Tuesday, May 15, 2012

ESPN3 is the ACC network and that's the problem

The ACC seems vulnerable and is dealing with unhappy members because of the new TV deal. All the gripes relate to money and third tier rights. As with most unhappy partnerships both sides are not seeing the value of the other. ESPN and the ACC can make ESPN3 one of the most viable new distribution platforms in TV and the Internet. But to do so, ESPN needs to revise the ACC deal again and pay a premium for the ACC's third tier rights.

ESPN3 is the perfect network

New sports networks have had varied levels of success in their distribution. ESPN3 hasn't had the same political or financial hurdles because they are dealing with Internet Service Providers and not cable and satellite companies. Most major ISPs carry the network and have for a few years.

I've complained like everyone else about having to watch games on my laptop, but technology is making that less of an issue. There are a variety of streaming devices and gaming systems that enable putting ESPN3 on a big screen. As ESPN continues to invest in ESPN3 the production quality will be as good as any traditional channel and seamless from a Big Ten Network or Pact 12 Network production. And unlike those other networks, ACC content would be still within the ESPN network so the conference will benefit from ESPN's cross promotion and massive audience.

ESPN can make ESPN3 the biggest Internet Channel available. It can be bigger than Hulu or MLBTV. And that is big for the ACC. While the other college networks can pushed to a sports tier, the ACC can be the center piece of ESPN's biggest innovation since ESPN2.

ESPN3 is not a money machine

Where the ACC suffers is in revenue allocation from ESPN3. The Big Ten Network collects approximately $1 per cable subscribers in Big Ten markets. ESPN3 collects an undisclosed amount per ISP subscriber for ESPN3. But regardless if ESPN3 collects $1 per subscriber, that money is not exclusively for the ACC. Why share all that revenue with the ACC when EPSN can claim that some of those subscribers are more interested in the other programming on ESPN3 like soccer or tennis or auto racing? If the ACC had its own network or had built one with the Pac 12, that revenue division would be less opaque.

Now ESPN has plenty of cash. They have their cable revenue and enormous ad sales that the Big Ten or Pac 12 networks cannot approach. With that track record and advantage, ESPN will probably turn ESPN3 into a cash cow too. But because it's not one now, the ACC suffers.

ESPN needs to save the conference

I am sure ESPN viewed their new deal with the ACC as fair. Since they were bidding against themselves, I imagine they didn't feel the need to break records. But that conservative approach clearly backfired. Florida State is unhappy and ready to join the Big 12. Some would say that ESPN doesn't care, because as a member of the Big 12, ESPN would still have rights to plenty of Florida State games. But if ESPN let's Florida State leave they will be losing a valuable asset. The ACC is exclusive to ESPN. That bond should have a premium.

We'll find out more about the ACC's future this summer. The likely outcome is a breakup. I hope everyone slows down, because the ACC's partnership could be fantastic. But no one seems to see the big picture.

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12 Comments:

At 2:21 AM, Blogger Matt said...

I loved it that ESPN3 had most of the BC basketball games. It was awesome and I absolutely loved ESPN3 for it. I just hope that doesn't change. I understood that they couldn't provide coverage locally to encourage locals to go to the games, but for me and several others living so far away attendance is often not an option.

 
At 10:31 AM, Blogger Big Jack Krack said...

I have been a BC Football fan even before I ever attended.

I am sick of this stuff - "The likely outcome is a breakup."

Our team has to get ready regardless. I'm concentrating on them.

 
At 10:31 AM, Blogger mod34b said...

"Florida State is unhappy and ready to join the Big 12. . . . We'll find out more about the ACC's future this summer. The likely outcome is a breakup."

ATL - this is a ridiculous assertion. Do you have shred of support for such a crazy prediction?

 
At 11:34 AM, Blogger EL MIZ said...

why does the ACC continually get screwed in negotiations? why don't we look for other options outside of ESPN? i'm at a loss for why this seems to happen -- other conferences get huge deals and we get a deal that undervalues the conference. what gives?

also, i'm still not understanding the big 12 math. if you just add in FSU and another team without re-negotiating their deal, FSU is going to come out with less money than they currently get in the ACC. on top of that, they'd owe $20 million to the ACC as an exit fee. how is it more lucrative for them to leave? they seem to be upset about these "third tier rights" whatever that is.

ESPN doesn't have to save the ACC; the ACC needs to save itself. can we get someone with a little bit of negotiating tact into the room the next time we have to make a deal, so that we aren't bent over by ESPN again for the "opportunity" to be shown on ESPN3 every saturday.

 
At 1:45 PM, Blogger Knucklehead said...

This comment has been removed by the author.

 
At 1:46 PM, Blogger Knucklehead said...

The real issue with this is that the person or group that made the decision to sign with ACC again did not get unanimous approval from all the schools.

Seems like you would want to get everyone on the same page before signing an agreement whether you are obligated to or not.

It is as easy as "Hey guys we cam to an agreement with ESPN. You are scheduled to be paid $17 million annually and we are planning to sign in 24 hours. Follow up either way."

I am a schmuck analyst with an MBA. It always blows my mind how people get into upper level decision making positions. They frequently do not forsee issues and do not know how to communicate.

 
At 1:47 PM, Blogger Lenny Sienko said...

ESPN 3 will not be the answer for the ACC so long as it is not economically available to smaller, independent ISP's. At this point the cost is approximately $1.00 per subscriber per month for ESPN3. The Big Boys have no problem with that; but the rest of us who have non-affiliated ISP's will never see ESPN3.

If the ACC would insist that ESPN3 be included in the ESPN package without additional cost, the increase in number of viewers would be exponential. Doesn't anybody make money on advertising anymore?

Until ESPN decides to change its business model for ESPN 3, its is going to be watched on bootleg, illegal sites-not in most homes in the country.

 
At 3:47 PM, Blogger NEDofSavinHill said...

The new deal with ESPN is a dog. It pays only $12 mil(per team per year) initially and doesn't reach $17 mil for a decade. Meanwhile the Big 10 and Pac 12 are getting $21 mil. The league was hamstrung by the idiotic deal it negotiated in 2010. The ACC presidents have to be the dumbest people on the planet. Swafford and the gang of 12 should have been fired years ago.2. Why do Indiana, Purdue,Iowa St. Kansas, Wash. St. and Colorado get significantly more money fot their tv rights than FSU,VT and Miami? Didn't BC and VT top the ratings chart for Thursday night at ESPN? 3. FSU, VT, Miami, GT, Clemson and BC should all petition ND to start a new conference so that they may extricate themselves from this enslaving contract. Whose benefit is Gdf working for, BC or ESPN?

 
At 5:01 PM, Blogger Knucklehead said...

The ACC doesn't deserve the same money as the Big12, Big 10, SEC, or Pac 12. Each of those conferences have 2x the alumni of the ACC. They have 2x the stadium capacity. I am guessing that they have higher ratings. Each of those conferences have their own network or have the cache to dominate one of the big networks(CBS, NBC).

The ACC just does not have the Q rating of the SEC, PAC-12, or Big 10.

I cannot believe that there was not a consensus among the AD/Presidents of all the schools before the deal was signed.

 
At 10:13 PM, Blogger Pearl Washington said...

This really is a joke. Knucklehead is 100% correct. The ACC is comprised of small academic minded schools (except maryland, fsu). This is the reason it was a basketball conference primarily given student bodies , alumni sizes, etc. Read this USA Today cover story today on Athletic Revenue and you see why the ACC does not belong. The numbers are staggering.

http://www.usatoday.com/sports/college/story/2012-05-15/texas-athletics-spending-revenue/54960210/1?csp=hf

 
At 10:33 PM, Blogger chicagofire1871 said...

At what point does it make sense to embrace UCONN (and perhaps other northern schools) as allies against the power and arrogance of the southern football schools?

 
At 10:57 PM, Blogger mod34b said...

Chicago -- as to Uconn, NEVER.


For all their arrogance, FSU is not getting its way. And its belief in its own power is vastly exaggereated. Seems like the FSU admin, BOT and faculty would rather hang with Duke, UNC, UVA, GT and BC then Oklahoma and Kansas etc.

 

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