Off Dawgvent by LawFawg86:
College Football Expansion - Who is Next and Why
The USC/UCLA move to the B1G has set off all sorts of social media speculation as to who is next. It's complicated by the ACC Grant of Rights (GOR), the idea of expanding outside the conference footprint (sometimes by thousands of miles), and wondering if any of the eligible candidates can actually contribute enough to the conference revenue pie to justify their equal piece. When looking at college football economics, there are three things to look at that drive the value of a potential member - the basic cable market, average TV viewers ("eyeballs"), and the College Football Playoffs (CFP). Let's take a look at these 'Three Rails" of college football economics - Markets, Eyeballs, and CFP:
1. Markets. "Market" was all the rage in the 2007-2014 timeframe when the B1G channel was launched, followed by the SEC and others. Basically, the economics at the time was that if you could get your conference channel included in the basic cable package you got paid a "per-subscriber" fee whether someone watched the channel or not. If the SECN was available in a market where there was an SEC team, the SEC received an "in-footprint" subscriber fee that was greater than the "out-of-footprint" fee received where there wasn't an SEC team. This is why the SEC grabbed Mizzou in 2012 and the B1G grabbed Rutgers in 2014. Expanding the basic cable market in general, and having in-footprint fees more specifically was the goal. The Rutgers acquisition was the gold standard for this type of move when the BTN became "in-footprint" for not only New Jersey but also the entire state of New York.
The problem with this rail of CFB economics is that the market is dramatically shrinking, and geography isn't as important in an ever-growing streaming world. The following are estimates, but fairly accurate. Around 2014 there were about 90 million households with basic cable. By 2027 that number is estimated to be around 40 million - basically more than a 50% reduction in subscribers meaning far less revenue from this economic rail. Cord cutters who don't want basic cable have gone to streaming content like NetFlix and Prime. Those that still want a full line-up of channels can get the streaming equivalent of cable through YouTube TV, Hulu, Sling TV, Fubu, and the like. While the major conference networks are available on those platforms, they aren't geographically restricted. A conference doesn't have to have a team in Los Angeles to get a subscriber fee from ESPN or Fox through YouTube TV. This is why the "LA market" isn't as important to the USC/UCLA move as the other two rails. There is still money to be made, but as detailed in the article below(1) it could be as little as $20 million per year for the LA market which is almost a rounding error in a media package of more than a billion dollars.
With far fewer subscribers and being able to get a fee without being in a particular geographic area, thinking that market component is a big deal is so 2012-ish.
2. Eyeballs. TV viewership is where the big money is right now. How many people watch your games? How many premier matchups of greater than 4 million sets of eyeballs can you get? The idea of the Four Million Club (FMC) was first posited by Andy Staples of The Athletic(2):
What’s the Four Million Club? It’s the group of football games that draw more than four million viewers.
These are the games networks are willing to pay premium prices for, and they’re also the type of games the SEC’s addition of Oklahoma and Texas will add to that league’s inventory. In conversations with television executives and consultants, conference officials and athletic directors, it has become clear that the hunt for premium television product will drive this round of realignment (or, in the case of the alliance, rearranging). So I asked a trusted source who has been involved with many television contracts what audience qualified as meter-moving in this ever-splintering environment, and that source drew the cutline at four million. (emphasis mine)
It makes sense then that the networks are looking for the matchups that will drive the most eyeballs. Looking at data from 2015-2019, here are some of Staple's observations:
Those five seasons featured 1,593 rated telecasts and dozens more on the ACC Network, Big Ten Network, Pac-12 Network and SEC Network, which weren’t measured for audience size.
Of those, 198 telecasts made it into the Four Million Club. The audience size ranges from massive (16,841,000 for the 2016 Michigan-Ohio State game) to just above the cutline (4,010,000 for the 2015 Louisville-Auburn game). And the conference distribution of the games is quite telling.
35 Alabama
31 Ohio State
26 Michigan
17 Auburn
17 Notre Dame
16 Florida
16 LSU
15 Clemson
15 Georgia
14 Oklahoma
13 Tennessee
12 Penn State
11 Michigan State
10 Texas A&M
This explains why the SEC accepted OU and UT. Almost all games that include any of the top SEC teams and OU/UT will be in the Four Million Club. This also explains the scheduling moving to 9 Intra-conference (IC) games. Instead of teams playing each team every 6 years, with a 3-6-6 scheduling format (3 permanent rivals, 6 of the other 12 teams every other year), the top teams will play each other annually, or at least every other year. This greatly increases the number of Four Million Club games to at least four times the number of such games prior to the acquisition of OU/TX and the expansion to 9 IC games. The quick napkin math for this is that we now average about 12 of these per year with SEC teams only (there are more with Out of Conference games - OOC). The 8 SEC teams on the list above will now play 3 times more frequently. When you add TX and OU that results in approximately 10 more FMC games per year. That comes close to quadrupling the number of FMC games to almost 4 per week instead of 1 per week.
This is also why the B1G went after USC and to a lesser degree UCLA. While neither of those teams appears on the list above, games like UM v. USC, tOSU v. USC, and PSU v. USC will likely add to the FMC inventory. That said, I believe it also shows why the SEC got the better end of expansion - the new SEC has 8 teams on the most Four Million Club games list, while the B1G only has 4. And neither new team is on the list while OU is and if Texas should be in the future. OU will drive more eyeballs than USC, and UT will likely drive more eyeballs than UCLA, their poor performance over the last decade notwithstanding.
These numbers provide guidance as to who the SEC and the B1G will want to expand with going forward. If they don't draw eyeballs to the TV screen, they aren't attractive. With the "Market" rail shrinking, even a great market like LA won't make up for the lack of having high average viewership numbers.
College Football Expansion - Who is Next and Why
The USC/UCLA move to the B1G has set off all sorts of social media speculation as to who is next. It's complicated by the ACC Grant of Rights (GOR), the idea of expanding outside the conference footprint (sometimes by thousands of miles), and wondering if any of the eligible candidates can actually contribute enough to the conference revenue pie to justify their equal piece. When looking at college football economics, there are three things to look at that drive the value of a potential member - the basic cable market, average TV viewers ("eyeballs"), and the College Football Playoffs (CFP). Let's take a look at these 'Three Rails" of college football economics - Markets, Eyeballs, and CFP:
1. Markets. "Market" was all the rage in the 2007-2014 timeframe when the B1G channel was launched, followed by the SEC and others. Basically, the economics at the time was that if you could get your conference channel included in the basic cable package you got paid a "per-subscriber" fee whether someone watched the channel or not. If the SECN was available in a market where there was an SEC team, the SEC received an "in-footprint" subscriber fee that was greater than the "out-of-footprint" fee received where there wasn't an SEC team. This is why the SEC grabbed Mizzou in 2012 and the B1G grabbed Rutgers in 2014. Expanding the basic cable market in general, and having in-footprint fees more specifically was the goal. The Rutgers acquisition was the gold standard for this type of move when the BTN became "in-footprint" for not only New Jersey but also the entire state of New York.
The problem with this rail of CFB economics is that the market is dramatically shrinking, and geography isn't as important in an ever-growing streaming world. The following are estimates, but fairly accurate. Around 2014 there were about 90 million households with basic cable. By 2027 that number is estimated to be around 40 million - basically more than a 50% reduction in subscribers meaning far less revenue from this economic rail. Cord cutters who don't want basic cable have gone to streaming content like NetFlix and Prime. Those that still want a full line-up of channels can get the streaming equivalent of cable through YouTube TV, Hulu, Sling TV, Fubu, and the like. While the major conference networks are available on those platforms, they aren't geographically restricted. A conference doesn't have to have a team in Los Angeles to get a subscriber fee from ESPN or Fox through YouTube TV. This is why the "LA market" isn't as important to the USC/UCLA move as the other two rails. There is still money to be made, but as detailed in the article below(1) it could be as little as $20 million per year for the LA market which is almost a rounding error in a media package of more than a billion dollars.
With far fewer subscribers and being able to get a fee without being in a particular geographic area, thinking that market component is a big deal is so 2012-ish.
2. Eyeballs. TV viewership is where the big money is right now. How many people watch your games? How many premier matchups of greater than 4 million sets of eyeballs can you get? The idea of the Four Million Club (FMC) was first posited by Andy Staples of The Athletic(2):
What’s the Four Million Club? It’s the group of football games that draw more than four million viewers.
These are the games networks are willing to pay premium prices for, and they’re also the type of games the SEC’s addition of Oklahoma and Texas will add to that league’s inventory. In conversations with television executives and consultants, conference officials and athletic directors, it has become clear that the hunt for premium television product will drive this round of realignment (or, in the case of the alliance, rearranging). So I asked a trusted source who has been involved with many television contracts what audience qualified as meter-moving in this ever-splintering environment, and that source drew the cutline at four million. (emphasis mine)
It makes sense then that the networks are looking for the matchups that will drive the most eyeballs. Looking at data from 2015-2019, here are some of Staple's observations:
Those five seasons featured 1,593 rated telecasts and dozens more on the ACC Network, Big Ten Network, Pac-12 Network and SEC Network, which weren’t measured for audience size.
Of those, 198 telecasts made it into the Four Million Club. The audience size ranges from massive (16,841,000 for the 2016 Michigan-Ohio State game) to just above the cutline (4,010,000 for the 2015 Louisville-Auburn game). And the conference distribution of the games is quite telling.
- 58 games between either independents or teams from different conferences (including all five Army-Navy games played during that period)
- 55 SEC-only games
- 49 Big Ten-only games
- 13 ACC-only games
- 12 Big 12-only games
- Five Pac-12-only games
- One American Athletic Conference-only game (2017 South Florida at UCF)
35 Alabama
31 Ohio State
26 Michigan
17 Auburn
17 Notre Dame
16 Florida
16 LSU
15 Clemson
15 Georgia
14 Oklahoma
13 Tennessee
12 Penn State
11 Michigan State
10 Texas A&M
This explains why the SEC accepted OU and UT. Almost all games that include any of the top SEC teams and OU/UT will be in the Four Million Club. This also explains the scheduling moving to 9 Intra-conference (IC) games. Instead of teams playing each team every 6 years, with a 3-6-6 scheduling format (3 permanent rivals, 6 of the other 12 teams every other year), the top teams will play each other annually, or at least every other year. This greatly increases the number of Four Million Club games to at least four times the number of such games prior to the acquisition of OU/TX and the expansion to 9 IC games. The quick napkin math for this is that we now average about 12 of these per year with SEC teams only (there are more with Out of Conference games - OOC). The 8 SEC teams on the list above will now play 3 times more frequently. When you add TX and OU that results in approximately 10 more FMC games per year. That comes close to quadrupling the number of FMC games to almost 4 per week instead of 1 per week.
This is also why the B1G went after USC and to a lesser degree UCLA. While neither of those teams appears on the list above, games like UM v. USC, tOSU v. USC, and PSU v. USC will likely add to the FMC inventory. That said, I believe it also shows why the SEC got the better end of expansion - the new SEC has 8 teams on the most Four Million Club games list, while the B1G only has 4. And neither new team is on the list while OU is and if Texas should be in the future. OU will drive more eyeballs than USC, and UT will likely drive more eyeballs than UCLA, their poor performance over the last decade notwithstanding.
These numbers provide guidance as to who the SEC and the B1G will want to expand with going forward. If they don't draw eyeballs to the TV screen, they aren't attractive. With the "Market" rail shrinking, even a great market like LA won't make up for the lack of having high average viewership numbers.
