Outkick The Coverage College Football Blog

SEC Network Revenue Is Impressive

The SEC Network's impact will be monumental.

The SEC Network will be a tremendous success at launch, being available in right at 75 million homes. That will equal ESPN and the SEC's stated goal for a nationally distributed channel. It will also make the SEC Network the most successful sports television launch in cable and satellite TV history. While DirecTV hasn't yet officially announced that it will carry the network, they reached out to Outkick two weeks ago to let everyone know that they planned to carry the channel. Already there have been official announcements from Dish Network, AT&T Uverse, Comcast, Time Warner, GoogleFiber, and Cox. The only real drama will come in whether DirecTV has it at the official launch or it takes a couple of weeks after launch. Regardless, it's a very good bet that DirecTV will have the SEC Network rolled out by August 28th for the first games. 

Ultimately, rest easy SEC fans, every single cable and satellite operator in the South will carry the SEC Network. That's a testament to two things: 1. SEC fan demand for the channel was extraordinary and 2. ESPN and the SEC executed a flawless roll out strategy that took advantage of that fan demand and translated it into tangible results. The SEC Network's launch literally could not have gone any better. Now that the network's national distribution is assured -- no small feat considering that still hasn't happened with the Big Ten and Pac 12 Network -- the revenue that the SEC Network will produce is extraordinary.

 

Last week I wrote about the size of the SEC Network in relation to other sports media channel. At launch the SEC Network will be the fifth largest sports channel in the country.    

1. ESPN: 97 million households $7 billion

2. NFL Network: 72 million households $1.05 billion

3. ESPN2: 97 million households $861.4 million

4. FS1: 88 million households $718.8 million

5. SEC Network: 75 million households $611 million*

6. NBC Sports Network: 80 million households $259.2 million

7. Pac 12 Network: 26 million households $249.6 million

8. Big Ten Network: 52 million households $237.1 million

9. ESPN News: 75 million households $207 million

10. NBATV: 60 million households $194.4 million

11. ESPNU: 75 million households $189 million

12. CBS Sports Network: 53 million households $159 million

13. ESPN Classic: 31 million households $78.1 million

*The SEC's revenue is based on a $1.40 per subscriber average monthly cost in the 28 million cable and satellite subscriptions in the 11 state SEC footprint and .25 cents per month in the remaining 47 million households. Last week I told you that I would break down what these revenue streams would look like for individual SEC schools.

So let's do that now.

This past year the SEC distributed $20.7 million to each school. That's TV money from ESPN and CBS under the league's existing TV contracts. That money will continue to grow going forward, but it be a more measured growth, around a million or two a year. The rapid growth in TV money will come from the SEC Network.

So what will the SEC Network money look like? Well, let's start with a couple of caveats: 1. There will be costs associated with running a network. The Pac 12 Network cost around $100 million to run. So we'll have to pull those costs out of the revenue. 2. Costs to buy-out local media contracts have to be factored in over the first couple of years. So I'm not going to project first or second year SEC Network revenue, I'm going to focus on third year and beyond. So all of these numbers are for the third year and beyond. 

Having said that, let's dive in. Sports Business Journal has reported two different rate sheets for the in-state subscriber costs -- one was $1.30 a month and the other, the most recent deal with Comcast, was $1.40 per month. Let's be conservative and say that the rate will average $1.30 a month in the SEC states. Multiplying that rate times the 28 million cable and satellite subscribers in the 11 SEC states yields us $436.8 million. The reported rate for non-SEC states has held pretty consistent at .25 per month, or $3 a year. That's 47 million additional households and adds up to $141 million. This gives us total subscriber revenue of $577.8 million. (The difference from the bolded number above is based on lowering the average subscriber rate in the SEC from $1.40 to $1.30).

Then let's get into advertising. I've been using the existing ESPN model to forecast ad sales for the SEC Network. (ESPN gets about 25% of its revenue from ad sales). But let's say that hoping for a similar percentage for the SEC Network is too optimistic since this is a regional network that's just starting out and doesn't have guaranteed ratings or sales infrastructure in place. So let's cut that percentage in half and say the SEC Network will only do $72 million in ad sales. That gets us to an easy number, $650 million in total revenue. Then we have to subtract $100 million in costs -- the same number as the Pac 12 Network recently did -- and we're left with $550 million to split between ESPN and the SEC. 

The official split between the conference and ESPN isn't public, but I've been told by several people on both sides of the deal that 50/50 is pretty accurate. Using that as a template then the SEC would receive $275 million. Dividing that between the 14 member schools leaves us right at $19.6 million per school. This means that combined with the existing money coming in from ESPN and CBS, every SEC school will be bringing in a whopping $40 million or more in TV revenue by the third year of the SEC Network. That's roughly double what the league schools receive right now and $15 million more per school than any conference received in 2013.    

Putting that TV money into perspective, $40 million in revenue would have made you the 62st largest athletic department in the country last year. Using Mississippi State as an example, the SEC Network money that Outkick projects the Bulldogs will land in three years, would take State, the lowest revenue producing school in the SEC, from the 49th largest athletic program in the country to around the 30th largest. For schools like Alabama and Florida, already among the top revenue schools in the country, the SEC Network money will allow them to challenge Texas for the title of largest athletic department in the country. Remember when the Longhorn Network seemed like a big deal? Every SEC school will make more money off the SEC Network than Texas does off the Longhorn Network.

Put simply, the SEC Network is one of the biggest game changers in the history of college athletics. And most still haven't recognized this fact yet. The SEC Network's impact is going to be monumental.