Disparity In Conference Revenue Undergirds Underwood Move

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We can blame anyone for this, really. Mike Holder, Brad Underwood, Travis Ford, whoever you want to blame probably deserves to shoulder a little responsibility for Underwood bailing on Stillwater after Year 1 for Champaign.

I think we can also all agree this was (mostly) a money issue. If Illinois is a better job than Oklahoma State (a big if), then it is marginal at best. Not even worth discussing the minutia that might make it so.

Illinois was willing to pay ~$20 million (including Underwood’s $3 million buyout) and OSU was not. Cut and dry. Quick and dirty.

You can argue about whether Underwood even gave them the chance (and what that says about his relationship with OSU athletic director Mike Holder), but I’m pretty sure if Hodler had ponied up this time last week and said “we’re in for $3 million a year” that Underwood would be down scouring Florida for some of those fours and fives Leonard Hamilton is rolling out there.

On the other hand, it’s hard to find Mike Holder at fault for not wanting to pay someone who is just one year removed from coaching in the Southland Conference.

The real issue here, though, is that this specific situation is a harbinger for the future.

We already talked extensively about money yesterday and about how OSU has a lot of it, but it also spends a lot of it, too. That $3 million is a lot of money for a college basketball coach to be paid. Especially one that is .500 in conference games in a Power 5 league.

In football, $3 million is nothing. In basketball? Well this time last year Jay Wright (Villanova), John Beilein (Michigan), Tony Bennett (Virginia) and Mick Cronin (Cincinnati) were all making less than that.

So how does OSU balk at $3 million while Illinois pays it? Enter FOX and ESPN.

Wait … huh?

Let me explain. The Big 10 just signed a new TV deal with FOX for all of the moneyHere is Jon Wilner of the Mercury News.

 

Remember: The Big Ten’s new Tier 1 deal begins in 2017-18, and it’s also a whopper, averaging $440 million per year.

Which brings us to …

Fiscal year 2017-18 school distributions …

Big Ten: $45 million (estimate)
SEC: $43 million (estimate)
Pac-12: $31 million (estimate)

What does it mean?

As a general rule among the Power Five, distributions from the conference office account for varying percentages of the athletic budgets of its memberships — for some, it’s 20-25 percent, for others, 35-40 percent.

That revenue stream helps pay coaches and pay debt service and pay cost of attendance and pay recruiting expenses … and much more.

That is insane. The Big 10 will be making $45 million per team next year. Keep in mind: The Big 12 just distributed $30 million to each of its teams last year and is expected to max out at $44 million in 2025. The Big 10 numbers include third-tier rights while the Big 12 numbers do not (more on this in a second).

Berry Tramel wrote about this for The Oklahoman last year. Who knew how prescient this would be.

How does this relate to the Big 12? Well, the Big 12 is going to be well behind the Big Ten in team payouts — the Big 12 figures to be in the high $20 millions the next few years, which was a good number when the current TV deal was signed a couple of years ago and about even with the Big 12’s peers. But now the Big Ten and SEC have jumped back up.

That’s a concern for the Big 12. And it’s not a problem that can be solved by formation of a Big 12 Network. OU president David Boren has led the charge to establish a conference network, but even if the Big 12 formed such an enterprise, it’s not likely to be as fruitful as the Big Ten Network, which has a wide reach with the big populations in Big Ten Networks.

And even if a Big 12 Network could reap $8 million per school per year, that would not carry the Big 12 into Big Ten financial territory. The financial disparity is a long-term dilemma for the Big 12.

The theoretical Big 12 Network Tramel mentioned is be tantamount to each Big 12 team’s third-tier rights. The Big 10 (and SEC) sell their third-tier rights to their conference networks and that money is baked into their conference distribution. The Big 12’s is not. You’re on your own with third-tier rights in the Big 12.

Texas makes $15 million a year on this from the Longhorn Network which means they are in Big 10 territory in terms of money and can pay Shaka Smart $3 million a year, and it’s not an issue. OSU likely made around $5-6 million on this last year, but its numbers are not skyrocketing as quickly as that of the SEC or Big 10.

The reality here is that other conferences are getting richer faster than the Big 12, and unless you’re Texas or (to an extent) OU and can sell your third-tier rights for big bucks, heists like this will continue to happen into the future.

It’s not an accident that a Big 10 team stole a basketball coach from a Big 12 team that could not pay him as much money. Look at the schools that pay a lot in the Big 12. Kansas (duh), OU and Texas both pay $3 million (they make a lot more money than OSU), West Virginia (Huggins rocks) and TCU (IDK).

There are innumerable angles to look at this from, but it sort of underscores a future that Big 12 schools don’t want to consider. Other conferences and teams are going to have more cash to go around, and that means the gap will only widen as the years roll on.


  • CowboyFan

    Since you are talking about revenue it seems like you would actually want to compare the revenue of the two schools being discussed.

    http://sports.usatoday.com/ncaa/finances/

    OSU didn’t lose him because they couldn’t afford him.

    • David

      Illinois model will be bankrupt shortly. Just because they bought doesn’t mean they can afford.

    • TL

      Those numbers are from the 2014-2015 season. Long before the Big 10 signed their tv deal and tier 1 rights started being distributed, as Kyle states above. If it was ‘only’ about money, Illinois could out bid us. Very simple

    • Stephen Olinghouse

      You haven’t looked at next yr and beyond #’s each big 10 school will reap at least $15 million ( probably more in future yrs than all of the big 12 schools. That is each year illinois, Purdue Minn etc will easily outpace their rivals in big 12. Yes they have the money to take chances. With way smaller population base and alumni base the big 12 will not be relevant the next two decades. Money tv sets population base say so. We have to expand into bigger tv/ population centers or die. Cindy and Temple make great acquisitions. I believe big time Comcast exec is temple alum. Big 12 needs to think outside box or die. Already heard he made overtures to big 12 about tv packages during our big 12 beauty contest

      • joep

        TV(cable) as we know it might also be irrelevant in two decades. Adding Temple to get a deal done with Comcast makes no sense in a world where sports is watched on Netflix (or something like it).

        Plus do you really think people in Cincinnati are Bearcat fans or is it more likely that they are Buckeye fans… The city of Philadelphia is going to go Owl football crazy if they join the Big XII?

  • David Einstein

    Blame Texas.