Wednesday, June 16, 2010

Conference Realignment Strategies


The following post is the first in a series that will examine the role of conference realignment strategies of universities. The long term financial implications of conference realignment could be the key to financial stability and success for some schools, and have drastic revenue limitations for others.


At the moment, there are only 3 schools that have realigned. They are:
University of Nebraska: Will leave the Big 12 Conference and will join the Big 10 conference
University of Colorado: Will leave the Big 12 Conference and will join the Pac-10 Conference
Boise State University: Will leave the Big 12 Conference and will join the Mountain West Conference

However, the biggest news coming from conference realignment is not the schools that have left, but one that decided to stay: The University of Texas has decided to stay in the Big 12 Conference. Why?

Andy Staples from SI.com sums it up perfectly. Two very important points that need to be highlighted:

1. Pay attention to the apparent deal that the University of Texas will receive from the Big 12 Conference regarding television broadcasting rights. If reports are correct, the University of Texas will generate between $20-$25 million in television rights and be able to start their own television network. This could be a dangerous precedent, as this deal clearly gives the University of Texas leverage on future conference decisions. It could also be a model for other top-tiered schools to use when they wish to explore the possibility of conference affiliations.

2. Conference realignment is not over. There is money to be made in conference realignment. In Commissioner Beebe’s white paper, he points out that more media partners will enter the bidding war for college football, which should drive the market price higher. As conferences negotiate television rights deals, the overall goal for each conference is the ongoing need to make their market more attractive to the media partners. Reducing their market share or remaining flat would certainly jeopardize a conference’s ability to generate more revenue through larger television contracts.

Conferences have been able to increase its market share as regions get bigger. This is a strength that Big 12 Conference Commissioner Beebe also highlighted in his white paper, as he compares the South, where the Big 12 schools are located, to the North, where the Big 10 schools are situated. He states “For any institutions evaluating membership in the Big Ten, I hope full consideration is given to linking the future with a part of the country that is losing population and tax base relative to the Sun Belt. In addition, disconnecting with the Sun Belt region may result in removing significant contact with a region where many alums and fans reside, not to mention a fertile recruiting ground for students and student-athletes. I don’t proclaim to be an expert, but in looking at the long-term positioning of an institution, it seems that its best linkage is to the South and West.”

Finally, market share also increases when you attract new schools from previously untapped parts of the country. The strategy of attracting new markets appears to be the current plan for increasing revenue among conferences such as the Pac 10 and Big 10. The Pac 10 is reportedly interested in adding the University of Utah, which along with the University of Colorado, would extended their reach further east into Salt Lake City (# 31 TV market) and Denver (#16 TV market).

Depending on future decisions related to conference realignment, additional issues may arise. In the past, conference realignment has created a trickledown effect, causing a wider divide between the haves and have-nots of college athletics. Dr. Karen Weaver highlights this point in her guest column published in the Indianapolis Star. Kirk Wessler of the Journal Star also presents an interesting solution for the “basketball schools” that always seem to be powerless during these transitions. Time will tell if college athletics, or specific types of athletic programs, are doomed. Regardless of the type of institutions, the financial implications of realignment appear to be real.



This posting was authored by Tony Weaver, Assistant Professor of Leisure and Sport Management at Elon University. Tony has agreed to occasionally provide research summaries. Prior to teaching at Elon, Dr. Weaver was an athletic administrator at Iona College, Siena College and the University of North Carolina at Greensboro.