Wed. Sep 19th, 2018

How The SEC Network Took Off

Mike Slive knew that if the Southeastern Conference wanted to increase its revenue, a conference television network would be a good idea.

But Slive, who stepped down in May after nearly 13 years as commissioner of the SEC, realized the timing wasn’t right to launch a network in 2009 when the SEC’s deals with ESPN and CBS were up for renewal, according to several athletic directors who were involved in the process. The Big Ten had already launched its network, but the economy was in recession, and rumors of more conference realignment were picking up.

Slive decided to wait.

That decision proved extremely lucrative for  the commissioner and the rest of the SEC. The conference later added Missouri and Texas A&M in 2011, increasing the SEC’s cable television footprint by more than 10 million homes, according to Nielsen data, and giving Slive the ammo he needed to move forward with a network.

The SEC Network, which celebrated its first birthday on Aug. 14, was more successful than anyone could have imagined. After the most successful network launch in cable television history, the SEC Network has a market value of $4.77 billion, according to research firm SNL Kagan. By comparison, the Big Ten Network, which launched in 2007, has a value of $1.59 billion.

How did the SEC Network blow away the competition in its first year? It starts with the fans.

“The SEC’s passion and devotion is clearly showing through here,” said Jeff Nelson, vice president of client strategy at Navigate Research. “People wanted the network and were willing to pay for the network.”

Even the most casual observer knows the South is crazy about college football. Like, run full speed inside Bryant-Denny Stadium to get Nick Saban‘s autograph crazy. It’s what brings people together and gives them an endless supply of things to talk about year-round.

That passion made up the backbone of the SEC Network’s appeal to cable providers. While the Big Ten Network battled with providers for years, the SEC Network was available in 90 million homes when it launched. The reason was simple: The cable providers knew they’d risk losing customers, particularly ones in the SEC’s footprint if it didn’t provide the network.

When AT&T U-Verse considered whether it’d add the SEC Network when it launched, it evaluated the intensity of the average SEC viewer, looking at how often and how long they watched SEC sports. What AT&T learned was that “the subscriber intensity on viewership was off the charts for what we normally see for sports,” according to Ryan Smith, vice president of content for AT&T. U-Verse, which became the first provider to sign on, even hoped other providers didn’t distribute the network immediately so they could add additional customers.

“Some of the other college conferences they do well but far and away the SEC is the most intense and has the strongest viewership of really any of those conferences,” Smith said.

Knowing it had an army of passionate viewers up its sleeve, the SEC Network negotiated an aggressive subscriber fee of $1.30 or $1.40, depending on the provider, for its 30 million in-market subscribers. That’s significantly higher than either the Big Ten or Pac-12 network rates. When adding a $0.25 out-of-market rate (outside SEC footprint), the network has an average subscriber fee of $0.66 in the 66 million subscriber homes it averaged in its first year, according to SNL Kagan.

On the conservative end, that’s $576 million in revenue without even factoring in advertising.

“That a network covering 14 schools in 11 states in this country could generate that much traction early on and that much distribution,” Mississippi State athletic directorScott Stricklin said, “it speaks to all the things we know are special about this league.”

Power of ESPN

The SEC took a different approach when it launched its network. While the Pac-12 retained full ownership in its network, which has struggled to get widespread distribution, the SEC partnered with ESPN to launch the SEC Network. The SEC doesn’t have an ownership stake in the network — ESPN has full ownership — but instead negotiated a revenue split with the sports television power.

ESPN and the SEC declined to provide the exact terms of the arrangement, but it is believed to be a little less than a 50/50 split. That could limit the long-term revenue potential for the SEC and its schools — the Big Ten still owns a little less than half of its network — but gave it a tremendous advantage when initially negotiating carriage agreements.

Any resistance the network might have faced, ESPN could muscle its way through. ESPN was able to sell the network under its umbrella of other properties, including its main ESPN channel and ESPN2, making it almost impossible for cable providers to say no. It guaranteed that the SEC Network wouldn’t get relegated to a distant channel you can’t find the way CBS Sports Network and others have in recent years.

The Pac-12, without a powerful friend like ESPN, has struggled fighting its way out of premium packages and into markets. Larry Scott, the Pac-12’s commissioner, has publicly stated he was “disappointed that DirecTV has been willing to negotiate with ESPN for the SEC Network but not Pac-12” and that it showed the provider was more interested in dealing with conglomerates.

“When ESPN gets behind something and puts its resources with a new initiative like the SEC Network, it’s an impressive thing to watch and see,” said Justin Connolly who oversaw the launch as senior vice president of college networks for ESPN. “No doubt we benefited there.”

ESPN added credibility to the operation and helped cable providers feel comfortable that the content would be high quality. The network had already launched the Longhorn Network, focused all on the University of Texas, and learned through trial-and-error what the SEC Network would need to be successful. While the Longhorn Network hasn’t met expectations, its failures taught ESPN a valuable lesson and helped power the unprecedented success of the SEC’s television channel.

Connolly, who is now executive vice president of affiliate sales and marketing for Disney and ESPN, relied on veterans who had experience launching networks, programming shows and televising games.

To read the rest of this article visit AL Today where it was originally published