Thursday, January 1, 2009

Is the BCS Moving to Pay-Per-View?

By Bobby

The global economic crisis has led to many discussions of finance in various discussions. RTL has made changes to both of their major television franchises in the United States, eliminating the “Gives Back” show on the US version of their Idols franchise for the upcoming season, while the types of prizes and values on The Price Is Right has been increased (fancier prizes, especially leather, that had previously been banned, have been legalised, and also values of some games have increased, most notably the $25,000 on the bonus spin in the Showcase Showdown).

But the economic crisis has hit the media harder than what most people would expect. Companies are reducing advertising budgets, cutting back on 30-second commercials while the rates are continually increasing to pay for higher budgets caused by wage hikes for labor such as production staff and cameramen, which are used even in “reality” television programs. Such a problem led to the Bowl Championship Series bids by the three networks (NBC, CBS, Fox) to be considerably lower than cable (ESPN).

The result is starting in 2011, the BCS moves exclusively to cable on ESPN, at a rate of $125 million per year for four years. This could also bring to fruition the constant discussion of mainstream sports moving to pay-per-view, which is a constant issue being discussed by many in the sports business market. With the current economic downturn hurting advertising, this may be the time that ESPN implements pay-per-view for the BCS Championship, considering that most of the country were unable to see the Big 12 battles weekly except for pay-per-view under ESPN's policy on all college football being regional on the ESPN Broadcast Network. (Only the Southeastern Conference, on CBS, has a national game on network television weekly.)

The economic value of a BCS Championship pay-per-view after four BCS bowls on the ESPN Cable Network is now much easier to pull off than it was in the past because of the advertising policies.

First, ESPN has a $2.96 (current as of the time) per-subscriber rate it charges to cable and satellite providers. Raising it to $3.50 per month for the 90 million subscribers would generate about $48.6 million per year for the three BCS games, where they can sell advertising for the games on the ESPN cable network.

Second, ESPN can charge about $250 per bar (50,000 bars in the US), for a rate of $12.5 million total after all 50,000 bars to show the BCS Championship Game. Large venues (over 25 people) in areas near the two schools' hometowns would also buy the large venue fee.

Third, ESPN can use the pay-per-view to charge $30 per home, and with about three million homes that would buy a BCS game, that amounts to $90 million. This game would not be “televised” for purposes of NCAA media policy.

Together, ESPN could easily profit $150 million a year on the BCS, and when production costs are considered, they could easily turn a tidy profit for the BCS Championship Game on pay-per-view (the rights fee is $125 million a year for four years), and the other four games on the ESPN Cable Network.

This, when added to internet pay-media coverage of the games and highlights, was too much in easy profit that the networks could not offer. The concern now is that the BCS could easily go to pay-per-view, considering that the pay-per-view could easily make home at least $102.5 million (or more if the bar rate was increased) of ESPN's $125 million for the five games.

Therefore, the consideration of a pay-per-view of the BCS is now more serious than ever because ESPN has the resources to make the championship game a pay-per-view option that would make profits at the expense of viewers.

No comments:

Post a Comment

Remember: Think Before Commenting.

Related Posts Plugin for WordPress, Blogger...