The Lafayette Journal & Courier has learned that the Big Ten expects that television rights revenue will increase to $33 million a season in 2017-18 per school, according to information gleaned from a open records request to Purdue. That would be a $10 million increase over 2016-17, which is the last year of the Big Ten's current ten year contract with ABC and ESPN. Coincidentally, 2017-18 is also the first year that Nebraska fully shares equally in the Big Ten's revenue sharing. Nebraska, as will Maryland and Rutgers, must complete a six year financial integration plan, which includes an equity investment in BTN, the Big Ten Network.
The problem with that report is that its just a projection at this point. Negotiations haven't started yet, though it's clear why the Big Ten expects a huge increase in television money. Every other conference and sports league has signed new television deals with larger payments, so why wouldn't the Big Ten be the next to be able to cash in?
Because television rights fees are a bubble, and it's a bubble that's ready to burst. In financial terms, a bubble happens when the price of something gets out of control and become unsustainable. At the end of the 20th century, investors bid up the price of internet companies to ridiculous levels, only to crash as the 21st century began. Housing prices spiked upwards six to eight years ago, only to crash when the Great Recession began in 2008.
Why are television rights fees a bubble? Look at your cable and/or satellite bill. 20 years ago, it probably was under $30 a month, unless you subscribed to multiple movie channels. Now, it's probably double or tripled. Sure, the number of channels have increased, but how many of those channels do you actually watch? Whether or not you watch Fox News, you are paying for it. Whether or not you watch TLC, you are paying for it.
And a growing number of people are rebelling against paying for cable or satellite television. With the advent of services like NetFlix and Hulu, people can now watch most programs for a fraction of what cable and satellite cost. Except for sports.
For some people, that's not a problem. It might even be most people. A lot of people could not care less about sports. Their passion might be their kids. Or movies. Or music. Giving up ESPN and a $80 monthly bill in exchange for watching Game of Thrones on the computer or an iPad would seem to be a no-brainer decision for the non-sports fan.
For the sports fan, it's inconceivable.
But that's the reality of the future. And it's happening now. Last week, HBO began licensing their content to Amazon for online distribution on Amazon Prime. Ala carte is happening, and it's going to have an impact on both sports fans and teams that have come to depend on non-sports fans paying a large portion of the ever increasing rights fees. As the number of non-sports fans subscribing to pay television drops, the cost of pay television will rise, and the revenue available for networks to bid on rights will drop. Fans pay more, schools will make less. Bundling is simply unsustainable over the long term.
The bubble of broadcasting rights for sports is about to burst. It's not happening tomorrow. It probably won't happen next year. But what if the bubble bursts when the Big Ten opens up bidding for the rights that start in 2017-18. CBS, ESPN/ABC, and Fox are already on the hook for the existing college and NFL deals. If the networks see their revenue streams drying up, they simply won't have the resources to break open the checkbook for a B1G deal.
The Big Ten is projecting a $10 million dollar increase in rights. They could be right. They even could be underestimating the value of the Big Ten package, now that nearly every other sports league is already locked into a long term deal. It's the last property left for anybody to acquire.
But the very real possibility is out there that if the bubble bursts, there may not be an increase. Even worse, the value of the rights could actually drop in the resulting crash. Dream of the frivolous uses of the potential deal if you wish, but the reality is that broadcast rights fees can't continue to go up. If it's not this deal for the Big Ten, it's the next one where the money dries up. And the smartest programs will start planning now for that day when the money train derails. Pay off the debts, and build up sustainable endowments with the revenue increases that are occurring in the short term.
Those smart programs will be the best equipped to prosper after the money dries up. It's no longer a question of if, but when.