The Economics of a 12 team Big Ten - Part 1 (Conference games)

Now that the Big Ten will have 12 teams it was a foregone conclusion nationally that they will add conference championship game starting in 2011.  Jim Delany has been hesitant to commit to anything as it will be decided at the league meetings in August.  In the meantime they are reviewing all the facts and looking at alternatives as this decision has the potential to cost the league a lot of money.



Currently the league plays 8 league games and with the addition of Nebraska the question has arisen that it might make more sense to play 9 games instead.  That would mean the Big Ten would be able to keep its current system of every team playing all but 2 conference teams with 2 protected rivalries.  The biggest issue with this is it will cost every team home dates.  BCS schools usually divide their non conference schedule into two parts:  teams that require a home date and the teams that don't.  The current practice is to is to have 2 of each so your non conference schedule consists of 3 home games and 1 away game.  If you look at the fact that Ohio State made $36mm in 2008 from football it is easy to suppose that the average Big Ten team nets about $2mm per home date.  It's income is higher for the teams that don't require a home and home as you only need to pay a set amount to those teams $500-750k vs splitting the gate.  So some simple math gives us:

8 league games / 2 (every other year) = 4 league home games
1 home and home / 2 = .5 home and home game
3 guarentee payout games = 3 home games

That gives you a total of 7.5 home games per year.  Now compare that to a 9 game schedule.

9 league games / 2 = 4.5 (flip between 4 and 5 home games per year)
1 home and home = .5 home and home
2 guarentee payout games = 2 home games

That gives you 7 home games or the average annual loss of about $1 million for every team in the league.  That's not the only loss.  If you are the Big Ten network you need something to put on the air.  By moving to a 9 game schedule you actually have less product.

8 game conference schedule - 8 weeks x 6 games + 4 weeks x 12 games = 96 games
9 game conference schedule - 9 weeks x 6 games + 3 weeks x 12 games = 90 games

The loss of 6 games might not seem like a lot but less games means less money.  The Big Ten has a contract with ESPN/ABC to broadcast 41 games every year (This will definitely get renegotiated with the addition of Nebraska).  The rest get shown on the Big Ten Network which is where these 6 games would appear.  Currently advertising revenue isn't great for the Big Ten Network but I think it is safe to assume each game would net an additional $500,000 for the Big Ten Network (I can't find any reliable info on advertising rates so I'm assuming 45 minutes per game x $20,000/minute gross) or a total of $3mm.

What do you gain from a 9 game schedule?  The probability that the league would have better matchups but they currently aren't paid for matchups as their income is pretty much fixed.

The bottom line from my perspective is you will lose about $15mm moving from an 8 game to a 9 game schedule ($12mm from less home games and another $3mm from less total games to show on the BTN).  there is no reliable way to offset this.  Unless the presidents have some non-financial reason to move to a 9 game schedule I'd be surprised if the league changed.