Pac 12 network / direct tv (PACN now on fuboTV streaming)

[MiamiBuffs]

ESPN's $2.25 billion deal with the SEC expires in 2024. That's just one of many rich contracts held by ESPN and the other big networks. Billions of dollars are committed over many years to the conferences. And with cord cutting becoming more mainstream, ESPN's future revenue streams are looking more shakey all the time. Ditto for Fox, CBS, and NBC.

ESPN's parent company Disney sites cord cutters as a reason for earnings pressure and a falling stock price.

At what point do university presidents feel cord cutting pressures downstream? Already ESecPN has firmly crossed the line from a sports network to basically a promoter of a conference. After all, ESPN is legally bound to write big checks to the SEC, so they naturally have to milk that relationship for all its worth, even at the expense of alienating other conferences with smaller deals.

It stands to reason that more cord cutters will lead to even more preferential treatment from ESPN to the SEC. ESPN has got a milk cow and they have to milk it for all its worth for the full term of the contract.

It also stands to reason that the P12 network isn't going to grow revenues with a small and stagnant subscriber base. The P12N is also bound to contracts that require paying out to the member schools. Of course the P12N is vulnerable to revenue pressures from cord cutters just like everyone else.

Larry Scott needs to expand the subscriber base. And he cannot reasonably expect average per subscriber revenue to grow, or even stay flat. At some point he has to give on price and make up for loss of subscriber revenue through volume. The commissioner's pressure to look at partnering or consolidating with other conferences continue new to mount, at least for media deals, if not through out right expansion.

Or he could stay the course, which would only lead to more revenue pressures on the P12N that continues to hit P12 conference members in the wallet.

As a fans of P12 sports teams, any money saved by cord cutting probably comes back to bite us in the ass in the form of increased ticket prices and solicitations from the foundation to make donations. Something has to make up for network shortfalls caused by cord cutting because the bonds on facilities expansion and costs to run a competitive athletic department don't go away.

The Hail Mary pass is an over-the-top distribution model that is priced right, where the volume of value conscious cord cutters are still putting $15M - $20M paychecks into to the pockets of schools. It's going to take a national footprint for that to happen.

These pressures may not get to Larry Scott in 2016. But the day is coming where a business growth model that captures revenue in a changing IPTV media environment is what will define success or failure for Larry Scott. Already the failure to navigate a DTV deal or craft an industry best PPV on-demand Tier 3 media plan that is returning a profit has undermined confidence in his ability to deliver.

Larry Scott doubled each individual schools TV revenue over the previous contract with tier 1 and tier 2 TV rights. The conference network is typically tier 3 (scraps) that used to be on channels like Versus. So while I am sure that the 12 Presidents realize things haven't gone as planned they're not exactly crying either. Id imagine they too realize that the sands are shifting. And the Pac12 is not the SEC.

As you mentioned above above the SECs contract with ESPN (along with many others) obligates ESPN to pay those fixed amounts. And those amounts are not going to fall and thus those SEC schools will still get their money until 2024. Unless Disney spins off ESPN so it can file bk and reorganize (likely shedding the Longhorn network and doubling their commitment to the SEC).

Whats most likely going to happen is that as the cord cutting accelerates ESPN is going to try to offer streamed content direct to consumer to try and make up some revenue. I would assume that thats breach of contract with the middle men (Comcast, Dish, DirecTV, etc.) so ESPN will have to compensate them somehow to make that happen. So, how much is that going to cost? Most likely $10-$20 month. You'll probably get the Longhorn Network with that too because they have to balance that revenue. Either way they are stuck.

In the article I linked above keep your eye on wether the ACC channel ever comes about. Or if the B1Gs tier 3 rights or tier 2 rights get good money. If they dont TV as we know it is going down the tubes.

 

[Deleted member 807]

Sure Larry doubled the contract.
But the P12N is owned by the Pac 12 conference members. If the P12N fails to deliver contracted revenue because of low subscriber revenue, who are the PAC 12 schools going to sue? Themselves?

When grandpa fails to do deposit money in the bank account, grandma can pitch a fit, but suing your own family doesn't do much good. Everybody has to suck it up.

One thing seems obvious. The rich media deals that were signed 4-7 years ago were pretty optimistic about maintaining subscriber numbers and growing revenues under a linear broadcast model.

And that model is under pressure with over a half of a decade remaining on these conference media deals.

Given the uncertainty in the market, it's obvious that anything negotiated now would be structurally different with regards to PPV streaming and other OTT IP options.

At what point do the major networks push to amend these deals? If a day comes when ESPN and the SEC begin fighting over delivery of contractual payments, will any acrimony between Bristol, CT and SEC land somehow make Larry Scott's P12N more valuable?

I just don't see any richer deals in the offering until after the IPTV / OTT business model starts to shake out.

 

[skibum]

Really dumb question, and I don't actually know the answer to this: as a percentage of revenue, how much of, say, ESPN's revenue is from cable subscriptions, and how much is from advertising?

One of theories that drove the big contracts was that live sports is impervious to DVRs and fast forwarding through commercials, so the advertising revenue would become more valuable.

I'm wondering how that's playing out. Is subscription revenue dropping faster than advertising revenue is growing? Is advertising revenue not actually growing?

Also, if ESPN goes true a la cart streaming, will subscribers put up with commercials? I don't have to watch commercials on Netflix, or HBONow...

And for one more complicating factor: remember that some of the current "subscriber revenue" is actually advertising revenue, because ESPN allows the cable company to sell some of the ad time directly (think local commercials).

 

[EddieCrowder]

With the news that Twitter has landed the rights to stream the NFL's Thursday Night offering I think the massive ship that is "Pay TV" has taken a torpedo to its hull. Everyone will be watching to see how this goes, if its a success Larry needs to give some money back on the front end to get some kind of relief on the deals he cut. Then go get the PAC in on the forefront of the new wave. He can go from goat to hero very quickly if he is proactive. If he waits for the contracts to expire we are doomed.

 

[MiamiBuffs]

The pay TV universe continued to shrink – the report estimates that there was a decline of 1.13 million U.S. TV subscribers in 2015 (compared to 283,000 in 2014). Cord never/cord cutter households – those that do not subscribe to a pay TV service – also were on the rise to 24.6 million in 2015 from 22.5 million in 2014. Convergence estimates that 26.7 million households (an increase of 2.1 million homes) will join the cord-never/cord-cutter ranks in 2016.

 

[MiamiBuffs]

With the news that Twitter has landed the rights to stream the NFL's Thursday Night offering I think the massive ship that is "Pay TV" has taken a torpedo to its hull. Everyone will be watching to see how this goes, if its a success Larry needs to give some money back on the front end to get some kind of relief on the deals he cut. Then go get the PAC in on the forefront of the new wave. He can go from goat to hero very quickly if he is proactive. If he waits for the contracts to expire we are doomed.

And here is another

 

[MiamiBuffs]

Really dumb question, and I don't actually know the answer to this: as a percentage of revenue, how much of, say, ESPN's revenue is from cable subscriptions, and how much is from advertising?

Actually It's a double edged sword problem. Less viewers also means lower rating, less penetration, and thus less ad revenues as advertisers shift their spending elsewhere.

All of this also could be bad for for major sports. That $10 a month you pay in your bill goes indirectly to all the conferences and the NFL. Going back to cheap or skinny models will put less revenue in conference pockets in terms of tier 2 and tier 3 rights. Tier 1 rights will probably be the same value on over the air broadcasts. But less games might be available down the road.

 

[skibum]

Actually It's a double edged sword problem. Less viewers also means lower rating, less penetration, and thus less ad revenues as advertisers shift their spending elsewhere.

But the number of viewers /= number of subscribers. People who regularly view ESPN are not going to switch to a "skinny package" that does not include ESPN. And the advertising rates have always depended on the number of viewers, not the number of subscribers.

Which brings me back to: what is the subscriber/advertising revenue mix? Is advertising revenue not increasing as fast as expected (this has been an expectation as advertising for live sports events is supposed to be becoming more and more valuable)? Is subscription revenue decreasing faster than expected (probably true)?

 

[Deleted member 807]

But the number of viewers /= number of subscribers. People who regularly view ESPN are not going to switch to a "skinny package" that does not include ESPN. And the advertising rates have always depended on the number of viewers, not the number of subscribers.

Which brings me back to: what is the subscriber/advertising revenue mix? Is advertising revenue not increasing as fast as expected (this has been an expectation as advertising for live sports events is supposed to be becoming more and more valuable)? Is subscription revenue decreasing faster than expected (probably true)?

Just looking at Time Warner. Advertising is much smaller than subscription. Like 10:1.
http://ir.timewarnercable.com/inves...th-Quarter-and-Full-Year-Results/default.aspx

 

[MiamiBuffs]

But the number of viewers /= number of subscribers. People who regularly view ESPN are not going to switch to a "skinny package" that does not include ESPN. And the advertising rates have always depended on the number of viewers, not the number of subscribers.

Which brings me back to: what is the subscriber/advertising revenue mix? Is advertising revenue not increasing as fast as expected (this has been an expectation as advertising for live sports events is supposed to be becoming more and more valuable)? Is subscription revenue decreasing faster than expected (probably true)?

I found these....

• The average rate for a 30-second spot on the top 15 cable networks was $13,100 as of 2011. Of these networks, ESPN charged the highest rate, at an average of $31,551. Link.
• ESPN’s “Monday Night Football” commanded an average of $388,176, giving it the No. 6 spot in Variety’srankings.. Link
• Here's How Much Ad Time in NFL Games Costs Marketers This Season. Link

The lion share of the spots sold are not of the $380,000 variety since there are only 16-18 Monday night games out of a years worth of 24 hour programing. In reality all three articles indicate that the money is in NFL games while NBA games attract 1/4 the viewers (and probably prices). And thats probably where ESPN will go when push comes to shove. Which doesn't paint a very rosy picture for college football ad prices.

This formula explains in part why these college networks want to be on DirecTV, Comcast, and the like because for them subscription fees were once the pot at the end of the rainbow that vastly outweigh what they can net in ad fees.

The question is how many spots can they run in a day? How does that compare to the peak of 101,000,000 households paying ESPN $72 a year at $6 a month?

12spots hr x $32000 = $384,000hr x 24hrs = $9,216,000day x 30days = $276,480,000 month
101,000,000households x $6 = $606,000,000 month.

 

[Deleted member 807]

Really dumb question, and I don't actually know the answer to this: as a percentage of revenue, how much of, say, ESPN's revenue is from cable subscriptions, and how much is from advertising?

One of theories that drove the big contracts was that live sports is impervious to DVRs and fast forwarding through commercials, so the advertising revenue would become more valuable.

I'm wondering how that's playing out. Is subscription revenue dropping faster than advertising revenue is growing? Is advertising revenue not actually growing?

Also, if ESPN goes true a la cart streaming, will subscribers put up with commercials? I don't have to watch commercials on Netflix, or HBONow...

And for one more complicating factor: remember that some of the current "subscriber revenue" is actually advertising revenue, because ESPN allows the cable company to sell some of the ad time directly (think local commercials).

ESPN - 60/40 subscription fees over advertising.

http://www.businessinsider.com/char...n-revenue-comes-from-cable-subscribers-2013-7


ESPN ad revenue north of $2B
http://www.forbes.com/sites/frankbi...able-networks-in-affiliate-fees/#7447758fe60c

 

[skibum]

Just looking at Time Warner. Advertising is much smaller than subscription. Like 10:1.
http://ir.timewarnercable.com/inves...th-Quarter-and-Full-Year-Results/default.aspx

You would expect a cable company to have pretty low advertising revenue - they don't get to sell nearly as many commercials as do the actual channels.

ESPN - 60/40 subscription fees over advertising.

http://www.businessinsider.com/char...n-revenue-comes-from-cable-subscribers-2013-7

Also, note that was 2013. Subscription has been going down, and advertising going up...

I found these....

• The average rate for a 30-second spot on the top 15 cable networks was $13,100 as of 2011. Of these networks, ESPN charged the highest rate, at an average of $31,551. Link.
• ESPN’s “Monday Night Football” commanded an average of $388,176, giving it the No. 6 spot in Variety’srankings.. Link
• Here's How Much Ad Time in NFL Games Costs Marketers This Season. Link

The lion share of the spots sold are not of the $380,000 variety since there are only 16-18 Monday night games out of a years worth of 24 hour programing. In reality all three articles indicate that the money is in NFL games while NBA games attract 1/4 the viewers (and probably prices). And thats probably where ESPN will go when push comes to shove. Which doesn't paint a very rosy picture for college football ad prices.

This formula explains in part why these college networks want to be on DirecTV, Comcast, and the like because for them subscription fees were once the pot at the end of the rainbow that vastly outweigh what they can net in ad fees.

The question is how many spots can they run in a day? How does that compare to the peak of 101,000,000 households paying ESPN $72 a year at $6 a month?

12spots hr x $32000 = $384,000hr x 24hrs = $9,216,000day x 30days = $276,480,000 month
101,000,000households x $6 = $606,000,000 month.

Thanks, that's excellent work. Only quibble I have is that they sell a lot more than 12 30-second commercials per hour. In a typical cable television show, there are now 15 minutes of commercials per hour (http://www.latimes.com/entertainmen...nielsen-advertising-study-20140510-story.html) - also this is about right for football games too (see below*), so even if you reserve 4 minutes for cable company local sales, that leaves you with 22 spots/hour x $32,000 x 24 hours x 30 days = $507 million/month.

Given that 101 million subscriptions was "peak ESPN" (love that concept), then I would guess that advertising revenue has already, or is about to, exceed subscription revenue. If that's the case, and to tie this back to the Pac-12 network: Larry Scott should take the revenue hit with lower subscriptions rates from the carriers, and invest in the best ****ing advertising sales staff he can get, because that's where the future revenue will be found.


*During a football game there are 10 tv timeouts/half, not including halftime commercial spots. The TV timeouts are 90-180 seconds each, so let's say 4.5 commercials/timeout = 90 commercials per game. Then add in 15 minutes of halftime, and at least 5 minutes of that is commercials, so you're up to 100 slots or 50 minutes. If you used the 15 minutes of commercials per hour above, you get a 3 hour, 20 minute game, which is amazingly close to the actual run time of televised college games these days.

 

[BlackNGold]

Regardless of hardware (I've used most), if you're streaming and want to:
-change between channels quickly
-pause/rewind/fast forward without god awful annoying lags.
You pretty much have to have a wired network connection.

I have an AC 1750 wifi network that I can get fantastic speed through. Even so, hooking up the wire was a night and day difference in my TV watching enjoyment (particularly for sling and tablo).

I use Powerline adapters to have a wired connection utilizing the copper in electrical circuits in my house. The technology is getting better and better. I have used them for over a decade with no issues. It also cuts down on the wireless traffic.

 

[Highlander]

I use Powerline adapters to have a wired connection utilizing the copper in electrical circuits in my house. The technology is getting better and better. I have used them for over a decade with no issues. It also cuts down on the wireless traffic.

I tried powerline when the technology about 6 years ago. My experience was horrible trying to stream movies movies - I ended up dropping over $2k to get my house reworked for Ethernet to all the tv's.

Has it improved enough to stream relatively high quality mp4s and M4Vs?

 

[BlackNGold]

I tried powerline when the technology about 6 years ago. My experience was horrible trying to stream movies movies - I ended up dropping over $2k to get my house reworked for Ethernet to all the tv's.

Has it improved enough to stream relatively high quality mp4s and M4Vs?

I know there can be problems with some types of wiring. We stream HD Video all of the time from Netflixs, Hulu, Amazon, and it all works fine. I started out when the AV spec was 40 Mbps and now it is 1200 Mbps but you will never achieve that throughput (just like wireless). I like the fact there is a standard and all the manufacturers seem to comply. I have various versions(Linksys, Netgear, TP-Link) in my home and they all talk to one another. Speed test from various locations around the house are pretty consistent with speed teat at the router.

 

[MiamiBuffs]

Wow.



The number of people that have either cut the cords and dumped their cable television subscriptions or never ordered in the first place is steadily rising, now exceeding one in five U.S. households, according to a new report.

More than 1.1 million households cut the cord last year, with about the same number expected to get off the cable bandwagon this year, according to market research firm Convergence Consulting in its annual “Coach Potato” report.

Combining the cord-cutting trend in recent years with the growing number of consumers who have never subscribed to cable television, a total of 24.6 million households, or 20.4% of all U.S. households, were cable-free at the end of 2015.

That figure is projected to rise to 26.7 million households, or 21.9% of all U.S. households, by the end of 2016, the firm projected.

Fears of cable cord-cutting, along with measurable decreases in television ratings over the past year, have roiled the traditional video industry.

Shares of companies such Viacom, Time Warner, and CBS took a dive last summer, though the shares regained some of the losses over the past few months as the actual rate of cutting didn’t approach the most feared levels.


The NCAA final lost 1/3 of its traditional viewers.

 

[DBT]

Wow.



The number of people that have either cut the cords and dumped their cable television subscriptions or never ordered in the first place is steadily rising, now exceeding one in five U.S. households, according to a new report.

More than 1.1 million households cut the cord last year, with about the same number expected to get off the cable bandwagon this year, according to market research firm Convergence Consulting in its annual “Coach Potato” report.

Combining the cord-cutting trend in recent years with the growing number of consumers who have never subscribed to cable television, a total of 24.6 million households, or 20.4% of all U.S. households, were cable-free at the end of 2015.

That figure is projected to rise to 26.7 million households, or 21.9% of all U.S. households, by the end of 2016, the firm projected.

Fears of cable cord-cutting, along with measurable decreases in television ratings over the past year, have roiled the traditional video industry.

Shares of companies such Viacom, Time Warner, and CBS took a dive last summer, though the shares regained some of the losses over the past few months as the actual rate of cutting didn’t approach the most feared levels.


The NCAA final lost 1/3 of its traditional viewers.

At least for me, much of the magic of sports has gone away. The market is over saturated (I guess, by definition, you can't "over" saturate, can you?). Haha.

 

[MiamiBuffs]

At least for me, much of the magic of sports has gone away. The market is over saturated (I guess, by definition, you can't "over" saturate, can you?). Haha.

Yeah, its hard to get into it anymore. In a way it was easier when less was on TV and the coverage was less slick and more folksy. You could follow a bit more and let it get under your skin. You could more easily get excited when a team that shouldn't win starts to win. Now, not so much. Maybe were just getting old.

 

[DBT]

Yeah, its hard to get into it anymore. In a way it was easier when less was on TV and the coverage was less slick and more folksy. You could follow a bit more and let it get under your skin. You could more easily get excited when a team that shouldn't win starts to win. Now, not so much. Maybe were just getting old.

Yeah. Maybe.

 

[Highlander]

Yeah, its hard to get into it anymore. In a way it was easier when less was on TV and the coverage was less slick and more folksy. You could follow a bit more and let it get under your skin. You could more easily get excited when a team that shouldn't win starts to win. Now, not so much. Maybe were just getting old.

I had a defining "I'm getting old" moment last summer. I took my daughter to Elich Gardens. It was my first visit to an amusement park in pushing 30 years. I road all the rides, and honestly couldn't have given a **** personally, but did it all for my daughter. What the hell has happened to me? I used to love roller coasters...

 

[MiamiBuffs]

I had a defining "I'm getting old" moment last summer. I took my daughter to Elich Gardens. It was my first visit to an amusement park in pushing 30 years. I road all the rides, and honestly couldn't have given a **** personally, but did it all for my daughter. What the hell has happened to me? I used to love roller coasters...

CU football has been a decade of soul crushing?

 

[Shldr2Shldr]

Not sure how this hasn't been mentioned yet, but numbers for Big 10 selling half of its Tier 1 rights are out.

Big 10, 50% Tier 1 rights, $250M from Fox
Pac 12, 100% Tier 1 rights, $250M from Fox/ESPN

Larry has some work to do.

 

[GoBuffs08]

Larry Scott to the Pac12 schools

 

[MiamiBuffs]

Not sure how this hasn't been mentioned yet, but numbers for Big 10 selling half of its Tier 1 rights are out.

Big 10, 50% Tier 1 rights, $250M from Fox
Pac 12, 100% Tier 1 rights, $250M from Fox/ESPN

Larry has some work to do.

Our Tier 1 rights were sold in 2011/2012 in a 12 year contract for $3 billion dollars. The Big 10 last sold their rights in 2006/2007 for $1billion dollars. So the fact that there has been an increase should not be surprising.

The tier1 Pac 12 contract is not up again until 2024.

 

[MiamiBuffs]

Larry Scott to the Pac12 schools

Its more like $19,000,000 per year per school.

 

[Deleted member 807]

Its more like $19,000,000 per year per school.

Is that what the schools are actually getting? Or has the P12N distribution model caused any revenue pressure that's being passed onto the schools?

 

[MiamiBuffs]

Is that what the schools are actually getting? Or has the P12N distribution model caused any revenue pressure that's being passed onto the schools?

Its an average and thats just tier 1 & 2 rights. The contract also increases in value every year by 5.1%

BIRMINGHAM, Alabama (LINK)--The Pac-12's media rights fees from ESPN and Fox cost $185 million in 2013 and increase 5.1 percent annually through 2024, according to a copy of the agreement unsealed today in the Ed O'Bannon lawsuit against the NCAA.

The value of the Pac-12's deal is $3 billion over 12 years, an average of $250 million per year. Those figures have been previously reported. The term sheet shows the Pac-12 received a $30 million signing bonus in 2012 and then gets 5.1-percent increases until peaking at $321.3 million in 2024.

According to the term sheet, ESPN provides 53 percent of the money and Fox 47 percent. The document indicates Fox might have to make slight adjustments to its 47 percent payment schedule.

rate sheet​

Tier 3 rights and anything the PAC12 Network generates is on top of that.

Read the last line on the rate sheet linked above.

 

[Gary Indiana]

Is that what the schools are actually getting? Or has the P12N distribution model caused any revenue pressure that's being passed onto the schools?

Exactly. Not sure why Miami always breaks it down that way.

 

[Gary Indiana]

Thats just tier 1 & 2 rights. The contract also increases in value every year by 5.1%

BIRMINGHAM, Alabama (LINK)--The Pac-12's media rights fees from ESPN and Fox cost $185 million in 2013 and increase 5.1 percent annually through 2024, according to a copy of the agreement unsealed today in the Ed O'Bannon lawsuit against the NCAA.

The value of the Pac-12's deal is $3 billion over 12 years, an average of $250 million per year. Those figures have been previously reported. The term sheet shows the Pac-12 received a $30 million signing bonus in 2012 and then gets 5.1-percent increases until peaking at $321.3 million in 2024.

According to the term sheet, ESPN provides 53 percent of the money and Fox 47 percent. The document indicates Fox might have to make slight adjustments to its 47 percent payment schedule.

rate sheet​

Tier 3 rights and anything the PAC12 Network generates is on top of that.

Just curious...are there any costs associated with running your own television network?

 

[MiamiBuffs]

Just curious...are there any costs associated with running you own television network?

Yes.
The Pac12 Network reaches approximately 60 million households and derive about $58 Million in revenue from Carriage fees annually. Any advertising they sell is revenue on top of that amount. ESPN is required to give them $2.5 million a year listed as advertising thru 2024 (see rate sheet in post above).

I believe each of the schools set up something like CU Video out of these monies which contributes to some of the programing by offering file footage upon request and network logistical support.