I wanted to write a little about Texas A&M’s potential move to the SEC, but by now you have probably already read 20 articles on the subject. So in order to make this remotely interesting, I have decided to hit every possible tangent along the way.
I do not know all the details of the deal the University of Texas made to remain in the Big 12 last summer. And I certainly do not know all the details of the NFL’s new collective bargaining agreement. But I still find it fascinating to work through the logic of both agreements.
Let’s start with the new NFL CBA. The current NFL schedule has 16 games and 4 preseason games, but NFL owners have been pushing to expand the regular season to 18 games and reduce the preseason to 2 games. Owners believe they can earn more money with the 18 game model. But for players, this was a non-starter during negotiations. As a way to keep the idea open, the owners included a rule in the CBA that they can unilaterally adopt a model with 16 regular season games and 2 preseason games in 2013. Owners hope to use the threat of a shorter season to blackmail players to accept the 18 and 2 model.
My first reaction when I read this was to laugh. I cannot believe that reducing the number of preseason games is a big threat to revenue. Ask anyone who has been a season ticket holder for a few years, and they will tell you that preseason games are worth next to nothing. An NFL team might claim that an $800 season ticket is 10 games at $80 per game, but that is not how I view the ticket package. I view an $800 season ticket bundle as 8 games at $100 per game. Of course, people value tickets differently. The real question is whether the fans value the bundle of tickets (and rights to future tickets) at more than $800. Would their willingness to pay be materially impacted if one of the preseason games went away? For most fans, I’m guessing the answer is “not very much”.
(The whole concept of bundling regular season and preseason games is puzzling. All sports leagues need an opportunity to evaluate young players and borderline roster candidates. But most sports try to do this in a way that does not alienate regular season ticket holders. MLB and the NBA do this by holding rookie evaluations in another city. The MLB holds Spring Training in Florida and Arizona, and the NBA holds a summer-league in Las Vegas. Only the NFL insists on including these warm-ups as a significant part of the season ticket package.)
But again, if I am right, and a customer’s decision to renew season tickets has very little to do with the number of preseason games, cutting two preseason games is a very weak threat. And even if the threat works, it is silly because it harms the owners as much as the players. The owners might as well have signed something that said, “We reserve the right to throw money away in 2013.” Maybe it legally gives them an “out” to negotiate for an 18 game schedule, but it does not do much else.
The agreement Texas signed to stay in the Big 12 and keep the rights to some of its games seems equally quirky. Let’s start by talking about the types of TV rights that exist. When the Big Ten added Nebraska, they added a brand-name school that will help the Big Ten earn more money when negotiating “primary rights” contracts for its national games. And when the Pac-12 added Colorado, it added a school that will at least help with rights to “secondary” games. Even if Colorado is not in the national title hunt, the Buffaloes have strong attendance, play in a relatively large TV market, and the football team is relevant locally. (This last point is the most important. There is no value in adding a TV market if the fans do not demand to see the games. Philadelphia may be the fourth biggest TV market in the US, but you do not hear conferences clamoring to add Temple football.) Texas reached an agreement to hold onto these “secondary” rights and launch its own Longhorn network.
The first puzzle to me is how the Longhorns' “secondary” rights count as anything more than “tertiary rights.” The network initially announced that it would air one non-conference football game per year. And as many fans as Texas may have, I cannot imagine you can extract a lot of revenue with one cupcake opponent. But ESPN paid a lot of money for the rights to the Longhorn network, and now ESPN is working to try to improve the Longhorn network’s game inventory.
Because of the value of these “secondary” rights, a lot of people have been writing that Texas A&M will eventually join the SEC. There are too many “eyeballs” in Dallas and Houston for the SEC not to want a bigger presence in the state. On the one hand, this seems a bit implausible. A&M needs to not only bring in revenue in Dallas and Houston, it has to grow the size of the pie significantly. That is because adding an additional team hurts SEC teams in numerous ways. For example, there is still only one automatic bid to the NCAA tournament. And under BCS bylaws, there are still at most two SEC teams allowed in a BCS game in a given year. Thus, adding Texas A&M essentially cuts every SEC team’s share of the BCS money. To be a worthwhile addition, A&M would not only have to earn its own way, it would have to be valuable enough to share some of those revenue gains with the other teams.
But if any team can increase the size of the overall pie with just “secondary” game revenue, Texas A&M is an exceptionally good candidate. First note that teams in major cities are rarely relevant. The select few in major cities are usually overshadowed by pro-teams, or are already affiliated with college TV networks:
1. New York: Rutgers football is not a draw, and regular season basketball is not worth enough.
2. Los Angeles: USC and UCLA are going to be on the Pac-12 network.
3. Chicago: Northwestern is on the Big Ten network.
4. Philadelphia: No major football. Penn St. provides best market leverage to the Big Ten.
5. Dallas: Texas is launching the Longhorn network. Texas A&M wants more for its rights.
6. San Francisco: Stanford and Cal are going to be part of the Pac-12 network.
7. Boston: Boston College has been relevant at times, but not consistent enough. If the Big Ten expands again, I would be shocked if the Eagles were not a candidate.
8. Atlanta: Georgia and Georgia Tech are both very valuable. (In fact, being in the Atlanta market is so important, that the Colonial Athletic Association, a collection of mid-major schools located mostly in the mid-Atlantic region, added Georgia St. to the league a few years ago.)
9. Washington DC: Maryland, Virginia, and Virginia Tech are all worth something locally, but I am not sure they provide great leverage for this many TV sets.
10. Houston: Again, Texas and Texas A&M
Texas and Texas A&M are the only two teams that are considered “home” teams in multiple top 10 TV markets, and that are relevant in those markets. If Texas can extract more revenue by forcing the cable companies in Dallas and Houston to carry the Longhorn network, Texas A&M ought to be able to extract some more money too. Maybe an Aggie-only network would never fly, but an SEC network that airs multiple Texas A&M games should be able to force the cable companies’ hand. If the “secondary” TV rights justification is ever a good reason to add a team, Texas A&M is that team.
But here is the key thing that should not be missed. The reason Texas A&M to the SEC makes sense is not because Texas and Texas A&M have to be in separate leagues to extract local revenue. It is because when Texas agreed to stay in the league in exchange for its “secondary” TV rights, the Big 12 left the remaining teams with fewer options to market their “secondary” games.
If subscribers in Dallas and Houston were willing to spend five cents per household for the Longhorn network and five cents per household for the SEC network (with A&M), they might pay 10 cents per household for a complete Big 12 network. But Texas essentially cut a deal that takes that off the table. Unless someone can somehow market a 9-team non-Longhorn Big 12 Network, Texas A&M has no option to use its “local” leverage in these cities. And if the Big 12 cannot take advantage of that revenue, maybe the SEC can. When the Big 12 saved itself and stayed together by promising Texas its own TV network, that seemed like a great deal. But in the final analysis, that deal may be the exact thing that eventually pulls the league apart.
And if you expect me to end this with the normal conclusion that this is all about college football and that college basketball is irrelevant in this discussion, well I’m not going to go there. After all, I referenced the CAA in this post. You haven’t seen that anywhere else.