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Cover Sheet
Reese Miller
Business Story
Deal gone dry?
December 4, 2014
Budget line:The University of Texas at Austin signed a deal with ESPN to create the Longhorn
Network in 2011. While this looked like a financial boom at the time for Texas, currently every
school in the South Eastern Conference makes more money per year off the newly founded SECNetwork, including Texas A&M and Missouri who left the Big 12.
Sources:
Joel Lulla-Professor at the University of Texas, former consultant for Nebraska and theBig 12 to create possible networks
o Email [email protected]
o
Date(s) contacted: in person 12/1/14
o Met with him and discussed his work for a networks within the Big 12
Michael Cramer-expert on the business of sports and current UT professor
o Email: [email protected]
o Date(s) contacted: email 12/1/14
o Discussed his thoughts on the future of the Longhorn Network and the success ofthe SEC Network
Josh Blount-LHN Employee (asked not to be named)
o Phone: 713-823-1669
o Date(s) contacted: in person, over the phone 12/2/14
o Talked about the current state of LHN
Gracie Blackburn-Public Relations worker for ESPN
o Email: [email protected]
o Date(s) contacted: email 11/24/14
o Asked about the current state and future of LHN, she declined to comment
Invisible sources/web sites used:http://www.sportsbusinessdaily.com/Journal/Issues/2014/08/11/In-Depth/Conference-
breakouts.aspx?hl=longhorn%20network&sc=0
http://www.kansascity.com/sports/college/article437058/Big-money-headed-to-Big-12-SEC-
schools-thanks-to-giant-revenue-distribution.htmlhttp://www.foxsports.com/college-football/outkick-the-coverage/every-sec-school-will-make-
more-tv-money-than-texas-notre-dame-072314
http://www.fool.com/investing/general/2014/08/09/sec-network-launch-means-payday-for-schools-higher.aspxJoel Lulla also provided me with select numbers regarding networks.
http://www.sportsbusinessdaily.com/Journal/Issues/2014/08/11/In-Depth/Conference-breakouts.aspx?hl=longhorn%20network&sc=0http://www.sportsbusinessdaily.com/Journal/Issues/2014/08/11/In-Depth/Conference-breakouts.aspx?hl=longhorn%20network&sc=0http://www.sportsbusinessdaily.com/Journal/Issues/2014/08/11/In-Depth/Conference-breakouts.aspx?hl=longhorn%20network&sc=0http://www.kansascity.com/sports/college/article437058/Big-money-headed-to-Big-12-SEC-schools-thanks-to-giant-revenue-distribution.htmlhttp://www.kansascity.com/sports/college/article437058/Big-money-headed-to-Big-12-SEC-schools-thanks-to-giant-revenue-distribution.htmlhttp://www.kansascity.com/sports/college/article437058/Big-money-headed-to-Big-12-SEC-schools-thanks-to-giant-revenue-distribution.htmlhttp://www.foxsports.com/college-football/outkick-the-coverage/every-sec-school-will-make-more-tv-money-than-texas-notre-dame-072314http://www.foxsports.com/college-football/outkick-the-coverage/every-sec-school-will-make-more-tv-money-than-texas-notre-dame-072314http://www.foxsports.com/college-football/outkick-the-coverage/every-sec-school-will-make-more-tv-money-than-texas-notre-dame-072314http://www.foxsports.com/college-football/outkick-the-coverage/every-sec-school-will-make-more-tv-money-than-texas-notre-dame-072314http://www.foxsports.com/college-football/outkick-the-coverage/every-sec-school-will-make-more-tv-money-than-texas-notre-dame-072314http://www.kansascity.com/sports/college/article437058/Big-money-headed-to-Big-12-SEC-schools-thanks-to-giant-revenue-distribution.htmlhttp://www.kansascity.com/sports/college/article437058/Big-money-headed-to-Big-12-SEC-schools-thanks-to-giant-revenue-distribution.htmlhttp://www.sportsbusinessdaily.com/Journal/Issues/2014/08/11/In-Depth/Conference-breakouts.aspx?hl=longhorn%20network&sc=0http://www.sportsbusinessdaily.com/Journal/Issues/2014/08/11/In-Depth/Conference-breakouts.aspx?hl=longhorn%20network&sc=0 -
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Deal gone dry?
By: Reese Miller
December 4, 2014
While the Longhorns looked like they stole the loot from the USS Bevo when they signed a
television deal with ESPN to create the Longhorn Network, currently Texas A&M and Missouri
make more revenue per year from their television deals with the newly founded SEC Network,
which is also a branch of ESPN.
When the University of Texas signed a 300 million dollar, 20 year deal with ESPN in 2011 to
create the Longhorn Network, it sent a shockwave through collegiate athletics and created a rift
in the Big 12, which ultimately irked Missouri and Texas A&M enough to split from the
conference and join the SEC.
Three years later, the SEC reached a 20 year agreement with ESPN to partner for the SEC
Network. In August of 2014, according to the Sports Business Journal, the network experienced
the most successful cable network launch in television history and reached almost 90 million
homes, bringing the value and success of LHN into question.
I think for ESPN it made a lot of sense to be involved with the Longhorn Network and with
UT, said Joel Lulla, a University of Texas professor who studied the possibility of Nebraska
obtaining its own private network. LHN is a different kind [of network], they had a hard time
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getting distribution on cable or satellite systems, but certainly have more now. The SEC just has
such broader content and a more wide regional fan base.
A problem that effects LHN is its lack of reach to households across the United States. ESPN
isnt accustomed to this issue, as they reach 96 million per year and earn 6.96 billion on their
flagship channel alone.
The SEC currently has deals with CBS, ESPN, and the SEC Network. It has the advantage of
equal sharing of all conference revenues, meaning Vanderbilt and Alabama will make the same
amount off television deals even though their brands are vastly different. Meanwhile experts
project every SEC school to make around 28 million dollars per year off their conference-wide
network. Texas will make less from having its own private network. While LHN hasntpeaked
with television ratings or distributions, some still consider LHN a success.
From a financial standpoint, it is paying for itself with ESPN and, of course, UT is getting the
incremental money that it did not havebefore, said Michael Cramer, an expert on the business
of sports from the University of Texas. So, therefore, it is successful. Is it as successful as
ESPN hoped? Probably not.
LHN revenue is split between UT, ESPN and International Management Group. IMG, which has
controlled Texas marketing rights since 2001receives 17.5 percent, giving UT 12.5 million per
year.
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While the Big 12 has equal sharing revenue from ESPN and FOX for television rights, Texas is
the only school in the conference that boasts its own 24/7 cable network. Oklahoma, Kansas and
Kansas State have all tried variations whether digital or regional, but none accrue money within
nine million dollars of what LHN brings to Texas. The PAC 12 and the Big 10 now have their
own cable networks that project to make more per school than LHN in the next few years.
Experts feel one possibility for ESPN is when the LHN contract is up, transforming it into a Big
12 Network similar to that of the SEC.
I think it is very possible it will morph into that, Cramer said. UTwill not get less and the
conference members will get more than they get today in all likelihood. However, the future of
the conference is not assured and therefore I dont see this happening in the next year or two.
The Big 12 conference leaves one football game and several basketball games to the schools to
broadcast on a non-FOX or ESPN network per year. But, since LHN has first rights to the open
slot, it would prohibit a Big 12 Network from showing the Longhorns. It would be unlikely any
provider would want to create a Big 12 Network if they didnt get a piece of Texas, so right now
experts feel a Big 12 Network isnt a realistic aspiration.
An opportunity could arise however for Big 12 teams to bolt to other conferences looking to
expand and obtain more revenue. Although few teams in the Big 12 possess the same prowess
without the Longhorns.
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Its a bit of a double edged sword because they make a lot more money on their conference
deals with ESPN and FOX because Texas is in the big 12, Lulla said. But, at the same time
they cant monetize their own network like Texas can. Financially they are not in the same
position for exploiting their own individual school rights but at the same time they are making a
lot more from the big 12 conference if the longhorns werent in it.
Texas will receive 70 percent of LHN profit once ESPN earns back its original 295 million dollar
investment. The issue for both is that they may not reach that plateau.
A spokesperson from ESPN declined to comment on the state of their competing networks.
The current LHN contract expires in 2031, while the SEC Network contract expires three years
later in 2034.
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