Why DeLoss Dodds is Smarter Than the Rest of Us

The controversy of showing high school football games on the new Longhorn Network (LHN) and the threat that OU and aTm will bolt for the SEC is nothing more than an over-bet bluff in the first round of a poker tournament. For OU and aTm to move to the SEC would require the alignment of so many planets and so many backroom deals between universities and state governments, that their threat is a bit like a wife threatening to move to the Riviera when her husband refuses to take out the trash.  

If Texas wants to make the most of its long-term opportunities with LHN, it must keep a seat at the Big 12-2 table. via www.blindbetpoker.com

The threat of realignment seems more truly centered on a much larger issue that will likely play out in all of college football over the next decade as a series of high stakes matches worthy of an entire World Series of Poker epic. The Big 12-2, that loosely tangled conglomerate of schools with dramatically different market potentials, athletic traditions, and geographical and academic cultures, is merely the test tube for the grand economic experiment that is unfolding in college football. The issue for colleges and universities (note that I did not say the NCAA, because the financial choices of universities have nothing to do with the NCAA) is how to mix revenue generation and "fair" competition. Specifically, should individual universities fully exploit their marketing power even if they gain too unfair a competitive advantage in the perceptions of their sporting partners? After the jump, I try to expand on what Peter’s excellent missives suggest is the "long play."

There are really two options for establishing competitive structures in a sport, like college football, bathed in publicity and driven by revenue. The first, more traditional option, developed in the days before media saturation and the psychological addiction of society to football, is a full revenue sharing model. In college football, this would manifest as no team in a conference has too much of an unfair advantage in revenues. The classic example is the NFL with full revenue sharing, salary caps, etc. This model is founded on the idea that no team (school) can succeed on its own and that the collective (conference) is the real asset rather than the team. The second model is a "confederation" in which each team makes the best deals it can within the framework of an agreement to play competitive games, regardless of how that plays out in relative advantages among teams.  Major league baseball serves as this model with its drastically uneven revenues among teams and consistently uneven competitiveness among teams (Although one could argue that the Chicago Cubs violate this principle).

College football, by historical necessity, entered the media revenue age as a confederation. Schools roped themselves together on the financial high wire of college athletics to form conferences despite vastly different potentials to market and generate revenue. These differences spawned from their differences in historical success in football (Nebraska vs. Iowa State), the size and affluence of their active alumni base (Texas trumps Tech), and the pre-eminence of football in local culture (Texans breathes football, Hoosiers are not really quite sure what one is). Conferences were originally organized in the days when travel to games was by bus and a team, if they were really, really good and brushed their teeth every night, might be on TV once a year.  Thus, some schools had competitive advantages but they were considered earned by virtue of geography and the ability and luck to hire great coaches.

The state of the Big 12-2 - the financial and athletic success, and accompanying national reputation of Texas supports the many of the rest of the schools in the conference. via www.havredailynews.com

 Enter cable television, the proliferation of broadcast games, and the protectionist racket of the BCS into the college football market in the late 1990's, not coincidentally about the time that the ex-Southwest conference teams joined the old Big 8 in their marriage of convenience. Conference members still shared revenue from television appearances, but bowl payouts and expanded, television-fueled markets for apparel and other products meant that each school could generate its own revenue based on its own performance. This created what engineering nerds refer to as a "positive feedback," that is, the more success you have, the more money you make, and the potentially greater competitive advantage you have to convert into more success. "Hail to the Victors," indeed.

From this primordial economic soup rose the LHN, an evolutionary marketing mutation inspired by the Big Ten Network but financially viable for a single university. Sold by DeLoss Dodds in a frozen humble pie as just another piece of value added to athletic endeavors for UT, the full vision of its advantages for marketing and recruiting has now pierced the apparently previously foggy heads of AD's Bill Byrne and Joe Castiglione (and likely also the heads of other under-leveraged Big12-2 AD's moving in the shadows). The network was described initially by Dodds, in an amazing case of public relations rope-a-dope, as a speculative enterprise that could as easily fail as succeed. It is now underwritten and leveraged by ESPN into possibly every Aggie and Sooner's home in perpetuity. The horror....

"Well now," bellow the home folks, "there's unfair, but that's UNFAIR. In fact, it's so doggone unfair that we'll consider becoming another piece of athletic hamburger for the jaws of half a dozen SEC sports programs just so we can at least feel like things are FAIR. And on top of that, screw you, t-sippers, for your arrogance!" Imbedded in this attitude is the assumption that LHN wouldn't be worth a thin dime without the Big12-2 teams to populate its timeshares. This is in direct opposition to the Longhorn attitude that, "We're Texas!" inspires nationwide button-pushing of TV remotes (Why else would Texas vs Rice in 2010 be on ESPN, and why else would Texas vs. Wyoming in 2009 be carried on the YES network that caters to the Greater New York area) and that ignoring that marketing potential is a crime. "Screw you, farmers and land thieves, but you can't tell us what to do!"

After the testosterone has dialed back a bit, it's clear that this is an argument over the tension between the mutual benefits of a conference "kum bay yah" fest and the All-American drive for a university to make the most of its opportunities. Where should the line be drawn? Should a line even be drawn at all? It's polarized among the fans as competition vs. cooperation, socialism vs. capitalism, and doing vs. whining. There's no right answer, and the result will likely emerge from the froth of PR plays, reedy-voiced ultimatums, soft-pedaling, last minute, backroom TV deals, BCS and antitrust complaints, and yes, more conference realignment.

As Peter Bean insisted in his two missives, the key is to focus on the long play, and for Texas to be at the front of the pack, that is with the most chips at the end of the Great Poker Game of the decade. What exactly is the long play for Texas and what is the timeline for getting there? From where I sit, reading the tea leaves, it would appear, at this point, to be to employ a muted LHN as a way to add value to the athletic program but set the stage for independence.

Even without broadcasting high school football games, having a separate TV deal with ESPN is perceived by other schools as providing an unreasonably unfair advantage. The Big 12-2 kept itself together because Beebe's TV deal made the ratio of benefits to risks of staying together despite Texas' LHN (benefits: a conference, a BCS berth, and $20 million vs. risks: a conference with big discrepancies among its institutions, including a perceived prima donna) outweigh the benefits : risks of splitting up. My guess is that the rest of the Big12-2 wanted to see if LHN would actually materialize and then cry foul. ESPN stepped in to provide financial leverage, and here we are. Therefore, the long play here is to swallow some pride and "cave" to the temper tantrums of the disadvantaged and let the Big 12-2 sustain and feed the value of the LHN, the Texas brand, and the diversity of athletic interests. Broadcasting high school games is not worth exposing the whole network and losing a seat at that dinner table right now. This concession will keep the network intact. Who's to doubt that Dodds viewed the high school games as a red herring against which to compromise, thus preserving the core of the network.

The long play, also, seems ultimately to favor independence. Reasons?

1.     Texas already has a national brand. ESPN's willingness to finance and include the network in its cable packages supports that assumption. Once the network is established and becomes part of the viewer consciousness, then other options come into play.

 2.     Texas is committed to the network. Don't forget that the deal for the potential PAC 16 last summer dissolved in part because the PAC-10 didn't want Texas to have its own network.  

3.     The Big 12-2 is unstable, even without LHN. The conference is an entourage of athletic have nots (small alumni bases, no access to major TV markets, no strong football traditions) limping behind a sleeping mis-managed giant (aTm), a giant (OU), and a marketing colossus (UT). It's like a party at your mother-in-law's. The flaws are clear, and the partiers are looking for a way out, but they can't quite justify slipping out the back.

4.     Texas wouldn't be saddled with obligatory games against inferior competition. In 2009, Texas basically played like a BCS buster, needing to have a perfect season to get into the MNC game. Lucrative scheduling arrangements with other football powers (How much would games between Texas and Florida, Alabama, USC, Penn State (forget it Nebraska!), or Michigan be worth?). Wins in two or three more of these per season, plus games against OU and/or aTm and other independents Notre Dame and BYU would put Texas squarely into the MNC conversation regardless of any other games on the schedule. With the Big 12-2 as it stands currently, the dead fish smell of the defunct Southwest Conference is emanating from the grave, hinting that one more defection (such as Missouri) could push the "conference formerly known as the Big 12" to experience its own eulogy. Texas does not want to be trapped by circumstance again.

5.     If the Big 12 collapses for reasons other than Texas decisions (see Missouri or a scalded aTm), this may be the final straw that precipitates four superconferences (PAC 16, Big 16, SEC, ACC). Texas has the strongest academic affinity for the current Big 10 but the strongest geographical affinity with the PAC 12. Neither would likely allow the LHN. In the case that scheduling sports other than football was deemed sufficiently difficult reason, the LHN represents a major asset in any merger of Texas into a megaconference. More likely, Dodds and Belmont are positioning themselves to not have to be an attractive wallflower with inadequate suitors at the conference realignment dance.

6.     Independence might be attractive to other schools that face competitive disadvantages but have national followings.  If so, the scheduling nightmare that is the number one impediment to independence might be relieved somewhat. Schools such as Air Force might decide that independence is viable once again, and enter a pool of schools available for other independents to schedule. It seems unlikely that 6 or 7 other schools might do this, but the scheduling issue might not be as stark as is imagined. This is highly speculative.

Almost certainly, these possibilities are not in play today, but as Texas secures potentially greater and greater TV market share through the LHN and expands its brand out, who's to say that it won't generate more than 20 million in annual review on its own by the end of the decade. Independence just isn't that scary when you have your own network.

Think I'm all wet on this? SI's Stewart Mandel had this and this to say about BYU' shift to independence:

I've been saying for some time now that BYU's bold move looks smarter every day. It will be getting more exposure and TV revenue than ever (seven of its games this season are already slated for ESPN or ESPN2), and its scheduling flexibility will allow it to play in more high-profile games (future opponents include Texas, Notre Dame, Georgia Tech, West Virginia and Boise State)

There's no idea or initiative on the horizon to suggest that college football won't increasingly become a confederation of schools in megaconferences or as independents that find different ways to balance the development of financial potential against the need to work together to create the opportunity for competition. One would hope that the concentration of wealth and competitive advantages would not be concentrated in as few teams as major league baseball, but if that's the string of cards that plays out, expect Texas to be one of the few at the final table playing for the big stack of chips.

In the meantime, the Big 12-2 still has numerous chips of its own, not least of which is a conference that can still place two teams in BCS bowl games and a $20 million annual payout for Tier I games plus additional payouts for Tier II games from FoxSports. The Texas, OU, aTm, and Missouri programs pull in the local TV markets and some national attention to attract these deals. This is not a poker table you want to leave just yet, however galling it is to lose a few chips (high school football broadcasts) on an obvious bluff (OU and aTm to the SEC).