Stewart Mandel looks at conference revenue in the next 10 years

[CloneJD]

The post Covid-19 economy is going to look a lot different than the pre Covid-19 economy IMO. The idea that we are just going to pick-up where we left-off is a bit simplistic.

 

[isucy86]

Expansion to 8 team playoff in his estimate. Should be a 16 team playoff. Everybody loves the dogs. Give me the #16 seed.

IMO a 16 team playoff would be the worst move college FB could make.

I watch between 8-10 hours of college football each Saturday from Sep-Dec because 1 loss can knock a team out of the ultimate goal- a National or Conference Championship. A 16 team playoff reduces the importance of early season losses.

I don't think that changes a whole lot with 8 teams in a playoff. It would likely include each P5 champ plus 3 solid at large teams.

Bump up to 16 teams and there will be 3 (and maybe 4 loss teams) in the playoff.

Plus in the college game there is a big gap between #1 and #16- especially if the game is in #1's field.

Lastly, conference championship games already represent the equivalent of a playoff game. So an 8 game NCG playoff is the equal to something like a 12 team playoff.

 

[Cloneon]

And if anything, i think i'd expect a change here.

The last round of big contracts and realignment was driven by cable markets. If you had X people in your footprint you could get $X*Y from the local cable providers.

With more and more cutting the cord and with streaming options becoming part of the game, i think we're going to go back to a more traditional model- how many viewers are you actually bringing to the table. How many subscribers to the streaming service are you bringing?

I think that could be beneficial for the big 12, which exists in a lot of areas with smaller populations but rabid college fanbases, meaning they'll do better numbers with this metric than they did by population alone.

Don't forget the 'wide' out of market distribution (ie alumns who now live in major markets). The Nielsen rating methodology is out the window due to the new streaming model. Also, alternative activities diluting interests is an important entity. And, finally, viewing time has always played against the Pac-12 and, san coast to coast scheduling I don't see that changing. Can you tell I lived on the west coast for most of my life? I've seen it first hand. Just not the same fandom as the midwest.

 

[isucy86]

I would love to believe this but the amount of ******** around ESPN+ and that $5 cover charge was unreal.

I can't find it. I don't have net fast enough to stream it. What channel is ESPN+? I'm not paying $5 for what I used to get for free back in 1987

If I can save on the standard package pricing by streaming, then I am willing to pay $5/month for something like ESPN+.

Then there's reality. Everyone will have to pay for ESPN+ if you want to watch Cyclone or Big12 games go forward.

One thing I have been disappointed in streaming services is no provider has taken a true ala carte approach. They keep adding content and upping the price. Even YouTube which started at $40/month will soon be $60/month IMO.

 

[MeanDean]

The post Covid-19 economy is going to look a lot different than the post Covid-19 economy IMO. The idea that we are just going to pick-up where we left-off is a bit simplistic.

I will go out on a limb and disagree with this statement

 

[CapnCy]

Look at what some of these streaming services have paid for exclusive rights to old tv shows ($200 million/year for Big Bang?). It’s plausible top viewership conferences like the SEC and Big10 could maintain their current levels imo. You’ll have more bidders, and bundled live sports is still the most premium product. Imagine if the Big 10 and SEC bundled together? With their large fanbases and population centers, the arms race to get exclusive rights would facilitate keeping them whole to the current revenue mechanisms

Very good point (how much they have paid for rights to shows)....as we've seen Amazon, Netflix ponying up BIG money for not only old shows, but production of new specials and movies....things are changing!

I don't see ESPN being the biggest wallet at auction any more....i would LOVE it we (big 12/ISU) could get good money AND as consumers we could also get an easy way to access games without having to mess with tiers of ESPN, Fox, etc.

 

[agrabes]

I would argue those streaming services are currently being subsidized in another way, either through the unrelated profits of their parent companies (e.g., Google's advertising and search functions) or by investors willing to take losses in the short-term to build up market share before raising prices/gaining profitability sometime later.

I am not sure that plan is going to work, but that is at least the plan. There might come a point where Google's virtual monopoly is broken by a competitor, regulators, or infighting over control of the company, and investors might eventually tire of those losses when they feel profits are never coming. Things can change quickly.

There are way too many moving parts here to draw a straight line like the above.

Fair point that the tech companies are more willing/able to run a massive loss on content. But I also would argue that they have to see a path to profitability at some point. We should also think about why these streaming companies do what they do. A lot of the reason that companies like Netflix spend huge amounts of money buying up rights for things like TV shows or spending money to produce their own shows is because if they don't they will lose their customers and therefore their revenue. Netflix doesn't want you to cancel once you've watched every episode of The Office and only renew for one month each time "Stranger Things" has a new season. For the "FAANG" companies to get into college sports would mean they have to see something in it for them. Can they ever have a path to making more than they lose? For a company like Netflix, it would be just adding another rat race for content to the one they already have. It's not their core business - so why spend billions on this content with a real chance of never getting it back?

I could see it with Apple possibly buying up PAC12 - that's a possible value proposition there - get in while the value is low and build it up with good marketing. Maybe even buying up something like the ACC or MWC rights could make sense. But it seems like getting in the fight for the B1G or SEC media rights is not a money making proposition. Even the Big12 is iffy - it's a pretty big contract.

I guess the point is we should not simply assume that college football TV contracts will keep going up at similar rates to what they have. I think that the contracts will be coming up as we are still recovering from the economic impacts of COVID-19, hitting companies hard that have already felt the squeeze from the existing contracts seem unlikely to pony up for additional money in bad economic times.

 

[Sigmapolis]

Fair point that the tech companies are more willing/able to run a massive loss on content. But I also would argue that they have to see a path to profitability at some point. We should also think about why these streaming companies do what they do. A lot of the reason that companies like Netflix spend huge amounts of money buying up rights for things like TV shows or spending money to produce their own shows is because if they don't they will lose their customers and therefore their revenue. Netflix doesn't want you to cancel once you've watched every episode of The Office and only renew for one month each time "Stranger Things" has a new season. For the "FAANG" companies to get into college sports would mean they have to see something in it for them. Can they ever have a path to making more than they lose? For a company like Netflix, it would be just adding another rat race for content to the one they already have. It's not their core business - so why spend billions on this content with a real chance of never getting it back?

I could see it with Apple possibly buying up PAC12 - that's a possible value proposition there - get in while the value is low and build it up with good marketing. Maybe even buying up something like the ACC or MWC rights could make sense. But it seems like getting in the fight for the B1G or SEC media rights is not a money making proposition. Even the Big12 is iffy - it's a pretty big contract.

I guess the point is we should not simply assume that college football TV contracts will keep going up at similar rates to what they have. I think that the contracts will be coming up as we are still recovering from the economic impacts of COVID-19, hitting companies hard that have already felt the squeeze from the existing contracts seem unlikely to pony up for additional money in bad economic times.

This is a very good post -- thank you. Adding to it...

When times are tough, like they are now, the first thing a company cuts is its marketing budget. CW has noted CF saw a massive decrease in its online advertising revenues when COVID-19 hit, and I would imagine selling advertising packages to small businesses in Ames and Des Moines is harder now than it was six months ago.

Until the economy comes fully and confidently back, large companies are going to keep their powder dry. This goes for the FAANG types buying into the market and potential advertisers buying ad space on broadcast or cable games. Great ratings for SEC games, even if drawing eyeballs, are not as valuable if nobody has the cash to pay for advertising freight networks need to turn a profit, which depresses the value of the initial deal for the conferences and the NCAA for postseason contests. The gravy train crashes.

When the largest driver of revenue growth in the past -- conference networks on cable TV -- is about to plateau or decline because of market saturation and cord-cutting, I do not see why one should be immediately confident the gravy train is going to keep up chugging when the replacement business model is unproven and unsure.