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Media Contracts...In's, out's and where the ACC (and the industry) currently stands

The idea of conference expansion has gotten me fired up the past few weeks.  As you all know, I want the best deal for Clemson regardless of the conference we would be affiliated.  I make no apologies to the ACC for looking out for Clemson's best interest simply because I honestly do not believe that the ACC always has Clemson's best interest in mind.  From this statement, I would like to expand on the concept of media, and where we could be going as a conference with the current deal being negotiated..

Today we are discussing Raycom, FOX, an ACC Network, how the Big 10 and ESPN have shifted the landscape, how the chips have fallen to this point, and what we can expect in the future.  This television debate will likely frame a lot of talk regarding expansion at some point, so it is important to know how this deal could shake out for the conference and why.

Click the jump for a comprehensive assessment of all options and a gross amount of information regarding the subject.

I have been a proponent of investigating all feasible options for Clemson as we move forward.  One question to be examined is whether or not the Tigers should jump ship if given the option in the near future.  While I will not expand upon the various expansion theories that are out there, I will examine the Tigers role as a member of the ACC and what this conference brings to the table.  Obviously the deal negotiated by the ACC will affect the attitude that we and (hopefully) the university will take towards the conference's future.

The current conference media deal is laughable.  With Raycom playing a key role in the conference's media plan, we are seeing less than impressive coverage of the ACC and Clemson here in the state of South Carolina.  This was never more evident than the (lack of) coverage of the ACC Tournament in certain portions of SC.  Lack of coverage for one of the nation's elite basketball tournaments is unacceptable and casts a negative shadow on all ACC schools, particularly in the under-served markets here. 

We will all agree that a television deal that does not get the ACC's product out to a minimal Southeast audience is unacceptable.  I believe that a deal that does not create more national attention would be a failure in this round of media talks as well.  More air time for conference members increases exposure and the possibility of cultivating other revenue streams for the member schools.  A national presence also helps both the athletic and academic programs in recruitment of future students and student-athletes. 

The SEC put itself on the national stage and generated ridiculous amounts of media revenue with their ESPN deal.  The Big Ten started this whole process by starting their own network (and are subsequently in charge of such a network) which has allowed the conference to expand its presence while bringing in much more capital than it did in previous years.  Each is generating tons of revenue for its respective conferences, with this money eventually flowing downstream into the hands of its member schools.

For those of you keeping score at home, I will (hopefully) briefly describe the situation the ACC and all of college football is currently in, why such has arisen, and rock out a few concepts that should be in play moving forward.

This whole revenue grab began in 2006 with the formation of the Big 10 Network.  These folks went out and started their own deal to have more control and ensure that more Big 10 games are broadcast.  The network's current deal combines Big 10 Network coverage with ABC/ESPN football and CBS basketball coverage.  Currently, ALL Big Ten home football games are broadcast in some fashion, whether on the main network or through a sports package provided by many cable companies as well as DirecTV.

The SEC was able to take advantage of the success of the Big Ten Network as they were able to play their hand after the Big 10 chose its direction.   The SEC also was the benefactor of outstanding timing as their deal was formed at a critical moment in ESPN's strategical plan for the '10 decade.  With the Big Ten out of play and ESPN wanting to build a sustainable platform from which they could launch other media ventures, timing was perfect for SEC commissioner Mike Slive and his staff to put together the blockbuster deal with ESPN/CBS that ensued.

Other conferences have gotten creative with their media deals in recent years.  The Mountain West, for instance, created its own network for a variety of reasons.  The most prevalent cause here was control.  MW schools and the conference in general were not pleased about having to play on Thursday nights just to get on ESPN, a situation that extends past guaranteed cash and into school schedules and marketing needs for the conference and its schools.

You may be asking yourself why these events are happening now and were not prevalent years ago.  The answer is simple: cable TV and satellite services.  Originally, network television broadcasted from local stations to homes via analog signals (they have since switched to digital signals, but the delivery method is irrelevant for this discussion).  Hence, anyone with an antenna could pick up these signals and watch network television for free provided they owned a television set.  The way these media outlets made money was through advertising revenue only.  This means that long term revenues are not always guaranteed and are dependent of the network attracting advertising dollars.

Over the years, various methods of getting television programming have emerged.  The two most prevalent today are "cable" television services and satellite-based systems.  Here, a central company (Comcast with cable and DirecTV/Dish Network with satellite-base, for example) provides all signals as a package to the subscriber.  These companies get their programming by paying media entities (i.e., ESPN, CNN, MTV, FoxNews, etc...) for programming for their systems.  Essentially, each one of these media entities receives a set amount per subscriber and are, thus, guaranteed revenue because of the subscriber base.  Advertisement capital generated from such telecasts are also available to these folks in addition to the subscriber fees generated.

Because cable TV and satelite-based services have become extremely popular and almost common-place in today's society, the revenues for these systems has become quite substantial over the years.  Also, because non-network outlets do not transmit their programming for free, they can demand more for their services than network TV.

So how does all of this play into today's media contracts for collegiate athletics?  With the current business structure in the telecommunications industry (specifically with Cable and Satelite services), the media gets paid if its network is broadcast to the end user.  One network being broadcasted is nice, two is better, three is even better, and so on.  This idea is critical to understand ESPN's decisions regarding these contracts.

ESPN over the years has realized this with the development of ESPN2, Deportes, Classic, and ESPNU.  At the time of the SEC contract, ESPN was really trying to get ESPNU off the ground.  Part of their strategy was to increase the number of college football games broadcast on the network to entice the DirecTV's and Comcast's of the industry to pick up their programming (this is similar to TurnerSouth picking up a large chunk of Braves games a few years ago).  Over the past few years, their plan has been successful and the "U" brand is now carried on most of the more basic packages from Comcast, DirecTV, and Dish Network.  ESPN/ABC has filled their schedule with quality games from the SEC and Big Ten, which allowed other quality games to be placed on the ESPN network.

Effectively, ESPN has cast its lot with the SEC. Such a large contract severely limits the amount of capital that ESPN will be willing to spend on another conference.  Also, ESPN has done a nice job of integrating its "side projects" into the mainstream and is now benefiting greatly from these subscriber fees.  The fact that this group has done such a nice job in this area to date solidifies them as a market leader and provides less incentive to move forward with deep deals.  It is also noteworthy that the BCS games will migrate to ABC/ESPN, with the Rose on ABC and the others on ESPN.

Outside of a mega-deal from ESPN or creating your own network, conferences may choose to partner with other conferences to create a larger market to demand more in the negotiation process.  A good example of this is the Pac-10/Big 12.  Leaders of both groups have identified synergies between the two conferences and think that cooperation will create a value add situation in which their combined values will eclipse the sum of the individual values.  In addition to the large markets located on the West Coast and in the Southwest, guaranteed intra-conference match-ups create an interesting dynamic for the negotiation process.

So, what are the ACC's options? 

The ACC tries to bang out a deal with ESPN.  As explained earlier, the ACC does not have nearly as much leverage as the SEC did a few years ago.  The current situation within ESPN coupled with the (relative) lack of success the conference has achieved in football over the past decade will handicap the conference in negotiation.  Almost certainly ESPN/ABC will be thought of in all aspects of this process, but will more than likely be a tough nut to crack moving forward.  It should be noted that ACC schools currently generate a lot of notoriety by participating in ESPN/ABC Saturday and Thursday games on this popular network.  It is of note that ESPN was not too proactive during their exclusive 60-day exclusive negotiation period early this Spring.  Company execs have openly stated that they are not likely to pony up the reported $120 mil per year deal that the ACC is looking to get (ESPN pays $150 million per year to the SEC).

The ACC looks to work with Raycom and another network in a situation similar to the agreement currently in place.  It is pretty obvious that the SEC to ESPN has hurt Raycom.  Raycom Sports largely revolves around the ACC, and losing this deal would force them to look in other places for their sporting coverage.  Raycom controls a large media distribution network composed of various television stations across the country.  Raycom has also been involved with the ACC for nearly 30 years.  Such a long term relationship should give them a chair at the negotiating table.  Raycom will have to parner up with a cable/satellite partner to increase its bid size as its current business plan revolves mostly around advertising revenue that has fallen in the current economic environment.

HOWEVER, for the ACC to enter any sort of deal with Raycom, their product MUST improve.  We have had numerous complaints about Raycom and how it limits this conference, and we will not compromise our demands for full coverage of both ACC football and basketball in ACC school states.  We also believe that Raycom needs to adjust its on-screen talent.  There is only so much "peppa in da grits" and references of removing pints of blood that I can take.  Sure this is mildly entertaining, but there is a need for pure substance which I think Raycom lacks at times.  Raycom has some talent on their team that may be misallocated at times.  I think that the ACC has a lot of leverage with Raycom Sports and will utilize this leverage in all negotiations.  Having a Raycom/Cable AND Satellite partner would increase their overall appeal and add to the capital that they could potentially bring to the table.

The ACC could also go it alone and create its own media network.  I am not sure how successful the ACC would be at organizing such and would have expected to be further along with the development of such if this will be the final proposition for the conference as we move forward.  Personally, I am not quite confident that the ACC can successfully pull something like this off especially with their track record over the past decade or so.

If the ACC did this, they would probably rely heavily on someone like Raycom to help get this going with the regional coverage.  Starting up a full production outfit is not easy and requires a good bit of capital to get going, so I believe the conference would absolutely have to farm a lot of this work out to someone to at least get off the ground.  The ACC would have creative control and could make significant dollars out of a cable/satellite.  I am fearful of the product that would emerge from such a venture and if the product would make it to the mainstream.  The conference would also need another avenue besides its cable/satellite network to get media out and would look to team up with one of the big boys (ABC, ESPN, CBS) to get prominent national coverage. 

The idea that I really like the most would involve working with another conference to create a much larger and more attractive package for a possible suitor.  This concept would be (IMO) the best option for the conference in terms of future scheduling (possibly an ACC/other conference "challenge" in all sports) and negotiating leverage.  I have always thought that a deal with the Pac-10 would make a lot of sense for a network like Fox who seems to be trying to get into this arena.  An ACC/Pac-10 deal would allow for wall-to-wall football coverage each Saturday while generating a coast-to-coast deal for the participants.  I would not, however, limit our options to our Pacific neighbors as there are a couple of other dancing partners that may be able to help sweeten this deal.

The final option to discuss is the use of another non-traditional football network.  The addition of NCAA football on the NFL Network seemed like a feasible option as the network has aggressively pushed for more mainstream coverage.  An example of this strategy can be seen in the NFL Network's coverage of live professional games.  The addition of these contests has put pressure on the providers to include their programming on more basic packages.  There have been prevalent rumors circling that the ACC has been working closely in talks with the NFL Network to create a possible package.  Such a package would incorporate only football, which would leave a need for further contract negotiations for arguably the nation's best college basketball conference.

Fox is the first choice on my list as they have shown some interest in the college game through their involvement in the BCS and Cotton Bowl over the past few years.  Fox has also used its regional networks to highlight other games over the course of the season.  Also of note, Fox was able to revolutionize the pro game a decade and a half ago with its cutting edge coverage of NFC contests AND Fox successfully ventured into stock car racing to evolve its brand.  As the nature of the business has evolved, I would not be surprised to see Fox attempt to venture further into regular season college games.

In order for a big deal to emerge, Fox would really have to work on its Sports Network to get this going, as it seems to currently be a confederation of regional programming loosely tied to the Fox Sports (Regional) Networks.  Something centralized would be nice, so Fox would possibly need to utilize their existing network (yeah, the free-tv one), create a new network, or utilize one of their existing spots to host large scale football events.  I do know that Fox can put this together, as they have done a jam up job with the pro-game and with their NASCAR coverage.  After thinking more about Fox and its constant growth I am more convinced that whomever partners with this network will be pleased with the product they see on the screen eventually.  As much as I would like this option, Fox currently works with the Big 12 and Pac 10 and I am afraid a marriage between these two conferences is much more likely.

The final "other" network option includes a deal with Versus.  Versus currently pulls games from Fox SportsNet.  The addition of Versus would give the ACC more national exposure.  Serious negotiations with Versus could affect any ESPN negotiations, as a deal with Versus would provide direct competition for the sports network.

What do you think?  Have we missed a good/feasible idea?  Is there room for more creativity?  Let us know what you think.