Massive cash infusion looms for Power Five schools: They just have to get there
AJ Maestas, the CEO of Navigate Research, said the budget crisis currently underway across the NCAA won't last forever: He expects huge increases in the value of the next media rights deals.
Amid the coronavirus pandemic, there is a speck of a hint of a reason to be optimistic about the financial future of college sports, according to AJ Maestas, the CEO of Navigate Research.
The highly-influential research analytics firm, which has clients throughout professional and college sports, crunched the numbers and likes the dollar figures visible on the major college horizon.
It’s just that the path to the pots of gold will be treacherous.
“Collegiate athletics will be just fine in a few years,’’ Maestas said during our latest podcast.
Over the past six months, Maestas has authored columns and co-hosted podcasts for the Hotline on a series of critical issues facing collegiate athletics, including the decline in football attendance, the value in playoff expansion and the economics of football recruiting.
This week, we discussed coronavirus and its impact on athletic department budgets, the options for playing college football in 2020, the importance of digital/mobile marketing and the longer-term outlook for the industry. (Listen below.)
Maestas is deeply skeptical about the likelihood of a football season — especially a season with fans. He’s not convinced the university presidents and chancellors will have the stomach for it.
“Think of what even motivated them to be (in their positions) in the first place,” Maestas said. “They want to cure Covid-19. They don’t want to be associated with an outbreak or a relapse.”
The impact of a canceled season would be devastating to athletic departments, and Maestas expects sports teams will be eliminated.
But on the other side of the pandemic — once we reach the middle of the decade — two expanded revenue streams suggest a bright outlook for budgets:
1) As Navigate explained in December, the (seemingly inevitable) expansion of the College Football Playoff would be highly lucrative:
“Based on the average payout by ESPN on a per-TV-viewer basis, we estimate that an expansion to eight teams would bring in at least another $420 million per year, and expansion to 16 teams would add another $560 million annually.
“That’s tens of millions of dollars in additional revenue for the conferences — and millions for the individual schools.
“Combine that with the current payout for the four-team event, $467 million per year from ESPN, and the total for eight teams would be $887 million per year. A 16-team event would generate up to $1.45 billion per year.”
2) The next round of media rights deals will bring massive cash to the Power Five, as well.
Navigate’s latest projections call for an increase in value of 50-to-100 percent.
“The next set of TV deals, we believe, will be enriched, not harmed, by what’s happening right now — that shift toward home (viewing),’’ Maestas said.
“We’re about to release projections, and it’s roughly a 50-to-100 percent jump in TV money for all the conferences other than the ACC; they’re just stuck in a very long deal.
“This return to a new normal (after Covid-19) — these universities won’t be down for long. All those deals come up in the next four or five years. That means every major Power Five will take another significant step forward in their budgets.”
The Pac-12 currently receives $250 million annually (on average) from ESPN and Fox and generates about $130 million in revenue from all the content on the Pac-12 Networks.
An increase of at least 50 percent would produce $600+ million per year in media rights.
Deals for the Big Ten and SEC would be even more lucrative.
“So as painful as this is,” Maestas said, “I do think collegiate athletics will be just fine in a few years.
“It can sound dramatic to say a 50-to-100 percent jump, but that’s really what happened the last time, and we see TV’s place is still strong.”
The schools just have to get to the other side of the crisis.
Please enjoy the discussion.
Contact Maestas at: AJ@NavigateResearch.com
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