Conference realignment analysis

cwobrien11 is a KU fan and JayhawkSlant member who has an excellent history in analyzing the business of college sports. When he opts to post on the Slant I make it a point to read his comments, as I almost always learn something.

I am posting his realignment analysis post here FYI as all in one post he has covered the situation to date in clear and logical detail based on his experience and research.

He takes a long, deep dive on the subject, but IMO it is worth taking the time to read it all. Very informative and well thought out.

GOR: Grant of Rights
GOR Expiration Dates of interest:
Pac12 - summer 2024
Big 12 - summer 2025
ACC - summer 2036
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kansas.forums.rivals.com/threads/confere...106440/#post-2088672

cwobrien11
Memorial Stadium Slant Suite
July 7, 2:54 pm CDT
CONFERENCE REALIGNMENT ANALYSIS

I looked for a thread to put this in and I just don’t think there’s a great fit so I’m starting my own. I apologize now for the length of this and also for starting the 10,000th thread regarding realignment.

I’ve done an exhaustive amount of research over the last week. I took the week off to do some projects in my shop but a mix of extreme heat followed by extreme humidity has meant that I couldn’t do what I wanted to do. So instead of doing those projects, I have spent the last week collecting and analyzing information about this. Why? I’m a nerd.

There’s just so much going on right now it’s hard to capture everything but I’ve done my best to decipher as much as possible…the what, why, and potential how’s. Once again, this is going to be a long post.

For those that don’t want to read everything, here's the TLDR: Fox and ESPN are trying to consolidate properties, maximize revenues for themselves, and reduce overall expenses. ND controls how this goes down over the next 10 years. After ND, the next most valuable properties are in the ACC. There’s value elsewhere but it’s unlikely that anyone picks it up until after the ACC is picked clean. It’s a matter of when this happens, not if…either the ACC will break up in the next 5 years or they will be picked clean inside of 24 months of their GOR expiring [in summer 2036 - HE]. Anything anyone else does between now and then is just trying to maximize what you can for the short term.


[THE DETAILS FOLLOW… HE]

First, I think it is time for everyone to stop thinking of this as B1G/SEC and start thinking of it as a Fox vs. ABC/ESPN thing. The conferences might think that they are making moves, but at the end of the day the money is dictating the decisions. Consolidating properties allows them to incrementally increase the value of those properties while exponentially decreasing the value of the remnant. There are infrastructure and programming wins for the networks. I don’t know exactly what their endgame is…only that neither one wants to be left holding a worse hand than the other when the dust settles.

Right now ABC/ESPN control the ACC and SEC, Fox controls the B1G, and they share the Pac-12 and Big 12. I don’t think they particularly enjoy sharing. I believe that you are going to see the Pac-12 go all Fox or all ESPN when they sign a new TV deal…and it will be at bargain-basement prices unless there’s a strategic reason to do otherwise.

Taking USC/UCLA out of the equation easily reduced the value of the conference by 40%. The contract is undervalued currently…so their new deal will likely leave them close to where they are at right now. That’s going to be a huge blow for those schools. They sponsor a ton of non-revenue sports that don’t cost nearly as much to operate as football or M/W basketball, but in aggregate it adds up.

Only a handful of schools were operating in the black or neutral…not funky accounting but legitimately reallocating university funds to cover losses. They first bet on the Pac-12 Network rivaling the B10N financially but with 100% ownership. It didn’t. Recently, they were betting on a substantial increase in their T1/T2 content…that’s no longer coming.

The Pac-12 is hoping that Phil Knight can help them work with ESPN to get something more palatable than what they think is going to happen. I don’t think he’s got the pull that they’re hoping he does because ESPN isn’t going to do anyone else any favors. Right now they are all playing kumbaya in the corner hoping the numbers look more favorable than what they believe they will look like. We’ve all been there. It sucks.

Oregon and Washington want into the B1G. Washington St. and Oregon St. are leveraging every single political maneuver they have to link themselves to Washington and Oregon. It won’t work because no state is going to risk having two dogs when they can have a shot to only have one. Utah, Colorado, Arizona, and Arizona State realize that they probably aren’t options for the B1G any time soon and are just looking for a more secure landing spot. Stanford is pretty confident it will find a home in the B1G because they are fvcking Stanford. Cal? I don’t have a clue what Cal is doing right now but I think they’ve realized that they’re probably the odd man out and are probably looking at what an Ivy league-type of existence looks like.

The four most valuable, movable properties are off the board. I say movable because they were at or near the end of their GOR’s. They are OU, UT, USC, and UCLA.

The most valuable piece isn’t quite movable. That’s Notre Dame. From an ideological standpoint, they value football independence. From a monetary perspective, they’re locked into the non-football portion of the ACC’s GOR which expires about the time current preschoolers are signing letters of intent. That number though isn’t insurmountable for ND. They’ve got the money to pay it. They will if they have to.

The question is do they have to?

I personally believe that it comes down to whether or not they will have a pathway to a national championship. People can laugh at that, but it’s the reality. The B1G (Fox) is probably going to want to make that as hard as possible. The SEC (ESPN) is going to want to keep it viable for them. The SEC knows that if forced, ND will join a conference and it won’t be the SEC. The ACC really wants ND to be forced to join a conference and right now ND is contractually obligated to join them…which equals dollar signs…so they may take the B1G’s stance. That contract is up in 3 years. Initial talks are probably going to start in about 12 months.

So the question keeps getting floated out “why wait for Notre Dame” and the best thing I can say is that Notre Dame is probably the key to opening up a lot of other stuff. If the B1G can land ND, a lot of options open up very quickly and likely leads to two massive conferences. If they can’t, you probably see 3-4 conferences that are bigger than they are today, but not nearly as massive and everything goes dormant until about 2033 or 2034.

Notre Dame isn’t just the most valuable property left on the board. They’re also a significant driver of ACC stability. They helped drive the ACC network into reality…which got ESPN a significantly longer GOR timeline. Even as a non-football member, they create a lot of value for the ACC in both content, expanded markets, and expanded viewership. Overall ACC football viewership increased substantially after they cut their deal with ND (upwards of 50%). I can source that later if someone wants to call bullshit, but the information came directly from the ACC. I was shocked too.

You pull ND and you start to drive a wedge in the ACC. Why does that matter?

After ND, the next 7 to 8 most valuable properties are all in the ACC…bound up by a GOR until 2036. They’re basically untouchable with the GOR in place.

I know there’s some stuff floating out there about a competitive clause. I haven’t seen the new GOR, but everything I’ve read says that it’s almost identical to the previous one and there’s no competitive clause in there. I’ve read the old one. It’s not there. From a financial standpoint, it wouldn’t make sense for ABC/ESPN to put one in there…it would just mean that they would potentially be forced to overpay for content. I think ESPN makes some risky and questionable decisions from time to time, but I don’t believe that they are dumb. For now, I’m saying that the competitive clause stuff that’s floating around is idle speculation.

There’s also some stuff floating out there that says if the ACC adds teams, it would void their existing GOR and they would have to sign a new one…which would give teams an out. That’s not how it really works either.

All teams are required to sign onto the GOR before they can be formally admitted to the conference. The only time a GOR would change is if the terms of the GOR change…and the only term that’s really in there that could change would be length. In 2016, the ACC signed a brand new GOR because the terms of their contract with ESPN required them to in order to get the ACC network. It didn’t void the previous GOR until it had been signed by all of the teams in the conference. Had teams refused to sign onto that GOR, the only thing that would have happened is that ESPN wouldn’t have adjusted their network contract or created a new network. All of those teams were still held by the previous GOR until 2027.

So the ACC adding teams doesn’t void their GOR. If they tried not to sign the GOR, they wouldn’t get the benefits associated with the new teams but would still be under contract until 2036. They could try to fight it in court, but there’s a reason no one has attempted to challenge one of these in court.

That really means that the only way to void the GOR is to void the ACC.

You do that by creating instability. If the B1G pulls ND, they’re going to pull a partner (probably Stanford) and that means that they are at 18. The SEC will react. They won’t just sit on their hands. Those 6-8 next most valuable properties become desirable for the SEC and ESPN is unlikely to get in their way via pushing a Big 12 or Pac 12 team in.

I’ve long believed that some of the moves that ESPN were making provided minimal benefit to ESPN but provided significant blocks against Fox. BevoNet was one of those…the last time I looked, it was still operating in the red…but it kept UT’s rights under lock and key for a long, long time with a buyout penalty that was prohibitive for most conferences. I think it’s the same thing with the ACC network. ESPN isn’t really make much money off of the deal, but it allowed them to pull the ACC’s TV deal out of cycle and effectively blocked Fox from poaching.

The ACC is going to lose money immediately after ND moves. Probably a few million per school per year. You combine that with the money they are seeing from the B1G and SEC…particularly for those schools that share a state with someone currently receiving those funds (Clemson, FSU, Miami, GT, Louisville, etc.) and the fact that the SEC is now on the prowl? People are going to be looking for a safe landing spot.

You need 7 to want out to void the ACC’s GOR. With Fox and ESPN wanting this to happen, they will play a little fast and loose with what they are willing to spend to make it happen. For ESPN, they don’t really want to break up the ACC yet…but if they have to, I believe they will. Teams are going to want out sooner rather than later and ESPN would rather the whole thing blow up than have to pay top dollar for both the ACC and SEC…and they would have to really pony up for the ACC’s rights to keep that at bay. The remnants of a blown up ACC get distributed into something else at a much lower rate.

For the B1G, they want to move down the coast…that means UVA, UNC, GT, and Miami. Miami isn’t an AAU school, but their academics are top notch. For the SEC they want the most valuable properties they can land and they want into NC/VA. That probably means Clemson, FSU, NC State, and Va Tech. I think they would prefer UNC and UVA, but for now, let’s just play it this way because the math works. No more ACC.

After that, there’s blood in the water as the two power conferences round out their lineups. It will be all about getting to 24 (26, 28, 30, whatever). The schools that remain won’t care about existing rivalries, conference friendships, etc. It will be about getting a seat at the table and being a have instead of a have not.

Notre Dame is on the clock. I know people are saying 12 months because that is when the B1G announces its new TV deal. Maybe that pushes them, maybe not. Every day that they don’t say, we are not interested in joining the Big Ten is probably a day closer to their eventual announcement. Personally, I think they will hold off until the CFP contract talks start up but who knows?

That was scenario 1.

Scenario 2 is that ND decides that it doesn’t want to join the Big Ten at this time.

That means that the SEC and B1G stay at 16 until 2033 or so.

It probably also means that the Pac-12 has three options: expand, limp through at a disadvantage, or die.

The harsh reality is that few people watch Pac-12 games. KU was last in the Big 12 in football tv viewership over the last 5 years (duh, although not by as much as I would have thought). KU would have finished 7th in the Pac-12 in football viewership…and it would have been relatively close to the teams that finished 5th and 6th. KU had about as much viewership as the teams ranked 11th and 12th combined. That’s saying something.

The Pac-12 has good markets but bad slots and average content. Expansion for them is obviously East. That means the Big 12…with a GOR that is expiring soon. However, the Pac-12 has historically been particular about who they add. Academically they are looking at AAU schools, high academics, and non-religious institutions. Not a lot of options in the Big 12. Basically KU and ISU. If they stretch their academic profile, Okie State and Texas Tech. If they stretch their religion profile, Baylor and TCU. They will never add BYU even if they open things up. Stanford, Cal, and Utah would block that shit all day long.

The question then becomes is it worth it for any of those schools to move? I don’t think it makes sense financially. Travel costs immediately go through the roof and at BEST it’s a break even on conference revenue distribution…at best. Realistically, it’s probably still worse…there are some absolute dogs in the Pac-12 from an athletic revenue generation perspective. There are some dogs in the Big 12, but not nearly as many.

Limping through is a viable option. Not a great one, but viable. For Oregon, Washington, and Stanford it’s probably what they want. They are trying to buy time until they get B1G and/or SEC invites…and while those things aren’t imminent, they’re all on the list of pickups and they know it. Cal is a non-starter. I think they realize that they are fvcked without USC/UCLA because they don’t really bring anything to the table for anyone.

I don’t think that is what Colorado, Utah, Arizona, Arizona St., Washington St., and Oregon St. want. Washington St. and Oregon St. know that they have no shot in hell of making it into the SEC or B1G so they’re probably looking for a landing spot for the long term…they know that the Pac-12 is on borrowed time. CU, UU, AZ, and AZ St. have some value for either the B1G or SEC but they’re much further down the list than they would like.

It comes down to whether or not ESPN or Fox want to keep things stable enough to not have people panicking but still unstable enough to keep things open down the road. If they do, they may overpay for content slightly. It won’t be enough to be in the same realm as the SEC and B1G…still a fraction of that…but it will be enough to not make leaving quite as attractive.

I think you’re seeing some attempts at that with ESPN floating the idea of rebranding the ACC network and including the Pac-12 content. It gets everyone a little bit more money in their pocket and keeps eyes from wandering a bit.

If they don’t overpay for content slightly, I think that opens up the final option. The teams that can get out do so and jump to the Big 12. You pull 4-6 teams into the Big 12…giving the Big 12 16-18 teams. That number could grow…I could see Washington and Oregon politics being strong enough to force the Big 12’s hand into taking Oregon State and Washington State. That play won’t work with any other conference but might work with the Big 12.

It would be a massive conference of convenience and would last until the ACC’s GOR is up before chaos picks back up.

There is an alternative to that option…both the Big 12 and Pac 12 dissolve and form a new conference with the best 16 or so properties. It’s much less likely but technically possible because the Big 12’s GOR is about to expire which would give all of the Big 12 teams a viable out. Once again, it would be another conference of convenience that would last until the ACC’s GOR is up.

One of the things that I think is important for people to remember is that there are still valuable properties in the Big 12 and Pac-12. The issue right now is that the most valuable ones have been snagged and the next most valuable ones are locked into the ACC. That’s why the SEC and B1G aren’t just picking up all of the schools that could conceivably provide value. Think of it like recruiting. Why fill up your class quickly with high 3-star kids when you can wait a little bit to see how many of the 4-star kids you can snag? You will still be able to find plenty of 3-star kids to fill out your class so you can afford to be patient.

That takes me to the final point. Anything that the ACC, Big 12, or Pac-12 do in the immediate future has a shelf life. It’s remodeling a house that is going to be torn down in a decade. It doesn’t mean that there isn’t value in doing that, just that nothing you do is going to save the house in the long run.

The only thing that stops that eventual demolition is the money running out at ESPN and Fox. I think that would lead to a contraction of properties…a consolidation of only the most valuable ones and everyone else getting jettisoned. Frankly, that’s just as bad for the ACC, Big 12, and Pac-12…maybe worse. I don’t see any of that happening any time soon.

I think if it moves to two massive conferences (50+ teams), you see a breakaway from the NCAA. WIth that would come a collective bargaining with the TV networks and probably “divisions” that would be more geographically sound than current. That’s an NFL/NBA/MLB light with a loose university affiliation. Those broadcasting rights would be gold.

If it doesn’t get to that size, I think you see what you are seeing now…but with a wider distribution between the top and the middle.

There are a lot of people that are throwing shit at the wall right now. I do not have any inside information here. This is purely based on sifting through all of the data that’s available right now and actually analyzing it.

I firmly believe that it is inevitable that the Power 5 becomes the Big 2. I don’t think the leftovers suddenly become an extension on the G5 either. The properties that are left are still worth a helluva lot more than any of the properties in the G5. I don’t have a clue what that will eventually mean down the road.

Where KU falls in all of this probably depends a lot on how big the B1G and SEC go. If they stop at 22 each? I think KU is on the outside looking in. In a scenario where each of those conferences adds 6 more teams, I think KU is behind ND, UVA, UNC, Clemson, FSU, Miami, GT, VT, NC State, Stanford, Oregon, and Washington. The only possible exception to that would be if the SEC snagged UVA and UNC. VT and NC State aren’t schools that the B1G would want. KU would be fighting it out with Colorado, Utah, and Arizona for the final 2 slots in the B1G.

If it moves to 24, I believe that KU is in but it would probably come down to where the SEC wants to expand. If they want to continue expansion into OK and TX, KU is back to battling it out with Colorado, Utah, and Arizona for the final two slots in the B1G.

If it moves to 26 or more, KU is in regardless of where the SEC wants to expand. A national brand and AAU are attractive, but not as attractive as high population states and large media markets.

Does that suck? Yes. Is that the reality? Yes.

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[cwobrien11 on why Fox and ESPN will work against each other instead of together to create 2 super conferences, and why, beyond providing market data and projected valuations of different configurations, they don’t get involved in the actual decision making of who gets asked. - HE]

kansas.forums.rivals.com/threads/somethi.../page-3#post-2088399

You're assuming that Fox and ESPN are on the same side of the equation. They aren't.

Every property that ESPN owns is a property that Fox can't own. They aren't going to sit in a room and alternate picks because that means that one of them doesn't have an opportunity to snag 4 out of the top 5 properties left out there, even if the schools begged them to. They want to maximize the revenue they make...the revenue the schools make is a fraction of what the networks will make off of the content and merely a happy consequence of the transaction.

The other thing to remember is that technically ESPN and Fox can keep their hands clean on this stuff from a legal liability perspective. The conferences are making the decisions, not Fox/ESPN. The conferences are extending invitations, not Fox/ESPN. The conferences are the ones that determine who has a seat at the table and who is left out, not Fox/ESPN. Fox and ESPN provide the conferences with information regarding valuation...and the conferences make their decisions. If Fox/ESPN were to actually have a direct hand in making those decisions, there is a legal liability issue there that they don't want to deal with.