So, What Does ESPN Stand For?

A891A4DD12E44F8C900A86F007FBFF96An amiable session in which the Big Ten and ESPN cleaned up “housekeeping matters” — schedules and announcers — took a nasty turn at the one-hour mark.  That’s when talk turned to a contract extension, a negotiating session that went nowhere.  Fast.  “The shortest one I ever had,” [Jim] Delany, [Commissioner of the B1G Ten] told the Chicago Tribune.  “He lowballed us and said: ‘[t]ake it or leave it.  If you don’t take our offer, you are rolling the dice.’  I said: ‘Consider them rolled.'”

This moment represents the proverbial line drawn in the sand between arguably the most innovative business man college football has ever seen and the Network that has cornerned the market on sports entertainment.  The latest salvo that was fired was revealed in a $157 million dollar lawsuit filed this past Monday by the University of Maryland in which, amongst other things, the school is claiming that the ACC, directed by ESPN, attempted to convince two members of the B1G Ten to leave the conference and join the ACC.  What ultimately resulted instead was a high stakes acquisition of two monopoly properties (think Mediterranean and Baltic Avenues), though the ACC, backed by ESPN, might have had something altogether different in mind—a shot fired over the bow meant to weaken a conference that dared to tell them to “step into my office, you’re fucking fired.”  While this guy thinks the lawsuit filed by Maryland is a brilliant tactical strategy to get the ACC to forgive its fifty-two million dollar exit fee, here’s to hoping this drama and all the dirty laundry gets spilled in a Federal Maryland North Carolina Courtroom in the not too distant future. 

In 2011, amidst the never ending conference realignment saga, then Boston College Athletic Director  Gene DeFilipio, apparently erroneously, uttered: “[w]e always keep our television partners close to us. ..ESPN is the one that told us what to do.”  DeFilipio later apologized and said that he misspoke.  As DJ Byrnes of 11 Warriors said it: “[y]ou’re damn right he misspoke, but only in that he spoke about college football’s wizard-behind-the-curtain in public.  But should the existence of ESPN’s other, invisible hand, surprise anyone?’  Only to those who aren’t initiated with the facts.

A brief review of history will help us understand how we have gotten to where we are today and just how events shaped the chess match that was never far from the tentacles of the World-wide Leader in Sports Related Revenue.

In 2008, ESPN signed a TV deal with the SEC for $2 billion dollars to run for the next 15 years, with the 24/7 SEC launch set for this fall.  ESPN will have rights to every SEC home football game not on the network package and all league matchups will be shown on some outlet, including at least 20 a year on ESPN or ESPN2.  That includes two primetime Thursday night matchups and Saturday night games.  “We’re thrilled with the historic nature of this deal,” ESPN executive vice president John Skipper said, adding that college sports have been part of our DNA” for nearly 30 years.  It’s not hard to figure why we’d want to be involved with it, given the quality of SEC sports, for 15 more years.” 

In 2010, ESPN signed a TV deal with the ACC worth 1.86 billion over the next twelve years.  The deal would give the four letter network exclusive rights to conference football and men’s basketball games.  Partnering with ESPN ends talk for now about the ACC following the lead of the Big Ten by creating its own television network. Commissioner John Swofford said the league did its “due diligence” by researching the issue, but said the ACC opted to avoid the upfront startup costs and the financial risk in favor of utilizingDrew1119 ESPN’s in-place broadcast and multimedia outlets.  “When you go with somebody for that kind of money with no financial risk and they have the extensive platforms they have to distribute your games — plus they have the technology and the desire to be on the cutting edge with new media — it really begs the question: Why would you need your own network?”  

Not to be left out, the Big 12  and Pac 12  also have multi-billion dollar deals with ESPN, as does the University of Texas, with whom ESPN helped launch (and of course owns various rights to) the Longhorn Network, a potential conflict some really smart guy wrote about here.

And of course ESPN owns the rights to just about every one of the Bowl games played, even those named after car parts that no one cares about.  And care to guess which network has the rights to the new twelve year playoff that begins in 2014?  Ding Ding Ding Ding! 

EEB141172E8346AE9476950A3D978E30All of this stands in contrast to April 30, 2004.  ‘That’s when a posse of ESPN executives, led by Mark Shapiro, John Wildhack, Loren Matthews and Chuck Gerber, met with conference honchos at Big Ten headquarters in Park Ridge.  The Big Ten’s long-term deal with the network had three years remaining, but Commissioner Jim Delany wanted to dip his toe in the pool.  Turns out the water was ice cold.  And shark-infested.”  That same Chicago Tribune article referenced at the beginning of this piece, characterized the negotiations as follows:

Delany had warned ESPN officials that without a significant rights-fee increase, he  would try to launch a new channel that would pose competition both for TV viewers and the Big Ten’s inventory of games: the Big Ten Network.  He threw his weight around, Shapiro said in a telephone interview, and said, ‘I’m going to get my big (rights-fee) increase and start my own network.’ Had ESPN stepped up and paid BCS- type dollars, I think we could have prevented the network.  In retrospect, that might have been the right thing to do.  Jim is making a nice penny on that.

All that stands between the network and its monopolistic footprint is one stubborn and visionary man who refused to march to the beat of the network conglomerate’s drum.  Ask an executive of the Network what the four letters stand for, and you will be told “Entertainment, Sports, Programming Network.”  If the four letter network had had it their way, at least as it pertains to college football, ESPN would have stood for Every Single Program’s Network

*****

Let’s be clear, Maryland’s lawsuit is probably little more than an effort to maximize leverage against the ACC in order to whittle down its $52 million dollar exit fee obligation, a lawsuit the university was unable to get thrown out of courtThe legal wrangling that will likely result in a compromised settlement is of less interest to this guy—the idea being that if this actually turns into a courtroom battle, depositions and interrogatories will detail back room deals and dirty secrets that the fat cat-power-brokers and television executives (redundant?) would prefer remain in documents far from public scrutiny.  This is precisely why some deal will probably be brokered before we witness legal armageddon, lest all parties risk slaying the golden goose (one of Maryland’s claims is that the exit fee is an antitrust violation, an argument that is amusing when one considers that many “public universities” generate tens of millions of dollars in profit each year that is tax exempt because of their public university status—it’s best that these fights do not distract a congress that would prefer to wrangle with much more pressing legislation).

The juicy rumor in the conference realignment gambit is that the ACC had contacted two B1G schools and attempted to persuade them to join their conference, a move many believe was backed by that same conglomerate network.  The school said [Maryland] the ACC’s desire to expand is driven “in large part on counsel and direction that the conference received from ESPN.”  Whether that guidance was given formally or informally,” the document alleges, ESPN has “incentivized the ACC to compete more aggressively in thebal-terpsacc-20140114 market for conference affiliation/membership.”  ESPN responded with a brief statement Tuesday: “[a]s we’ve said many times, decisions about potential realignment and expansion were made by the individual schools and conferences.”  This statement is significant for what it fails to say–that ESPN is not offering advice to conferences as they consider adding partners to their multi-billion dollar dance card.  

The belief by many is that the dominoes fell this way:  the ACC (possibly with a little birdie whispering in their ear) attempted to lure Penn State and one other B1G Ten school to join the ACC (though the lawsuit does not name the targeted schools, this guy believes the other school was Northwestern, as its academic prestige fits the ACC and it doesn’t hurt having a school in the lucrative Chicago market), a move that would have strengthened an ESPN property while simultaneously striking a blow against the lone conference that has dared to defy “The Network.”  Others have theorizied that the B1G struck back by taking ACC school Maryland (and Big East school Rutgers), in part to appease a Penn State school that has no geographical rivals (personally, I think Penn State is happy to keep cashing B1G checks, but who knows what happened in smoke filled rooms behind closed doors.  But then, that is precisely the point).

At this juncture, these are merely allegations in the legal pleadings of a school that clearly has an agenda–avoiding a massive exit fee that the financially challenged school would prefer not to pay.  But if true, this appears to be the second round in the fight between Jim Delany and ESPN, with the former remaining undefeated and unscathed.  Here’s to hoping there is no quick settlement so we can get a peek behind the curtain.

*****

Let’s be clear about one thing—I do not wear a tinfoil hat, do not come running downs the stairs expecting free gifts from a fat man with a penchant for wearing red velvet, and I have never plunked down money on the counter for a National Enquirer touting articles suggesting that a dead Elvis was spotted riding Nessie.  One need not bust out the “c” word in order to understand that a network that shells out some $700 million dollars annually for college football entertainment might try and pull some strings meant to protect said investment.  As Mr. Byrnes put it:

[a]s cable subscription numbers continue to dwindle, is ESPN supposed to sit idly by while conferences (into which they’ve sunk billions) enter this brave new world?  Is it not standard business practice to wring every cent out of their investment?  It’s not as if ESPN is asking Dabo Swinney to run cocaine up the eastern seaboard during the off-season recruiting trips.

Beyond questions about ESPN’s influence in college sports are concerns about its pervasiveness.  “”It approaches a monopoly, if it’s not literally one,” says Stephen Weber, a former member of the NCAA’s Division I board of directors who retired as president of San Diego State University in July of 2011.  You always have potential issues when you’re in a situation like that.  Can ESPN objectively weigh in on realignment discussions when one conference stands to gain, another to lose and the network has contractual ties with both? (The ACC and Big East, for example. Or the SEC and Big 12.).  ‘I suppose it is a conundrum for them,’ Oklahoma athletics director Joe Castiglione says. ‘We understand they have multiple partnerships with institutions and other conferences.  We all agree there’s a concern.  I’m just not sure how we do anything about it.'” 

forkintheroadrealignmentESPN has always denied any direct involvement in the conference expansion waltz.  Instead, insider discussions have characterized the conversations as inquiries from the conferences regarding the impact of various team movements on prospective television contracts.  For instance, prior to Notre Dame striking it’s ACC deal, rumors swirled that the Irish might forego independence and join the Big 12, a conference that has attempted to rebuild itself after watching Nebraska join the B1G Ten, Colorado the Pac 10, and Texas A&M and Missouri join the SECThe Oklahoman uncovered memos from then interim Big 12 commissioner Chuck Neinas that demonstrate that ESPN and FOX had specifically advised the Big 12 that only Notre Dame added TV value for the conference.  The question for the astute observer becomes, is this the TV networks driving conference expansion, or conference commissioners merely doing their due dilligence and consulting with the networks in order to maximize revenue ahead of such seismic shifts? 

Purely from a business perspective, it makes sense that ESPN would encourage the ACC to poach properties from the B1G Ten.  Think of it like this–ecouraging the ACC to steal a school from, say, the Pac 12, is a little like robbing Peter to pay Paul–while the value of ESPN’s ACC portfolio would increase, this would be offset by the corresponding decrease in the value of another asset.  In terms of the monopoly parlance, it would be the equivalent of trading North Carolina Avenue for Pacific Avenue.  But acquiring a school (or even better two) from the conference whose secondary rights you do not own has the value of increasing your asset at the expense of your rival–this would be like taking Pennsylvania Avenue from an opponent in the game to complete the set of green properties (and ESPN knows all about the house and hotel construction business).  So while sticking it to Delany might be a nice ancillary benefit, it is just that, as first and foremost, ESPN is a business conglomerate that has proven it understands how to maximize the value of its assets.

I will admit, the more research I did on the topic, the more blurred the line became for me regarding the role networks played in recent conference realignments, and that’s because that is probably exactly how the Network wants it.  Its why I hope that this lawsuit does not settle quickly, that preliminary depositions and interrogatories are at least conducted, and memos that otherwise might not see the light of day will be splashed on pages of internet news providers who would love to expose the clandestine back room deals of the true emperor of college football (he’s nude sir).  In particular, I would love to know all the scandalous details of the cat-fight between the revolutionary man who runs the most profitable “independent” college sports network and the behemoth sports conglomerate that he has twice spurned.  Just in case, I will have my peanuts and popcorn at the ready.

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