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How Texas Saved the Big 12

Texas may have inadvertently saved the Big 12. Here’s how.

The LGG

How Texas Saved the Big 12

In economics there is a concept called Game Theory. Basic concept can best be explained by considering two players with four potential outcomes. My economic professors were partial to using a model that involved the police and two criminals. Say two guys are arrested and are being interrogated for a crime they committed.

There are four possible outcomes. One, both turn on each other and both go to jail. Two and Three, one turns on the other (and vice versa), so only one goes to jail while the other walks. And four, neither talks and so they both walk free.

This is why the police separate suspects when interrogating them. It creates uncertainty and usually one of the suspects will talk. Anyway, the point is, the best outcome is rarely achieved, at least for the criminals. Instead, a suboptimal outcome is most common with at least one guy going to jail, and frequently both. Why? Because most people are in it for themselves.

Back in 2010 the tectonic plates of college football were shifting. Schools and conferences were in a mad dash to grab as much money as possible. The Big 10 and SEC each had networks bringing in money, but both conferences were looking to add TV sets by bringing in brand name schools and markets outside of their then geographic footprint. By the end of all this volatility, the Big 10 and ACC had so decimated the Big East that it is no longer a football conference. And, the world almost got its first super-conference.

In the summer of 2010 both Colorado and Nebraska had announced that they were leaving the Big 12 for the PAC 10 (now 12) and Big 10, respectively. The Colorado announcement was a surprise. Nebraska, however, had been discontent for a while, frustrated by how they perceived that Texas was running the Big 12. Rumors were also circulating that Texas had used its influence to nix a Big 12 conference network and was working on creating their own school network.

However, by the middle of June of 2010 things had reached a fevered pitch. Texas did announce that they planned to create their own network. Both Colorado and Nebraska would be in new conferences by the start of the 2011 football season. Then, Larry Scott, commissioner of the PAC 10 swung for the fences.

News broke that Larry Scott had hand delivered invitations to Oklahoma, Oklahoma State, Texas Tech, and Texas to join the PAC 10. On June 7, 2010, the PAC 10 had voted to approve conference expansion. Larry Scott had not only delivered invitations to OU, OSU, TTU, and UT, but also Colorado and Texas A&M. If all had accepted it would have brought the conference to 16 members. Colorado jumped at the chance, accepting by June 10. Texas A&M was considering between the PAC 10 and the SEC. And, the four remaining teams in the Big 12 North were wondering if they would be left out in the cold.

However, by June 15 the PAC 16 super-conference deal had fallen apart, with only Colorado jumping from the Big 12. So, what happened?

Short answer: Texas.

Longer answer: Texas was unwilling to give up the ability to have its own network. In the Big 12 the schools have control of their Third-Tier rights. Basically, when any event is not picked up by ABC/ESPN or Fox, the school can then distribute anyway it wants and pocket the profits for itself. The PAC 10 (now 12) requires schools to give up those rights. The PAC 10 was interested in launching their own network. Texas was not willing for its potential network to be folded into a conference one and give up its potential money windfall.

ESPN and Fox were also not interested in a land of super conferences. They promised that the Big 12 TV deals would bring in money on par of the Big 10 and SEC. By creating super conferences (conferences with 16 teams or more) it actually cut down available inventory. In other words, there would be less “big money” programs, the programs that bring in viewers and hence advertising dollars, so many games would be harder to market to wide audiences. So, ESPN and Fox were willing to shell out more money and even put in a rider in a new contract that they would increase that money automatically if the Big 12 expanded no matter who the Big 12 added (whether it be Notre Dame, the Electoral College, or any one else).

But, what was really tantalizing was the development of those Third Tier rights. More sporting events beyond football and basketball could be monetized and the schools would not have to split the money with others, unlike a conference network. Texas was not willing to let those go (reporting at the time also said that Oklahoma and a few other schools were not eager to give them up, either). This was seen as a huge mistake by many at the time. Talking-head after talking-head berated Texas and the Big 12 for being short-sighted and not jumping at the chance of a conference network. Because, not only did PAC 10 expansion fall through, the Big 12 did not seem interested in creating its own conference network of any kind. Why? Because Texas was not willing to give up the cash cow of the Longhorn Network.

Nobody, and I mean nobody has parlayed those Third-Tier rights into dollars like Texas. ESPN paid the University of Texas a whopping $295 million for a 20 year contract. Admit it, if it were your school would you want them to give up that kind of guaranteed money for something that now seems incredibly risky? That PAC 12 Network? Not doing so hot. And, there is no assurance that the ACC Network will bring piles of cash, either.

Knowing that this was in the works, Texas was not keen to give up that kind of money to join an unfamiliar conference that would require it to give up a potential major revenue stream. The Longhorn Network also put the kibosh on any potential Big 12 Network forming for at least 20 years (or at least making it much more difficult).

Fast forwarding to today, a mere seven years in the future, and Texas looks like Nostradamus. In 2010 and 2011 everybody thought the Big 12 messed around and missed the gravy train. However, it is increasingly looking like the Big 12 schools skipped the tasteless salad appetizer to make more room for the main meal. Every day more and more people are “cutting the cord.” Cable television, while still king, is looking frailer by the day. Cable networks are hurting. ESPN and Fox are not doing as great as they once were. Heck, ESPN has lost $48 million so far on the Longhorn Network!

When it comes to television, right now the money is pouring into streaming services. Netflix, Hulu, YouTube, etc. are making bank. The NFL broadcasts (for free, mind you) the Thursday night games on Twitter this past season. If you had cable you would have needed the NFL network to watch that game, which is an extra cost to the consumer. Unlike the Big 10 (which just signed a streaming service agreement), PAC 12, SEC, and soon ACC, each Big 12 school can work with any number of streaming services to broadcast any sporting events that are not picked up. Not just football, but men’s and women’s basketball, softball, baseball, equestrian, hockey, etc. Whatever sports the school competes in, they can broadcast those events.

Currently, we are just seeing the tip of the iceberg emerge as Big 12 schools create content and negotiate with providers. And, just the tip of the iceberg has brought each school in the conference around SEC  levels of money. Texas currently makes double what a school in the PAC 12 or ACC makes, by the way. Instead of collapsing, the Big 12 is financially stronger than ever. So much so, that when the Big 12 announced it was exploring conference expansion, roughly 4o schools came knocking trying to get a slice of the pie. Those are some pretty big muscles to flex. Not only that, but there is enough smoke to suggest that some schools in the PAC 12 (and even the ACC) might have a roving eye when their conference rights expire. In other words, the Big 12 looks more attractive to them in its supposedly weak state than their current “strong” conference.

Did Texas plan all this? Did it see the streaming boom? Or, did it think that with a Longhorn Network it could go independent if the Big 12 collapsed and be just fine? It does not really matter. In the end, Texas chose itself over others. That usually leads to a sub-optimal outcome. However, this time, it turned out to be the best decision possible. That selfishness is how Texas accidentally wound up saving the Big 12.

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