Follow the Money.
All the President’s Men, 1976.
Abstract
This essay describes important technological changes with regard to broadcasting and the growth of new revenue streams that those changes have created over the last 30 years and their influence on how, when, where and even for whom college sports are played. We discuss college sports broadcasting history, including the advent of cable television and new media technologies, complementary industries such as sponsorships and apparel, and public goods and winner-take-all market considerations as they relate to broadcasting. We examine the impact of these changes on the National Collegiate Athletic Association and its members as they adjust to, and compete for this new money that is on the table. Finally, we speculate about how all of this might play out by 2030.
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Notes
The case was originally filed in 1981 by attorneys for the universities of Georgia and Oklahoma. The 7–2 decision was reached on June 27, 1984.
O’Bannon v. NCAA, 7 F.Supp 3d 955 (2014), which was filed in 2009; see also the appeals court decision, O’Bannon v. NCAA, 802 F.3d 1049 (2015).
PowerPoint slide-based presentations—which are used ubiquitously nowadays in meetings, lectures, and public programs—were also launched by Microsoft in 1990.
While not all of these products, platforms, or services allow for alternative viewing or streaming of live content, they do allow users—fans in the case of college and professional sports—to engage with each other on a much wider scale than was possible before. The “interactive” aspect has added another dimension and revenue source.
In terms of the NCAA itself, in 2011–2012, 81% of its revenue came from television and marketing rights fees; this is the approximate percentage for the last decade. The bulk of the most recent money is from its 14-year, $10.8 billion contract with CBS/Turner to broadcast “March Madness”: the men’s basketball tournament. By contrast, the 1982 CBS agreement was for 3 years and $49.9 million.
Large flat-screen televisions and LCD and LED technologies were developed in 1964 at the University of Illinois; but owing to cost and other technological considerations, for practical purposes they are a twenty-first century invention.
This stadium-versus-in-home viewing quandary is not limited to college sports. For the National Football League (NFL) television revenue is the revenue dog, not the tail; with regard to stadium attendees, the immense size of the facility and remote viewing nature for many fans, weather concerns, and pre- and post-game congestion are tipping the scales in favor of staying home to watch the games, which affects the “electricity” in the stadium as well as concession and other revenues; this is a consideration that is not lost on the NFL: “Television Revenue is Killing the NFL Stadium Experience,” http://www.sporttechie.com/2014/12/01/trending. The advent of compact discs and improvement in sound quality in home equipment has made it more difficult for symphony orchestras to sell full-season tickets; music lovers can have an acceptable substitute at home without the hassles of travel, a set schedule, and uncomfortable seats. Ever since the first radio broadcast of a sporting event, one question on the table has been whether these two options—listening to, or now watching, the game at home versus live in the stands–are substitutes or complements. That is, does broadcasting a game increase or reduce attendance; the evidence thus far appears to favor the former.
Over the last several years, in the federal courts and the court of public opinion, college athletes have made inroads in terms of redress. The O’Bannon decision was one shot across the bow. The attempt to unionize by Northwestern University football players was another. Institutions and the NCAA have moved toward guaranteed multi-year grants-in-aid (full scholarships) and modest increases in their value. For a fuller review of the history and current status, see Sanderson and Siegfried (2015, pp. 115–138). On a more micro front, two 2017 first-round draft picks—Leonard Fournette at LSU and Christian McCaffrey at Stanford—opted not to play in their teams’ lesser bowl games to avoid the risk of an injury that could affect significantly their long-term income streams. Such expressions of the modicum of leverage that star college athletes possess may pose another constraint on the NCAA cartel’s power.
Though not a broadcasting issue per se, on the input side of the ledger social media sites and complementary technologies have complicated the recruitment of college athletes. NCAA-imposed limits on recruitment materials that can be given to prospective players, contacts between institutional representatives and those athletes, and simply information that is readily available to all parties, are all much harder to monitor, control, and enforce in a high-tech, social-media environment.
U.S. Census Bureau, Population Division, Population Estimates, US and World Population Clock, http://www.census.gov/popclock/?eml=gd&intcmp=home_pop&utm_medium=email&utm_source=govdelivery.
US Department of Education, Digest of Education Statistics, 2015, Table 303.10.
The geographical relocations may have transformed regional affinities into national ones as the country continues to move west and south and to urban areas. Of the top 10 cities, by population, in the US 100 years ago, only New York, Philadelphia, and Chicago remain on that list today; the other seven today are in California, Arizona, and Texas.
US Department of Commerce, Bureau of the Census, Historical Income Tables, Table H-1.
Complementary contracts include a new Fox deal with the Big Ten Conference to televise 25 football games and 50 basketball games over the period 2018–2024, for a price of $250 million a year.
In 2013, college football revenue exceeded $3.4 billion. While this falls short of revenues in Major League Baseball ($8 billion) and the NFL ($6 billion), it is inching closer to the NBA ($5 billion) and NHL ($3.7 billion). Ten years earlier the comparison figure for college football was $1.6 billion. http://www.businessinsider.com/, December 17, 2014.
There is some speculation that with the advent of formal playoffs to determine a national collegiate champion, some of the lesser bowls, which require explicit and implicit subsidies from the institutions whose teams are playing in them, and which draw poorly, could be on the chopping block.
Satellite television technologies developed alongside cable, but early systems were not popular, due to their expense and the large dish systems that were required. At present, the two main subscription-based satellite television firms are DirecTV and the Dish Network.
The men’s basketball championship game on April 4, 2016, attracted 17.8 million viewers across the cable networks that carried it; the year before, when the game was on CBS network television, the viewing audience estimate was 28.3 million. CBS had televised the championship game since 1982. In 2016 the Final Four matchups, carried on TBS, attracted fewer viewers than the previous year. See Perlberg (2016).
While exempt from the 1961 Sports Broadcasting Act, the NCAA and its members long eschewed playing many games on Friday nights so as not to interfere with high school football attendance. The popularity of Friday night high school football was exemplified by Buzz Bissinger’s Friday Night Lights book and subsequent popular television series of the same name featuring a fictional Texas town and high school football program. That is clearly no longer the case.
In “the good old days” the Final Four was held on a college campus, in a regular basketball arena. Then it shifted to NBA-type arenas, such as Madison Square Garden; these venues held 20,000 fans in what was foremost a basketball arena. 1996 was the last time that the Final Four was held in a facility that was the regular home of a college basketball team. Since the lion’s share of the revenues from those games comes from television, one wonders why the NCAA would consciously produce an inferior product for the in-venue fans and players just to scoop up another few million dollars. But college athletics is not one to leave money on the table.
The NBA finals are on a basketball court; the NHL finals are on someone’s “home ice.” The Super Bowl isn’t at anyone’s home field, except by accident. NCAA Division I bowl games are in football stadiums, as is the final playoff game. The World Series is played in a baseball park. Only in men’s college basketball is the final game played in a different sport’s venue.
For the 2017 season, Brigham Young University (BYU) took advantage of an NCAA rule that allows it not to count a game in Hawaii against the 12-game regular-season limit; thus it had a 13-game schedule. In addition to “March Madness”, here is an example of “December Madness” to capture revenues: The University of Utah (a public institution) played a basketball game against Stephen F. Austin (a public university that is in the Bible belt) on Christmas Day 2016, which was also a Sunday. The game was played in Hawaii. And it began, local time, at 7:30 a.m.
One basic tenet of economics—tradeoffs—has surfaced with the advent of cable: smaller viewing audiences versus higher fees. See footnote 18. In addition to the raw totals, there are likely demographic differences between audiences that watch over-the-air television broadcasts, those who subscribe to cable packages, and those who would prefer just to stream the games.
It was reported by digital platform security company Irdeto that about three million people illegally watched the August 26, 2017, Mayweather versus McGregor fight on 239 illegal streams.
The Wall Street Journal, November 22, 2016, page A1.
In 2015 Twitter acquired start-up Periscope, the video streaming app. In addition, Facebook recently signed a deal with MLS and Spanish-language broadcaster Univision to stream at least 22 regular-season soccer games. The Wall Street Journal, March 10, 2017.
The Wall Street Journal, April 5, 2017, page B2.
While Amazon.com is implicitly associated with driving brick-and-mortar stores from the marketplace and creating abandoned malls across the country, some evidence suggests that it is the “big box” outlets such as Sam’s Club and Costco more than “etailers” that are responsible for the declines in traditional establishments. But Amazon.com is not immune from technological change and shifts in consumer demand either: ebook sales, such as via Kindle or Nook, now constitute the majority of book sales for Amazon. The same holds for academic publishers of leading economics texts that now rely on electronic versions of their texts and ancillary “bells and whistles” such as on-line homework apps such as Aplia or Mind Tap for survival.
Arguably now coming full circle from the O’Bannon case that turned on the use of likenesses in video games, in January 2017 the Big Ten Network began televising an e-sports tournament. E-sports may be the “new new thing” as professional franchise owners, broadcasters, and video game developers compete for entertainment dollars and live programming. The Pac-12 is also exploring e-sports, as are a number of individual universities. Another interactive complement is the expansion of the video game industry from niche markets to mainstream. This industry now has annual revenues of about $25 billion, with sports games’ comprising about 13% of that total.
Sports league commissioners, who were stalwart opponents of gambling, in the face of softening television ratings have begun to warm up to the idea of legalized sports betting as a new revenue stream. The move of the NFL Raiders from Oakland to Las Vegas is an indication that the wall between sports and gambling is becoming porous. The NCAA is firmly opposed to legalized gambling—at least for now.
Congress outlawed televised cigarette commercials in 1971, but then companies turned to venue and event sponsorships. One college football game, the Tobacco Bowl, was played until 1983. The NCAA allowed its broadcast partners to have sponsorship deals with beer companies, a trend that has continued. Dos Equis became an official sponsor of the college football playoffs in 2015.
Germano, S. Mega Contracts with Colleges Start to Pinch Under Armour. The Wall Street Journal, October 27, 2016, B8.
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Acknowledgements
The authors acknowledge and thank their research assistant, Lindsey Currier, for her valuable contributions and Jill Harris and Lawrence White for helpful comments on an earlier draft.
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Sanderson, A.R., Siegfried, J.J. The Role of Broadcasting in National Collegiate Athletic Association Sports. Rev Ind Organ 52, 305–321 (2018). https://doi.org/10.1007/s11151-017-9593-9
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DOI: https://doi.org/10.1007/s11151-017-9593-9