The Future Is Now, and Forgotten 5 Conferences Need Their Own Exclusive Media Partnership

We talked before about the Sun Belt’s “new” media rights deal with ESPN. It’s essentially a pre-emptive extension and expansion of their existing deal. But it is a lot less positive and exciting than the press release would suggest.

The reason the Sun Belt deal is so poor is that it was unnecessary. The current deal still had 2+ years remaining and the new deal accomplishes next-to-nothing. Reports are that there will not be a significant bump in overall or per-school payout from ESPN. So increasing revenue couldn’t have been the reason for the early renegotiation.

Barring that, the other goal would have been increased exposure. Sure, the number of football games on linear networks is more than doubling, but that’s still only about a third of the conference slate. Meanwhile, the remainder of the increase is going to either be a bloat in ESPN3 content or a bloat in ESPN+ paywall content.

That’s increased exposure, but more like hiking your skirt up from below the knee to above the knee than anything else.

That’s Nice, But What Now?

Personally, we tend to believe that criticism of an existing option is easy. But is there an alternative option that attempts to address concerns in a better way?

To that end, we are here to propose an alternative future, where the entire Forgotten 5 has their own network through YouTube, YouTubeTV, or another major streaming entity. We believe it will provide greater viewership, greater fan engagement, and greater ability to deal with the financial volatility that they face on an annual basis.

Let’s start with an excerpt of a discussion I had with David*, a contact of mine in higher education:

I believe every school should use their radio/TV in-house media department to run games on YouTube streaming. It costs less, can create a major following for the 18-and-under crowd, and they can sell ads to cover costs. I think it will be what the smarter Higher Ed institutions go to in the long term. Schools will catch themselves up with production value, but I also don’t think fans would think production value has to be as high if they get the product on YouTube.

It turns into an expectation of lower budget, but you can also cater more to the fan and less to ESPN trying to sell the next Power 5 game. Also, it’s not like the production value with ESPN3 has been that great. You would have much more control over the product, which is what any company should want. The problem is you’re still dealing with higher education administrators who think they should hire this stuff out even though they can do it in-house.

They are sold easily by someone that understands TV; higher ed admins have typically never run a business, so if someone can pitch them a reason for sticking with ESPN they seem to bite pretty quickly. It happens with many things on a campus. It’s why bookstores are so terrible. The good ones are in-house and cost students almost nothing while still making a profit. But farming out bookstores to eFollett and the like is just something higher education has always done.

You have to sell admins on the fact that they already do the production with their own staff and equipment, and the added costs pay for themself. Plus, they would hit the high school kids because they are all on YouTube and not cable. Give them a model that shows how they could make money from advertising, plus sell the aspect of having total control of their product.

*His name isn’t David, but those are his own words.

Reaching Viewers New and Old

This seems like a pretty logical scenario. Especially when you understand that ESPN3 doesn’t generate a dime of revenue for the schools. It is purely an exposure equation.

If you were to compare the number of ESPN subscribers to the number of YouTube (or Facebook, or Twitter) users, you’ve got a much larger potential audience pool. Additionally, a larger percentage of that potential audience is future fans/recruits who you are trying to sell on your product. These numbers are from various points from July to September 2017:

  • YouTube – 1.5 billion monthly active users
  • Twitter – 330 million monthly active users
  • Facebook – 2.3 billion monthly active users
  • ESPN – 88 million subscribers

Now, there’s more to those numbers. ESPN has 88 million subscribers, but only a portion of those are active viewers. YouTube has 1.5 billion active users per month, but only 20% of their views come from the states, and so on. You need to tweak these global social media numbers for the fraction that represents the US market, but even that fraction still dwarves ESPN’s subscriber base easily, let alone their actual viewership numbers.

Add to that the research which suggests that given current trends, by 2025 half of viewers under the age of 32 will be either “cord-cutters” (ditched traditional for streaming) or “cord-nevers” (only ever used streaming). Similarly-aged data suggests that people are replacing “time spent in front of TV” with “time spent in front of YouTube” in substantive chunks. That’s three-year-old data now, and the move to streaming has only accelerated since then.

If you are a conference that is trying to gain reach and exposure, doesn’t it make sense to gravitate towards the thing everyone else is, rather than standing pat? Why not move your content where the people are going?

The Mountain West Conference has already played around with things like streaming games live on Twitter and Facebook via Stadium (with quite positive results). They did it on purpose, while Conference USA more stumbled into such an arrangement due to their inability to secure a more traditional media rights deal. Either way, the numbers speak for themselves.

The six football games that the Mountain West aired on Stadium via Facebook last season pulled a cumulative 4.7 million viewers, and the New Mexico-New Mexico State game pulled 1.2 million viewers by itself. C-USA’s nine games on the same platform brought 5.5 million views of their own.

Middle Tennessee State’s random Thursday night basketball game at Old Dominion pulled 395,000 live viewers and another 25,000 views via replay in the three weeks after. The 45 regular season men’s basketball games Stadium aired on Facebook pulled 19.3 million views, and the six C-USA tournament games they aired racked up 3 million views.

That’s a not-insignificant amount of views, and it becomes significantly more valuable if the conferences are able to retain and reinvest some of that generated revenue.

I can also assure you that the product that Stadium produced for Facebook is a dramatic improvement over, a bad service which required $7 just for a 24-hour pass.

I’ll just leave these here:

That Leaves The Money

Doing it on your own could mean a couple of things, but it definitely means stepping away from the big bad (insert name brand network) monster. Some would worry that this move is the equivalent of biting the hand that feeds you, but you might want to pay closer attention to where the food actually comes from.

ESPN has seen a 12% dip in subscribers in the last 6 years, and they’ve had to jack up their subscription fees to compensate – which raises cable subscription costs, which causes people to cancel. You get the idea, this is a zero-sum pursuit for the Worldwide Leader. The subscriber defection has slowed considerably, but the odds are more likely that this is a plateau before the next drop, assuming those viewership trends are right.

If you need an indicator that sources like ESPN are struggling and in search of life vests left and right, note that this Sun Belt deal is the second Forgotten 5 conference that has been approached about an extension of their existing deals within the past 6-8 months, despite none of their current deals expiring before 2020.

The Mountain West conference is a great example of where any Forgotten 5 conference should be heading, as they were approached last summer about an extension of their existing deals (which dwarf the Sun Belt at around $1 million per year per school) and said “no thanks, we’re going to keep exploring our options in a changing landscape.”

Obviously, a conference with a more desirable product and more resultant leverage can be pickier, but it just flat-out makes sense to pursue newer, emerging media with deep pockets and a desire to expand their product. Which is more likely to benefit you; paying for the same exact internet you’ve had for a decade, or spending extra money on the company that has similar service now but will very soon offer gigabit service? You want to play to your potential, or you’ll never grow.

A 2017 fourth-quarter earnings statement shows $12.8 billion for Disney’s entire company. Only $5.5 billion of that came from all of Disney’s media networks combined, of which ESPN is a portion.

Compare that to the following:

  • Facebook – $13 billion
  • YouTube – $32 billion
  • Amazon – $60.5 billion

The idea David mentioned about streaming direct to YouTube and collecting ad revenue is an iffy proposition because there are a lot of variables these days with how YouTube hands out revenue, and what your ad rate will actually be. It’s not a bad option, but it’s probably not the best option beyond the short-term.

A deal with Stadium via Facebook, or directly with Facebook, or with Amazon Prime, or with YoutubeTV; does it work out better than where ESPN is headed? There’s no guarantee, but I would think that even a slightly greater chance of success, with a partner that has much deeper pockets (and margin for error) than ESPN, would be a much better bet in the long run.

Valuing Yourself Appropriately

Paired with that money issue is another component. As we all know, when it comes to exchanging goods and services, what you have is only worth as much money as someone is willing to give you for it. If you and I possess houses that are identical in every single way, but I find some poor bastard who is willing to pay $50,000 more for my house than yours, then *voila* my house is more valuable. Despite not actually possessing any additional value.

The Forgotten 5 conferences are doing the exact opposite; they are undervaluing their own content because they perceive their role to be one where they need to accept whatever deal they are offered, and all they can do is haggle in the margins. Well, I’m here to tell you that now is the time, because it is a buyer’s market.

It has been true for a while now that in a world where everyone has grown accustomed to recording programming so that they can watch it later and skip the commercials, a live sports event with unskippable advertising is far more valuable to an advertiser. They’ll take a smaller audience that will definitely see their advertisement over a bigger crowd of merely potential eyeballs any day.

That is only going to accelerate now that all of Google, Amazon and Facebook are seeking live video programming. Facebook just got into live, original video content via Facebook Watch and recently bid $600 million for the right to air Indian cricket matches. They’ve got a new guy coming on board for the sole purpose of running a new arm of Facebook dedicated to media rights acquisitions.

If you think Facebook’s money is burning a hole in their wallets, what about Amazon, whose 2017 Q4 earnings were quadruple those of Facebook? You can’t tell me that Amazon has put this much time and effort into Prime Video and isn’t eventually going to launch some form of AmazonTV which will need content.

That means a buyer’s market, and an opportunity to let others bid over you. All live sports carry that coveted captive advertising audience, so there’s value in everything from the College Football Playoff to the MEAC volleyball tournament, and everything in between.

Is it really so crazy to imagine a scenario where Facebook, who just paid roughly $30 million dollars to air one Major League Baseball game per week for one season, might give Conference USA a deal worth $45 million over three years? I assure you it isn’t. The money is shifting away from ESPN, those who have it want the live sports content these schools have to offer, and it would behoove the schools to capitalize on the potential feeding frenzy.

Oh, We Forgot One Thing

It’s perhaps unsurprising that the conference in the most conservative part of the country would take the most conservative approach possible. Rather than use market uncertainty as an opportunity to capitalize on market inefficiencies, the Sun Belt decided that the solution to potential chaos was to dig the bunker deeper.

We can probably scratch them off the “willing to try some kinky, experimental streaming action” roster.

Conference USA has gone somewhat the opposite direction, leaning a little bit harder into streaming on Facebook (and Stadium) than they did last year on a short-term deal that increases their per-school revenue in part by having the provider cover production costs. This is a better idea but still pretty tame.

This is still a new venture, and nothing will ever get adopted in large scale until it has demonstrated success in small scale. Obviously, you’re a long way from a full-scale Forgotten 5 Network on Amazon (call me!) when all you currently have is a couple of conferences airing a few games at a time on a few platforms.

Even one whole conference going whole-hog into one of these avenues could be seen as rather aggressive, though a group like Conference USA would likely be upgrading if they ditched their ESPN/CBSSN/Stadium/beIN quilt for one whole warm Facebook/Amazon/YouTube down comforter.

No, we should probably start smaller; a program on the outskirts who’s got little to lose. The University of Massachusetts and New Mexico State University come readily to mind.

The Minutemen have already done unique things like playing in an NFL stadium, and NMSU is always on the hunt for ways to expand their financial margin for error. Why not jump to Facebook?

Suddenly, you have a potential global audience to expose to your athletics product, an audience which includes the millions of 18-and-under-year-olds you’re trying to attract to your campus and athletics teams, and alumni who don’t donate because life and distance has caused them to disconnect. Meanwhile, Facebook gets to take all of their resources and figure out how to maximize the quality of the product for when they start airing more major sporting events.

There is an opportunity here for a school or conference to get ahead of the curve and bet on emerging digital media. It’s not guaranteed to work out, but the companies who want to make it happen have a ton of money to burn and want to invest it in something, so why not the product that you offer?

Maybe it doesn’t work out in the long run, but even a short-term deal could produce substantial revenue for your program and give you the opportunity to achieve meaningful progress within your athletic department.

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