Update from C7 Meeting

[GGGG]

Pakuni has it right.  The C7 hold most (actually almost all) of the cards and will absolutely act in concert for their own benefit.  The Invite 5 (which certainly has more than 5 names on the list) may be given some opportunity to offer suggestions but in the end will be presented with a final 'take it or leave it' offer to join.  Knowing that a 'polite no' will relegate them to the equivalent of the Horizon league and likely not materially change the deal that the C7 can negotiate with Fox, they'll happily sign on the dotted line smiling because good fortune shined on them that day. BOTH sides of the negotiation know it.

What makes you believe this is the case?  I think Chicos is right here.  You think Fox isn't going to change their tune if Xavier, Butler, et al say "no," and instead the C7 invite the likes of St. Bonnies and Duquesne?  They have a little more leverage than you are giving them credit for.

As I have been saying, in the end everyone wants this to happen.  The C7 want to build a power conference.  The "Invite 5" want to be a part of it.  And unless either side is completely unreasonable, they will figure things out in a manner that satisfies everyone.  If they don't, neither side is going to maximize their revenue.

[keefe]

Disagree, because without those additional schools, that $500 million contract doesn't exist so the value of increased earnings is overstated.  It's actually tied to them being in the conference, thus the power and leverage that they have.  Sure, they'll make more money by joining the new league, but how much more they make is absolutely tied to them actually joining the league.  Without the additional schools, that contract isn't the same, not close. 

"Dear C7,

We are excited that you are willing to consider us to join your not yet named, not yet approved or certified athletics conference.  However, we have a few concerns.  We understand you want us to be paid less than you guys in terms of media revenues, despite the fact your basketball prowess for most of the your schools is not very good, your attendance is lower than ours and you generally are trading in on achievements from decades ago (not you Marquette, Georgetown and Villanova).  More importantly, we understand that we are the vital piece missing so that you guys can actually implement this plan of inequitable payments.  We are sorry that you have to incur exit fees from the Big East, we also would have to incur exit fees from the MVC and Atlantic 10.  We're sorry that legal fees will be large and consulting costs added to the expenditures, we also have to incur these costs.  As for the Big East name, well what is that worth today?  It has become a name that has been tarnished, mocked, sullied, and weakened in the last few years.  A sunken ship where schools can't wait to get off before they drown.  We're fine not paying for that name and coming up with a new one which Fox will promote heavily.

So let us know when we are all aboard this new conference TOGETHER, on equal footing.  We're happy to split up all of the costs, our exit fees...your exit fees, our lawyer fees and your lawyer fees and equally happy to share in the revenues equally.  It seems you need us for that television contract you so desire.  We want more revenues, as well, but to make both of these objectives a reality, we both need each other and cannot get their on our own.  So call us when terms are equal, in the meantime we're going to continue winning games, going to the NCAA tournament....we're happy to explain that to DePaul, Providence, Seton Hall, etc if they don't know what that means"

Sincerely,

Butler, Xavier, Creighton (and two others we don't particularly care who they are

Chicos is spot on here

[chapman]

As I have been saying, in the end everyone wants this to happen.  The C7 want to build a power conference.  The "Invite 5" want to be a part of it.  And unless either side is completely unreasonable, they will figure things out in a manner that satisfies everyone.  If they don't, neither side is going to maximize their revenue.

Boom, nailed it.

C7: We're fronting the start-up costs and effort, we've done the work to get this thing started, we've got the major conference label and are offering you five times your current TV deal revenue and more exposure.

Invite 5: You are also taking a lot more of the TV deal than we get.  Your TV deal falls apart without us and you'll be left with even less than you'd get if things were split equally with us from the get-go.  Your NCAA shares will also go down if you're stuck inviting lesser programs since only two or three of the seven of you are in good shape at the moment.

And that's why we have:

[M@RQUETTEW@RRIORS]

Pretty simple.

If the 5 new schools are adamant about equal shares(which we dont even know that they are)
Then they need to pay an equal amount of the costs to get this rolling.  Either pay up front, or take less until the costs are taken care of.

[keefe]

And that's why we have:

HOLY SH1T! Where did you get this? Has anyone thought to get a copy of this to the Taliban? And Hezbullah? Christ but we could have avoided a lot of suffering if we only had this formula! Too bad this wasn't around in 1939.

[Pakuni]

What makes you believe this is the case?  I think Chicos is right here.  You think Fox isn't going to change their tune if Xavier, Butler, et al say "no," and instead the C7 invite the likes of St. Bonnies and Duquesne?  They have a little more leverage than you are giving them credit for.

You're making the same mistake Chico's is making ... arguing as if the potential invitees are acting together instead of as five separate entities looking out for their own interests. They have leverage only if they're acting as a single unit. But they're not. Creighton's not going to turn down a better deal for itself because Xavier doesn't like it. Butler isn't going to reject the additional money and exposure because Dayton feels short-shrifted.  
To suggest that they're all going to say no to extra revenue, extra exposure, better competition, etc. because of some misguided notion of fairness (and by "fairness" Chico's means, "No, C7, you are not entitled to recover your startup costs") is, well, misguided.

As I have been saying, in the end everyone wants this to happen.  The C7 want to build a power conference.  The "Invite 5" want to be a part of it.  And unless either side is completely unreasonable, they will figure things out in a manner that satisfies everyone.  If they don't, neither side is going to maximize their revenue.

Nobody has ever disputed this. This, in fact, is why the invitees take the deal even if it means unbalanced revenue distribution initially. Because they know this is how they maximize their revenues.

[Pakuni]

Pretty simple.

If the 5 new schools are adamant about equal shares(which we dont even know that they are)
Then they need to pay an equal amount of the costs to get this rolling.  Either pay up front, or take less until the costs are taken care of.

Exactly.

Find it inexplicable that some here seem to be arguing that, essentially, Marquette and the rest of the C7 ought to subsidize other programs' entry into this thing by footing the startup costs on their own.

[GGGG]

You're making the same mistake Chico's is making ... arguing as if the potential invitees are acting together instead of as five separate entities looking out for their own interests. They have leverage only if they're acting as a single unit. But they're not. Creighton's not going to turn down a better deal for itself because Xavier doesn't like it. Butler isn't going to reject the additional money and exposure because Dayton feels short-shrifted.  

And you know this how???  How do you know that the Butler people aren't talking to the Xavier people, etc? 

This, in fact, is why the invitees take the deal even if it means unbalanced revenue distribution initially. Because they know this is how they maximize their revenues.

If they feel that it based on fairly compensating the C7 for their work...then yes.  I was simply commenting on jsglow's point that they have no leverage because the C7 will simply turn elsewhere without substantial impact to the Fox contract.

[mu-rara]

I am not understanding what you are arguing about.  Reminds me of an episode of Big Bang Theory where Sheldon and Leonard argue about which Klingon is more powerful.

Chicos et al.:  Invite 5 get equal TV revenue immediately, but pay up front costs as part of entrance into the league.

Counter argument:  Invite 5 enter league with no upfront expenses, but receive a lower payout for some agreeable, negotiated period of time. (assume no acrimony)

Am I missing something?  Doesn't this net out the same $$?   Some may favor the Counter Argument as slightly less risky.  (No upfront $$ paid out).  Reasonable people will make this work either way.

[🏀]

I am not understanding what you are arguing about.  Reminds me of an episode of Big Bang Theory where Sheldon and Leonard argue about which Klingon is more powerful.

Chicos et al.:  Invite 5 get equal TV revenue immediately, but pay up front costs as part of entrance into the league.

Counter argument:  Invite 5 enter league with no upfront expenses, but receive a lower payout for some agreeable, negotiated period of time. (assume no acrimony)

Am I missing something?  Doesn't this net out the same $$?   Some may favor the Counter Argument as slightly less risky.  (No upfront $$ paid out).  Reasonable people will make this work either way.

The only people really making this out to be a big deal are the message boards. The costs are costs and will be paid for by every member in some way.

[M@RQUETTEW@RRIORS]

I am not understanding what you are arguing about.  Reminds me of an episode of Big Bang Theory where Sheldon and Leonard argue about which Klingon is more powerful.

Chicos et al.:  Invite 5 get equal TV revenue immediately, but pay up front costs as part of entrance into the league.

Counter argument:  Invite 5 enter league with no upfront expenses, but receive a lower payout for some agreeable, negotiated period of time. (assume no acrimony)

Am I missing something?  Doesn't this net out the same $$?   Some may favor the Counter Argument as slightly less risky.  (No upfront $$ paid out).  Reasonable people will make this work either way.

I agree.  But I do think there is a difference.  For example, if you have a business idea and you want to allow someone else in on the idea.  You can either allow them to invest equally up front and share equally in the profits.  Or you can not allow them to invest equally and not quite get equal shares in the profit.  Since you are the one with the idea and business, you get to control how it all goes down.  Pretty simple.

[JTBMU7]

here's an interesting article on the possible TV partners and what they bring to the table...
http://www.awfulannouncing.com/2013/january/the-possible-tv-suitors-for-the-catholic-7-basketball-schools.html

[keefe]

The only people really making this out to be a big deal are the message boards. The costs are costs and will be paid for by every member in some way.

Chicos knows everything because he does everything at DirecTV. Didn't you know that?

[Pakuni]

And you know this how???  How do you know that the Butler people aren't talking to the Xavier people, etc? 

They may very well be talking, but I think it's highly unlikely that multiple programs from multiple conferences (even moreso if this were happening a mere four months earlier), most of whom have little shared history, are banding together to serve one another's interests, as opposed to each trying to get the best deal they can. Can I say this with 100 percent accuracy? I suppose not. But given that there's been zero reporting of this, and given the recent history of realignment, and given the stakes, I think it's a safe assumption that Butler won't subordinate itself to Xavier and Creighton won't risk being left out in the cold to stand on principle with Dayton.
Maybe I'm wrong, but logic dictates otherwise.
If you can find anything indicating so, I'd be happy to check it out.

If they feel that it based on fairly compensating the C7 for their work...then yes.  I was simply commenting on jsglow's point that they have no leverage because the C7 will simply turn elsewhere without substantial impact to the Fox contract.

None of us know the impact on the Fox contract. But I would suggest the true value of the contract for Fox by and large comes from the core programs (i.e. the C7), not the five additions. That's not to suggest those programs wouldn't add value, just that Xavier, Dayton and St. Louis, for example, have less value to a network than Georgetown, Marquette and St. John's.
If anything, the A-10's new contract illustrates this. A conference featuring Xavier, Butler, Dayton, etc. was judged to be worth $40 million over 8 years.
If the reports are true, the market for those schools + the C7 is worth $500 million over 12 years. Have Dayton, Butler and Xavier suddenly become that much more valuable in a matter of months? Did the A-10 woefully underestimate its value and accept a terrible, terrible deal? Or does the majority of the value lie in the C7 programs? I'm suggesting it's primarily the latter.
You're free to disagree.

[Benny B]

Boom, nailed it.

C7: We're fronting the start-up costs and effort, we've done the work to get this thing started, we've got the major conference label and are offering you five times your current TV deal revenue and more exposure.

Invite 5: You are also taking a lot more of the TV deal than we get.  Your TV deal falls apart without us and you'll be left with even less than you'd get if things were split equally with us from the get-go.  Your NCAA shares will also go down if you're stuck inviting lesser programs since only two or three of the seven of you are in good shape at the moment.

And that's why we have:

Meh... here's an even better flowchart.

[Big Papi]

What makes you believe this is the case?  I think Chicos is right here.  You think Fox isn't going to change their tune if Xavier, Butler, et al say "no," and instead the C7 invite the likes of St. Bonnies and Duquesne?  They have a little more leverage than you are giving them credit for.

As I have been saying, in the end everyone wants this to happen.  The C7 want to build a power conference.  The "Invite 5" want to be a part of it.  And unless either side is completely unreasonable, they will figure things out in a manner that satisfies everyone.  If they don't, neither side is going to maximize their revenue.

Fox will change their tune a little if Xavier and Butler say no but do you honestly believe Xavier and Butler will walk away from tripling their revenue based on principle?  The C7 are going to at least double their revenue no matter what. If the last 2 plus years have shown us anything it is that if any institution can generate WAY MORE revenue somewhere else, they are GONE in less then 60 seconds.  Tradition, rivalries and anything else be damned.  Xavier and Butler have very little leverage and Creighton, St. Louis, VCU and Dayton have none.

Plus if it really is only about who else we add, wouldn't the C7 bend over backwards to have Gonzaga in the league?  Now they are way more a brand name than Xavier and Butler combined.  Heck by some arguments in this post, the C7 should all just bow down to Gonzaga and give them twice the revenue of everyone else and even name the league after them.

[ChicosBailBonds]

You're making the same mistake Chico's is making ... arguing as if the potential invitees are acting together instead of as five separate entities looking out for their own interests. They have leverage only if they're acting as a single unit. But they're not. Creighton's not going to turn down a better deal for itself because Xavier doesn't like it. Butler isn't going to reject the additional money and exposure because Dayton feels short-shrifted.  
To suggest that they're all going to say no to extra revenue, extra exposure, better competition, etc. because of some misguided notion of fairness (and by "fairness" Chico's means, "No, C7, you are not entitled to recover your startup costs") is, well, misguided.
Nobody has ever disputed this. This, in fact, is why the invitees take the deal even if it means unbalanced revenue distribution initially. Because they know this is how they maximize their revenues.

You are right Pakuni, but that's also why I said if I were Butler and Xavier, I would form a bloc...they are the key.  Maybe Creighton as well.  As a bloc of 2 or 3, they control tremendous leverage.  These schools, if I were consulting them, would be wise to act as a bloc and say we are coming as a bloc and if you don't invite all three (or five) of us, then go to your next rung on the ladder which is a considerably diluted level.  We're happy to come on board, but it has to be as equals.  We'll share the burdens and the revenues.

I just don't see why this is so hard, it's actually quite easy framework to setup.  Why poison the well in a league before you even get it started.  The "critical 3" or Must Have 3 as I like to call them, have a ton of leverage if they act in concert with each other...I absolutely agree with you.

[M@RQUETTEW@RRIORS]

You are right Pakuni, but that's also why I said if I were Butler and Xavier, I would form a bloc...they are the key.  Maybe Creighton as well.  As a bloc of 2 or 3, they control tremendous leverage.  These schools, if I were consulting them, would be wise to act as a bloc and say we are coming as a bloc and if you don't invite all three (or five) of us, then go to your next rung on the ladder which is a considerably diluted level.  We're happy to come on board, but it has to be as equals.  We'll share the burdens and the revenues.

I just don't see why this is so hard, it's actually quite easy framework to setup.  Why poison the well in a league before you even get it started.  The "critical 3" or Must Have 3 as I like to call them, have a ton of leverage if they act in concert with each other...I absolutely agree with you.

If they do that there is no argument.  Its just a matter of semmantics.  Do the new schools pay up front?  Or do they pay as they go by taking less till the debt is recovered?

[ChicosBailBonds]

Chicos knows everything because he does everything at DirecTV. Didn't you know that?

Definitely not, but I've been around the block on this stuff for almost 20 years and work with these networks, the professional sports leagues, the NCAA, etc.  Just trying to help define and put some color on how these things work.  There are many turns and twists and more turns.  There will be public statements and then there will be what really happened in back rooms.   

I'm trying to offer a view from both the business side and the college athletic administration side...I've been in both positions and simply trying to share some of that perspective.  This will all get worked out, I'm of the mindset of starting with a clean slate, make sure everyone has equal skin in the game and equal outcomes.  It provides for the best possible marriage and long term stability.  That's not the standard I would use for some business deals, you have to use your leverage where you can.  In a situation like this, however, where multiple parties are needed to make this work...I believe it is the right thing to do.

[Benny B]

Let's all keep in mind that the "uneven distribution" model is still speculation at this point.

Focus more on the "how," less on the "what if."

[Nukem2]

Let's all keep in mind that the "uneven distribution" model is still speculation at this point.

Focus more on the "how," less on the "what if."

Yep.  Just an offhand comment by an ESPN ( ) writer so far. 

[Lennys Tap]

Definitely not, but I've been around the block on this stuff for almost 20 years and work with these networks, the professional sports leagues, the NCAA, etc.  Just trying to help define and put some color on how these things work.  There are many turns and twists and more turns.  There will be public statements and then there will be what really happened in back rooms.   

I'm trying to offer a view from both the business side and the college athletic administration side...I've been in both positions and simply trying to share some of that perspective.  This will all get worked out, I'm of the mindset of starting with a clean slate, make sure everyone has equal skin in the game and equal outcomes.  It provides for the best possible marriage and long term stability.  That's not the standard I would use for some business deals, you have to use your leverage where you can.  In a situation like this, however, where multiple parties are needed to make this work...I believe it is the right thing to do.

First, I absolutely respect your knowledge in this stuff as you have an extensive background.

That said, isn't this as much about "eyeballs" as it is about recent basketball success? Xavier has been a really good team for a decade or more but is still playing for peanuts on TV. DePaul has been crap for 20 years but the Big East went after them. The C7 has Chicago, DC, Philly and NY/NJ in addition to (probably)the Big East name. Given that MU, GTown, Villanova roughly = Xavier, Butler and Creighton in recent on court success (and trounce them historically) to me it's advantage (and therefore leverage) to the C7.

[Pakuni]

You are right Pakuni, but that's also why I said if I were Butler and Xavier, I would form a bloc...they are the key.  Maybe Creighton as well.  As a bloc of 2 or 3, they control tremendous leverage.  These schools, if I were consulting them, would be wise to act as a bloc and say we are coming as a bloc and if you don't invite all three (or five) of us, then go to your next rung on the ladder which is a considerably diluted level.  We're happy to come on board, but it has to be as equals.  We'll share the burdens and the revenues.

I just don't see why this is so hard, it's actually quite easy framework to setup.  Why poison the well in a league before you even get it started.  The "critical 3" or Must Have 3 as I like to call them, have a ton of leverage if they act in concert with each other...I absolutely agree with you.

OK, so we agree the C7 should be reimbursed their startup costs and the other five members should not be subsidized into the league.

I asked a question earlier that probably got lost in the minutiae, so I'll ask again ... why do yo think it would be preferable/advantageous to the non C7 schools to pay some sort of lump sum entry fee to cover a share of startup costs as opposed to letting the C7 recover that money over a defined period of time out of shared revenues? I would think the latter would be more palatable, for a number of reasons, for most of these programs than having to fork over $5-10 million on the spot. It sure would seem to make more sense financially.

[Silkk the Shaka]

OK, so we agree the C7 should be reimbursed their startup costs and the other five members should be subsidized into the league.

I asked a question earlier that probably got lost in the minutiae, so I'll ask again ... why do yo think it would be preferable/advantageous to the non C7 schools to pay some sort of lump sum entry fee to cover a share of startup costs as opposed to letting the C7 recover that money over a defined period of time out of shared revenues? I would think the latter would be more palatable, for a number of reasons, for most of these programs than having to fork over $5-10 million on the spot. It sure would seem to make more sense financially.

Because Chicos likes to dig in heels and argue a point to death with agonizing minutiae even when proven wrong.  Fairly obvious.