All indications at this point are heavily pointing towards the Big 12 expanding, most likely by an additional four teams, in the next month or so. The biggest reason? The desire to immediately grab more money from their TV partners, Fox and ESPN, thanks to a pro rata clause in their contract that would allow them to get the same amount of money per new team, no matter who they add. Without a traditional conference network on the horizon, it’s the best way to maximize the league’s financial gains and keep up with the ACC, SEC and Big Ten.
If you’re a BYU fan, or a Cincinnati, Houston, etc fan, you love this plan. If you’re a Big 12 administrator, you probably like this plan. But you know who really doesn’t like it? ESPN and Fox. And now they’re essentially going public with it, leaking info to Sports Business Daily.
The Big 12’s TV partners are pushing back on the conference’s plans to expand.
ESPN and Fox Sports believe that expansion with schools from outside the power five conferences will water down the Big 12 and make it less valuable, not more, sources said
Both networks, according to sources, are digging their heels in against paying those kinds of increases based on expansion with schools outside the power five.
This isn’t a huge surprise. Expanding by four teams could force both TV networks to pay out an additional $80 million a year, or about $20 million per team, and nobody in the Big 12 expansion candidate pool, even BYU, is worth that much money to the networks. Plus, adding less valuable teams to the conference could potentially dilute the value of currently contracted conference games.
There may be an argument that they could become more valuable brands with access to an additional $20 million, but that would take years to pay off, and in the meantime, increasingly cash-strapped TV networks would be taking a haircut now.
This also might be a clue for BYU’s TV valuation in the future. ESPN seems to value the rights for BYU at an independent schedule at around $6-7 million a year. BYU with more money and a Big 12 schedule might be worth more, but probably not $14 million more.
SBD reports that the networks are looking at possible other solutions. Those include:
Several options are being considered at the networks’ headquarters.
ESPN and Fox could negotiate smaller rights-fee increases as opposed to the pro rata increases.
If the networks, both of which have encountered some financial challenges in the last year with cutbacks and subscriber losses, decided to staunchly challenge the contracts, they could simply not pay the increases and force the conference to take them to court. ESPN and Fox would argue that the move to expand and charge the TV networks more money does not reflect the spirit of the original deals, which were signed four years ago. The conference, of course, can fall back on its contracts, which spell out pro rata increases.
Another option would be to go along with the increases now and not support the Big 12 in 2025, when the grant of rights and the TV deals expire.
A protracted court battle seems less likely, and would certainly be ugly. The networks might be right that a hefty increase to add, say, Tulane or Memphis does go against the spirit of the original agreement (which was to help keep the conference together, and avoid messy negotiations adjudicating the value of specific programs), but the contract is the contract, and it is reportedly pretty clear about what the networks need to do.
A prolonged legal battle would further napalm the Big 12’s relationship with broadcast partners (potentially future ones too), and even if they won, a legal mess could cut into their expansion television gains. It would be good for nobody.
ESPN/Fox negotiating some smaller settlement might be in the best interest of both parties, but it would be bad for BYU, or any other candidate, who may potentially join the league. One of the biggest reasons to join a power conference is access to the major financial payout, and any decrease in the TV check will almost certainly come out of BYU’s future pocketbook.
The Big 12 could decide to ignore network concerns and expand anyway. They probably have that right. But they’ll need to negotiate again in 2025, and if the rights marketplace hasn’t evolved to the point where Netflix, Facebook, etc can be major bidders, poisoning a relationship with ESPN and Fox could be fatal, especially since ESPN and Fox are major partners with the SEC and Big Ten, conferences that could be interested in poaching anchor Big 12 members.
There may not be an easy solution to this problem. The fact that conference executives are willing to leak this information and get it into the public suggests these concerns are not minor. Are they enough to scuttle expansion completely? Probably not, but it wouldn’t be a Big 12 expansion story without even more twists and turns near the end.