CBS's Relationship With the SEC Is Over: Why Not Sell Its Games?
CBS has the best television deal in all of sports, paying just $55 million a year for the top Southeastern Conference game every week along with the SEC title game. Given that ESPN pays $80 million a year for the Rose Bowl, the SEC title game by itself, a default playoff game nearly every year, is worth at least $80 million a year by itself. CBS is paying, wait for it, nearly $40 million a week for the Thursday night NFL package. And those games are often incredibly mediocre and doubly airing on the NFL Network. In comparison CBS is paying roughly $3.5 million per SEC game. That's insanity.
On the open market right now the SEC's top game every week and the SEC title game is probably worth at least $200 million. CBS has a steal of a deal, but one that is rapidly coming to a close.
Why?
Because in the wake of the conference's addition of Texas A&M and Missouri, CBS refused to increase the amount it was paying for the package of rights. This was an incredibly stupid decision that effectively ended CBS's relationship with the SEC. Sure, there are nine years left on the existing CBS and SEC deal, but every year the value of this deal diminishes because there is a 0% chance it is going to be extended. So while CBS is making a substantial amount of money on the deal right now, the company's intractable position in the recent round of negotiations forever fractured CBS's partnership with the SEC. This relationship is over.
This leaves me with an interesting question -- why doesn't ESPN, Fox, or NBC try to buy the remainder of the SEC on CBS deal and work on a long-term extension with the conference in the process? Any of these networks could pay in the neighborhood of $125 million a year to CBS for the next nine years of TV games -- which, at $70 million a year in profit is more than CBS makes right now actually airing the games. The new partner could increase the SEC's payout to $75 million a year over the life of the existing deal -- an increase of $20 million a year to help keep the SEC happy and erase any concerns about assignability -- and extend the deal for another decade -- as ESPN recently did when the SEC Network partnership was announced -- at around $200 million a year. Voila, you'd suddenly have the nation's most valuable college football television package for the next generation at a relatively reasonable price.
Given that the only major television properties coming up for bid in the next decade or more are the NBA and the Big Ten, acquiring rights from other parties may become the only viable way to add attractive programming. Indeed, the sports programming was a big reason for Fox's Time Warner bid. In fact, you can make a pretty strong case for why buying the SEC's television package from CBS would make sense for all three major sports networks -- ESPN, Fox and NBC.
Let's dive in and explain why.
1. ESPN has the rights to every SEC football game, but the SEC game of the week and the conference's title game.
Don't you think ESPN would like to control all of the SEC's games just like it controls all of the ACC's games? How much more valuable could the SEC Network become if ESPN could occasionally put a game like Alabama-Auburn on there? ESPN believes that the SEC Network is a national network, what if you put the SEC title game on the SEC Network one year? Can you imagine the nationwide demand? With negotiations taking place every five years or so for new cable and satellite distribution deals, ESPN could easily recoup these costs just by increasing the carriage fees for the SEC Network.
The better the games ESPN has, the more money it makes. It's honestly a no-brainer for ESPN. I'd be shocked if they haven't made inquiries about buying CBS's SEC package.
2. Fox could buy CBS's package.
Fox is ESPN's only real competitor in college football. Right now Fox has half the Big 12, half the Pac 12, and owns half of the Big Ten Network. With the Big Ten's TV deal coming up soon, figure on Fox acquiring a substantial portion of that league's televised games as well. What major league is left out of Fox's deals? The SEC. (Also, the ACC. But other than Florida State no football team really has a national profile in the ACC).
Fox doesn't have the college football playoff, but it does have the Big Ten title game every year and the Pac 12 title game every other year. Combining those two games with the SEC title game would basically mean that Fox had three playoff games the final weekend of the regular season.
Pairing the SEC's game of the week alongside a Big 12 and Pac 12 game of the week could create an incredible tripleheader of national Fox television. Or Fox could get really bold and pay a premium to put the SEC game of the week on FS1.
Given that FS1 is in 90 million homes, does it really matter if the SEC's on a traditional network any longer? Just as the games would increase the carriage fees for the SEC Network, can you imagine what 16 SEC games would do for FS1's national rates? The deal would pay for itself.
3. NBC desperately needs to add sports programming too.
Right now NBC only has Notre Dame football. Adding the SEC's games to its roster would be a significant statement about NBC's intent to compete with ESPN and Fox. Just as Fox could consider carrying the SEC games on FS1, so too could NBC contemplate carrying its games on NBCSN. Increased carriage fees could pay for the deal.
Adding the SEC's CBS package makes a ton of financial sense for ESPN, Fox, and NBC.
Now would CBS sell the remaining years on its deal? Maybe, maybe not. Maybe CBS just wants to ride out this deal's incredible value until the relationship ends. (Even if selling it would make more money). But on the other hand maybe CBS realizes that it could really use hundreds of millions of dollars to strengthen its hold on Thursday night football. Remember, the NFL didn't sign a long term deal with CBS. That deal isn't going to come cheap. Ten years from now CBS won't have any college football, why not double down on the NFL, a property that you absolutely have to retain?
With most sports rights gone, the SEC's package on CBS is the best deal in sports. If it's tremendously undervalued -- which it is -- and the CBS and SEC's relationship is broken and won't be repaired -- which it is --, doesn't it make sense for another network to make a play for this package?
I think so.
We'll see if it happens.
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Update: after this article was published a CBS spokesperson sent the following email to Outkick: “The SEC is a cornerstone of our fall programming schedule. We will be broadcasting the SEC Game of the Week for the next 10 seasons and we have every intention of renewing these rights when they expire after the 2023 season.”
