Launching a Conference Network Presents Equal Parts Risk, Reward

Ever since the Big 10 Network began generating millions of dollars in revenue for its member schools a couple of years ago, the most buzz-worthy term in the college sports media has been “conference network.” While a branded network may seem a one-way ticket to profitability for many conferences, it is easy to forget that launching a network of your own also requires millions of dollars, years of patience, and, most important, a strong stomach.

“Everyone would like to have their own channel, but it’s not that simple,” IMG Media EVP Barry Frank said during the closing panel at the SBJ/IMG Intercollegiate Athletics Forum on Wednesday. “It’s extremely expensive. You have to have programming 24 hours per day, and the cost of production and staffing for something like that is huge. The going-in cost is considerable, and you better have an angel who is going to put it up, or you’ll be in big trouble.”

The Rough Road to Profitability
In the case of the Big Ten Network, that angel was Fox (and its parent company News Corp.), which owns 49% of the network and covered much of the startup cost prior to its launch in August 2007. In addition, DirecTV signed on as a carrier almost from day one. However, the network struggled mightily to achieve widespread carriage and profitability during its first 12-18 months on the air, causing many to question the conference-network model.

“In this moment of branded-network euphoria, one thing people forget about the Big Ten Network is that they went through a considerable period of severe discomfort and difficulty getting that channel up and running,” said Burke Magnus, SVP of college sports programming, ESPN. “[Big Ten Commissioner] Jim Delaney will tell you point blank that it was not easy.”

The network eventually turned the corner, however, paying out $72 million to Big Ten schools during the 2008-09 fiscal year. Perhaps most important, the Network is now carried by most major cable/satellite providers and is available in more than 40 million U.S. homes.

“Their time was immaculate in terms of where the economy was at the time they launched,” said Magnus. “Jim had a very unified group of institutions that had a very common goal, but it was a very difficult process to get to where they are today. And where they are today is a great place to be.”

Too Rich for the ACC’s Blood
In July, the ACC and ESPN agreed to a wide-ranging 12-year, $1.86 billion deal for the conference’s television rights. This came as a surprise to many who assumed that the ACC would go the way of the Big Ten and launch a network of its own. In the end, however, the startup costs involved (not to mention ESPN’s offer of more than double the ACC’s previous rights agreement) overwhelmed the potential benefit.

“[The ACC] was certainly very interested in a [conference network],” said Frank, who represented the ACC in the negotiations. “They saw what the Big Ten did and thought, why don’t we do that? But, when you looked at the numbers, unless you had an angel who will put up the money like the Big Ten did with Fox, it is very difficult.

“Our analysis was that it would cost them a minimum of $50 million in the first five years until they reached the break-even point,” he added. “They all looked around and said, we haven’t got $50 million and we don’t think we can find an angel to put that up, so we’re not going to try that.”

A Network on the Pac-10 Horizon?
The biggest question on the immediate horizon centers on the soon-to-be Pac-12 Conference and its upcoming rights negotiations. The Pac-10’s current TV deals with ESPN and Fox Sports will expire in 2012, at which point the conference will have to make some key decisions. Should the conference opt to launch a network of its own, it is expected to do so in partnership with one of the major sports networks — likely ESPN, Fox Sports, or the yet-to-be-officially-approved Comcast-NBCU entity.

“There are a lot of financial benefits and a lot of non-financial benefits [to a network],” said Pac-10 Commissioner Larry Scott at the Forum. “The Big Ten has a great model, and the SEC has a great model. If we do have our own network, I don’t think we’ll necessarily mimic either one, but we’ll try to improve upon what they’ve done and design something that makes sense for us.”

Big East Needs a Football Boom
The Big East represents another conference that must make the difficult conference-network decision in the coming years. With three years left on its current deal with ESPN, the Big East is working to strengthen the one piece most important to a conference network’s success: an attractive football package. Following the news that TCU will join the Big East in 2012, it looks as if the conference is well on its way to doing just that.

“At the Big East, our basketball position is very strong, but the football side is another story,” said Rutgers University Athletic Director Tim Pernettti. “We have looked at plans for our own network in various iterations. But we just don’t have enough football inventory right now, which is why TCU is coming into the league. The football piece gives you more options. You can look at the traditional licensing deal or primary and secondary licensing deals or even a network. But the one thing we keep coming back to is football inventory.”

Cheap Labor, Valuable Education
While building a network can be costly and risky, colleges and conferences boast an extremely valuable resource that has yet to be exploited on a grand scale: cheap, young talent in the form of students.

“The colleges need to start understanding that they have the potential to reduce their production costs to virtually zero by simply offering more classes in television production,” said Frank. “I think that you will see more of that in the college curriculum very soon. If you’ve got a crew to produce these [events] so it doesn’t cost $50,000 for a tennis match, you can do a lot more. That’s going to make these channels a lot more affordable.”

Mass Distribution Not a Given
Distribution and carriage are among the chief factors a conference must consider when deciding whether to launch a network. Although the Big Ten Network and MountainWest Sports Network (The Mtn. is currently available in more than 50 million homes) have achieved mass distribution, future conference networks cannot assume that they will have the same success.

“Don’t assume you’re going to get 100% distribution,” said Tom Cullen, EVP of sales, marketing, and programming for Dish Network. “The expectation to distribute it to all customers is a difficult first step in launching a new network. For example, we don’t carry The Mtn. It was not a popular decision, but, as a distributor, you have to consider pricing sensitivity and packaging flexibility.”