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The Longhorn Network Isn’t Going Away

  • VaHorn said...

    "Everyone invovled was cognizant of the fact that the Big 10 Network had a tremendously difficult time obtaining widespread coverage. The negotiations with the carriers were brutal....The Big 10 Network took three years to rollout."

    No offense, but that's only sorta true. My company was involved in the grassroots effort to get the network carriage agreements -- particularly Comcast -- and it was brutal. But it didn't take "three years".

    The Big 10 Network launched in August of 2007 with basically nobody able to see it. But by fall 2008, Comcast, Time Warner, the satellite companies and most everybody else was on board. It took longer to get in on cable outside of many Big 10 states, but basically everyone inside of them had if for free one year after it launched.

    Sin Miedo ●

  • Sin Miedo said...

    No offense, but that's only sorta true. My company was involved in the grassroots effort to get the network carriage agreements -- particularly Comcast -- and it was brutal. But it didn't take "three years".

    The Big 10 Network launched in August of 2007 with basically nobody able to see it. But by fall 2008, Comcast, Time Warner, the satellite companies and most everybody else was on board. It took longer to get in on cable outside of many Big 10 states, but basically everyone inside of them had if for free one year after it launched.

    Comcast was a key one for them. Should I say more than 2 years? The BTN has agreements with over 300 providers. All of that didn't happen in the first two years and some of the cable deals (e.g., Charter) that were signed in the first two years initially didn't include all of the areas in the Big 10 footprint.

    What do you think of the guesses on your board suggest that an SEC network would immediately produce $15 million per school? The BTN seems like a rip roaring success to me (distributions up 21% last year) and it was only paying out $7.8 million per school 4-5 years after launch.

    VaHorn ●

  • Sin Miedo said...

    No offense, but that's only sorta true. My company was involved in the grassroots effort to get the network carriage agreements -- particularly Comcast -- and it was brutal. But it didn't take "three years".

    The Big 10 Network launched in August of 2007 with basically nobody able to see it. But by fall 2008, Comcast, Time Warner, the satellite companies and most everybody else was on board. It took longer to get in on cable outside of many Big 10 states, but basically everyone inside of them had if for free one year after it launched.

    Facts like that just get in the way. Let him keep going, he's on a roll.

    Newy25

  • VaHorn said...

    Comcast was a key one for them. Should I say more than 2 years? The BTN has agreements with over 300 providers. All of that didn't happen in the first two years and some of the cable deals (e.g., Charter) that were signed in the first two years initially didn't include all of the areas in the Big 10 footprint.

    What do you think of the guesses on your board suggest that an SEC network would immediately produce $15 million per school? The BTN seems like a rip roaring success to me (distributions up 21% last year) and it was only paying out $7.8 million per school 4-5 years after launch.

    I really have no idea and certainly no expertise in that business. I have seen Clay Travis say that if an SEC network charged $1/subscriber across the 11 state conference footprint, the total would be over $350 million. So if the conference was splitting splitting those revenues 50-50 with ESPN as the network producers, you would get $12 or $13 million when half is split 14 ways.

    However, who knows what the split would be, how expenses would be accounted for, how advertising revenue would be handled, etc. More importantly, I think some believe the SEC would command a significantly higher subscriber fee -- both inside and outside the footprint -- than BTN.

    Sin Miedo ●

  • Sin Miedo said...

    I really have no idea and certainly no expertise in that business. I have seen Clay Travis say that if an SEC network charged $1/subscriber across the 11 state conference footprint, the total would be over $350 million. So if the conference was splitting splitting those revenues 50-50 with ESPN as the network producers, you would get $12 or $13 million when half is split 14 ways.

    However, who knows what the split would be, how expenses would be accounted for, how advertising revenue would be handled, etc. More importantly, I think some believe the SEC would command a significantly higher subscriber fee -- both inside and outside the footprint -- than BTN.

    Based on the rest of those figures, I am assuming the $1 per subscriber is "per month." ESPN is having absolutely no luck getting 40 cents/subscriber/month from anybody with a substantial subscriber base. I can tell you this with absolute certainty: You can make anything work on paper, because the assumptions can be whatever you want them to be. When the real world steps into the picture, things can and do change in a hurry.

    The economic realities of life in America have changed drastically since the launch of the Big 10 Network. I really don't think we are playing under the same rules that they enjoyed at the time. The major distributors of television programming are suddenly approaching a growth ceiling. They are squeezed between customers who either cannot or will not tolerate significant increases in monthly bills, and program providers who constantly demand more money for their content. Consumers want ala carte program selections that allow them to customize what they choose to watch and how much they are willing to pay, while carriers stick doggedly to the package offerings that bring the most revenue.

    Things are changing, however. DirecTV, in an effort to keep their exclusive on NFL Sunday Ticket, has rolled the price back to what it was almost 10 years ago. They have publicly stated a willingness to take a loss on this programming in order to leverage it into attracting and keeping more subscribers.

    Eventually (and who knows how long that will take), consumers will likely pay for programming they select from a menu, and distributors will in turn pay for the programs based upon how many are actually watching. As technology changes, the distributors may be cut out of the picture completely. Either way, the inevitable result will be less programming, as networks will have to either appeal to a broad audience, or find a niche that will pay enough to make it profitable to produce particular content.

    Sports programming is attractive because of its live nature. Fewer people will record sports to watch later, unless they also watch live, as well. This makes sports attractive to advertisers, ans was cited as a reason that the LA Dodgers sold for over $2 billion. However, sports programming tends to have a regional or audience-specific appeal, meaning that the more limited it is in its appeal, the more likely it will have to be offered on a specific fee basis to interested viewers. In turn, advertisers wanting to reach a particular demographics will pay a premium to address a certain type of viewer.

    None of this points to ESPN having an easy time getting LHN onto the basic programming tier of major carriers at anything approaching the 40 cents/month rate they are trying to get. They could significantly reduce the asking price, get wide distribution, and still make good money on the LHN. OTOH, they could sell it as an annual subscription of $100, and still accomplish the same revenue stream. They appear to want a whole lot more, and I am just not sure that the market they remember still exists. Change is hard, but everybody has to adjust to it.

    This post was edited by texaztom on 5/13/2012 at 2:36 PM

    texaztom

  • You guys have a lot of fans, but its hard for me to see that much demand for one schools product. BTN has many many teams to view over many many states.

    There is nothing more dangerous in this world than a man with nothing to lose.

    bruthaman ●

  • Really well done, texaztom. I agree with pretty much everything in your post.

    As for the $1/subscriber, yes, that is monthly. It's based upon the BTN model that charges that in the conference footprint and less than a dime outside of it.

    I'm certain that an SEC Network could do at least that in much of their footprint -- and probably more. The question to me is what happens in larger and more diverse states like Texas and Florida. In the Big 10 states, they have all of their dominant powers in the conference and thus on the network: Michigan and MSU, Ohio State, Wisky, Minnesota, Indiana, etc., all dominate their states. Even Penn State for the most part.

    Plus, within those states, you also have large populations of other Big 10 schools. In other words, almost everyone is a fan of the Big 10. Same holds true for the SEC across the South.

    But it's just a different dynamic in states like Texas and Florida. I suspect the network would try to sell it at $1 with the idea that the cable companies are getting a deal in most states and perhaps overpaying in other more diverse markets. Keep in mind, regional sports nets like YES in New York, NESN in Boston/New England, etc., charge two or three dollars per subscriber, so the carriers pay more when they have to.

    This post was edited by Sin Miedo on 5/13/2012 at 3:44 PM

    Sin Miedo ●

  • I am in the camp that believes they are risking the brand at least in the short run. When a fan has no hope of watching a third of its teams games there comes a point where you say to heck with it. Missing one game is bad enough, but four? No sir.

    signature image signature image signature image

    Texasmdcoach

  • texaztom said...

    Based on the rest of those figures, I am assuming the $1 per subscriber is "per month." ESPN is having absolutely no luck getting 40 cents/subscriber/month from anybody with a substantial subscriber base. I can tell you this with absolute certainty: You can make anything work on paper, because the assumptions can be whatever you want them to be. When the real world steps into the picture, things can and do change in a hurry.

    It's content that is the difference. BTN covers multiple states/multiple teams. LHN is one state/one team. I believe the BTN is charging in the range of $0.45 per subscriber per month. Most people would say the SEC network should be worth more than that. I would be surprised if its worth twice the BTN, but probably around $0.60 if I had to guess.

    I just don't see how the LHN and BTN are worth the same on a national scale when talking about subscription fees.

    The true test of a man's intelligence is how much he agrees with you.

    boone8466 ●

  • The providers agree and ESPN is willing to withhold it.

    I bet Texas did not see this coming. I'm sure they understood that this would take time, but I doubt that they foresaw that ESPN would treat it like every other property it owns.

    Talked to a friend last night with a lot of contacts in the industry. He acknowledged that the providers may have reached the point at which they would fight ESPN, choosing not to pay for what they likely (and probably correctly) see as a niche network.

    If the LHN could grab some other properties to show more live content, they probably could get carried, but the question is what and how much.

    “Kansas may wind up number one in these polls, but that would be so unfair to Texas...” -- Len Elmore, 2/13/11

    Bob in Houston ●

  • Bob in Houston said...

    The providers agree and ESPN is willing to withhold it.

    I bet Texas did not see this coming. I'm sure they understood that this would take time, but I doubt that they foresaw that ESPN would treat it like every other property it owns.

    Talked to a friend last night with a lot of contacts in the industry. He acknowledged that the providers may have reached the point at which they would fight ESPN, choosing not to pay for what they likely (and probably correctly) see as a niche network.

    If the LHN could grab some other properties to show more live content, they probably could get carried, but the question is what and how much.

    For the first time, I am actually beginning to see the possibility that the LHN, as currently constructed, could fail.

    texaztom

  • texaztom said...

    For the first time, I am actually beginning to see the possibility that the LHN, as currently constructed, could fail.

    It won't fail in the sense that ESPN won't pay for what it bought or not produce what it contracted to produce.

    But Texas isn't getting what it contracted for, which is Tier 3 exposure.

    This post was edited by Bob in Houston on 5/14/2012 at 11:48 AM

    “Kansas may wind up number one in these polls, but that would be so unfair to Texas...” -- Len Elmore, 2/13/11

    Bob in Houston ●

  • A simple question:
    What providers carry LHN?
    I know Consolidated Communications does. Who else?

    signature image signature image signature image

    You shall know the truth and the truth shall make you free. Never trust a man who only knows how to spell a word one way. Andrew Jackson

    JFrankWebb

  • FIOS, Grande, Consolidated Communications, En-Touch Systems, E-Tex Communications, Bay City Cablevision, Mid-Coast Cablevision and Texas Mid-Gulf Cablevision

    smaxx

  • rozell99 said...

    I believe you have a firm grasp of the situation. ESPN is the closest thing in the US to an unregulated monopoly. They pay whatever it takes to buy the rights on all the best sports properties and pass it along to all the cable companies on the basic tier customers. The other guys pick up leftovers or one time events like the Olympics that are difficult to build into regular monthly rates until there are so many of them they become incremental.

    What ESPN needs to do is let the providers sell to the people that want to buy. They want to force the cable companies to pay for 100% of the customers while only 1% want to watch 98% of the programming on the LHN network. The one to three football games might draw 20% since they will be dog games. Twelve hours of real programming. We have dealt with these scumbags before (espn) and they make the upfront on the high end of low and then ramp the pricing up on a steep curve. That is why UT believes LHN is going to end up being multiples of 15 million per year since that is the minimum payment.

    Put your pressure on ESPN and tell them to allow the companies to put it out as a premium for those that actually want to pay for it. To get to their revenue targets in the early years, you will probably have to pay about $12 per month. That is with little markup by cable companies.

    You will never see a satellite deal done unless it is on the same basis as I just mentioned. UT is a power in Texas and a solid ratings team everywhere on good games. Not so much on third tier games nationally, regionally, or even within the state.

    I have seen people trying to argue back with the Big10 network being on basic in a number of areas. My answer is to bring a Big12 network that has multiple options rather than the highest low point of one university and we can at least consider it at some price point.

    My company is not in Texas, but I can tell you that these discussions have taken place. ESPN believes they can bring the radical fringe to bear enough to force others to the table. It is not likely to happen soon because rights fees are ramping up too quickly and companies are losing customers because of it.

    Finally, and I will never post on a LHN thread again, Verizon is offering this on Fios strictly as a marketing ploy. They were not reaching their subscriber targets and needed a splash. I haven't price shopped them lately, but they used to be fairly high after the promo period. If you are "lucky" enough to go that route, don't be surprised when they either drop LHN at the end of the first contract or boost rates substantially. Verizon is only willing to eat marketing loss leaders so long.

    I am one of the 1% as far as being a fan, but this is one of the most immoral things I have ever seen. You might also want to know that they are also one of the leaders in trying to force the cable model over to the Internet. ESPN3 is only offered to ISPs willing to pay a rights fee on ALL of its subscribers. The number of people watching that is extremely low and end up using too much bandwidth at the end of the month.

    Finally, this model works fine when it works in your favor. You would much rather pay $0.50 rather than $12.00. It isn't so great when there are 50 channels working in the other direction at the same price that you never watch. The only reason you hear about this channel versus the others is that ESPN is the worst of the lot (marginally beating out Fox) for pure greed in the ramping of fees.

    Nice post.

    Lead Writer Hookem.com___EMAIL:atrubow@statesman.com___TWITTER: http://twitter.com/#!/aTrubow

    Alan Trubow

  • Sin Miedo said...

    Really well done, texaztom. I agree with pretty much everything in your post.

    As for the $1/subscriber, yes, that is monthly. It's based upon the BTN model that charges that in the conference footprint and less than a dime outside of it.

    I'm certain that an SEC Network could do at least that in much of their footprint -- and probably more. The question to me is what happens in larger and more diverse states like Texas and Florida. In the Big 10 states, they have all of their dominant powers in the conference and thus on the network: Michigan and MSU, Ohio State, Wisky, Minnesota, Indiana, etc., all dominate their states. Even Penn State for the most part.

    Plus, within those states, you also have large populations of other Big 10 schools. In other words, almost everyone is a fan of the Big 10. Same holds true for the SEC across the South.

    But it's just a different dynamic in states like Texas and Florida. I suspect the network would try to sell it at $1 with the idea that the cable companies are getting a deal in most states and perhaps overpaying in other more diverse markets. Keep in mind, regional sports nets like YES in New York, NESN in Boston/New England, etc., charge two or three dollars per subscriber, so the carriers pay more when they have to.

    It's different in Florida because Florida and Miami/Florida State are in different conferences.

    It wasn't different in Texas (prior to the A&M move).

    If there was a Big 12 network, that would have basically covered the entire state of Texas in previous years.

    TCU, Houston and other schools wouldn't have been included. But they aren't any different from schools like Ohio University and Miami of Ohio in the state of Ohio (that might have been confusing). They aren't the main schools and you could have run a Big 12 network without much problem.

    The problem now with Texas is it is like Florida where the big schools are divided.

    Lead Writer Hookem.com___EMAIL:atrubow@statesman.com___TWITTER: http://twitter.com/#!/aTrubow

    Alan Trubow

  • Eventually (and who knows how long that will take), consumers will likely pay for programming they select from a menu, and distributors will in turn pay for the programs based upon how many are actually watching. As technology changes, the distributors may be cut out of the picture completely. Either way, the inevitable result will be less programming, as networks will have to either appeal to a broad audience, or find a niche that will pay enough to make it profitable to produce particular content.

    AppleTV could make this happen quickly

    Lead Writer Hookem.com___EMAIL:atrubow@statesman.com___TWITTER: http://twitter.com/#!/aTrubow

    Alan Trubow

  • Alan Trubow said...

    AppleTV could make this happen quickly


    Apple has working on TV now for nearly a decade. They do many things better than anyone else, but TV isn't one of those things. At this point, it is difficult to take AppleTV seriously.

    Along those lines, someone alluded earlier, I believe it was srr50, to younger people doing what is called "cord-cutting" and the latest data shows that that phenomenon simply isn't happening. In fact, more to the point, younger folks are watching more TV-related services than ever before, but simply through more devices. In any event, subscriptions for video services have been net up for the past 5 quarters or something like that. It's basically just Uverse and FiOS stealing from Cable/Sat right now, but that's going to swing back the other way by year end on some level.

    Ultimately, monthly video services subs are going to be considered an enormous bargain for entertainment versus damn near any other vein of the entertainment/sports world, and the cable/sat/phone guys have figured this out and are going to really begin hammering this home before real cord-cutting ever actually occurs.

    close to jumping ●

  • Alan Trubow said...

    It's different in Florida because Florida and Miami/Florida State are in different conferences.

    It wasn't different in Texas (prior to the A&M move).

    If there was a Big 12 network, that would have basically covered the entire state of Texas in previous years.

    TCU, Houston and other schools wouldn't have been included. But they aren't any different from schools like Ohio University and Miami of Ohio in the state of Ohio (that might have been confusing). They aren't the main schools and you could have run a Big 12 network without much problem.

    The problem now with Texas is it is like Florida where the big schools are divided.

    Absolutely agree. Since we were discussing an SEC Network, I considered that a given. Sorry it wasn't clear.

    Sin Miedo ●

  • All they need to do is add a pay per view option for these games and everyone will be reasonably satisfied. Or as an alternative make it available to all on a delayed broadcast
    on ESPNU at 3am. Just want to see the game and that's what the DVR is for.
    Deloss Dodds would get an earful from me with his comment "The pain is worth the gain".

    TXbravehorn

  • TXbravehorn said...

    All they need to do is add a pay per view option for these games and everyone will be reasonably satisfied. Or as an alternative make it available to all on a delayed broadcast on ESPNU at 3am. Just want to see the game and that's what the DVR is for. Deloss Dodds would get an earful from me with his comment "The pain is worth the gain".

    If you could DVR the games, that would lessen the need for any carrier to buy the LHN. Why buy something that you're already paying for (ESPNU in your example).

    The true test of a man's intelligence is how much he agrees with you.

    boone8466 ●

  • TXbravehorn said...

    All they need to do is add a pay per view option for these games and everyone will be reasonably satisfied. Or as an alternative make it available to all on a delayed broadcast on ESPNU at 3am. Just want to see the game and that's what the DVR is for. Deloss Dodds would get an earful from me with his comment "The pain is worth the gain".

    The pain is worth the gain is a pretty apt comment. And if there is no pain, there will be no gain.

    VaHorn ●

  • VaHorn said...

    The pain is worth the gain is a pretty apt comment. And if there is no pain, there will be no gain.

    Actually, the proper way to make the point would be to say that the GAIN is worth the PAIN. Unless, of course, he said it the way he meant it.

    texaztom

  • texaztom said...

    Actually, the proper way to make the point would be to say that the GAIN is worth the PAIN. Unless, of course, he said it the way he meant it.

    Agree. Or even, the gain WILL BE worth the pain.

    VaHorn ●

  • boone8466 said...

    If you could DVR the games, that would lessen the need for any carrier to buy the LHN. Why buy something that you're already paying for (ESPNU in your example).

    I am talking about reshowing the game 24-48 hours after it happened.
    I live in Northern California and there are no carriers within 250 miles that have the LHN.
    Lots of Texas-exes living outside of Texas that would like some type of access to viewing the game.
    The old local Sportsbar is no longer an alternative.
    I have bought the pay per view option in the past and that is no longer available.
    Guess I'm screwed then if I want to watch the game? Actually 3 games.

    TXbravehorn

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