Last May, I estimated that ESPN’s new SEC Network could collect up to $283 million per year in subscriber fees alone. As it turns out, those numbers were way too low.
Sports Business Daily reported on Monday that ESPN will ask carriers for $1.30 per month from pay TV subscribers in SEC states. It was previously thought that ESPN would ask only $0.80 per month for the channel from its core audience, which is in line with what the Big Ten Network and Pac-12 Network receive. The boys in Bristol clearly believe, however, that SEC fans will gladly pony up for the extra coverage.
Also, Clay Travis, who’s also been covering these shenanigans, pointed out to me that the source I used to calculate the number of pay TV homes (located here) did not account for satellite TV subscribers.
With that in mind, I went back and recalculated these numbers based on current Nielsen market data, which is located here and here. (You can see all my calculations here.) The end result is that the numbers are even more staggering, and SEC athletic departments are primed for a huge payday.
Let’s look again at the number of pay TV households in the 11 SEC states:
(We don’t know how many of those 31,870,036 homes have only basic cable or that HBO-only plan that Comcast quietly introduced last fall to keep its numbers up, but this is SEC country, so we’ll presume for now that all these homes will pay for SEC Network.)
With a $1.30 sub fee, SEC Network is poised to collect $41,431,046.80 per month from cable and satellite customers in those 11 states. That adds up to a whopping $497,172,561.60 per year. That’s about $150 million more than Fox currently collects for Fox Sports 1, which is in 90 million homes. It also underscores the importance of inviting Texas A&M and Missouri into the conference, a move that added more than 10 million homes to the channel’s bottom line.
Add to this ESPN president John Skipper stating that SEC Network will be a national channel on par with ESPNU. At the present, ESPNU is in more than 74.3 million homes. The SBD report states that ESPN will be seeking $0.25 per month from carriers outside of SEC territory. Should ESPN succeed in getting this channel in 40 million homes at that rate, SEC network will collect another $120 million in sub fees outside of SEC territory. That brings the channel’s haul to more than $617 million.
Now let’s say ESPN agrees to pay the SEC 50% of these fees, which is a rough equivalent of the split between BTN and the Big Ten. Each of the 14 schools in the conference would receive just over $22 million per year from SEC Network alone. Add that to the $55 million CBS is paying the SEC for first-tier rights and the $150 million ESPN is paying for second-tier rights, and SEC schools are poised to collect more than $36.6 million each per year.
Meanwhile, as Steve Spurrier reminds us, SEC football and basketball players will continue to get no pay for their labor, save for scholarships that are designed more to keep players eligible than get them educated.
But nobody thinks about that when a missed field goal is being returned 109 yards for a touchdown, do they?
Fans of SEC schools crave football. They organize their lives around games, buying tickets and t-shirts and RVs and more, just to be a part of the game. Nobody understands this better than ESPN. That’s why SEC Network is going to happen, and why it’s going to be a huge success in the southeast. Fans will demand it from carriers in stadium-sized droves, and carriers will cater to their demands.
Of course, that begs the question: If there’s so much demand, why not make SEC Network an a la carte channel? Given the number of games and the amount of coverage that will be on this channel, why not go after all those SEC football fans directly and ask them to pay, say, $6.99/month for the channel? Certainly, there are more than 7.36 million hardcore fans out there who would be more than willing to do just that, which would bring the network more than $617 million. Even Vince McMahon understands that true fans will pay big bucks for a product they want. He’s banking on this with the launch of the new WWE Digital Network.
So why does ESPN want to make entire country foot the bill for SEC football, rather than just the hardcore fans?
For one, it’s easier to hide the true cost of the network inside your cable bill. No one will ever look at that extra monthly charge and think, “Gee, do I really need that?”
For another, if SEC Network were an a la carte channel, some fans might probably drop to a lower tier of cable service to afford it, and that means less money for other channels in which ESPN’s parent company, Disney, has a stake. That’s the big problem with the current pay TV system — everybody has to pay for sports, but sports fans have to pay for everything else, including all the programming they don’t want.
SEC football fans could find plenty of channels they don’t want pretty easily, but they’ll keep right on paying for them, because that’s the only way to get the channels they do want — ESPN and SEC Network. As long as those 31 million homes in those 11 states continue to buy into the system, ESPN has zero incentive to change its business model for this new channel. And the games go on.