From Forbes... well written article about 3rd Tier Rights

Jun 4, 2012, 5:56 PM

and why it's killing the ACC..

http://www.forbes.com/sites/chrissmith/2012/06/04/the-accs-third-tier-rights-and-why-theyre-killing-the-conference/

I wrote last week that the ACC is currently on its deathbed, largely because of the conference’s poorly renegotiated TV deal with ESPN. My claim provoked an impassioned reaction from commenters on both sides of the debate, and many readers offered detailed and thoughtful responses. But some of those comments also made it apparent that there is a fair amount of confusion regarding the details of the conference’s television rights, particularly third tier rights, and what impact they will likely have on the conference’s future.

It ultimately comes down to the fact that ACC schools do not retain third tier rights for football or basketball games, a sacrifice that was not rewarded with comparable rights fees to those paid to the other “major” conferences. That does not mean that ACC schools are entirely without valuable media rights, but it puts the conference at a significant disadvantage and has led schools like Florida State and Clemson to consider leaving the ACC for another conference.

To quickly cover the basics: there are three tiers of media rights. The first and second tiers are generally controlled by the conferences, which sell them – either separately or combined – to national networks like ABC/ESPN, CBS and Fox. The first tier rights holder gets first pick of the conference’s televised sporting events, usually for over-the-air broadcasts. The unselected games then pass to the second tier rights holder, and games chosen at that level are generally aired on cable networks. The technical definition of “third tier” varies from conference to conference, but it mostly consists of what remains after the first two tier selections have been made. For most conferences, third tier rights belong to the conference members, who are free to monetize them as they see fit.

The most valuable football and basketball telecasts are obviously snatched up by the national networks. What usually remains in the third tier is a few football and basketball games, plus the vast majority of non-revenue sports like baseball, lacrosse and soccer. Third tier rights can also include schools’ multimedia rights for things like radio broadcasts, coaches’ shows, arena/stadium signage and website advertising.

All of these details are important because the ACC included its first, second and a significant portion its third tier rights in the recently signed contract with ESPN. There was some initial confusion about how much the conference actually gave away, but Burke Magnus, Senior Vice President of ESPN’s College Sports Programming, thankfully broke down the details of the new contract a few weeks ago:

"ESPN retains exclusive rights to all football and men’s basketball games. Additionally, ESPN retains the first selection rights to women’s basketball and all other ACC sports such as baseball, softball, soccer, lacrosse, etc. Whatever is not selected for coverage and distribution by ESPN from these sports is retained by the member institutions."

In other words, ESPN has the rights to every valuable piece of ACC television property. Especially troubling for ACC schools is that they don’t retain rights to football and basketball games, the primary drivers behind television rights fees. The Big 12, by contrast, guarantees each member school third tier rights to one football game and several basketball games each year. ACC schools may be able to monetize the remaining non-revenue games, but the income from third tier live telecasts will be stunted without football or basketball games to help buoy the rights fees.

When I predicted that the conference’s days are numbered, the crux of my argument was that the ACC gave away its members’ most valuable televised properties but accepted sub-par rights fees (the ACC’s deal is worth an average $17 million per school annually; the Big 12?s is worth $20 million). In short, the ACC is giving away more and getting back less.

What’s more, this isn’t the first time that ACC Commissioner John Swofford has left media rights money on the table. When the ACC signed its previous ESPN contract a few years ago, Swofford insisted on maintaining a partnership with syndicator Raycom Sports, possibly giving away increased media rights revenue in the process:

"Swofford let the strongest bidders, ESPN and Fox, know that he wanted to include Raycom, which went into the talks as a partner to both networks, rather than trying to bid against their deeper pockets."

The ACC television rights that Raycom secured are credited with keeping the syndicator alive: “company executives acknowledged that keeping a piece of the ACC’s business was the only way the small, regional TV syndicator and production company could stay relevant.” Raycom pays $50 million annually in a sublicense agreement with ESPN; ACC schools see none of that money.

It’s rather surprising that a conference would so willingly take less TV money – the core source of revenue in collegiate athletics – just to keep a broadcast company from folding. There are, of course, plenty of conspiracy theories to explain Swofford’s irrational decision. Raycom Sports is based in North Carolina, and the ACC is often accused of favoring its four NC schools. Then there’s Swofford’s son, Chad Swofford, who is the Senior Director of New Media and Business Development at Raycom Sports (he was also employed by Boston College athletics when the school received an invite from the ACC). But regardless of what theory you choose to believe, the ultimate conclusion is that the ACC has not been the best at negotiating its TV rights contracts.

That’s not to say that ACC schools are without any media rights. As multiple commenters on Tuesday’s story rightly pointed out, conference members retain their non-televised third tier media rights. Sources at Clemson and North Carolina do not expect that the new TV deal will change any of the schools’ multimedia rights.

I reached out to IMG College, a sports marketing subsidiary of IMG that has agreements with ten ACC schools, and the company is quite pleased with the TV deal. George Pyne, President of IMG Sports and Entertainment, responded that, “The exposure the ACC gets via ESPN enhances the value of our rights. We are very happy with their agreement. The better the ACC does, the better we do.” IMG doesn’t foresee any negative impacts from the new deal, though the company would seem to have little to lose if one of its schools were to change conferences.

One example of the value of multimedia rights retained by ACC schools is the new deal North Carolina State signed with Learfield Sports, an IMG College competitor. Some details from the school’s official press release:

"The Wolfpack Sports Properties sales team…will develop corporate partnerships, as well as manage the operations of the comprehensive rights program, including signage, event marketing, radio play-by-play and coaches’ shows, television coaches’ shows and official athletic web site sponsorships. The new rights agreement will pay NC State a minimum of nearly $49 million over the 10 years"

The $4.9 million annual payout sounds like a sizable paycheck, but it actually ranks towards the bottom of the stack according to a 2010 report by the Sports Business Journal. The simple fact is that NC State, like most ACC schools, has a limited reach compared to schools like Nebraska or Tennessee, which each takes home more than $8.5 million annually just from multimedia rights. The ACC’s less valuable multimedia rights make the conference’s television contracts increasingly important, especially if ACC members hope to keep up with schools from the other major conferences.

The ACC ultimately signed away more rights than its competing conferences, and it did so for a smaller payout. The proposed changes to college football’s postseason are also expected to add even more pressure for conference realignment. The end of the ACC as we know it seems inevitable, and the conference has only itself to blame.

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THE TIGERS ARE IN MY HEART..... BUT THE DUCKS ARE IN MY PANTS....

How much more does having those one or two football games and few early season bball games add.

Looking at the list he posted and making a few adjustments (adding NCSU $49M/10yrs, changing Texas to $15M/year). It breaks down like this:

Big XII $8.38M/yr
B1G: $8.29M/yr
SEC: $7.27M/yr
ACC: $6.33M/yr
BE: $4.17M/yr
ND: $2.6M/yr

Obviously this is no scientific study and more information is needed for the other ACC schools, but it looks to me that the difference is around $2M/year between the ACC and Big XII.

Now the question is this:

Is $2M/year worth more than the exposure provided by having every game broadcast by ESPN?

Anyway, I'm still not sold on the value of tier 3 rights. There is a reason they are given back to the schools and I would imagine we benefit from having all of them thrown together (Clemson FB/BB with UNC/Duke BBall, FSU/VT Football, etc.) than alone.

From Forbes... well written article about 3rd Tier Rights

Re: From Forbes... well written article about 3rd Tier Rights

I love the TD... they can't say anything to dispute what

Re: I love the TD... they can't say anything to dispute what

It appears that The Mods have taken away the ability

He still does not answer a very simple question.

Re: He still does not answer a very simple question.

Re: He still does not answer a very simple question.

Re: He still does not answer a very simple question.

Re: He still does not answer a very simple question.

I couldnt find 3rd tier numbers on Clemson, but FSU made

You have it wrong.

Re: You have it wrong.

Clemson's 3rd tier rights are around 4.5 million annually...

Thanks Knight

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