When the University of Texas agreed to partner up with ESPN in 2011 to form the Longhorn Network, they traded conference stability for a $300 million payday. When the SEC Network launches in August of 2014, it will make the contract for the Longhorn Network look like chicken feed.
In June of 2010, Texas Athletic Director Deloss Dodds confirmed to Nebraska officials that Texas would not relinquish their third-tier media rights to the Big 12 conference. Dodds wanted to retain the rights in order to form a school-specific network in the future.
That decision was the last straw in Nebraska’s disenchantment with the Big 12 conference. Nebraska decided to join the Big 10 and started the dominoes falling in conference realignment. Those dominoes would eventually lead to Texas A&M and Missouri joining the Southeastern Conference.
Dodds’ justification for breaking up the Big 12 was the $300 million payday that Texas received from ESPN for the Longhorn Network. After distributions to IMG and the academic side of the university, the deal paid the Texas athletic department approximately $11 million per year for 20 years.
This type of deal was unprecedented in collegiate athletics. With the $11 million in third-tier revenue added to the $22 million coming from its share of the conference television rights, Texas made approximately $33 million from television revenue in 2013.
The Big 10 distributed more to their member institutions than any other conference in 2013 with a $24.7 million payout to each school. In 2013, the SEC distributed $20.7 million to each member institution. The SEC Network is about to put all of those numbers to shame.
The SEC Network is going to charge $1.30 per subscriber per month inside the conference’s footprint. There are over 30-million cable subscribers in the 11 states that make up that footprint. If you do the math, that equates to $468 million in revenue from the SEC states alone. That equates to each SEC member school receiving revenue of $33.4 million from the SEC Network from just the cable viewers in the member institutions’ states. There are 72.7 million cable and satellite subscribers in the non-SEC states.
If only half of those subscribers choose to pay the extra $0.25 per month for the SEC Network, that equates to an extra $109 million per year in revenue. Assuming that ESPN is able to reach carriage agreements with all of the major cable and satellite companies in the United States for the SEC Network, the revenue from the network in the first year should approach $600 million.
The SEC and ESPN are going to split that revenue at a yet to be determined rate. If you assume that ESPN gets an overly generous half of the revenue, each SEC member institution can still expect over $20 million from the SEC Network in its first year.
When added to the first and second tier rights fees, each member school in the SEC can expect over $40 million in television revenue for the 2014-2015 school year. When considering that most SEC fans would pay many times more than $15.60 per year to watch the SEC Network, the potential windfall from the network really begins to take shape.
If you raise the subscriber fee to $3.00 per month for each subscriber in the SEC footprint, the revenue for the network just from the SEC member states would be approximately $1.08 billion per year. Assuming that ESPN takes half of that, you are looking at each member institution receiving $45 million per year in revenue for their third-tier rights from only the television viewers in those 11 states.
In a couple of years you could reasonably see SEC member schools bringing in $65-70 million per year from television revenue. For the smaller revenue schools in the conference, that would mean doubling their income from athletics on a annual basis.
With more revenue you can hire the best coaches, build the best facilities and attract the best recruits. The revenue generated by the SEC Network will help ensure that the SEC remains the top conference in the country in all sports for years to come.
In 2012, noted media personality Clay Travis wrote a blog post predicting that the SEC Network would be worth $1 billion per year. It appears that Travis may have greatly undervalued the network.
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