The engine powering Big Ten expansion is not merely the notion of getting to 12 teams to have a conference championship game. That in itself would, as Joe Paterno points out, get the conference on television in early December and back in the limelight along with other conferences playing their conference championship tilts. And it would garner the conference another $5 or $6 million annually.
That might have been the initial idea, but that's relatively small potatoes.
Rather, the engine powering Big Ten Conference expansion is the Big Ten Network.
The agreement to create the Big Ten Network (BTN) was announced on June 21, 2006. The network was launched a little more than a year later, on August 30, 2007. In the short span of less than three years since then (warning: abrupt metaphor shift ahead), the Big Ten Network has grown into a money tree for the Big Ten Conference.
It's difficult for a non-financial guy like me to find out exactly how lucrative the BTN money tree is. An article by John Ourand and Michael Smith in Sports Business Journal in March 2008 indicated that at its inception the BTN projected it would yield $2.8 billion for the Big Ten Conference over the 25-year life of the current deal. That would be an annual payout of $112 million, which would mean an average payout of $10.18 million for each of the conference's eleven schools, every year. I've read elsewhere that the annual payout may already be at that level.
The BTN contract calls for the conference schools to be compensated through two components, a guaranteed annual rights fee and an equity share distribution. The rights fee increases each year. In 2008, the rights fee was $66 million, equating to $6 million for each of the conference's eleven schools. Some articles indicate that the rights fee is now about $6.3 million per school.
The second part of the contract is the equity share distribution, the division of profits based on ownership of the network. The Big Ten Conference owns 51 percent of the Big Ten Network.
Current reliable numbers are elusive. I've read in multiple sources that the Big Ten Network has been turning a profit for the past two years, but I haven't been able to learn what the equity payout has been. If my calculations that follow are in error, or if any of my assertions are wrong, I would welcome corrections from someone with a business background or access to more reliable BTN profit figures.
If we use the BTN's projected payout of $112 million annually as an example, and subtract $66 million in rights fees, that suggests a projected annual equity payout to the conference of $46 million. Since that would account for 51 percent of total profits, then we can extrapolate that the total annual profits for the BTN would be projected to be about $90 million, after the rights fees are paid. (Ninety million dollars times 51 percent equals about $46 million.)
That would leave $44 million in projected annual profits that do not go to the Big Ten Conference.
Where do the remaining profits go? To the BTN's minority partner, Fox Cable Networks.
Fox Cable Networks (FCN) holds the remaining 49-percent ownership stake in the Big Ten Network. FCN is a unit of the Fox Networks Group, a wholly owned division of News Corporation, the media conglomerate founded and run by Rupert Murdoch.
In Charles Dickens' magnificent novel David Copperfield, the despicable character Uriah Heep sidled himself into control of the business owned by the kindly but weak Mr. Wickfield, treated him badly, siphoned off the profits, and was an all-around scoundrel. No matter what one thinks of Rupert Murdoch, however, in this instance he is no Uriah Heep. And the Big Ten is no abused Mr. Wickfield.
Fox Cable Networks is responsible for the management and daily operations of the Big Ten Network. In this role, FCN has quickly turned the BTN from concept to a profitable entity. FCN is making money for the Big Ten Conference hand over fist. The Big Ten Conference is the beneficiary of a great deal, sees its schools on a TV network playing round the clock every day of the year, and annually receives at least $66 million in current rights fees plus 51 percent of the BTN's profits. I imagine the Big Ten is quite content to count its share and see the remaining 49 percent of the profits go to Fox Cable Networks and News Corporation.
That association leads to interesting questions, however. Which partner is really behind the push for the Big Ten to expand into the eastern media markets? How much influence is held by the minority partner? It clearly seems that expansion is in the best interests of Fox Cable Networks and News Corporation, regardless of whether expansion is in the best interests of the Big Ten institutions themselves.
Adding schools to the conference will add more media markets, provide more live content, bring in more advertising, and generate greater profits.
And what's wrong with that? Wouldn't expansion of the BTN, if it yields bigger profits, likewise benefit the schools of the Big Ten? Wouldn't part of that increased revenue stream go not just to athletics, but also to library improvements, academic scholarships, hiring more faculty members? Yes, it probably would.
That may make the Big Ten's decision easier, or it may make it more difficult. The ultimate decision on Big Ten expansion will be made by the Big Ten presidents and chancellors. How much will they weigh the additional revenues to be received? How much will they feel as though they're ceding their institutional responsibility to the profit interests of a gigantic media corporation?
How does their involvement in generating greater profits for News Corporation square with their schools' status as nonprofit state educational institutions?
The Big Ten presidents and chancellors will face other questions as well. Will the promise of additional BTN revenues be sufficient for them to expand their academic association by nearly half, which would be the case (45%) if the Big Ten were to expand by five schools to get to a total of 16? How would such an expansion affect the extraordinary income that each of their universities receives in research funding?
Would another multi-school raid on the Big East prompt another lawsuit similar to the one filed when the ACC raid took place, however ineffectual that might be? How will the Big Ten administrators weigh that prospect, if at all? (And that begs the further question, how would schools like Rutgers, Pitt, or Syracuse, who were parties to that lawsuit by the Big East, defend their actions against their own previous legal arguments if they are on the other side of the "vs." this time around?)
Would raiding another BCS conference, possibly to the extent of killing it off, harm the Big Ten's reputation and self-image, or would that not even be a minuscule consideration given the magnitude of the money involved?
And will Big Ten tradition, seemingly revered, be severely watered down for more money?
For these reasons and more, it may not be easy for the Big Ten presidents and chancellors to decide to expand their conference, especially to 16 schools. Money will not be the only factor involved, but greed will be the primary reason if that is the decision they make. And if the Big Ten Network didn't exist, I doubt that expansion of the Big Ten beyond adding a 12th school would be even a topic for discussion.
A decision to expand won't affect just the Big Ten and the few schools it invites into its association. Depending on the number and current conference affiliation of the invited schools, the Big Ten's decision could severely harm several other state universities. One wonders if the Big Ten presidents and chancellors will consider that at all, or if they'll simply brush it aside as inconsequential to their own financial interests.
Reputation, integrity, and doing the right thing have always seemed to be important to the Big Ten. At least one university president in the Big Ten has referred to the conference as an "ivy league" of public universities. If the Big Ten presidents and chancellors won't look beyond the contemporary business model's singular pursuit of profits, then who will? In many ways, the Big Ten has always seemed to portray itself as better than other conferences, and certainly an institution where acting honorably is an esteemed quality.
Sometime in the weeks and months ahead, we're going to find out about that. With additional millions of dollars in BTN profits as the motive, will the Big Ten presidents and chancellors cut the throat of the Big East Conference?
That seems like a harsh way to put it, but it also seems accurate. And my cynical opinion is that all of the other considerations mentioned above will not matter even a teeny, tiny bit. I think they'll take the money in a heartbeat, and not lose a minute of sleep over the harm they're doing to the non-selected schools of the Big East.
To end on a somewhat optimistic note, however, it could oddly benefit some of the left-behind Big East schools if the Big Ten were to take, say, Rutgers, Pitt, and Syracuse as part of its expansion. Why? Because then if the ACC decides to expand to 16 to keep up with the big boys, or has to replace schools lost to SEC expansion, those three schools wouldn't be in the pool that the ACC would have available to choose from. That could improve WVU's chance of someday getting an invitation from the ACC.
Could that happen? I'll believe it when I see it. But hey, we look for rays of sunshine where we can find them, and maybe like David Copperfield, this expansion story could have a happy ending.