The Hammer Falling Or The First Domino?
Things are about to get a little bit tougher for Conference USA:
Old Dominion and the other 13 Conference USA schools apparently will have to make do with about $500,000 less in television revenue next season.
League TV revenue is likely to fall by about half when new contracts with Fox Sports and the CBS Sports Network take effect July 1, according to sources at three schools familiar with C-USA’s TV contract negotiations.
The two networks paid the league more than $14 million per year – about $1.17 million per school – for the past six years. Although the new contracts haven’t been finalized, negotiations are nearing completion, sources said.
This is only the third time in history that a conference has been offered a pay cut. The two previous cases, the American Athletic Conference and the WAC, involved conferences that lost their marquee teams. As was the case here. However, losing your prize teams historically has not been enough. In the early aughts, Conference USA lost Army, TCU, Louisville, Cincinnati, and South Florida only to see their TV deal increase anyway. The Big 12 has lost four programs, gained two, and is making as much as they ever have. The Mountain West Conference lost its big three programs (TCU, BYU, and Utah) and got a nice raise in their last set of negotiations.
What has, thus far, prevented conferences from losing TV money, has been a combination of bringing new schools on board with comparable value and the general escalation of college sports TV contracts. The Mountain West Conference, for instance, was coming off a contract in which their product had been seriously undervalued long-term contract. Conference USA previously had replaced the five losses with six solid additions. In each case, they probably would have made even more had they not been pilfered, but the difference was not enough to negatively effect their bottom line.
There were some indications that this might be coming down the pike. Conference USA had been the marquee product for CBS Sports Network, but since the last realignment the network seems to have been uninterested in showing their games above and beyond their contractual requirements. The Liberty Bowl, the home of Conference USA’s champion since the inception of the conference in 1996, dropped them (though it looked like that might have happened anyway). Rice started flirting with the MWC, despite the closest team to them in that conference being almost 1,000 miles away. And Marshall, which I will get to below.
So what changed for Conference USA? That’s an important question because of what it means for the other conferences.
It is entirely possible that their lost value was mostly a product of being unable to stock with better schools. That was what had happened with the WAC, for example, when it lost Fresno State, Boise State, and Nevada and only had two FCS promotions (Texas State and UTSA) to show for it. And here, Conference USA lost the upper-half of its conference. There were five programs in Conference USA that had a winning conference record, and four of them left the conference. There were six programs that had ever made it to a conference championship, and five of those were among the departures. The hope for Conference USA was that they would be able to claim in markets (by adding the San Antonio, Nashville, Charlotte, Norfolk, Miami, and Boca Raton markets) what they lost in competition. The problem is that the schools that they added were from the WAC (the same WAC that just had their TV deal cut dramatically) and the Sun Belt, which has a TV deal so bad that they lose money on it. Those programs did not suddenly become more valuable in a new conference. If that’s what’s going on.
An alternative explanation is the change in dynamics in the relationship between conferences in college football. The top five conferences (the Power Five) now have more autonomy than they used to, and the gap between how much revenue they bring in compared to their lower cousins (the Group of Five) has never been wider. The implementation of a playoff system which the G5 conferences may be locked out of has also had an effect. On the flipside, however, all of the G5 conferences have more access to major bowl games as they are (collectively) guaranteed one every year. As much as the lost programs, it was a change in status that caused the American Athletic Conference – from being considered among the “P6” at the time to now being one of the G5) to lose money on their new TV deal. While there has been no official change in designation for Conference USA, the new system may have changed their relevence.
If the G5 programs are locked out of the playoffs, what do they have to play for? In what way are they relevent to viewers? The answer is the ability to get into that good (“NY6”) bowl game. But Conference USA may be virtually locked out of that, too. There is one spot for five conference, and Conference USA is roughly third in the G5 pecking order. That may or may not be a big deal depending on the size of the gap between them and the first two (American Athletic Conference and Mountain West Conference). If 2014 was any indication, though, the gap is pretty significant. Going into Week Fifteen of that season, Marshall was 11-0 with some pretty impressive margins-of-victory. They scored more than forty points in nine of games, allowed less than twenty in nine of them, and won by three or more touchdowns in eight of them. And yet the playoff committee had them ranked below Boise State, which had two losses.
The main reason for their low ranking was Marshall’s lackluster schedule. What’s less clear is what aspect of their scheduling was hurting them. If it was their out-of-conference scheduling, that’s one thing because in the future they could try to schedule better opponents. But if it was their conference schedule, that’s not going to change any time soon and that is a burden shared by everyone in their conference, which bodes ill for all of them. If it requires more than two extra wins to get that NY6 slot than a rival in the Mountain West Conference (which, for reference sake, makes $1.7m per year per team), or presumably the American Athletic Conference (which makes $2.1m/yr/team), that would mean that they are virtually shut out not only of the playoffs, but a major bowl game. That makes it harder for the networks to get people to watch. In fact, that there are two conferences below them in the pecking order would mean that there are only two semi-relevant G5 conferences left.
Notably, the Mid-American Conference, theoretically one level below Conference USA in the pecking order, signed a TV deal with ESPN just last year worth roughly the same amount as Conference USA’s contract (a very significant upgrade from their previous contract, which was almost as bad as the Sun Belt’s). That suggests there may no longer be separation between Conference USA and the MAC, and the only separation that matters is between the the top two of the G5 and the remaining three and that TV deals are about to be flattened to reflect this. It also means that if they lose any more programs, they won’t be able to grab any MAC schools like Northern Illinois or Toledo (both of which are allegedly looking to move).
Or it could be a sign of very tough things to come not just for Conference USA, but for all of the G5 and perhaps even the P5 conferences as well. It may be the leading indicator that the bubble is bursting, and the spigot is coming off. Which, in turn, would mean that even though they have not yet faced any defections, when it comes time to renegotiate the American Athletic Conference and Mountain West Conference may be in for a rude surprise. The same could even be true of the ACC and Big 12. It is at least plausible that these gigantic TV contracts are a result of a cable model that is imploding around them. If that’s the case, that could spell trouble for almost everybody.
The AAC and MWC seem especially vulnerable, because they are not enough of a draw to produce their own network. (The same may be true of the Mountain West, but I haven’t seen them.) But that’s not going to do them a lot of good if there aren’t bidders. The major conferences, at least, can threaten to start their own networks or to push more content there. How serious that threat is will vary from conference to conference, however, and right now ESPN and Fox are paying a lot for each viewer (something on the order of twice as much as for each MWC viewer, and three times as much for each AAC viewer).