was a CYA firing by Mike Thomas, but the seat under his own “A” is going to be burning hot coal for awhile. To be fair, many of the non-revenue programs have seen quite a bit of success under Thomas, particularly volleyball, tennis, golf and baseball. However, football and men’s basketball are where power conference athletic directors are ultimately judged and Thomas has, at the very least, underachieved with both of them.

Here are my basic expectations for the Illinois football program: considering its location with access to the Chicago and St. Louis recruiting areas along with Big Ten membership, this team should at least be winning 6 to 8 games per year to consistently make it to bowl games while challenging for the weaker Big Ten West every 4 years or so when senior-laden teams cycle through. This shouldn’t be much to ask for. I’m not delusional in believing that Illinois should be having Ohio State-level success in football or becoming the dominant team in the Big Ten West. However, I also don’t buy some of the national narratives that Illinois football has to be inherently bad. Illinois is not like Indiana or Kansas where football will always be a placeholder until basketball season starts, so I’ll never accept the “Illinois is a basketball school” excuse for football ineptitude. (Besides, a top tier athletic department should have the ability to perform well in both football and basketball. See Ohio State, Michigan State and Wisconsin just in the Big Ten.) Instead, Illinois is simply a fairweather football school in the same manner as 90% of other college programs: they sell tickets when they win but fans won’t come out when they lose. The Illini football fan base is similar to the fan base of my Chicago White Sox – there are large numbers of us out there, yet we aren’t paying to watch a poor product like, say, Cubs fans have historically done. Illinois has made several terrible bad football decisions in the past, but there isn’t any structural reason why the school can’t have at least a competent football program. The immediate issue is that I don’t trust that Illinois will make a competent football decision until Mike Thomas is gone.

Of course, even with the turmoil surrounding Illinois football, I’m still pathological enough of a football fan to get excited for a Friday night game against Kent State. I’m fairly certain that my hopes and dreams for the Illini and Bears this year will be quickly crushed within the next 4 weeks, but until then, que sera, sera. Enjoy the games and holiday weekend!

Follow @frankthetank111

(Image from News-Gazette)