How TV Economics Are Transforming the Landscape of College Football

In the new math of college sports -- where new schools plus new TV-paying households equals more money -- the Big Ten knows it's gotta be bigger than ten

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The Big Ten is about to expand to 14.

The University of Maryland and Rutgers are set to join twelve other schools in the Big Ten conference in 2014, in a move that is making football traditionalists apoplectic. College sports isn't typically in the purview of the Atlantic's Business page, but this particular story isn't really about Rutgers football, or Terrapin basketball. It's about economics. Television economics, pure and simple.

In college football, as in professional football, money equals audience. And the most valuable audience is the one watching you on TV. That's why the Big Ten was brilliant to start its own cable channel, the Big Ten Network, dedicated to following college sports for the millions of Midwestern alums living nostalgically through their alma maters on TV. 

THE NEW MATH OF COLLEGE FOOTBALL

Cable channel make money in two ways: (1) advertising and (2) the small cut of your monthly cable bill. For most BTN subscribers, that small cut is $1 per household. That's one dollar, each month, from your checking account to the Big Ten, through the TV.

Stop right there. Stop thinking like a college fan who wants to preserve the 1980s-era conferences, and start thinking like a television executive. I just told you that every pay-TV household with BTN is worth one dollar a month. The obvious question is: How do I get more of those folks? Answer: You expand into more television markets where people haven't had any reason to care about the Big Ten, yet. Each time the Big Ten adds a school in a new city, the Big Ten Network adds a market. So, more schools, more schools!

The University of Maryland, which just announced it would join the Big Ten in two years, sits in a local market around Washington, D.C., with more than 3 million households paying for television. Let's say Maryland joins the Big Ten, and BTN negotiates with those local cable providers to get the same deal it's made in the Midwest. That's a cool $36 million for the conference "before the first ad gets sold," Andy Staples writes.

We haven't even gotten to the point where the Big Ten renegotiates its licensing rights with other networks in 2017, where larger guaranteed audiences yield larger paychecks. In 2011, the Pac-12, another mega-conference, sold a little more than a 100 annual basketball and football games to ESPN and Fox in exchange for $3 billion over 12 years. In four years, the Big Ten will get even more.

THE GOOD NEWS

Does it make you sick to think of amateur athletes creating billions of dollars of wealth for their schools? Maybe it should. But if you're seeking silver linings, think of it from the perspective of a middle-income college student from Baltimore facing the prospect of rising public college tuition. In May, the University of Maryland narrowly escaped a "Doomsday Budget" that would cut education spending and forced the school to reduce services and raise tuition. Similar budget cuts have been one of the most important drivers of tuition inflation at public schools around the country.

There is a debate whether college football is a net gain, or net leech, on most university budgets, but one thing is for certain: It's not going anywhere. And in an atmosphere of tight money, one ought to hope for a college football program that pays for itself and the new science labs rather than a college program that pays for itself by shuttering the old science labs.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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