Big 12 Television Contracts Likely to Protect League
Published on: September 08, 2011 | Written by: Clay Travis
I've been arguing for several years that the Big 12's future as a major conference is grim. Texas A&M's departure to the SEC helped to make that prediction a reality. Oklahoma and Oklahoma State departing to the Pac 12 could make that even more true. But here's an interesting twist that isn't getting very much attention, the Big 12's television contracts may keep the league from actually dying. Why? Because Fox and ESPN are so conflicted in college sports that they may not be able to get out of these contracts without facing an enormous lawsuit for breaching the Big 12's television contracts.
The end result? The leftovers in the Big 12, those without many options, might stand to reap a whirlwind for the next decade or more as remaining members of the Big 12. That is, Baylor, Iowa State, Kansas, Kansas State, and Missouri -- the five schools that aren't presently leaving or rumored to be leaving, yet -- have a strong legal argument that ESPN and Fox will breach the Big 12 contract if those networks provide the inducement to other schools, Texas A&M, Texas, Texas Tech, Oklahoma and Oklahoma State, to leave those conferences.
That's why this is a fact you can take to the bank: ESPN and Fox aren't going to reduce the amount they are paying the Big 12 for television rights even if the remaining Big 12 is a shell of its current state. (Fox and ESPN could also elect to pay a substantial settlement sum up front to these five remaining schools as well. Likely that sum would be in the neighborhood of $400 million or more. But I think it's much more likely that the networks would continue to pay the rights fees and carry the games).
So even if all five of these schools left the remaining five Big 12 schools would still have attractive television contracts to dangle in front of new members to persuade them to join a new Big 12. (This is also one of the major reasons why Baylor and crew suing the SEC over A&M's departure would make no sense; there aren't actually any damages).
Let me unpack this for you.
ESPN presently pays the Big 12 $65 million a year.
Just this past spring Fox signed a $1.17 billion deal with the Big 12 that pays the current ten schools in the conference in the neighborhood of $90 million a year through the 2024-25 season. That deal doesn't commence until 2012, but it's already been signed. (To forestall the emails, I know that there are composition clauses in these contracts that would allow the networks to reduce payments, but the threat of a lawsuit with massive liabilities outstanding would keep the networks from enacting these provisions).
But guess who also has a deal with the Pac 12? Fox and ESPN. So how would the Pac 12 gain the leverage to add Big 12 teams like Oklahoma, Oklahoma State, Texas and Texas Tech? By getting more money from ESPN and Fox for the Pac 12 for television rights, money that would induce Oklahoma, Oklahoma State and -- maybe, Texas and Texas Tech to leave. Except that breaches a fiduciary duty in the contract between the Big 12 and those networks since effectively these network partners would be paying teams that are already under contract with one league more money to play in a new league. That would open up ESPN and Fox to a substantial lawsuit if those teams' departure killed the Big 12.
So even though the Big 12 contract would be worth drastically less money without teams like Oklahoma and Texas, I think you'd find out that Fox and ESPN would continue to pay $90 million under the Big 12 deal. That's even though the new teams would be much less attractive.
Don't believe me?
We've already seen ESPN do this once. Back when Nebraska and Colorado left for greener pastures everyone thought the Big 12 was dead. Except even with the loss of two major teams ESPN came back to the Big 12 and said it would keep its rights fee at $65 million a year.
ESPN would do the same again. Why? Because in addition to paying more money to the Pac 12 to add Big 12 teams, it alone would be providing the inducement for Texas A&M to join the SEC. ESPN would be firing a double-barreled shotgun into the future of the Big 12. In fact, I've already written about ESPN's contract issues and why it's going to continue to recur as conferences realign. Read that piece here.
In other words, the $155 million in television contracts money is going to continue to exist, and that's going to keep the Big 12 alive.
I've already told you that Baylor's lawsuit against the SEC is meritless, and it is, but Baylor's lawsuit in conjunction with the remaining Big 12 members against ESPN or Fox would be legitimate and massive. That's provided, however, that ESPN and Fox tried to walk away from the combined $155 million a year in TV fees going forward. And there's no way that Fox or ESPN is going to take this litigation risk. How do you think a jury in the hometown of one of these five schools might react to ESPN or Fox sending their beloved team to Conference USA?
You want to let them gauge damages, punitive or otherwise. Plus, what might come out during discovery? You think there aren't some interesting emails rolling out from Fox and ESPN about conference realignment right now?
Nope, both networks are continuing to pay the same rights fees.
Let's break this down further and see how this may all play out going forward.
1. Baylor, Kansas, Kansas State, Iowa State, and Missouri should pledge to stay together in the Big 12.
Missouri is the only other school with real options here. If it won't pledge to remain that hurts, but it doesn't kill you.
The other four schools are all guaranteed to make less money if they leave the Big 12. Why? Because the Big East is the only viable "major" option for any of these schools and it has a much less lucrative television deal than the Big 12 already does. Plus, more members. So why would you leave a conference with two great TV contracts and less members for a conference with less television money and more members?
It makes no sense.
No matter what Baylor, Kansas, Kansas state, and Iowa State should stay in the Big 12 until the bitter end. That's the way to preserve their legal arguments and, very importantly, cash in on the buyouts.
Everyone is focusing on Baylor's sham lawsuit against the SEC; what everyone should be focusing on is Baylor and crew's very real lawsuit against ESPN and Fox.
2. Oklahoma and Oklahoma State may have more money to be made in the Pac 12.
So let those schools go. Make it clear that you want them to stay, but let them go if they insist. Before you let them go, I'd draft a letter to Fox and ESPN from Dan Beebe laying out the legal argument that you believe those networks will be breaching their duties to the Big 12 conference if they provide more money to the Pac 12 to add teams. But say you won't fight the moves in court if the networks agree to keep their payments the same for the future Big 12 conference.
Also make it clear that you expect Oklahoma and Oklahoma State to both pay out around $15 million each in damages for leaving.
Then split those funds with the remaining members of the conference.
3. What about Texas and Texas Tech?
Texas is still in a plum spot if the Big 12 can be saved. Amazingly, if Oklahoma and A&M leave Texas will have the same amount of money and now have no viable competition in its conference. Even Notre Dame will be jealous of Texas's perpetual spot in the BCS.
That's why I believe that Texas will end up remaining in the Big 12 even if Oklahoma and Oklahoma State leave.
Because it will still make the same amount of money as before. Even better for Texas, it can probably leverage more games on the Longhorn Network in exchange for remaining in the Big 12.
Texas Tech is going to follow Texas wherever it goes, so even if Oklahoma and Oklahoma State leave, you've just got three spots to fill in the conference.
4. Who would the Big 12 be able to add?
Even if it has to add five teams, that's if Texas and Texas Tech leave which I don't believe will happen, the existing television contracts provide a powerful incentive that no other conference can match.
Plus, it's most likely that the Big 12 only has to add three teams.
For the amount of money the Big 12 has locked up in television rights fees, you could get a lot of teams to jump. Even teams from the Big East.
Houston, Louisville, Memphis, TCU, BYU, SMU, Cincinnati, Pittsburgh, these are a few names that would kill to be in this conference with the rights fees at stake.
It's not a heavyweight conference, but if Texas stays is it every bit the equivalent of the Big East? Certainly.
Want to get really gangster? And Texas is the OG in college sports right now. The Longhorns could insist that the television payments remain the same for an eight team conference. What's the payoff to ESPN? Texas agrees to put more games on the Longhorn Network since there would only be seven conference games now.
5. This doesn't even consider the amount of exit fees that you can receive.
Lose three teams?
That's at least $30 million split seven ways. Plus, if you really wanted to play litigation hardball, it's as much as $78 million.
6. The end result? The Big 12's TV contracts are going to keep it alive.
In the next few days or weeks stories will start trickling out about how Dan Beebe is a miracle worker. Columnists and prognosticators will herald his genius. But the simple fact will be this: ESPN and Fox are so conflicted over realignment that they aren't going to be willing to cancel existing league contracts for fear of massive liabilities via lawsuit.
Voila, the Big 12, a dead conference walking, just got a reprieve on execution's eve.
If you're interested in FSU, Clemson, Oklahoma, Oklahoma State, Texas Tech, Texas, Georgia Tech, North Carolina, Duke, N.C. State, Maryland, Virginia, Virginia Tech, et al. basically we've talked about why those schools are likely or unlikely to join the SEC in the below articles. Just scroll through and you'll be entertained and informed. I promise.
Read all of OKTC's conference realignment stories here.