History of the Big East Conference and TV Rights Contracts
Posted: Tue Aug 24, 2021 7:03 amPost #1
History of the Big East Conference and its TV Rights Contracts
Post #1: History of the Big East Conference and its TV Rights Contracts: May 31, 1979 - December 10, 2012
Post #2: History of the Big East Conference and its TV Rights Contracts: December 11, 2012 – September 4, 2021
Post #3: Present and Future TV Rights Contracts
Post #4: Information about the Big East Universities and Most Likely Expansion Candidates
Post #5: Rankings for Men’s Basketball Expenses
Post #6: Why Xavier, Butler, and Creighton were chosen over Dayton, Saint Louis, and VCU
Post #7: Fieldhouse Flyer’s "You heard it here first" post - September 7, 2021
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Big East Conference Commissioners
May 31, 1979 - June 30, 1990 • Dave Gavitt
July 1, 1990 - June 30, 2009 • Mike Tranghese
July 1, 2009 - May 7, 2012 • John Marinatto
August 14, 2012 - June 30, 2013 • Mike Aresco
July 1, 2013 - present • Val Ackerman
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The Present Fox Sports TV Rights Contract
The Fox Sports TV Rights Contract
Fox TV Contract Year. Basketball Season
1. 2013-14 . . . . . 7. 2019-20
2. 2014-15 . . . . . 8. 2020-21 (11-member conference)
3. 2015-16 . . . . . 9. 2021-22 (11-member conference)
4. 2016-17 . . . . 10. 2022-23
5. 2017-18 . . . . 11. 2023-24
6. 2018-19 . . . . 12. 2024-25
Contract Law and Specific Performance - Page 32 of the Conference Realignment thread:
History of the Big East Conference and its TV Rights Contracts: May 31, 1979 - December 10, 2012
1977 • The College Football Association (CFA) was formed by many of the American colleges with top-level college football programs in order to negotiate contracts with TV networks to televise football games. It was formed by 63 schools from most of the major college football conferences and selected schools whose football programs were independent of any conference. The National Collegiate Athletic Association (NCAA) had controlled all college football TV rights since the early 1950s. It limited the number of games shown on TV because of a concern that televising more games would hurt attendance. The schools that formed the CFA banded together because of what they viewed as obstructionism of the NCAA by smaller schools. "People were just fed up with the NCAA's parochialism, power grab, etc., but also they wanted more money, they wanted to maximize and they wanted their fans to be able to see them on TV," said James Ponsoldt, a law professor at the University of Georgia. One by one, the major conferences (and Notre Dame, the most prominent independent program) would eventually negotiate their own separate TV deals, reducing the importance of the CFA. The CFA shut down in 1997.
May 31, 1979 • The Big East is established as the country’s first big-time basketball-centric conference.
May 31, 1979 • Dave Gavitt is named first Commissioner of the Big East Conference
June 27, 1984 • The Supreme Court of the United States adjudicated in NCAA v. Board of Regents of the University of Oklahoma that the National Collegiate Athletic Association (NCAA) television plan violated the Sherman and Clayton Antitrust Acts, which were designed to prohibit group actions that restrained open competition and trade. The case dealt with television rights to college football games, which were controlled by the NCAA and limited the appearance of university teams in each season. The NCAA believed that their control of television rights protected live attendance, which was disputed by a number of colleges. These larger colleges formed the College Football Association to negotiate television contracts, until the NCAA advised the colleges that they would be banned from all NCAA competitions, not just in football. The Board of Regents of the University of Oklahoma and the University of Georgia Athletic Association sued to force the NCAA to stop the practice. The Supreme Court held that the NCAA's actions were a restraint of trade and ruled for the universities.
June 21, 1990 • Mike Tranghese is named as second Big East Commissioner. Tranghese, who was Dave Gavitt's right-hand man, was the unanimous choice of the league's athletic directors.
July 2, 1990 • Conference Realignment Could Reshape College Athletics - Mark Maske, The Washington Post - [This epic tome of an article was written more than 31 years ago, but it reads and feels like it could have been written yesterday, and is well worth a look.]
Also see: History of Conference Realignments 1955-1991 – HLOH thread - August 10, 2021
1991 • The first season that the Big East sponsors college football. The Big East becomes the sixth ‘Power 6’ football conference.
February 16, 1994 • CBS: Big East Pact More Than Move To Fill Space - Steve Nidetz, The Chicago Tribune
February 16, 1994 • Big East Kicks Off TV Deal - Jack Bogaczyk, The Roanoke Times
August 12, 1994 • Fox Sports is launched.
March 22, 2000 • ABC, ESPN Ink Big East Deal – CBS News
August 29, 2006 • Big East, ESPN agree to six-year deal - ESPN
August 30, 2006 • Big East, ESPN Reach New Six-Year Agreements - Villanova.com
June 30, 2009 • Michael Tranghese, the Commissioner of The BIG EAST Conference since 1990 and league’s first full time employee in 1979 retires. Shortly after being named Commissioner, Tranghese directed and oversaw the creation of Big East football, which began competition in 1991.
June 30, 2009 • Mike Tranghese steps down after 19 years as Big East commissioner.
July 1, 2009 • John Marinatto became the third commissioner of the conference. Marinatto will inherit a conference that is stable with membership and television contracts, thanks to the hard work of Tranghese during his tenure.
April, 2012 • At the Big East's spring meetings in Ponte Vedra Beach, Florida, NBC Sports/Comcast and Fox provided in-depth "pitches" to the league's athletic directors. Sources said the league's AD's were most impressed by the presentations from NBC Sports.
May 26, 2011 • Big East Turns Down ESPN Proposal That Would Have Paid Schools $11M Per Year - Sports Business Journal.
May 26, 2011 • Commissioner John Marinatto turns down 9-year deal with ESPN which would have paid its basketball schools $2.5 million per year.
May 26, 2011 • For Big East, where is all this leading? - Mark Blaudschun, The Boston Globe
September 17, 2011 • Dave Gavitt, Founding Force of the Big East Conference, Dies at 73 - Richard Goldstein, The New York Times
May 7, 2012 • John Marinatto, the third commissioner of the conference, resigns from his position.
2012 • Grumblings about the football schools by the Big East’s Catholic schools become more frequent in local and national news reports.
May 26-28, 2012 • Memorial Day weekend.
June 4, 2012 • On Monday morning, an executive at Fox Sports (who I’ll call ‘George Smiley’) sat in his office reading the latest article about the mistrust and dissension within the Big East. He knew that Fox Sports was searching for new opportunities in live sports programming, and he wondered out loud: ”What if we paid the Big East’s seven basketball schools to leave the Big East and start a new basketball-centric conference?”. The idea intrigued him, and it was not as mad as it might initially seem, because George aware that:
• The Big East was established as a basketball-centric athletic conference in 1979, and did not sponsor football until 1991.
• As of December 17, 2012, the Big East Conference did not have a television contract beyond the 2013-14 season.
• Under the Big East’s current TV Rights contract, each basketball received $1,500,000 per team per year.
• In April 2011, the 16 Big East schools turned down a deal with ESPN which would have paid its basketball-only schools $2,500,000 per year.
George Smiley thought that Fox Sports should test the waters of live college basketball broadcasts, because he believed that there was a possibility of exploiting the dissatisfaction that the Catholic schools were having with the Big East’s football schools. Three big questions loomed:
(1) “Could the seven Catholic schools be persuaded to split off from the football schools?”
(2) “If so, would they leave for $3,000,000 per school per year?” (double their present payout)
(3) “Could the seven Catholic schools keep the Big East brand name?” (very important for instant credibility, continuity, marketing, etc., etc.)
This marks the beginning of the ‘Conceptual Phase’ of the Big East project.
June 4, 2012 to June 22, 2012 • George Smiley works long hours on his proposal, calling in assistance from colleagues in Fox Sports’ Marketing, Legal, and Finance Departments.
June 11, 2012 • George arranges a meeting with the CEO of Fox Sports on Friday, June 22, 2012 to present his proposals. George is aware that the Second Quarter of 2012 ends on June 30th, and there is quarterly meeting of the Fox Sports; Board of Directors scheduled for early July. George wants to give the CEO the opportunity to consult the Board of Directors before committing big money to George’s proposals, which are still a work-in-progress at this point.
Friday, June 22, 2012 • George’s meeting with the CEO goes well, and he gets the go-ahead, as the CEO decided to have more detail in hand before raising the proposal with the Board. George gets a two-month deadline (to August 24th), and a budget of $200,000 to spend on the initial phases of market research, Due Diligence, and the preparation of Draft #1 of the proposed TV Rights Contract.
The first thing George would have done is to liaise with Fox Sports’ HR manager to quickly assemble an ad hoc staff of internal contract lawyers and experienced specialists in marketing, finance, and IT. The next thing was to place an order with the Nielsen Corporation for college basketball viewership ratings for the Top 75 DMAs for the last five years in the form of a Microsoft Access database. The Nielsen Corporation will sell you any data they have for the right price, and Fox Sports was a regular blue-chip customer.
► Nielsen Designated Market Area (DMA) Rankings for the 210 Largest Markets for 2020 and 2021 – Last updated in March, 2021
► Interactive US Map of Nielsen Media Markets – Last updated in March, 2021
George then turns his attention to the tricky question of: ”How much to offer each school?” to leave the Big East Conference. Fox Sports know they have to offer the Catholic 7 a sufficient financial inducement for them to pull the trigger and sign on the dotted line. It is known that under the 2006 TV Rights contract with ESPN, each Catholic Big East school receives $1,500,000 for basketball. An offer too low would be perceived as an insult, and get things off to a bad start. At the same time, Fox Sports wants to minimize their financial risk on the Big East project – and you minimize risk by extending the lowest possible offer. The bigger the offer to the Catholic 7, the bigger the financial risk to Fox Sports. So essentially, Fox Sports needed to find their optimal position on the risk–return spectrum.
As would be standard practice at Fox Sports, George Smiley and his staff would employ the Monte Carlo method for determining Fox Sports’ ideal bid - and its sensitivity to risk. Eight Monte Carlo models would be constructed – one national market model, and seven regional models (one for each of the DMAs hosting a Big East school). Each Monte Carlo model would have 10 to 20 variables, sorted into categories of college basketball viewership, ad revenue ($ price per minute for TV ads – 60 second slots and 30-second slots) and market penetration. Then the IT staff would convert raw data available into probability density curves (a.k.a., ‘Normal Distribution curves’, and more informally, ‘bell curves’) as the weighting factors for each chosen variable. For those of you who are not familiar with this process, I’ll provide an over-simplified example.
Many of you would be familiar with the formula: (WF1)*(Var1) + (WF2)*(Var2) + (WF3)*(Var3) + (WF4)*(Var4) + (WF5)*(Var5) + . . .
… where WF1 is Weighting Factor No. 1 (usually between 0.1 and 0.9) and Var1 is the name of Variable No. 1
… and (WF1 + WF2 + WF3 + WF4 + WF5 + . . . ) = 1.00
Now, if we replace each decimalized Weighting Factor WF with (WF)*(probability density curve), we get the basis of a Monte Carlo simulation. It is generally accepted that 10,000 iterations of a Monte Carlo simulation will produce reliable results if the input is correct (which can be tricky in most instances).
The results (or outputs) from a number of different bespoke Monte Carlo simulation models would enable George to make the necessary 10-year annual projections of total viewership of Catholic 7 college basketball teqms + 3 more ‘statistically average’ unknown expansion teams (broken down for each of the Top 75 DMAs), projected annual revenue from selling advertising for those games (broken down for each of the Top 75 DMAs), and Annual Operating Costs (both fixed and variable), broken down into each of the 120 months of the Monte Carlo projections. Then, a global Monte Carlo simulation model would be created, using components which had previously been created for each of the bespoke Monte Carlo models – giving George all of the answers he needed. It should be noted that Monte Carlo simulation models are only as good as the assumptions on which they are based, the IT expertise in creating the simulation models, and the care in which raw data is converted into probability density curves. Wrong assumptions, or a poor model, or errors in preparing the probability density curves are certain to lead to significant errors in the ‘numbers’ and recommendations contained in the report that George will personally hand to the Fox Sports CEO on Friday, August 24th. With so much riding on the accuracy of his analyses and projections, George will ensure that everything is checked and double-checked by experienced people with the appropriate expertise. Fox Sports would have a lot of them in-house.
George Smiley prudently assumed that an offer of less than $3,000,000 per school per year would not be well-received by the Catholic 7. But it wasn’t that simple, as more detail was required for the Monte Carlo model. Given that the Catholic 7 were presently getting $1.5 M/school/year, and had turned down ESPN’s reported offer of $2.5 M/school/year, George had to subjectively assign a probability of the Catholic 7 accepting the offer, for offer amounts ranging from $3.00 M/school/year to $4.50 M/school/year (in 15 increments of $100,000) based on the assumption that if the Catholic 7 were offered 3 times as much as they are presently getting, there was a 100% chance of the Catholic 7 accepting an offer of $4.50 M/school/year.
After a very considerable amount of work by George and his staff on the Monte Carlo simulations and sensitivity studies for each variable utilized, he determines that the ‘optimal’ offer is $3,400,000 per school per year, and that the ‘ceiling offer’ is $3,800,000 per school per year. An offer in excess of that amount is deemed to be too risky to offer, thus the term ‘ceiling offer’.
August 14, 2012 • Big East Officially Names Mike Aresco as Commissioner
August 14, 2012 • Big East gets serious about TV efforts – ESPN, feature article by Kristi Dosh, Attorney & Sports Business Analyst
Friday, August 24, 2012 • George Smiley submits his completed proposal to the CEO. The CEO is impressed with it and is pleased with the numbers George has put together. The CEO schedules a meeting with the Fox Sports Board of Directors in early September to get their approval for the Big East project, and to get budget approval for its implementation.
Wednesday, September 5, 2012 • The CEO makes his presentation to the Fox Sports Board of Directors.
Wednesday, September 19, 2012 • The Board of Directors notify the CEO of their approval of George Smiley’s proposals, and approval of a provisional budget of $3 million for the ‘Development Phase’ of the Big East project, subject to the following caveats: (1) Noting that ”As of December 17, 2012, the Big East Conference did not have a television contract beyond the 2013-14 season”, the Board set a December 15, 2012 deadline for the completion of the TV Rights Contract negotiations with the seven presidents of the Big East’s Catholic schools, and the signing of a Memorandum of Understanding to that effect. (2) Prior to an official announcement of the anticipated deal in mid-December 2012, absolute secrecy must be maintained. If the media, or the Big East officials, or any of the football schools hear of the secret negotiations taking place before the deal is agreed, the project may be aborted on very short notice. (3) Noting the extensive volume of legal work that must be executed after the deal is agreed (by both internal council and external council) which is expected to take three months, the Board set a March 15, 2013 deadline for the signing of the completed (and legally scrubbed) TV Rights Contract by the CEO of Fox Sports and the seven presidents of the Big East’s Catholic schools. (4) The Catholic 7 should be ‘strongly encouraged’ to obtain the Big East brand name.
Thursday, September 20, 2012 • George Smiley is given a substantial budget increase, and a lot more ad hoc staff members.
Friday October 26, 2012 • Big East shopping for new TV deal - Brett McMurphy, ESPN
Tuesday October 30, 2012 • The CEO of Fox Sports sends seven invitations by courier to presidents of the Big East’s seven Catholic schools, requesting their presence, or the presence of their appointed representative, at a meeting in New York on Tuesday, November 13th to hear a proposal concerning Fox Sports’ sincere interest in offering a TV Rights contract exclusively to the seven universities that are not participating in Big East sponsored football. A reply to this invitation is requested no later than Tuesday, November 6th. The invitations spark a conference call between the seven university presidents, who are quite interested to hear Fox Sports’ proposal, and collectively decide to send their Heads of Legal (usually called the universities’ Vice Presidents for Legal Affairs) from each of the seven universities. They also decide to immediately engage external counsel, and have one of that legal firm’s specialists in TV Rights Contracts attend the meeting, for a total of eight attendees.
Tuesday, November 6, 2012 • The seven Big East presidents send their reply to the Fox Sports CEO. Their reply was exactly what Fox Sports had expected.
Wednesday, November 7, 2012 • Fox Sports’ CEO replies to the seven presidents, thanking them for their positive response, and proving more particulars about the meeting. It was then agreed that external counsel for both sides would attend the meeting as observers, meaning that they would not ask questions, they would not answer questions, nor would they provide any explanations during the course of the meeting. This suited both sides quite well, as neither side wanted a disagreement between the two external counsel over the precise definition of a word during the course of Fox Sports’ presentation.
Tuesday November 13, 2012 • A Tuesday was chosen for the meeting to allow the eight attendees from the Catholic 7 to arrive the day before and have meeting(s) amongst themselves, so as not to impinge on the attendee’s weekend. Upon confirmation of the meeting, Fox Sports had booked eight guest rooms and a Boardroom in a luxurious Manhattan hotel, where the meeting would take place. It went something like this:
10:30-10:35 am – The CEO of Fox Sports welcomes the eight attendees, tells an anecdote or two, tells the attendees who they will be hearing from, and introduces this first speaker (5 min).
10:35-11:00 – George Smiley make the primary presentation (MS PowerPoint), which does NOT include the first offer to the Catholic 7 schools. No Q&A for George (25 min).
11:00-11:20 – Presentation followed by Q&A by Fox Sports’ Vice President of Legal (20 min)
11:20-11:35 – Tea/coffee break (15 min)
11:35-11:50 - Presentation followed by Q&A by Fox Sports’ Vice President of Finance (15 min)
11:55-12:20 - Presentation followed by Q&A by Fox Sports’ Vice President of Marketing (25 min)
12:20-12:30 – Fox Sports’ CEO then presents his offer: an 8-year contract for $3,000,000 per school per year for 10, 11, or 12 schools, with the 3 to 5 additional schools selected by mutual agreement between Fox Sports and the seven Catholic universities. He said he would like the negotiations to begin as soon as practicable and conclude by Friday, December 14th. He added that a further three months would be required for the negotiations to add three to five schools, negotiations for possession of the Big East brand name, and ‘legal scrubbing’ of Final Draft of the TV Rights Contract, leading to a target contract signature date of March 15, 2013 - which by a fortunate coincidence is just before the beginning of the 2013 NCAA Men’s Basketball Tournament, guaranteeing extensive free national TV publicity for the new basketball-centric conference.
Fox Sports CEO knew that the Catholic 7 could not ‘go public’ with his proposal until it was agreed, and the Catholic 7 need to make an official public announcement about splitting away from the Big East before they could begin negotiations with prospective expansion schools. The Catholic 7 needed to be able to tell any prospective expansion school exactly what was on offer from the Catholic 7 and Fox Sports before they could be approached. It was also necessary to ‘go public’ before negotiations could begin with the ‘football’ schools for ownership of the Big East Conference brand name – something that was crucial to the Catholic 7 and Fox Sports.
He then provided information packets to each of the eight attendees, which included his offer in writing and Draft #1 of the proposed TV Rights Contract. Draft 1 was like only 2 or 3 pages, and included only the proposed main section headings - or ‘Articles’, as they were likely called – and below each heading, one or two paragraphs of easy-to read text about would appear in that particular Article.
He then invited the eight attendees to an impressive lunch being served for them in a nearby private dining room in the hotel, giving them the opportunity to discuss his proposals in private. The Fox Sports personnel and their external council then left the hotel, picking up the tab for the eight guest room, the Boardroom, and all meals the attendees had at the hotel.
Wednesday, November 14, 2012 • in the presidents’ offices at each of the seven Catholic schools, their respective Heads of Legal (who attended the meeting) give their presidents their account and impressions of the meeting with Fox Sports, and a copy of Fox Sports contract proposals. It is agreed to postpone telling the universities’ athletic directors about the proposals until the seven presidents have discussed the proposals amongst themselves via conference call and have agreed a common approach. Back in New York, the Big East’s external council is preparing his summary and observations of the meeting he attended the previous day, along with his recommendations going forward.
Thursday, November 15, 2012 • The presidents of the seven Catholic schools receive identical copies of the report by their external counsel, discuss it among themselves, and authorize the external counsel to draft a Letter of Reply for their approval no later than noon on Monday. The external counsel has informed them that $3,000,000 per school per year is a very good opening offer, and that if they opened with that generous of an offer, they must be prepared to go higher, but how much higher is unknown. He recommends a $4,000,000 per schools per year counter-offer. He also recommends trying to extend the contract period from 8 to 12 years to lock in the revenue for as long as practical. His report is well-received.
Friday, November 16, 2012 • The presidents of the seven Catholic schools meet with their seven respective athletic directors (who have been kept in the dark until now) to inform them of their intention to break away from the football schools and start a new basketball-centric conference, financed by Fox Sports. The athletic directors are tasked with creating a short list of suitable expansion candidate schools, with a primary emphasis on near-term basketball success, and the absolute need for secrecy. The last thing the presidents want is for the new conference to get off to a bad start in the 2013-14 season – a view strongly shared by the athletic directors and the head coaches of men’s basketball. The athletic directors have been kept out of the loop until today, because there was no point of widening the circle of secrecy until it was decided by the presidents to proceed with breaking away from the football schools.
Tuesday, November 20, 2012 • The Big East’s external counsel sends a letter to Fox Sport’s CEO to this effect, after its content and wording have been approved by the seven presidents:
“I have been authorized by the presidents of [seven universities named] to inform you that they are receptive of your overtures and wish to pursue negotiations concerning your proposals at your earliest convenience. I have also been authorized to conduct said negotiations on their behalf, as they do not wish to involve themselves directly on such sensitive matters at this stage. The presidents agree to your requested deadline of December 14, 2012 to conclude the negotiations on the agreement, and agree to your target deadline of March 15, 2013 to sign the agreement, assuming all goes well.”
“I am also pleased to forward to you my clients’ proposal concerning same: a 12-year contract for $4,000,000 per school per year for 10, 11, or 12 schools, with the 3 to 5 additional schools selected solely by the seven Catholic universities.. Yours truly, etc., etc.”
Wednesday, November 21, 2012 • Fox Sports’ CEO acknowledges receipt of the counter-proposal, informs the external counsel that he can expect a reply in due course, and wishes counsel a Happy Thanksgiving. Privately, the CEO is furious at the sheer brass neck of the Big East’s counter-offer. He had been expecting a counter-offer of $3.5 million per school per year, to which he would make his final offer of $3.25 million per school per year, to seal the deal. But the Catholic 7, who knew they had the upper hand in the negotiations, were getting downright greedy.
November 22-25, 2012 • Thanksgiving weekend.
Tuesday November 27, 2012 • Tulane to Big East: This is actually happening - Jason Kirk, SB Nation. The Big East becomes a national laughing stock.
Thursday November 29, 2012 • Tulane University officially joins the Big East Conference – to the dismay of the seven Catholic basketball schools.
Tuesday December 4, 2012 • It has now been two weeks since the Big East submitted their counter-offer of $4,000,000 per schools per year, and the Big East presidents are getting very concerned (as was the intention of Fox Sports). The presidents request their external counsel to initiate a phone call to Fox Sports’ external counsel to enquire about their November 20th offer. He does, and informs the presidents that he was told their offer substantially exceeds what Fox Sports is willing to pay for the TV Rights contract, and that is a big problem for Fox. He was alos told to expect a reply from Fox Sports shortly.
Tuesday December 4, 2012 • This is the phone call that Fox Sports’ CEO had been waiting for. The Catholics were jittery, perhaps realizing that they had aimed too high, just as they had done in April 2011 when they scuppered the offer from ESPN with their greed. Now was the precisely right time for Fox Sports to reply.
Tuesday December 4, 2012 • Fox Sports agrees to lengthen contract period, but is not yet ready to give away their input in selecting the expansion schools. Fox Sports submit their second offer to the Big East: a 10-year contract for $3,500,000 per school per year for 10, 11, or 12 schools, with the 3 to 5 additional schools selected by mutual agreement between Fox Sports and the seven Catholic universities. Fox Sports also warns the Big East that they cannot go a penny above $3,500,000 per school per year without having some control over the selection of the expansion schools.
Wednesday December 5, 2012 • Fox Sports receives a second counter-offer from the Catholic 7: a 12-year contract for $3,750,000 per schools per year for 10, 11, or 12 schools, with the 3 to 5 additional schools selected solely by the Big East, but limited to their guaranteed short list of Xavier, Dayton, Saint Louis, Butler, Creighton, and Virginia Commonwealth.
Thursday December 6, 2012 • Fox Sports is happy enough with the six schools on the ‘guaranteed short list’ and replies: “We would be willing to accept your December 5, 2012 offer subject to the Catholic 7 schools obtaining the Big East brand name and all associated legal rights pertaining thereto. If the Catholic 7 are unable or unwilling to obtain the Big East rights, then the specified Contract Amount shall be $3,500,000 per school per year. This is our best and Final Offer.”
Friday December 7, 2012 • External counsel for the Catholic 7 urges the presidents to accept Fox Sports’ Final Offer, and after a brief discussion, they do. A Memorandum of Understanding incorporating what has been agreed is then signed by Fox Sports and the seven university presidents on December 7th.
The deal is finally agreed.
[SIDEBAR #4: Incentive or Leverage?] Recall that on Wednesday, September 19, 2012 • The Board of Directors notify the CEO of their approval of George Smiley’s proposals … subject to the following caveats: ”(4) The Catholic 7 should be ‘strongly encouraged’ to obtain the Big East brand name”. An executive ignores his Board of Directors at his own peril. As part of their negotiation strategy, Fox Sports deliberately did not include an incentive for the Catholic 7 to obtain the Big East brand name, until they presented their ‘Best and Final offer’ to the Catholic 7 presidents. This was because Fox Sports did not want to find themselves involved in an inevitable protracted negotiation over the ‘true value’ of the Big East brand name (which neither side actually knew), so their ‘Best and Final offer’ included a $30 million incentive to the Catholic 7 to obtain the Big East brand name, knowing that it was worth far more than $30 million. Note that the difference between $3,750,000 and $3,500,000 is $250,000 per school per year, and that ($250,000 per school per year)x(10 schools)x(12 years) = $30 million. “Take it or leave it” the Catholic 7 were told on December 6th. They took it.
* * * * *
Saturday afternoon, December 8, 2012 • A press release issued jointly by the seven presidents of the seven Catholic schools stated that they decided to break off from the league.
Sunday night, December 9, 2012 • In an undisclosed location in New York City, Mike Aresco stood in front of a room of seven men -- all of whom wanted to know what was being done to save their institutions. Just 10 days earlier, the latest iteration of the Big East Conference had come to open its arms to Tulane University, another school from a smaller conference replacing a large and powerful football-playing member.
The seven schools -- Seton Hall, St. John's, Villanova, Georgetown, Marquette, DePaul and Providence -- had been wary of the addition but were still willing to stomach it based on the promise of a lucrative television rights contract the conference's commissioner was supposed to be delivering. But three days before the meeting, a CBSSports.com report broke the news that a TV rights deal with the decaying league could be worth as little has half of what the Big East was estimating it would command. It turned out to be the final straw for the league's basketball schools. Enough was enough.
[COMMENTARY]: The timing of the recent external events could not have been better for Fox Sports and Catholic 7 presidents. Recall that on October 30, 2012, the CEO of Fox Sports sent invitations to Catholic 7 presidents to hear their proposal for splitting the Catholic 7 from the Big East in order to form a basketball-centric conference backed by Fox Sports. Total secrecy had been maintained throughout, and as a direct result, the Catholic 7 already had possession of a signed preliminary contract with the relevant numbers filled in. It is clear from what was written at the time that neither Mike Aresco, nor the football schools, nor the sports media had any idea that the Catholic 7 already had a TV Rights contract in place. Sure, they all knew the Catholic 7 were unhappy about a lot of things, but they wouldn’t really quit the Big East in a fit of anger. Surely not. Yet, the sports media portrayed the Catholic 7’s split as a near-spontaneous reaction to Tulane and the fall in market value of the next Big East TV Rights contract. The brave (and perhaps foolhardy) Catholic 7 presidents had taken a giant leap of faith into the unknown, hoping to find some like-minded Catholic soulmate universities with whom to start a new basketball-centric athletic conference, and then go in search of a TV Rights Contract with someone in the spring of 2013.
Except that in the real world of big money, that’s not how things work. The Catholic 7 would never split from the Big East without a TV Rights agreement in hand, as that would be far too risky for them to even contemplate. The sports media of the day clearly did not understand this, and assured their readers that the concept of a new Catholic basketball conference was now in its infancy. They couldn’t have been more wrong.
The Catholic 7 presidents could now openly recruit expansion schools for their new conference, and open formal negotiations with the football schools for the Big East Conference brand name and all associated legal rights pertaining thereto – the Holy Grail of future marketing success – not to mention the Big East’s record book full of impressive accomplishments and National Basketball Championships.
Monday, December 10, 2012 • By now, George Smiley and his staff had heard the news about the Catholic 7 presidents going public with their departure from the Big East on Saturday afternoon. Early on Monday morning, George assembled his entire staff, and thanked the people he had seconded from the marketing, finance, and IT departments. “Your assignments have now been completed, and you have my sincere thanks and appreciation for your tremendous effort and success in the Big East project. Please start packing your things, and the HR Department will be in touch with you by lunchtime to give you your new assignments. The Contract Lawyers will remain with me until mid-March. Your present assignment is to complete the updating of the TV Rights Contract by Friday, December 21st. On January 2nd, you will be joined by many more Fox Sports lawyers to scrub the Final Draft of the contract, and to incorporate new Articles concerning the Big East name, if the Catholic 7 can get it from the football schools. You will also need to review the Article concerning conference expansion and the new 3-5 schools after they are selected by the Catholic 7 schools. Thanks again, and best of luck going forward.”
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History of the Big East Conference and its TV Rights Contracts
Post #1: History of the Big East Conference and its TV Rights Contracts: May 31, 1979 - December 10, 2012
Post #2: History of the Big East Conference and its TV Rights Contracts: December 11, 2012 – September 4, 2021
Post #3: Present and Future TV Rights Contracts
Post #4: Information about the Big East Universities and Most Likely Expansion Candidates
Post #5: Rankings for Men’s Basketball Expenses
Post #6: Why Xavier, Butler, and Creighton were chosen over Dayton, Saint Louis, and VCU
Post #7: Fieldhouse Flyer’s "You heard it here first" post - September 7, 2021
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Big East Conference Commissioners
May 31, 1979 - June 30, 1990 • Dave Gavitt
July 1, 1990 - June 30, 2009 • Mike Tranghese
July 1, 2009 - May 7, 2012 • John Marinatto
August 14, 2012 - June 30, 2013 • Mike Aresco
July 1, 2013 - present • Val Ackerman
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The Present Fox Sports TV Rights Contract
The Fox Sports TV Rights Contract
New Big East, Fox Sports Formally Ink 12-Year, $500M Deal – Sports Business Journal – March 21, 2013The new Big East yesterday formally inked a 12-year, $500M contract with Fox Sports, a “sum that will rise" to $600M if, "as expected, the league expands to 12 members,” according to Richard Sandomir of the N.Y. TIMES.
($500,000,000)/(12 years) = $41,666,667 per year [total] to the Big East Conference.
($41,666,667/year)/(10 Big East schools) = $4,166,667 per school per year. It will actually be less, as the BE Conference will take about 10% to cover Big East head office salaries and pensions, game officials’ salaries and pensions, travel, meals, and accommodation for all of the preceding personnel, marketing, insurances, consultants, taxes, etc.
..... (0.1)x($4,166,667 per school per year) = $416,667 per school per year ‘contribution’ to the Big East head office.
..... (0.9)x($4,166,667 per school per year) = $3,750,000 to each Big East school per year.
It’s Official! UConn joins the Big East Conference - Dan Madigan, SB Nation - July 1, 2020
On July 1, 2020, the escalator clause in the original 2013 TV Rights contract with Fox Sports was automatically activated, increasing the pro-rata value of the contract from $500M to $550M for the addition of one school, resulting in the annual payments to each of the 11 Big East schools remaining at $3,750,000 to each Big East school per year, with an increase of $416,667 to the Big East head office per year to cover the additional expensed incurred as a result of UConn being added to the conference (more games require more game officials, etc.).
Fox TV Contract Year. Basketball Season
1. 2013-14 . . . . . 7. 2019-20
2. 2014-15 . . . . . 8. 2020-21 (11-member conference)
3. 2015-16 . . . . . 9. 2021-22 (11-member conference)
4. 2016-17 . . . . 10. 2022-23
5. 2017-18 . . . . 11. 2023-24
6. 2018-19 . . . . 12. 2024-25
Contract Law and Specific Performance - Page 32 of the Conference Realignment thread:
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------On August 24, 2021 Fieldhouse Flyer wrote:
The present realignment of conferences and schools is just the latest instalment of an ongoing series of events which began in the mid-1950’s, and will continue indefinitely. For more than 2,500 years, there have been self-selected groups of people who have planned, plotted, and schemed to gain an advantage over their rivals. Don’t expect that to change anytime soon.
History of the Big East Conference and its TV Rights Contracts: May 31, 1979 - December 10, 2012
1977 • The College Football Association (CFA) was formed by many of the American colleges with top-level college football programs in order to negotiate contracts with TV networks to televise football games. It was formed by 63 schools from most of the major college football conferences and selected schools whose football programs were independent of any conference. The National Collegiate Athletic Association (NCAA) had controlled all college football TV rights since the early 1950s. It limited the number of games shown on TV because of a concern that televising more games would hurt attendance. The schools that formed the CFA banded together because of what they viewed as obstructionism of the NCAA by smaller schools. "People were just fed up with the NCAA's parochialism, power grab, etc., but also they wanted more money, they wanted to maximize and they wanted their fans to be able to see them on TV," said James Ponsoldt, a law professor at the University of Georgia. One by one, the major conferences (and Notre Dame, the most prominent independent program) would eventually negotiate their own separate TV deals, reducing the importance of the CFA. The CFA shut down in 1997.
May 31, 1979 • The Big East is established as the country’s first big-time basketball-centric conference.
May 31, 1979 • Dave Gavitt is named first Commissioner of the Big East Conference
June 27, 1984 • The Supreme Court of the United States adjudicated in NCAA v. Board of Regents of the University of Oklahoma that the National Collegiate Athletic Association (NCAA) television plan violated the Sherman and Clayton Antitrust Acts, which were designed to prohibit group actions that restrained open competition and trade. The case dealt with television rights to college football games, which were controlled by the NCAA and limited the appearance of university teams in each season. The NCAA believed that their control of television rights protected live attendance, which was disputed by a number of colleges. These larger colleges formed the College Football Association to negotiate television contracts, until the NCAA advised the colleges that they would be banned from all NCAA competitions, not just in football. The Board of Regents of the University of Oklahoma and the University of Georgia Athletic Association sued to force the NCAA to stop the practice. The Supreme Court held that the NCAA's actions were a restraint of trade and ruled for the universities.
June 21, 1990 • Mike Tranghese is named as second Big East Commissioner. Tranghese, who was Dave Gavitt's right-hand man, was the unanimous choice of the league's athletic directors.
July 2, 1990 • Conference Realignment Could Reshape College Athletics - Mark Maske, The Washington Post - [This epic tome of an article was written more than 31 years ago, but it reads and feels like it could have been written yesterday, and is well worth a look.]
Also see: History of Conference Realignments 1955-1991 – HLOH thread - August 10, 2021
1991 • The first season that the Big East sponsors college football. The Big East becomes the sixth ‘Power 6’ football conference.
February 16, 1994 • CBS: Big East Pact More Than Move To Fill Space - Steve Nidetz, The Chicago Tribune
The breakup of the College Football Association continued Tuesday when the Big East signed a deal with CBS to air football and basketball games through 2001. "We're pleased to get back into college football," said CBS Sports President Neal Pilson, whose network telecast the sport from 1982 to 1990, when ABC won rights to CFA games. While the football contracts won't begin until 1996, when the current CFA deal with ABC ends, CBS will extend its existing Big East basketball deal. The contract, worth approximately $60 million to the Big East, are for the league the way it is constituted now. "Our agreement with the Big East is for the eight schools that play football," CBS Sports President Neal Pilson said. Any changes, added network Vice President Jay Rosenstein, "would be a topic of discussion between us."
February 16, 1994 • Big East Kicks Off TV Deal - Jack Bogaczyk, The Roanoke Times
The Big East Conference took another step toward expansion or explosion Tuesday, when the league's eight football schools agreed to a five-year contract with CBS Sports.
That's because CBS made the deal with the Big East Football Conference, exclusive of six other Big East members that play basketball and non-revenue sports. However, the package also will include men's and women's basketball telecasts for the football eight.
So, if Seton Hall, Villanova, Connecticut, Providence, Georgetown and St. John's do not agree to merge with all-sports members Syracuse, Miami, Pitt and Boston College and football-only players Tech, Temple, Rutgers and West Virginia, the last eight of those will take their money and start a new league.
CBS will pay $69 million for Big East rights. Tranghese said on Tuesday that if the conference chooses to expand to 14 schools, then all 14 would share in the basketball portion of those rights. Without expansion, the basketball fees and appearances would be divided only by the eight current football members.
However, with or without expansion, only the football members will share the football money - which at $56 million to $58 million is the bulk of the package.
August 12, 1994 • Fox Sports is launched.
March 22, 2000 • ABC, ESPN Ink Big East Deal – CBS News
ABC and ESPN have agreed to a seven-year deal worth about $105 million to carry Big East conference football games through 2007. The agreement, which starts with the 2001 season, sees ABC replace CBS as the broadcast network home of the Big East Conference.
August 29, 2006 • Big East, ESPN agree to six-year deal - ESPN
August 30, 2006 • Big East, ESPN Reach New Six-Year Agreements - Villanova.com
June 30, 2009 • Michael Tranghese, the Commissioner of The BIG EAST Conference since 1990 and league’s first full time employee in 1979 retires. Shortly after being named Commissioner, Tranghese directed and oversaw the creation of Big East football, which began competition in 1991.
June 30, 2009 • Mike Tranghese steps down after 19 years as Big East commissioner.
July 1, 2009 • John Marinatto became the third commissioner of the conference. Marinatto will inherit a conference that is stable with membership and television contracts, thanks to the hard work of Tranghese during his tenure.
April, 2012 • At the Big East's spring meetings in Ponte Vedra Beach, Florida, NBC Sports/Comcast and Fox provided in-depth "pitches" to the league's athletic directors. Sources said the league's AD's were most impressed by the presentations from NBC Sports.
May 26, 2011 • Big East Turns Down ESPN Proposal That Would Have Paid Schools $11M Per Year - Sports Business Journal.
May 26, 2011 • Commissioner John Marinatto turns down 9-year deal with ESPN which would have paid its basketball schools $2.5 million per year.
May 26, 2011 • For Big East, where is all this leading? - Mark Blaudschun, The Boston Globe
The latest issue came this week when the Big East, with its contract for football and men’s basketball with ESPN running out after the 2012-13 season, turned down an offer from the network that insiders say would have paid Big East schools in the neighborhood of $11 million each. ESPN told the Big East that was its best offer.
The Big East power base said, “No. We can wait and get a better offer.’’ That is not likely to happen. In fact, less money might be on the table when the Big East does get around to finalizing its television contract.
Big East Commissioner John Marinatto concedes he is taking a gamble, but he may have a hole card if NBC/Comcast and Fox come in and elevate the offer in the fall of 2012.
“It’s the bottom of the ninth, and we’re at bat,’’ said Marinatto, meaning that all the other conference contracts are done. “We need to get the best deal we can get to help secure our future.’’
Then there is the ongoing basketball/football battle being waged internally in the Big East. The basketball schools are already frustrated by having to make a 16-team work. It could go to 18 and perhaps as many as 20 if some of the football schools get their wish to increase that sport to 12 teams, which would allow for a conference championship game and more money.
A basketball-football split seems a question of when, not if.
September 17, 2011 • Dave Gavitt, Founding Force of the Big East Conference, Dies at 73 - Richard Goldstein, The New York Times
May 7, 2012 • John Marinatto, the third commissioner of the conference, resigns from his position.
2012 • Grumblings about the football schools by the Big East’s Catholic schools become more frequent in local and national news reports.
[SIDEBAR #1: Dates] A good Contracts Lawyer with decades of experience in high-level contract negotiations can read the information available in the public domain and piece together a surprisingly accurate description of what went on behind the scenes, as evidenced by the following informed speculation. Note that the undocumented dates which follow have been calculated with reference to the published key dates of December 8, 2012 and March 19, 2013, and other dates obtained from articles by reputable sources. The undocumented dates were necessarily guided by a detailed knowledge of which things needed to happen in TV Rights Contract negotiations, in which order they had to happen, how long each thing took to accomplish, and the number of people required to accomplish each thing.
[SIDEBAR #2: Secrecy] In TV Rights Contract negotiations (and other large contract negotiations, such as mergers & acquisitions), secrecy during the early stages of the process is of paramount importance. The more people who know about the existence of a potential deal-in-the-making, the greater the risk is that the news will spread to their friends or close associates and eventually make its way to the news media, or an internet or twitter message board, which could well scupper the deal before it has a chance to be made – to the detriment of both interested parties. In this instance, the two primary parties are Fox Sports and the presidents of the Catholic 7 universities. Soon after the initial contact was made by Fox Sports, the “circle in the know” expanded to include the internal heads of legal affairs and athletic directors of the Catholic 7 schools, and external counsel for the seen Catholic universities. It is normal for this period of secrecy to last four to six weeks, as there are many things that need to be discussed among the Catholic 7 themselves, and with Fox Sports – all with the greatest of confidentiality. It was particularly important that the Catholic 7 kept this information from the Big East Conference itself, and from its football schools who were not invited to join Fox Sports’ new college basketball conference.
[SIDEBAR #3: External counsel] “External counsel”, as used in this post, refers specifically to large law firms that have a department which specializes in TV Rights Contracts, and a long track record of successful contract negotiations. It is a very specialized (and expensive) area of law, there would only be about a dozen or so big names in the field. It is quite likely that the external counsel for both Fox Sports and the Catholic 7 schools already knew each other from representing different clients in previous TV Rights Contract negotiations.
May 26-28, 2012 • Memorial Day weekend.
June 4, 2012 • On Monday morning, an executive at Fox Sports (who I’ll call ‘George Smiley’) sat in his office reading the latest article about the mistrust and dissension within the Big East. He knew that Fox Sports was searching for new opportunities in live sports programming, and he wondered out loud: ”What if we paid the Big East’s seven basketball schools to leave the Big East and start a new basketball-centric conference?”. The idea intrigued him, and it was not as mad as it might initially seem, because George aware that:
• The Big East was established as a basketball-centric athletic conference in 1979, and did not sponsor football until 1991.
• As of December 17, 2012, the Big East Conference did not have a television contract beyond the 2013-14 season.
• Under the Big East’s current TV Rights contract, each basketball received $1,500,000 per team per year.
• In April 2011, the 16 Big East schools turned down a deal with ESPN which would have paid its basketball-only schools $2,500,000 per year.
George Smiley thought that Fox Sports should test the waters of live college basketball broadcasts, because he believed that there was a possibility of exploiting the dissatisfaction that the Catholic schools were having with the Big East’s football schools. Three big questions loomed:
(1) “Could the seven Catholic schools be persuaded to split off from the football schools?”
(2) “If so, would they leave for $3,000,000 per school per year?” (double their present payout)
(3) “Could the seven Catholic schools keep the Big East brand name?” (very important for instant credibility, continuity, marketing, etc., etc.)
This marks the beginning of the ‘Conceptual Phase’ of the Big East project.
June 4, 2012 to June 22, 2012 • George Smiley works long hours on his proposal, calling in assistance from colleagues in Fox Sports’ Marketing, Legal, and Finance Departments.
June 11, 2012 • George arranges a meeting with the CEO of Fox Sports on Friday, June 22, 2012 to present his proposals. George is aware that the Second Quarter of 2012 ends on June 30th, and there is quarterly meeting of the Fox Sports; Board of Directors scheduled for early July. George wants to give the CEO the opportunity to consult the Board of Directors before committing big money to George’s proposals, which are still a work-in-progress at this point.
Friday, June 22, 2012 • George’s meeting with the CEO goes well, and he gets the go-ahead, as the CEO decided to have more detail in hand before raising the proposal with the Board. George gets a two-month deadline (to August 24th), and a budget of $200,000 to spend on the initial phases of market research, Due Diligence, and the preparation of Draft #1 of the proposed TV Rights Contract.
The first thing George would have done is to liaise with Fox Sports’ HR manager to quickly assemble an ad hoc staff of internal contract lawyers and experienced specialists in marketing, finance, and IT. The next thing was to place an order with the Nielsen Corporation for college basketball viewership ratings for the Top 75 DMAs for the last five years in the form of a Microsoft Access database. The Nielsen Corporation will sell you any data they have for the right price, and Fox Sports was a regular blue-chip customer.
► Nielsen Designated Market Area (DMA) Rankings for the 210 Largest Markets for 2020 and 2021 – Last updated in March, 2021
► Interactive US Map of Nielsen Media Markets – Last updated in March, 2021
George then turns his attention to the tricky question of: ”How much to offer each school?” to leave the Big East Conference. Fox Sports know they have to offer the Catholic 7 a sufficient financial inducement for them to pull the trigger and sign on the dotted line. It is known that under the 2006 TV Rights contract with ESPN, each Catholic Big East school receives $1,500,000 for basketball. An offer too low would be perceived as an insult, and get things off to a bad start. At the same time, Fox Sports wants to minimize their financial risk on the Big East project – and you minimize risk by extending the lowest possible offer. The bigger the offer to the Catholic 7, the bigger the financial risk to Fox Sports. So essentially, Fox Sports needed to find their optimal position on the risk–return spectrum.
As would be standard practice at Fox Sports, George Smiley and his staff would employ the Monte Carlo method for determining Fox Sports’ ideal bid - and its sensitivity to risk. Eight Monte Carlo models would be constructed – one national market model, and seven regional models (one for each of the DMAs hosting a Big East school). Each Monte Carlo model would have 10 to 20 variables, sorted into categories of college basketball viewership, ad revenue ($ price per minute for TV ads – 60 second slots and 30-second slots) and market penetration. Then the IT staff would convert raw data available into probability density curves (a.k.a., ‘Normal Distribution curves’, and more informally, ‘bell curves’) as the weighting factors for each chosen variable. For those of you who are not familiar with this process, I’ll provide an over-simplified example.
Many of you would be familiar with the formula: (WF1)*(Var1) + (WF2)*(Var2) + (WF3)*(Var3) + (WF4)*(Var4) + (WF5)*(Var5) + . . .
… where WF1 is Weighting Factor No. 1 (usually between 0.1 and 0.9) and Var1 is the name of Variable No. 1
… and (WF1 + WF2 + WF3 + WF4 + WF5 + . . . ) = 1.00
Now, if we replace each decimalized Weighting Factor WF with (WF)*(probability density curve), we get the basis of a Monte Carlo simulation. It is generally accepted that 10,000 iterations of a Monte Carlo simulation will produce reliable results if the input is correct (which can be tricky in most instances).
The results (or outputs) from a number of different bespoke Monte Carlo simulation models would enable George to make the necessary 10-year annual projections of total viewership of Catholic 7 college basketball teqms + 3 more ‘statistically average’ unknown expansion teams (broken down for each of the Top 75 DMAs), projected annual revenue from selling advertising for those games (broken down for each of the Top 75 DMAs), and Annual Operating Costs (both fixed and variable), broken down into each of the 120 months of the Monte Carlo projections. Then, a global Monte Carlo simulation model would be created, using components which had previously been created for each of the bespoke Monte Carlo models – giving George all of the answers he needed. It should be noted that Monte Carlo simulation models are only as good as the assumptions on which they are based, the IT expertise in creating the simulation models, and the care in which raw data is converted into probability density curves. Wrong assumptions, or a poor model, or errors in preparing the probability density curves are certain to lead to significant errors in the ‘numbers’ and recommendations contained in the report that George will personally hand to the Fox Sports CEO on Friday, August 24th. With so much riding on the accuracy of his analyses and projections, George will ensure that everything is checked and double-checked by experienced people with the appropriate expertise. Fox Sports would have a lot of them in-house.
George Smiley prudently assumed that an offer of less than $3,000,000 per school per year would not be well-received by the Catholic 7. But it wasn’t that simple, as more detail was required for the Monte Carlo model. Given that the Catholic 7 were presently getting $1.5 M/school/year, and had turned down ESPN’s reported offer of $2.5 M/school/year, George had to subjectively assign a probability of the Catholic 7 accepting the offer, for offer amounts ranging from $3.00 M/school/year to $4.50 M/school/year (in 15 increments of $100,000) based on the assumption that if the Catholic 7 were offered 3 times as much as they are presently getting, there was a 100% chance of the Catholic 7 accepting an offer of $4.50 M/school/year.
After a very considerable amount of work by George and his staff on the Monte Carlo simulations and sensitivity studies for each variable utilized, he determines that the ‘optimal’ offer is $3,400,000 per school per year, and that the ‘ceiling offer’ is $3,800,000 per school per year. An offer in excess of that amount is deemed to be too risky to offer, thus the term ‘ceiling offer’.
August 14, 2012 • Big East Officially Names Mike Aresco as Commissioner
August 14, 2012 • Big East gets serious about TV efforts – ESPN, feature article by Kristi Dosh, Attorney & Sports Business Analyst
In May 2011, the Big East turned down a TV broadcast rights deal from ESPN reportedly worth $11 million per school -- annually. Rights fees for conferences had been on the rise, and conference leaders were sure waiting for a better offer would pay off in a big way.
Today’s announcement that CBS executive vice president Mike Aresco will become the commissioner of the conference confirms the Big East is making television a priority. Aresco has led programming for CBS since 1996, handling such negotiations as the NCAA men’s basketball tournament and the 15-year SEC contract.
Neal Pilson, former president of CBS Sports, is optimistic about the Big East’s outlook. “If the Big East schools hang together, I believe they can secure a new TV deal equal to or better than the last offer from ESPN, because the media competition for their rights will be intense,” he said.
Friday, August 24, 2012 • George Smiley submits his completed proposal to the CEO. The CEO is impressed with it and is pleased with the numbers George has put together. The CEO schedules a meeting with the Fox Sports Board of Directors in early September to get their approval for the Big East project, and to get budget approval for its implementation.
Wednesday, September 5, 2012 • The CEO makes his presentation to the Fox Sports Board of Directors.
Wednesday, September 19, 2012 • The Board of Directors notify the CEO of their approval of George Smiley’s proposals, and approval of a provisional budget of $3 million for the ‘Development Phase’ of the Big East project, subject to the following caveats: (1) Noting that ”As of December 17, 2012, the Big East Conference did not have a television contract beyond the 2013-14 season”, the Board set a December 15, 2012 deadline for the completion of the TV Rights Contract negotiations with the seven presidents of the Big East’s Catholic schools, and the signing of a Memorandum of Understanding to that effect. (2) Prior to an official announcement of the anticipated deal in mid-December 2012, absolute secrecy must be maintained. If the media, or the Big East officials, or any of the football schools hear of the secret negotiations taking place before the deal is agreed, the project may be aborted on very short notice. (3) Noting the extensive volume of legal work that must be executed after the deal is agreed (by both internal council and external council) which is expected to take three months, the Board set a March 15, 2013 deadline for the signing of the completed (and legally scrubbed) TV Rights Contract by the CEO of Fox Sports and the seven presidents of the Big East’s Catholic schools. (4) The Catholic 7 should be ‘strongly encouraged’ to obtain the Big East brand name.
Thursday, September 20, 2012 • George Smiley is given a substantial budget increase, and a lot more ad hoc staff members.
Friday October 26, 2012 • Big East shopping for new TV deal - Brett McMurphy, ESPN
The Big East will not agree to a media rights deal with ESPN before the end of next week's 60-day exclusivity window, allowing the conference to negotiate with other networks, according to league sources. The Big East now will be free to negotiate its media rights deal with other networks, specifically NBC Sports Network/Comcast, which has shown the most interest in the league, and Fox. In April at the Big East's spring meetings in Ponte Vedra Beach, Fla., NBC Sports/Comcast and Fox provided in-depth "pitches" to the league's athletic directors. Sources said the league's AD's were most impressed by the presentations from NBC Sports.
The Big East may still end up re-signing with ESPN, but the league is banking on multiple networks bidding on its media rights deal to drive up its worth, league sources said. "We've been having productive discussions with the Big East and hope to continue our longstanding relationship," ESPN spokesperson Josh Krulewitz said. At last week's basketball media days in New York, Big East commissioner Mike Aresco said he was "optimistic about getting something done" with ESPN. "We're talking," Aresco said. "Talks have been good and constructive. They value our product immensely. We value them. We're continuing to talk. We'll see.
The Big East's current six-year media rights deal is worth $3.12 million annually for each of the eight full members and $1.5 million annually for each of the eight non-football members. The eight football members split $13 million; the 16 basketball members split $24 million.
In April of 2011, former Big East commissioner John Marinatto recommended the Big East accept a nine-year deal from ESPN worth $1.17 billion, an average of $130 million annually. That deal would have earned full members $13.8 million a year and non-football members $2.43 million a year. However, the league's presidents voted to turn it down. A $130 million deal per year would be worth $8.8 million each for the 10 full members; $6.5 million each for the four football-only members and $2.3 million each for the seven non-football members.
Tuesday October 30, 2012 • The CEO of Fox Sports sends seven invitations by courier to presidents of the Big East’s seven Catholic schools, requesting their presence, or the presence of their appointed representative, at a meeting in New York on Tuesday, November 13th to hear a proposal concerning Fox Sports’ sincere interest in offering a TV Rights contract exclusively to the seven universities that are not participating in Big East sponsored football. A reply to this invitation is requested no later than Tuesday, November 6th. The invitations spark a conference call between the seven university presidents, who are quite interested to hear Fox Sports’ proposal, and collectively decide to send their Heads of Legal (usually called the universities’ Vice Presidents for Legal Affairs) from each of the seven universities. They also decide to immediately engage external counsel, and have one of that legal firm’s specialists in TV Rights Contracts attend the meeting, for a total of eight attendees.
Tuesday, November 6, 2012 • The seven Big East presidents send their reply to the Fox Sports CEO. Their reply was exactly what Fox Sports had expected.
Wednesday, November 7, 2012 • Fox Sports’ CEO replies to the seven presidents, thanking them for their positive response, and proving more particulars about the meeting. It was then agreed that external counsel for both sides would attend the meeting as observers, meaning that they would not ask questions, they would not answer questions, nor would they provide any explanations during the course of the meeting. This suited both sides quite well, as neither side wanted a disagreement between the two external counsel over the precise definition of a word during the course of Fox Sports’ presentation.
Tuesday November 13, 2012 • A Tuesday was chosen for the meeting to allow the eight attendees from the Catholic 7 to arrive the day before and have meeting(s) amongst themselves, so as not to impinge on the attendee’s weekend. Upon confirmation of the meeting, Fox Sports had booked eight guest rooms and a Boardroom in a luxurious Manhattan hotel, where the meeting would take place. It went something like this:
10:30-10:35 am – The CEO of Fox Sports welcomes the eight attendees, tells an anecdote or two, tells the attendees who they will be hearing from, and introduces this first speaker (5 min).
10:35-11:00 – George Smiley make the primary presentation (MS PowerPoint), which does NOT include the first offer to the Catholic 7 schools. No Q&A for George (25 min).
11:00-11:20 – Presentation followed by Q&A by Fox Sports’ Vice President of Legal (20 min)
11:20-11:35 – Tea/coffee break (15 min)
11:35-11:50 - Presentation followed by Q&A by Fox Sports’ Vice President of Finance (15 min)
11:55-12:20 - Presentation followed by Q&A by Fox Sports’ Vice President of Marketing (25 min)
12:20-12:30 – Fox Sports’ CEO then presents his offer: an 8-year contract for $3,000,000 per school per year for 10, 11, or 12 schools, with the 3 to 5 additional schools selected by mutual agreement between Fox Sports and the seven Catholic universities. He said he would like the negotiations to begin as soon as practicable and conclude by Friday, December 14th. He added that a further three months would be required for the negotiations to add three to five schools, negotiations for possession of the Big East brand name, and ‘legal scrubbing’ of Final Draft of the TV Rights Contract, leading to a target contract signature date of March 15, 2013 - which by a fortunate coincidence is just before the beginning of the 2013 NCAA Men’s Basketball Tournament, guaranteeing extensive free national TV publicity for the new basketball-centric conference.
Fox Sports CEO knew that the Catholic 7 could not ‘go public’ with his proposal until it was agreed, and the Catholic 7 need to make an official public announcement about splitting away from the Big East before they could begin negotiations with prospective expansion schools. The Catholic 7 needed to be able to tell any prospective expansion school exactly what was on offer from the Catholic 7 and Fox Sports before they could be approached. It was also necessary to ‘go public’ before negotiations could begin with the ‘football’ schools for ownership of the Big East Conference brand name – something that was crucial to the Catholic 7 and Fox Sports.
He then provided information packets to each of the eight attendees, which included his offer in writing and Draft #1 of the proposed TV Rights Contract. Draft 1 was like only 2 or 3 pages, and included only the proposed main section headings - or ‘Articles’, as they were likely called – and below each heading, one or two paragraphs of easy-to read text about would appear in that particular Article.
He then invited the eight attendees to an impressive lunch being served for them in a nearby private dining room in the hotel, giving them the opportunity to discuss his proposals in private. The Fox Sports personnel and their external council then left the hotel, picking up the tab for the eight guest room, the Boardroom, and all meals the attendees had at the hotel.
Wednesday, November 14, 2012 • in the presidents’ offices at each of the seven Catholic schools, their respective Heads of Legal (who attended the meeting) give their presidents their account and impressions of the meeting with Fox Sports, and a copy of Fox Sports contract proposals. It is agreed to postpone telling the universities’ athletic directors about the proposals until the seven presidents have discussed the proposals amongst themselves via conference call and have agreed a common approach. Back in New York, the Big East’s external council is preparing his summary and observations of the meeting he attended the previous day, along with his recommendations going forward.
Thursday, November 15, 2012 • The presidents of the seven Catholic schools receive identical copies of the report by their external counsel, discuss it among themselves, and authorize the external counsel to draft a Letter of Reply for their approval no later than noon on Monday. The external counsel has informed them that $3,000,000 per school per year is a very good opening offer, and that if they opened with that generous of an offer, they must be prepared to go higher, but how much higher is unknown. He recommends a $4,000,000 per schools per year counter-offer. He also recommends trying to extend the contract period from 8 to 12 years to lock in the revenue for as long as practical. His report is well-received.
Friday, November 16, 2012 • The presidents of the seven Catholic schools meet with their seven respective athletic directors (who have been kept in the dark until now) to inform them of their intention to break away from the football schools and start a new basketball-centric conference, financed by Fox Sports. The athletic directors are tasked with creating a short list of suitable expansion candidate schools, with a primary emphasis on near-term basketball success, and the absolute need for secrecy. The last thing the presidents want is for the new conference to get off to a bad start in the 2013-14 season – a view strongly shared by the athletic directors and the head coaches of men’s basketball. The athletic directors have been kept out of the loop until today, because there was no point of widening the circle of secrecy until it was decided by the presidents to proceed with breaking away from the football schools.
Tuesday, November 20, 2012 • The Big East’s external counsel sends a letter to Fox Sport’s CEO to this effect, after its content and wording have been approved by the seven presidents:
“I have been authorized by the presidents of [seven universities named] to inform you that they are receptive of your overtures and wish to pursue negotiations concerning your proposals at your earliest convenience. I have also been authorized to conduct said negotiations on their behalf, as they do not wish to involve themselves directly on such sensitive matters at this stage. The presidents agree to your requested deadline of December 14, 2012 to conclude the negotiations on the agreement, and agree to your target deadline of March 15, 2013 to sign the agreement, assuming all goes well.”
“I am also pleased to forward to you my clients’ proposal concerning same: a 12-year contract for $4,000,000 per school per year for 10, 11, or 12 schools, with the 3 to 5 additional schools selected solely by the seven Catholic universities.. Yours truly, etc., etc.”
Wednesday, November 21, 2012 • Fox Sports’ CEO acknowledges receipt of the counter-proposal, informs the external counsel that he can expect a reply in due course, and wishes counsel a Happy Thanksgiving. Privately, the CEO is furious at the sheer brass neck of the Big East’s counter-offer. He had been expecting a counter-offer of $3.5 million per school per year, to which he would make his final offer of $3.25 million per school per year, to seal the deal. But the Catholic 7, who knew they had the upper hand in the negotiations, were getting downright greedy.
On February 10, 2013, SB Nation’s Brian Ewart wrote:
Since they seemingly initiated the split, FOX is willing to pay up for the rights to broadcast the Catholic 7 (plus between three and five additional schools). The most recent ESPN report puts the FOX offer at between $30 and $40 million per year, depending on the final number of schools in the league. That would pay each Catholic 7 member schools between $3.00 million and $3.33 million per year — a significant raise over the $1.5 million or so that each school makes from the current Big East deal.
November 22-25, 2012 • Thanksgiving weekend.
Tuesday November 27, 2012 • Tulane to Big East: This is actually happening - Jason Kirk, SB Nation. The Big East becomes a national laughing stock.
Thursday November 29, 2012 • Tulane University officially joins the Big East Conference – to the dismay of the seven Catholic basketball schools.
Tuesday December 4, 2012 • It has now been two weeks since the Big East submitted their counter-offer of $4,000,000 per schools per year, and the Big East presidents are getting very concerned (as was the intention of Fox Sports). The presidents request their external counsel to initiate a phone call to Fox Sports’ external counsel to enquire about their November 20th offer. He does, and informs the presidents that he was told their offer substantially exceeds what Fox Sports is willing to pay for the TV Rights contract, and that is a big problem for Fox. He was alos told to expect a reply from Fox Sports shortly.
Tuesday December 4, 2012 • This is the phone call that Fox Sports’ CEO had been waiting for. The Catholics were jittery, perhaps realizing that they had aimed too high, just as they had done in April 2011 when they scuppered the offer from ESPN with their greed. Now was the precisely right time for Fox Sports to reply.
Tuesday December 4, 2012 • Fox Sports agrees to lengthen contract period, but is not yet ready to give away their input in selecting the expansion schools. Fox Sports submit their second offer to the Big East: a 10-year contract for $3,500,000 per school per year for 10, 11, or 12 schools, with the 3 to 5 additional schools selected by mutual agreement between Fox Sports and the seven Catholic universities. Fox Sports also warns the Big East that they cannot go a penny above $3,500,000 per school per year without having some control over the selection of the expansion schools.
Wednesday December 5, 2012 • Fox Sports receives a second counter-offer from the Catholic 7: a 12-year contract for $3,750,000 per schools per year for 10, 11, or 12 schools, with the 3 to 5 additional schools selected solely by the Big East, but limited to their guaranteed short list of Xavier, Dayton, Saint Louis, Butler, Creighton, and Virginia Commonwealth.
Thursday December 6, 2012 • Fox Sports is happy enough with the six schools on the ‘guaranteed short list’ and replies: “We would be willing to accept your December 5, 2012 offer subject to the Catholic 7 schools obtaining the Big East brand name and all associated legal rights pertaining thereto. If the Catholic 7 are unable or unwilling to obtain the Big East rights, then the specified Contract Amount shall be $3,500,000 per school per year. This is our best and Final Offer.”
Friday December 7, 2012 • External counsel for the Catholic 7 urges the presidents to accept Fox Sports’ Final Offer, and after a brief discussion, they do. A Memorandum of Understanding incorporating what has been agreed is then signed by Fox Sports and the seven university presidents on December 7th.
The deal is finally agreed.
[SIDEBAR #4: Incentive or Leverage?] Recall that on Wednesday, September 19, 2012 • The Board of Directors notify the CEO of their approval of George Smiley’s proposals … subject to the following caveats: ”(4) The Catholic 7 should be ‘strongly encouraged’ to obtain the Big East brand name”. An executive ignores his Board of Directors at his own peril. As part of their negotiation strategy, Fox Sports deliberately did not include an incentive for the Catholic 7 to obtain the Big East brand name, until they presented their ‘Best and Final offer’ to the Catholic 7 presidents. This was because Fox Sports did not want to find themselves involved in an inevitable protracted negotiation over the ‘true value’ of the Big East brand name (which neither side actually knew), so their ‘Best and Final offer’ included a $30 million incentive to the Catholic 7 to obtain the Big East brand name, knowing that it was worth far more than $30 million. Note that the difference between $3,750,000 and $3,500,000 is $250,000 per school per year, and that ($250,000 per school per year)x(10 schools)x(12 years) = $30 million. “Take it or leave it” the Catholic 7 were told on December 6th. They took it.
* * * * *
Saturday afternoon, December 8, 2012 • A press release issued jointly by the seven presidents of the seven Catholic schools stated that they decided to break off from the league.
Sunday night, December 9, 2012 • In an undisclosed location in New York City, Mike Aresco stood in front of a room of seven men -- all of whom wanted to know what was being done to save their institutions. Just 10 days earlier, the latest iteration of the Big East Conference had come to open its arms to Tulane University, another school from a smaller conference replacing a large and powerful football-playing member.
The seven schools -- Seton Hall, St. John's, Villanova, Georgetown, Marquette, DePaul and Providence -- had been wary of the addition but were still willing to stomach it based on the promise of a lucrative television rights contract the conference's commissioner was supposed to be delivering. But three days before the meeting, a CBSSports.com report broke the news that a TV rights deal with the decaying league could be worth as little has half of what the Big East was estimating it would command. It turned out to be the final straw for the league's basketball schools. Enough was enough.
[COMMENTARY]: The timing of the recent external events could not have been better for Fox Sports and Catholic 7 presidents. Recall that on October 30, 2012, the CEO of Fox Sports sent invitations to Catholic 7 presidents to hear their proposal for splitting the Catholic 7 from the Big East in order to form a basketball-centric conference backed by Fox Sports. Total secrecy had been maintained throughout, and as a direct result, the Catholic 7 already had possession of a signed preliminary contract with the relevant numbers filled in. It is clear from what was written at the time that neither Mike Aresco, nor the football schools, nor the sports media had any idea that the Catholic 7 already had a TV Rights contract in place. Sure, they all knew the Catholic 7 were unhappy about a lot of things, but they wouldn’t really quit the Big East in a fit of anger. Surely not. Yet, the sports media portrayed the Catholic 7’s split as a near-spontaneous reaction to Tulane and the fall in market value of the next Big East TV Rights contract. The brave (and perhaps foolhardy) Catholic 7 presidents had taken a giant leap of faith into the unknown, hoping to find some like-minded Catholic soulmate universities with whom to start a new basketball-centric athletic conference, and then go in search of a TV Rights Contract with someone in the spring of 2013.
Except that in the real world of big money, that’s not how things work. The Catholic 7 would never split from the Big East without a TV Rights agreement in hand, as that would be far too risky for them to even contemplate. The sports media of the day clearly did not understand this, and assured their readers that the concept of a new Catholic basketball conference was now in its infancy. They couldn’t have been more wrong.
The Catholic 7 presidents could now openly recruit expansion schools for their new conference, and open formal negotiations with the football schools for the Big East Conference brand name and all associated legal rights pertaining thereto – the Holy Grail of future marketing success – not to mention the Big East’s record book full of impressive accomplishments and National Basketball Championships.
Monday, December 10, 2012 • By now, George Smiley and his staff had heard the news about the Catholic 7 presidents going public with their departure from the Big East on Saturday afternoon. Early on Monday morning, George assembled his entire staff, and thanked the people he had seconded from the marketing, finance, and IT departments. “Your assignments have now been completed, and you have my sincere thanks and appreciation for your tremendous effort and success in the Big East project. Please start packing your things, and the HR Department will be in touch with you by lunchtime to give you your new assignments. The Contract Lawyers will remain with me until mid-March. Your present assignment is to complete the updating of the TV Rights Contract by Friday, December 21st. On January 2nd, you will be joined by many more Fox Sports lawyers to scrub the Final Draft of the contract, and to incorporate new Articles concerning the Big East name, if the Catholic 7 can get it from the football schools. You will also need to review the Article concerning conference expansion and the new 3-5 schools after they are selected by the Catholic 7 schools. Thanks again, and best of luck going forward.”
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