AAC Inks $1 Billion Media Rights Pact with ESPN

AAC

Sports Business Journal reported that ESPN has agreed to pay the American Athletic Conference $1 billion over the next 12 years for the broadcast rights to nearly all its live sports programming – save a “small package” of men’s basketball games that air on CBS and Navy football games controlled by CBS Sports Network. The new deal, which goes into effect prior to the ’20 college football season, will pay the schools $83.3 million/year ($6.94 million/per); more than 4x the amount they currently collect annually under the terms of the expiring agreement with the company (7 years, $126 million). The conference has yet to begin renewal talks on its package with CBS – also set to expire in ’20.

Howie Long-Short: ESPN’s decision to tie up big money, long-term in the AAC is risky business considering the conference’s member schools aren’t tied to a grant-of-rights restricting their ability to leave the conference should greener pastures arise, but the network did manage to negotiate a “conference composition clause” that hedges against financial losses should the conference’s top brands leave before the expiration of the deal. It’s safe to assume that the AAC’s existing membership base will remain intact through the ’22-’23 school year, but with every existing power 5 conference broadcast deal expiring between ’23-’25, another round of conference realignment remains a threat. The belief remains that conferences can command larger media rights deals if they expand their geographical footprint.

The AAC’s decision to ink a 12-year agreement can also be questioned – particularly if the logic behind signing a deal that long was so that the conference could claim it had a billion-dollar TV partnership. William Mao, VP Media Rights Division at Octagon, explained “in the context of a lot of these national conference TV deals, 12 years may not seem out of the norm. But given that this deal starts today and that the time horizon for the introduction of new content delivery platforms, new formats and new technologies has gotten shorter, you would think that conferences would start to look to sign shorter deals; or agreements that provided for the flexibility to entertain additional distribution opportunities as they arrive over the next five to 10 years.”

Growing media rights revenues by nearly $5 million/year will gives AAC member schools some much needed financial support – as recently noted, the UConn athletic department fell $42 million short of its $89 million budget last year. The deal should also help to raise the profile of the AAC schools (assuming the volume of games on ESPN’s linear outlets remains unchanged). In addition to football and basketball games remaining on the ESPN family of networks (ESPN, ESPN2, ESPNU), the new deal guarantees the broadcast of select Saturday football telecasts on network television (ABC).

ESPN plans to air the “majority of [conference] basketball games” and “about half of the football games” on ESPN+ (along with baseball, softball and soccer), so much like the recently announced UFC deal, the network’s agreement with the AAC is about getting subscribers “into the big tent.” Jimmy Pitaro & co. figure that they can get alumni of the American Athletic Conference schools to sign-up for the service with football and basketball and then keep them as subscribers with high-profile UFC bouts, original content (think: 30 for 30, Kobe: Detail) and a collective of tier 2 and 3 live sports (think: MLS, Top Rank Boxing).

Even with the rights fee increase, the disparity in media rights revenues generated by AAC schools and those in the P5 conferences remains great. The Pac-12, which desperately needs to grow its annual payouts, still pays its member schools more than $31 million/year; the Big Ten leads the way with annual payouts exceeding $50 million/school.

The AAC has been marketing itself as the 6th power conference, but this deal indicates they’re not there just yet. Aside from the financial component, “4/5 power conferences have a linear network of some sort. The American just inked a deal for the next 12 years that does not include a linear conference network. It’s difficult to claim you’re one of the power conferences when you lack the one thing that almost all of them have.”

Fan Marino: The deal gives ESPN valuable college football/basketball programming for the ESPN+ ecosystem and the schools receive a significant increase in annual media rights revenue, so it makes sense on both sides. If there’s a loser, it’s the AAC fan that will experience an increase in the monthly cost (+$4.99) to watch their favorite team(s) play. But fans willing to pay $4.99 are invested in the outcome of their alma mater’s games and the deal with ESPN/ESPN+ gives AAC schools the financial resources (think: better coaches, facilities) to improve the quality of their athletic programs. One could argue that while it’s going to cost AAC fans more to watch every game on the schedule under the terms of the new media agreement, their teams are better positioned to compete in the NCAA Tournament or a big 6 bowl game because of the move to ESPN+.

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Author: John Wall Street

At the intersection of sports & finance.

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