OT: Has Texas finally overreached with LHN?
Here's a CNBC article from yesterday discussing the economics of LHN. My understanding is that BTN revenues were up over 20% again this year and that the network paid out $8.9 million per school. According to the CNBC report, LHN will pay UT approximately $11 million in the first year with a 3% escalator each year thereafter. That means BTN is on track to pass the LHN in revenues per school by 2013. It also has much broader distribution nationally. I found that interesting considering all the hype LHN has received.
Let's start with the Longhorn Network, which launches Friday, but has no carriers. Texas will receive $10.98 million a year and receive guaranteed three percent bumps through the life of the contract.
But Texas will only receive the truly big bucks — equal to 70 percent of the net revenue — after ESPN nets $295 million on the project. That might never happen. Carriers will surely come, but at what price will they accept a deal? And how many Longhorn fans will push their local carriers to get something done with one football game and eight men's basketball games? ESPN officials did not immediately respond to comment.
Then there's the issue with ticket prices. Texas is charging $70 for the Rice game, $75 for Kansas and Kansas State, $85 Oklahoma State & BYU and $95 for Texas Tech. Coming off a horrible 5-7 year, it appears like there's a glut in the marketplace for the non-marquee games and fans easily see that now that StubHub is the official secondary ticketing site of the Longhorns.
August 25th, 2011 at 6:46 PM ^
Mods delete (already a thread open with this topic)
August 25th, 2011 at 6:49 PM ^
Give the guy a break; he gave good insight and hit post one too many times.
August 25th, 2011 at 6:49 PM ^
For some reason I got a timeout in the original post and had to backup and do it again. Voila, I had two. So I marked one for deletion.
August 25th, 2011 at 6:51 PM ^
Getting past the posting part of your post, it will be a HALOL moment when Texas gets passed up by IU and Minnesota from TV revenue. And the pie would be that much bigger if they had come with us last offseason. That couple million dollars pays for a lot of non-revenue travel.
August 25th, 2011 at 9:16 PM ^
Yes, but they don't have to share, which I think is key for Texas. They hate sharing.
August 25th, 2011 at 6:47 PM ^
Or that works.
August 25th, 2011 at 8:21 PM ^
People need to stop trying to police the board.... especially newbies.
August 25th, 2011 at 6:54 PM ^
The Longhorn Network....airing Texas basketball right after the Arlington School Board meeting at 8PM next Wednesday.
August 25th, 2011 at 6:56 PM ^
$11M for TV rights to only 1 football game is pretty great. That's on top of what they get for everything else, right?
August 25th, 2011 at 6:56 PM ^
The BTN pays out after the check from ABC/ESPN clears also. I'd bet anything that with all the accounting done, Texas makes less money from TV than any of the B1G schools.
August 25th, 2011 at 7:38 PM ^
The problem is that it is an unworkable business model. ESPN is paying way too much for one, relatively unexciting football game and a handful of basketball games.
ESPN is eating all the production costs of programming for a 24/7 network and is basically paying UT a flat fee. That means ESPN needs to generate enough money through cable subscription fees and advertising dollars to cover the costs of the network and the payment to UT just to break even.
Of course, all of UT's high profile games will be picked up by ESPN or FOX under the current B12 contract, which means the only games left for LHN to pick from are the ones ESPN and FOX don't want. It's very hard to sell something like that to cable TV service providers and advertisers. And that is why UT and ESPN are now pushing so hard to be able to show a second football game each year (a conference game) and high school football games. They need to find some sort of content that will make the whole thing economically viable.
We all know how boring the non-live game content can get on BTN, and that is with 12 schools. Imagine a station rerunning non-live game content for UT over and over 24/7. People won't pay for it and that is why ESPN and UT are having a tough time getting cable companies to pick it up.
UT might get its $11 million per year for a couple of years, but at some point the economics are not going to work and ESPN is going to balk and find a way out of the deal. And, unlike with the payouts from BTN, there is little chance of that $11 million ever really going up over time. That was one of the primary points of the CNBC article.
Even if you assume (as some people do) that ESPN cut the deal primarily to keep UT happy and prevent them from joining the P12 and killing the B12, well, that hasn't worked either. The B12 is collapsing anyway. ESPN is sitting on a mess right now.
August 25th, 2011 at 11:32 PM ^
My money is on Texas going Independent in the next 5 years. Schools like Baylor, Iowa St., Colorado St., Kansas, and Kansas St. will get absorbed into conferences like the WAC and The Mountain West. The upper tier schools A&M, Texas Tech, Oklahoma and Okie St. will get snatched up by the BCS conferences. The Texas Gov't has used their clout to hold the rest of the southwest hostage for years. Unfortunately, Texas has seen this as an opportunity to get greedy. It was fine for a while but now the gov't is actually hurting the other Texas schools. I can't see them keeping it up much longer.
If Texas does go Independent, then ESPN would've rolled a hard seven. If not, snake eyes. It's really an all or nothing gamble...
August 25th, 2011 at 6:58 PM ^
"Overreached" in what regard? They want more money like every big division 1 school. Is this fair to the other schools in the conference? Maybe not. But can you really fault Texas for trying to push the envelope? They have a very lucrative brand they're trying to exploit (sorry, I'm allowing my U-M b-school training come out here). Unless the NCAA or their conference puts a nix on it, it's worth putting out there IMO.
August 25th, 2011 at 7:13 PM ^
If it results in Texas A&M leaving for the SEC and ultimately bringing down the Big 12, then I don't think it's a stretch to say that they will have overreached. There will come a point when the rest of the Big 12, particularly marquee schools like A&M and Oklahoma, will push back against Texas' greed.
August 25th, 2011 at 11:04 PM ^
Lookng at the conference, you've got OU and A&M - which are clearly strong brands on their own, probably just a hair behind Texas. These schools can actively hawk for a better deal, because they can expect to get them. After that you've got Mizzou, KU, and Texas Tech as schools that probably get picked up by somebody if super-conferences form. But I imagine they'd rather keep the status quo then step off that unknown precipice. Unless somebody makes a move to get them, they're not going anywhere. After that you've got Baylor, K-State, Iowa State, and OK-State. Schools that have every incentive to keep the status quo because otherwise they're the next Tulane - once great, but didn't keep up with realignment.
And who's going to make a move on Mizzou, KU and TT? The Big Ten has already said they won't. The SEC is a possibility, but frankly they probably have better options (like raiding the ACC or Big East). The Pac-12 was really only interested in Texas - the rest were just a way of getting them. Joining the Big East will be going from one unstable conference straight to another - it's something that would happen only after the dominos start falling. The ACC seems content at the moment, and would probably only ake waves if they get raided themselves.
I'm not saying the Longhorn Network will be a moneymaker long-term - but as long as UT wants the Big 12 around, I think it'll stay around. It may be the Big 8, but it'll still be there.
August 25th, 2011 at 7:14 PM ^
Their "overreach" will destroy their conference. While they have a lucrative brand, I'm not sure it is robust enough to compete nationally with the other conference networks. Even as global as U of M's brand is, I don't think it is stand alone, in regards to a sports network. We need the fans of the other schools to garner a profitable national audience/viewership. Imagine if they could have had a Big12 network; there might actually be reason to subscribe for a non-Big12 fan, I don't think any non UT fans will subscribe.
August 25th, 2011 at 11:24 PM ^
We must also consider that there will most likely be a time, in the near future (see the recent Economist article here http://www.economist.com/node/21526314 ) when cable packages as we now know them will begin to fragment. If, and when, this occurs, it will not matter how many cable providers you can convince to stick their subscribers with your network. It will stand or fall on it's own merits. A network offering one football game, a handful of basketball games, and college rodeo matches or whatever the hell else they watch down there (maybe televised executions?) will not lure many subscribers. Of course the most likely outcome is that the media landscape, at least in terms of televised sporting events, will remain relatively unchanged in the near future. But, the fact nevertheless remains that pay television has begun losing subscribers (a decrease in subscribers from the priot year) for the first time since it was offered. As the article above states, the most likely result of this will be either a la carte channel offerings, less channels, or both. Somehow though I still feel like I will be getting screwed somehow, and it will cost me like $400 to watch 12 M games, $200 for a Tigers package, $200 for the Lions, and then my bill for just these 3 things will be more than I was paying for all that and more.
August 25th, 2011 at 7:27 PM ^
He probably means they destroyed their conference and won't even make that much money off of it compared to what BIg Ten schools make off the BTN.
August 25th, 2011 at 7:29 PM ^
I expected him to make a point about the country enjoying Texas games but not needing them. Unless an entire conference comes or goes with them, we will all get through our Saturdays just fine without Texas football. I think that's true, but I'm not sure if that's the OP's point.
August 25th, 2011 at 7:34 PM ^
If the B12 implodes, UT will have to join another conference (most of which will not allow LHN in its current form) or go independent. It's unclear that UT will make more money as an independent than they would have in the B12, once the newly negotiated B12 TV contract kicks in (I believe the new contract starts in 2012). And they will have the problem of what to do with all of their sports other than football. Notre Dame has the same problem, but has found a home for their other sports (Big East) and has publicly stated that they are willing to accept less money to remain independent. If UT feels the same way -- that independence is a virtue in and of itself and will give up money for it -- then maybe they haven't overreached. But I don't think that is what UT was thinking when it decided to launch LHN. I think they looked at LHN as a source of additonal income.
August 25th, 2011 at 7:59 PM ^
Ah, but if they ended up independent TX could probably show their home games on TLN. All TX would make sure their cable providers carried TLN then.
August 25th, 2011 at 7:43 PM ^
But at least with the Big 10 Network you have an acknowledgement that there are other teams that have to be played (and paid). The Longhorn Network just seems to be a way to secure the dominance of Texas. I think this is part of the reason why Nebraska bolted the Big 12 for another Big 12. I wonder how much longer Oklahoma will remain in the Big 12?
August 25th, 2011 at 7:55 PM ^
Oklahoma has tied themselves to UT for recruiting and the RRR game. The problem is, just like everyone else, UT will toss Oklahoma under the bus whenever it becomes in UT's best interest to do so. Thus far, being tied to UT has worked out very well for Oklahoma. But, if I were them, I would be a bit nervous, always wondering when it will be my time to get screwed over by UT.
August 25th, 2011 at 7:26 PM ^
Considering the, uh, lack of interesting programming the BTN has on a normal day, I can't imagine how they're going to succeed with the LHN. The Texas in-state fan base has got to be comparable in size to, say, Ohio State's and no one thinks OSU could support a full TV network.
I can't really imagine cable providers outside of Texas agreeing to a per subscriber fee (which is how the BTN really makes its money) even on a super-ultra high tier package.
They'll make money, but they may realize they would have done better with A&M and the rest of the Big 12.
Edit: Can anyone figure out what is actually on the LHN day-to-day? Longhornnetwork.com lists 12 total hours of programming/week (assuming 1 hour shows). Dan Wetzel made a couple of guesses here.
August 25th, 2011 at 9:19 PM ^
How can you say that BTN has a "lack of interesting programming"? What's wrong with the women's volleyball marathon?
August 25th, 2011 at 9:56 PM ^
In bikinis.
August 25th, 2011 at 8:21 PM ^
Texas has been overreaching since they discovered oil and air conditioning became cheap enough to make Texas fit for more than raising cattle and pumping oil. But they are an excellent CFB recruiting bed and have lots of TV sets.
They're busy wrecking their 2nd conference, and have excellent prospects for a 3rd if anyone cares to dance.
Let's see now.....Arkansas....Missouri.....Colorado.....Nebraska....A&M....all making tracks. Have I missed anyone?
August 26th, 2011 at 8:02 AM ^
I foresee Texas going independent and ND dropping UM/MSU and adding Texas and BYU in the future, at least until the creation of Mega Conference (DO NOT WANT).
August 25th, 2011 at 8:32 PM ^
Texas thinks they are better than everyone else. They already destroyed one conference with their greed, and are working on two. In what is shaping up to be a much different paradigm, Texas is going to have to be an "equal" in the next conference they join.
In the meantime, they will continue sucking the Big 12 dry.
August 25th, 2011 at 9:55 PM ^
I think Texas is conspiring to break up the Big 12 and then join a conference that will allow them to put all their home games on the LHN. That conference will be the Pac 12.
August 25th, 2011 at 11:19 PM ^
Its Texas man go big or go home. Cant mess with those guys. Although I do hope this all turns out real crappy for the horns. And it will.
August 25th, 2011 at 11:24 PM ^
I thought that I hated USC, and then Texas came along. To hell with all of them.
August 26th, 2011 at 1:27 AM ^
My hatred of Texas comes from my hatred of "America's Team". If they are America's team, how come i didn't get a chance to vote on that? Texas ranks up there with Ohio in my books but Ohio comes out on top because of the Air Force Museum...
August 25th, 2011 at 11:47 PM ^
they have unbalanced tge economic fruitbasket of the Big12 .... they dont have another big money school to balance the league (like tsio and UofM) .... to add another $11 mil a year has just crowbarred the league apart ..... at least with the BTN IU and PU get a cut.
August 26th, 2011 at 12:17 PM ^
pretty weak. I live in West Texas and I can't believe none of the local major service providers haven't picked this up yet. That being said a ton of feathers have been ruffled from a lot of the other Big 12 teams that are in Texas. Growing up in Ohio, OSU was the team to root for, no matter if you went to Kent, Akron, Miami (OH), OU or Toledo. In Michigan I felt it was different and in Texas its the same way to a much broader extent. UT, A&M and TTech all have a good split of fans, at least this far west. Its going to be interesting to see if/when this gets picked up by these providers out here.