September 26, 2021

The World Stock Markets Tips & Targets, News, Views & Updates

The World Stock Markets Tips & Targets, News, Views & Updates

To understand why Texas and Oklahoma want to move to the SEC, follow the money

Oklahoma Sooners wide receiver Theo Wease (10) catches a pass over Florida Gators defensive back Jaydon Hill (23) during the Goodyear Cotton Bowl game between the Oklahoma Sooners and the Florida Gators on December 30, 2020 at AT&T Stadium in Arlington, Texas.

Matthew Pearce | Icon Sportswire | Getty Images

It’s the talk of the college sports world — two top football programs shifting alliances to a superior football conference. And the most notable sports network is awaiting to reap the benefits from a significant investment.

The University of Texas and the University of Oklahoma combined forces and officially requested entry into the NCAA’s Southeastern Conference on Tuesday.

The news came after they notified the Big 12 the schools would not be renewing media contacts after they expire in 2025. If Texas and OU joined the SEC, the conference could attract higher media fees, given the marketing muscle of the schools in college football and basketball.

The SEC’s $55 million package with CBS expires after 2023. Last December, ESPN reportedly agreed to pay the SEC $300 million per season starting in 2024. The package includes higher-tier SEC games in a deal that runs 10 years. Disney‘s ESPN also owns the SEC Network, a cable network dedicated to SEC sports.

The finger pointing has already started, and other Big 12 schools aren’t happy. But invitation meetings are scheduled, and this move is about positioning for what’s ahead.

When discussing the move, several execs used an old quote from legendary sports TV executive Don Ohlmeyer: “The answer to all your questions is money.”

ESPN anticipating the future 

The Texas and OU move is the first step to creating super conferences throughout college sports. The SEC, Atlantic Coast Conference and Big Ten have elite football programs that include Alabama, LSU, Ohio State, Michigan, Florida, and Clemson. These conferences would almost emulate a mini-NFL development league by adding more powerhouse programs, with highly touted prospects emerging from the schools annually.

ESPN would benefit from the reshuffling.

The network has a stake in the Longhorn Network, dedicated to University of Texas sports, and holds Big 12 streaming rights. But the LHN has failed to lure subscribers because of cord-cutting and because Texas hasn’t been dominant for the last decade.

Adding Texas and OU to the SEC would also provide access to high-value matchups for ESPN’s Saturday afternoon and prime-time slots during the college football season. Additional ad dollars would also flow for the annual UT versus Texas A&M game, should the A&M Aggies stick around in the SEC.

“That would renew an old rivalry and it’s a high-intensity game,” said former CBS Sports president Neal Pilson. He added that “national matchups … would have more value — Texas vs. Georgia, Texas vs. Florida, Alabama-Oklahoma.”

Expanding the conference would help ESPN justify its $3 billion investment in the SEC. 

There’s still a lot for lawyers to discuss, but the move could happen even sooner than 2025.

In their joint statement declining Big 12 rights renewals, Texas and OU said they “intend to honor” existing deals. “However,” they added, “both universities will continue to monitor the rapidly evolving collegiate athletics landscape as they consider how best to position their athletics programs for the future.”

When discussing the new SEC deal last December, ESPN executive vice president of programming Burke Magnus was asked about buying out CBS’ remaining years.

“We’re open to that possibility,” Magnus responded, “but obviously, it would have to be a circumstance that works for all involved. It’s not for me to comment because it’s an existing relationship, but we’re perfectly comfortable to let it run its course.”

On Wednesday, Big 12 Commissioner Bob Bowlsby sent a cease-and-desist letter to the network, accusing it of meddling in efforts to get the teams to the SEC faster. ESPN denied wrongdoing, telling The Associated Press: “The claims in the letter have no merit.”

Tight end Jelani Woods #89 of the Oklahoma State Cowboys dives into the end zone for a nullified overtime touchdown against defensive back Caden Sterns #7 and linebacker DeMarvion Overshown #0 of the Texas Longhorns at Boone Pickens Stadium on October 31, 2020 in Stillwater, Oklahoma.

Brian Bahr | Getty Images

Always follow the money

Texas and OU each received about $34 million from the Big 12 over the last year, according to AP. That figure could jump to over $60 million annually if they move to the SEC.

In addition, early speculation already points to the SEC eventually soliciting an even higher rights fee should things align. The SEC already gets about $497 million in TV and radio fees, according to USA Today. The newspaper estimated that figure could be more than $500 million in 2024-25, factoring in 3% increases.

“A company like Disney doesn’t throw money around,” Pilson said. “When you talk about big numbers, they’ve done the math, analyzed the marketplace and figured out revenue projections (subscriber growth, ads, and new distribution avenues). Adding Oklahoma and Texas creates additional value, and they’ll put a number on that as well.”

Name, image and likeness licensing provides additional revenue opportunities.

Athletes are now allowed to capitalize on their intellectual property following a Supreme Court ruling last month. Hence, top football schools need to create competitive marketplaces to solicit the best recruits who can then capitalize from their exposure. When Alabama coach Nick Saban hinted that quarterback Bryce Young reached the $1 million mark via NIL opportunities, that comment served almost like a recruitment pitch.

The message behind the message: Play football at Alabama and earn top dollar with NIL.

“I agree with that notion,” said sports attorney Edward Schauder of law firm Phillips Nizer. “The better the school, the more valuable the name and likeness rights.”

Also, programs could use the extra money by aligning with top conferences to fund reimbursable items that student-athletes can now receive. Things like premium Apple Macbooks and other education-related items are up for grabs, and the National Collegiate Athletic Association can only sit and watch thanks to the Supreme Court.

Schauder, who has negotiated endorsement deals involving top athletes including Tiger Woods, predicts the NCAA will eventually get a piece of the action. 

“I can see the NCAA offering to handle the NIL rights of certain players or other collegiate sports (outside of football and basketball),” said Schauder. He predicted multilicensing agreements in college sports, with companies adding team logos to their NIL rosters.

“The conferences and NCAA will catch up and benefit from this the same way pro leagues benefit from deals made by the player associations,” Schauder said.

The future of college sports is beginning to take shape. To figure out the next moves, just follow the money, media deals and NIL opportunities. The SEC, Texas and Oklahoma started the new trail.

Share This :