Here's how college sports media rights valuations actually work:
And no, it isn't just about market size and ratings
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College athletics is Big Business, but it isn’t just one kind of Big Business. College sports is a live events business, a higher education recruitment business, an athletic talent development business, and a slew of other enterprises. But if you really want to understand how major college athletics works, you need to understand the TV business.
TV money isn’t the only major revenue stream for P5 athletic departments. Based on the Knight-Newhouse database, TV money is typically somewhere between 35-50% of all FBS athletic department revenues, so money from ticket sales, donors, student fees, and sponsorships is still critically important. But when it comes to conference realignment, especially at the FBS level, no force typically wields more influence than TV.
I’ve written about TV rights a fair amount here on Extra Points. But as the Pac-12’s next media deal continues to be a major industry storyline, and as future valuation may shape what programs like Gonzaga decide to do in the near future, I think it’s worth revisiting a few common misconceptions about how media rights valuations actually work.
For example, readers (and brands) should be cautious when they see a PR release saying a gazillion people watched an event
I’m sure a lot of people watched the Super Bowl, just like a lot of people watched the World Cup, the Olympics, and many other major events. But the devil is very much in the details, and sometimes the PR release overstates how many people actually watched.
I was recently reading a paper by Dr. Daam Van Reeth, a Sports Economist at KU Leuven, a university in Belgium. He invites us to consider this example:
The complexities of determining the real TV viewership interest in a sports event is illustrated with the case of the Tour de France, the world’s biggest road cycling competition. Skoda, one of its major sponsors, claims the race is watched worldwide “by 1.4 billion television viewers” (Skoda, 2014).
Sports marketing agency Repucom counted almost two billion viewers: “The Tour de France accumulated more than half of the total cycling audience on TV (1,982 million)” (Repucom, 2013, p. 6).
A much higher number was reported by the Tour of Yorkshire, the British county that hosted the Tour de France start in 2014: “A worldwide television audience of 3.5 billion people” (Tour de Yorkshire, 2014).
On their website in 2016, race organizer Amaury Sport Organisation (ASO) even claimed a four billion worldwide TV audience (ASO, 2016).
The 2.6 billion difference between the lowest and highest proclaimed TV audiences is not only worrying from an economic point of view, but it also raises further questions with regards to the validity of such multibillion TV audience claims.
Part of the reason you see such wildly disparate numbers, according to Van Reeth, depends on how you define a viewer of an event. A consumer should check to see how long a viewer needs to actually watch the broadcast in order to be counted as a viewer (five seconds? 30 seconds? Ten minutes?), whether the study is counting the same viewer multiple times, and if they are counting viewers of the live broadcast, or also viewers of relays, highlight shows, and shoulder programming.
Total viewers, average viewers, peak viewers, audience reach and more can all tell slightly different stories. If a number feels outrageously high, well…it probably is, and the reader (or media buyer) should look under the hood a little closer.
This week, I talked to a few consultants who help schools (and networks) work on media rights valuations and negotiations. Based on those conversations, here are a few other things readers, fans, and even administrators ought to keep in mind when thinking about media rights:
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