LAS VEGAS — Here in the land of blind optimism and jackpot opportunity, there’s been one question on the lips of college coaches. All of the country’s top college basketball coaches scouted AAU games at local high schools around Sin City last week. This week, the Mountain West’s coaches gather here for their annual media days.
From the bleachers to the blackjack tables, the same refrain could be heard: “Who is the Big 12 going to add?” Since the league announced it would explore expansion last week, the question has dominated the college sports landscape.
But the best answer, for now, is actually more questions. What does the league actually want? A cash grab? Better football? Better markets? Long-term stability? It’s impossible to determine who the Big 12 will add until the league prioritizes what it wants to do with expansion. “I’m still curious, what is the criteria?” Boise State coach Bryan Harsin asked. “I don’t know.”
For now, no one is quite sure if the Big 12 knows either. Is expansion such a naked money grab—up to $800 million—that it threatens the conference's relationships with FOX and ESPN after their television contract expires in 2024–25? “In my opinion,” said a television industry source, “you are basically saying eight years from now this is over, and we might as well take the money.”
Commissioner Bob Bowlsby has kept a poker face amid the carnival of schools jockeying for position to jump aboard. For now, the best way to address the biggest question in college sports is a series of questions:
What’s the biggest motivating factor in this iteration of expansion?
The motivator of this round of Big 12 expansion is just like every other round of expansion. Money. It’s a straight financial play. One wise veteran of realignment said that making an average of about $100 million extra per year, as the Big 12 is slated to do, is like getting TV network money without adding a TV network. The Big 12 would get that money, essentially, if it added four intramural programs.
The Big 12 has no chance of starting a linear network, one of the recent motivators for adding schools. Nor is the league’s television contract up soon, which is the other historic trigger for realignment. This is a straight cash play to make sure the league doesn’t get left behind financially, as it’s the only major conference without a television network.
How do ESPN and FOX, which own the Big 12 Tier 1 television rights, view potential expansion?
It’s fair to say that they must not be thrilled, as any programs that bring actual value and potential ratings would have been added years ago. And the money that they’re contractually obligated to spend is significant.
A quick realignment history lesson is fitting here. Remember when the Big 12 looked rudderless after losing Nebraska, Colorado, Texas A&M and Missouri during the last flurry of realignment earlier this decade? Well, ESPN and FOX stepped up in 2012 and essentially paid the 10-team Big 12—after it added TCU and West Virginia—the same amount of television money it would have paid the 12-team league.
Within the television industry, there’s an open question whether ESPN and FOX are irked that the Big 12 would be using the pro rata clause essentially as a loophole. The clause states that any schools joining the league make an average of approximately $25 million in television money annually. The clause was originally put in during a time of tumult in realignment, when things were so fluid that leagues and networks didn’t want to arbitrate, for example, if TCU was worth the same as Colorado. Or if Rutgers was worth as much as Maryland. Essentially, it was put into place for convenience so schools coming and going could be attributed equal value. The Big 12’s potential additions don’t appear to have close to equal value to the league’s television partners. That’s why multiple sources opined that this latest Big 12 play has a short-term feel to it, as irking ESPN and FOX and diluting their inventory can’t be good for long-term business.
So how does the league balance long-term stability with its immediate needs?
This is the thorniest question, as the pink elephant in the Big 12 meeting rooms is the potential of Texas and Oklahoma leaving the league when the television contract expires in 2025. Oklahoma would be a viable candidate for the SEC. (Although the school would likely have to take Oklahoma State with it because of state politics, which could complicate matters.) Texas’s options would likely come down to the ACC, Big Ten or being an independent. (The independent option becomes more viable as the broadcast paradigms change. More on that later.) The school’s Longhorn Network deal runs through 2030. But that ESPN-run property could potentially be folded into another ESPN property like the ACC Network. (Texas has always thumbed its nose at the SEC.)
So here’s the rub. Do the other Big 12 schools listen to Texas and Oklahoma regarding their opinion of current expansion candidates, even though there’s a chance they may bail? (Texas, along with Texas Tech, has lobbied publicly for Houston.) Or do the other eight presidents do what they think is best in the long term, even if that may alienate Oklahoma and Texas? No easy answers there.
From the start, the Big 12 has acted with all the foresight and long-term vision of a 3 a.m. Las Vegas wedding. The presence of the Longhorn Network will always give the Big 12 a temporary feel, just like the unequal revenue sharing in the league’s last iteration. Financial inequality will be in the lead of the Big 12’s obituary if it ever dies. While there’s a land rush of schools trying to get into the Big 12, it’s fair to ask if they’re entering a new version of the Big East’s old football league.
If the Big 12 is potentially so unstable, why would teams be in such a rush to go there?
This one is very simple. ESPN’s contract with the American Athletic Conference is for $126 million over seven years for the entire league. That means one school could make more money annually in the Big 12—an average of $25 million—than the entire AAC is receiving right now from ESPN. (The AAC also has a secondary rights agreement with CBS Sports that pushes its value slightly higher.)
Will the Big 12 add two teams or four?
The argument for adding four schools is simple. Four schools would mean approximately $800 million over the life of the Big 12’s television deal. Two teams would mean about $400 million. When faced with the option of taking more money or less, college presidents almost always take more.
There’s a key caveat here that hasn’t been discussed publicly, however. League officials may lean toward adding two schools as a way to leave their options open to poach Pac-12 schools. There’s a feeling around the Big 12 that the Pac-12 could be vulnerable when its television contract expires in 2024. (Much in the same way there’s feeling around college sports that the Big 12 will be vulnerable the following year.)
The Pac-12 network isn’t working as currently configured, and there’s lingering animosity on some campuses regarding the network’s failure to produce similar revenue to the Big Ten Network and SEC Network.
If the Big 12 thinks it can snag schools like Colorado, Arizona or Arizona State when the Pac-12 deal ends in 2024, then it grows to 12 and waits. While there’s a lot of variables involved, this line of thinking is a factor in the Big 12’s decision making. Would the Arizona schools really leave their West Coast comfort zone and more logical geographic markets? That may sound nice in a meeting room, but it’s a potential $400 million gamble. That’s a heck of a risk for the Big 12, which has never exactly specialized in long-term planning or thinking.
How important are market sizes to the league if a traditional cable channel is dead?
Two weeks ago at Pac-12 media days, commissioner Larry Scott gave some fascinating insight into the future of broadcast rights. He listed seven companies the Pac-12 is actively building relationships with that could become bidders on the league’s rights when its current Tier 1 rights expire in 2024: Amazon, Google/YouTube, Twitter, Facebook, Apple, Netflix and Snapchat. He added: “I think there’s a good chance you and I are sitting here five years from now, even before our TV rights come up, and are talking about some of the [seven] that I just mentioned in the same breath as Direct TV and Comcast and in the same breath as ESPN and Fox.”
That said, markets and viewers are still important. But perhaps viewed through a different paradigm. BYU has the strongest national following of any candidate because of its religious affiliation with the Church of Jesus Christ of Latter-day Saints. BYU’s television market is ranked No. 37, but its following would resonate if the next round of television contracts features subscription-based models. How real is Netflix bidding with ESPN for the Big 12? We’ll find out soon. Is this perhaps why the conference is leveraging ESPN and FOX for so much money now? Will they need them later? Again, we revert back to the league’s propensity for not thinking that far ahead.
Our first clue on the next wave of broadcast rights will come in a few years. The prevailing industry thought is that the Big Ten’s recently announced six-year deal—through 2022–23—was done for a short period of time by commissioner Jim Delany in order to exploit the new wave of bidders.
When would the teams arrive?
There’s little doubt that schools would do anything possible to arrive in 2017. For teams in the AAC, there’s a $10 million exit fee. There’s also a 27-month notice of leave, which would likely just end up costing more money to get out of. For the Mountain West, there’s a forfeiture of a year’s television revenue if there’s a year of notice ($4 million for regular members, $8 million for Boise State). If there’s less than a year of notice, there’s an extra $5 million tacked on, so $9 million for regular members and $13 million for Boise.
While that sounds like a lot of money, it’s not in this context. The Big 12 will receive about $25 million annually per school in just television revenue, so there’d be little issue in brokering deals to cover those fees. It would be surprising if new members weren’t in the Big 12 in 2017.
How worried are the leaders of the AAC and the Mountain West?
Mountain West commissioner Craig Thompson pulled his iPhone out of his pocket on Tuesday afternoon and opened up his Fitbit app. He smiled as he showed a reporter that he slept eight hours and 13 minutes on Sunday night. The night before it was 7:53. The point was simple. He hasn’t lost sleep. “We’ve danced this dance before,” he said. “What are we going to do?” AAC commissioner Mike Aresco is likely more worried. He could lose up to four schools, and the options to replace them from Conference USA don’t exactly sizzle. (Western Kentucky? Marshall? Southern Miss?)
Aresco may not be sleeping as soundly, but he’s essentially in the same position as Thompson. Winston Churchill could be the commissioner of the AAC and schools would still flee. The league will get another windfall in exit fees, potentially add a few more schools and march on.
So where does this leave us?
With more questions than answers, of course. Different scenarios obviously favor different schools. If traditional television markets mattered, Houston and UConn would receive heavy consideration. If having the best football mattered, Boise State’s success over the past decade would be critical. If giving West Virginia an eastern neighbor mattered, Cincinnati would be attractive. If expanding into new markets mattered, UCF and South Florida would get long looks. If academics mattered, Tulane could emerge as a darkhorse. If potential subscribers matter, BYU would be considered. If financial support mattered, the deep pockets of Federal Express would be an ally for Memphis.
Once the Big 12 decides how many schools it’s looking for and exactly what it wants, things will get much easier.