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Big Ten battles for TV sports bonanza

August 27, 2007

Big Ten sports fans are starting to sweat--and so are athletic directors at Big Ten schools.

They're watching a fight between the new Big Ten Network and some of the nation's largest cable television systems over how consumers will be charged for the network's programming.

Hundreds of sporting events could be blacked out in local markets, including scores of Indiana and Purdue university football and basketball games, if the two sides don't reach an agreement. But of more importance to school administrators is the potential loss of millions of dollars in TV revenue that athletic directors are counting on from the network this year.

Big Ten officials are playing down the potential financial downside.

"We wouldn't have done the deal [to form the Big Ten Network] without certain guarantees," said Big Ten Commissioner Jim Delany.

The guarantees come in the form of an agreement with Los Angeles-based Fox Cable Networks, which co-owns the network with the Big Ten. Fox, which owns 49 percent of the BTN, guarantees that each Big Ten school will get $7.5 million this year from the network's operation. But some athletic directors were expecting much more, league sources said.

Lucrative deals with the Midwest's biggest cable companies would at least double schools' take from the network.

"Despite the guaranteed money, there is still plenty to fight over," said Larry DeGaris, director of academic sports marketing programs at the University of Indianapolis.

Cable channels such as the Big Ten Network make most of their money from subscriber fees extracted from cable companies.

Big Ten officials want the network placed on expanded basic cable packages. But cable companies want to charge subscribers a premium for the network. That would mean substantially fewer subscribers for the BTN, and a big cut in its subscriber-driven revenue.

Placing the network on a higher tier also means far fewer eyeballs on Big Ten programming, and "that has a dramatic impact on the marketing effect" for the conference and its member schools, DeGaris said.

With more than 17 million cable TV subscribers in Big Ten country alone, the potential revenue windfall could approach $250 million annually if the Big Ten gets what it wants, industry experts said.

High stakes for Hoosiers, Boilers

IU and Purdue could use the cash. The schools' athletic departments get no tax money or any revenue from the schools' general fund, unlike Big Ten brethren at Illinois, Iowa, Minnesota, Northwestern and Wisconsin.

Since 2001, IU's athletic department has operated in or very near the red. In those same years, Purdue's athletic department has also struggled to keep pace with escalating expenses.

Both schools' athletic department annual budgets are $40 million to $50 million--and this year they'll get almost half of that from conference-generated TV money.

Unless the Big Ten can turn its network into a cash cow, a big chunk of the TV money will continue to come from a 10-year, $1 billion contract with ABC and ESPN. Last year, league sources said each school in the conference received about $11 million from their share of the league's TV deals. This year, that amount is near $20 million, which includes the guaranteed cut from the BTN.

Even more money from the BTN would help Purdue and IU stay competitive with schools nationwide. Conference powerhouses like Ohio State University have athletic department budgets almost twice the size of the Indiana schools.

Purdue will use its stake to pay for basic department services--some of which it buys from the larger university--and to meet inflationary expense increases and fund capital projects, including a planned $83 million upgrade to its basketball venue, 40-year-old Mackey Arena, Purdue Athletic Director Morgan Burke said.

But Purdue's needs extend beyond its high-profile sports.

Burke pointed out that Purdue's baseball field has no lights and its soccer venue no permanent rest rooms.

"If I'm going to have a top 25 program, I can't have these types of deficiencies," Burke said.

IU is also in the midst of big capital projects, including building a new basketball practice facility and adding seats to its football stadium.

"There's no question the Big Ten Network will provide our program with a long-term source of revenue that will benefit our entire university," said IU Athletics Department spokesman J.D. Campbell.

IU officials declined to specify exactly how the money from the network would be spent.

Clock is ticking

With the network's launch set for Aug. 30, Comcast Cable, Brighthouse, Insight, Time Warner and Mediacom, which represent the majority of the cable viewers in Big Ten country, have yet to reach an agreement with the BTN.

Conference officials think there are enough events beyond what major networks choose to air that can be slotted as BTN programming and attract a broad nationwide audience.

During the first year, the BTN will air 400 sporting events ranging from baseball to hockey. Coaches' shows and highlight reels, along with classic games and nonsports educational programs featuring member schools, also will be aired.

"Naturally, we're strong in the states where our schools are," Delany said. "But we have large alumni groups in almost every major city across the U.S."

Delany is using the broad audience as a selling point for placing the BTN on basic cable packages. But cable companies aren't so sure about the size of the audience, and they're balking at the price per subscriber the BTN wants to charge.

Powerhouse stations like ESPN command $3 per subscriber from cable systems. Even so, industry experts said the $1.10 per subscriber the BTN is seeking in Big Ten states is a bit high for a startup. Many cable stations charge far less. The BTN would charge only 10 cents per subscriber outside Big Ten territory.

Officials for the area's biggest cable companies have suggested the BTN be placed on a higher tier--usually an all-sports package--which costs subscribers anywhere from $5 to $10 more per month.

Comcast is chief among the cable companies resisting the BTN's efforts to get on the expanded basic tier.

"This isn't the Big Ten versus Comcast," D'Arcy Rudnay, spokeswoman for Philadelphia-based Comcast told the Los Angeles Times. "We really see this as the Big Ten versus the consumer."

It isn't fair to ask subscribers--the vast majority of whom have little or no interest in the BTN--to pay for it, said Mark Apple, spokesman for Comcast Indiana. Instead, he suggests, a fairer approach is to put it on a sports tier with channels such as the NFL Network, and let people who want it pay for it.

Purdue's Burke thinks Comcast is merely trying to drive a large consumer base who want the new network to a pricier tier.

In the face of the very public battle, officials for the conference and its schools are bugling a battle cry among its faithful.

Purdue University is one of several Big Ten schools asking--through letters, e-mails and other pleas--for students, faculty and alumni to call their cable companies to voice their outrage.

"All the Big Ten schools are rallying their people," Burke said. "Our people are really hot. The Comcast phone line in West Lafayette is very busy, I can tell you that."

The battle has gotten so fierce that State Rep. Dave Crooks, D-Washington, recently asked Indiana Utility Consumer Counselor Susan Macey to jump-start negotiations.

Delany said Comcast's position is hurting negotiations with other cable providers.

"Comcast's stand is having a chilling effect, no doubt," Delany said.

While both sides are staying positive about getting a deal done, neither is optimistic it will happen before the BTN's launch.

"We're quite a distance apart, and there's no momentum in the negotiations," Delany said. "But we're not in this for one year. We're in it for 20 years."

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