SEC Network: A Game Changer

Kelly Lambert

The much-anticipated SEC Network became official today, and the ESPN/SEC collaboration should be another big win for the league.

The obvious became official Thursday as ESPN and the SEC formally announced the formation of the SEC Network, to be launched in August of 2014.

In the College Football Arms Race, this is a weapon of mass destruction.

At the press conference Thursday announcing the channel, SEC Commissioner Mike Slive described in one sentence the change in how the media game is played when he said, "For the first time, a conference will launch a network in partnership with its primary overall media partner."

Content is King:

From a sales standpoint working with your primary media partner means that the "bundling" of content gives ESPN more leverage when negotiating with distributors, and it gives them flexibility in placing those events across all platforms.

ESPN already controls 95% of all SEC football games. Being the primary media partner with the SEC means ESPN will have over 1,000 live events on the network or one of the digital platforms. The key portion of the inventory is 45 live football games. The network will have triple-headers on 13 Saturdays during the fall and that will be used to put pressure on carriers to get clearance.

CBS will still get first choice for its Saturday afternoon games, but they have given up exclusivity. The SEC will program a game opposite the CBS contest. Expect ESPN to maneuver at least a few "good" matchups over to the SEC Network should negotiations be slow to produce results as they move toward the 2014 season.

The channel will also carry 100 live men's basketball games, 60 women's games as well as over 250 baseball and Olympic sports events. There will be "insider" shows (much like you see on the Longhorn Network) for each school. They also have replay rights to every event, including the games shown on CBS.

Follow The Money:

The financial terms of the agreement are apparently so good that neither side was willing to give up any ownership details Thursday. The odds are it is set up one of two ways: split ownership, where it might be a 51/49 arrangement (much like the Big 10 Network) or ESPN could own it outright and pay a rights fee to the league as it does with the Longhorn Network.

Given that ESPN controls all media distribution rights, corporate sponsorships and that they are in total charge of sales, I lean towards ESPN being the owner of the network. Justin Connolly, the ESPN senior vice president of regional college networks will oversee the SEC Network as well as the Longhorn Network.

The SEC has an 11-state media footprint (welcome aboard Texas A&M!), and is expected to negotiate basic cable distribution in those states. They will negotiate out of area for placement on the sports tiers of carriers.

"We do not consider this to be a regional network, the SEC network will have national appeal." That is what ESPN President John Skipper stated at the press conference Thursday. That means they are shooting for the SEC Network to be on the same level as an ESPNU, and that means they are expecting the channel to be available on at least 75 million homes nationwide by the time they complete negotiations.

Suffice it to say that everyone involved believes that it will surpass what the highly successful Big 10 Network generates in revenue. After six years, the Big 10 Network is now producing between $7.5 and $8 million a year in added revenue for each member. Estimates range between $10 and $12 million a year for the SEC Network within 5 years.

Right now the Big 10 is paying out almost $23 million a year to its members in shared revenue (media, bowl, sponsorship).

The SEC is looking to match that in media revenue alone and when you throw in the new playoff and bowl splits, the league could be sending out $30-35 million a year to each University.

Distribution:

As always, the Devil is in the Details. ESPN announced today that AT&T U-verse is signed up to carry the SEC Network, but that covers just a little over 5 million subscribers. The next 16 months will see negotiations with Comcast (24 million subscribers), Time Warner (14.5 million), DirecTV (20 million) and DISH (14 million) establish the viability of the network.

ESPN will be offering all of the channel's content on computers, tablets, mobile phones or your Xbox - only if you have a subscription through a cable, satellite or telco provider.

Comcast is the lead dog in the negotiations for ESPN because they are the largest carrier in the SEC's 11-state area. Speculation (and that is all it is at this time) is that ESPN will be asking for at least $1 per month per subscriber in the 11-state area.

It has always been my contention that part of ESPN's interest in starting the Longhorn Network was to use it as a pilot program for other ventures. SEC programming will be the LHN on PED's and that should make negotiations with distributors much easier than seen with the LHN.

AT&T U-verse was the first "name" distributor to sign on with the LHN and perhaps ESPN made promises about cutting a "bundle" deal with the SEC Network. If true, then maybe ESPN is willing to work the same kind of deal with Time Warner and Comcast as well.

One can hope, because as of today, the SEC Network became the #1 priority of ESPN - at least for the next 16 months.

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