FanPost

Is it really about "Equal Revenue Sharing"?

I watched the oSu vs. Univ. of Arizona game last night because none of my guns shows were on and that was the best option.  By the way, oSu looked pretty good.  Anyway, at some point during the 3rd quarter they interviewed T.Boone Pickens aboutall the Big 12 conference re-alignment bullshit.  I paid particular attention because you would think that when someone spends as much money as he has, they would at least have a direct line to the decision makers.  Thus a pretty good idea of where the current line of thought is headed.  His opinion was that the Big 12 would stay together and the remaining members would re-negotiate the agreements to be more equal.

 

This made me semi-happy because one of my big goals for all this is for Tech to operate in a more level playing field.  Whether that be in the PAC-12 (16) or as a member of a revamped Big 12.  T. Boone'scomments about "equality" made me remember how Bebee touted a more equal agrrement inthe Big 12 after they inked the new TV deal with Fox shortly after NU and CU left.  Anyway, this train of thought got me thinkin' and I did some quick research.

 

Check out my thoughts after the jump

As an economist, I have always felt that understanding the incentives in a situation will give you a pretty good indication of how the participants will act (ie. what course of action they choose).  Some of the fundamental assumptions of economics get screwy when moved out of academia and applied to real world problems.  However, one of the core priciples always holds true.  We as human beings, when presented with a choice, will always choose the option that seems to maximize our benefits and minimize our loss.  Now, these benefits and losses are very subjective and we will always be forced to make these choices without perfect information.  This doesn't mean that we will always make the best choice, it just means that we will always choose the option we think is best for us, at that point in time, and given what information we have available.  I don't want this to turn into a "Economic Decision Making 101" so continue reading and I'll explain where I am going with this.  

 

The media and various statements the players in this drama have focused on the percieved un-equal revenue sharing model in the Big 12, compared to other conferences, as a root causeof all this turmoil.   I myselfgot caught up in this line of thinking and have opined in various comments on this blog about how an equal share of the $ in the PAC-12 (16) would be preferable to being ut'slittle brother in the Big 12 (-2 or 3).  My goal here was to get an idea of what the current revenue sharing agreement was in the Big 12.  A quick Google search on "Big 12 Revenue Distribution" pulled up a bunch of links.

Big 12's new revenue-sharing plan levels playing field, raises incentives

Looking At Big 12 Television Revenue Sharing

Looking at the Big 12's Revenue Distribution

A quick review of these article revealed some surprising information and insight.  In synopsis, under the new deal- all Bowl and tournament revenue and gets split evenly among all members.  All revenue from cable tv (ESPeNisand FOX) gets spit evenly.  The only un-even distribution comes from games that get picked up by the network (ABC).  This money gets split with 50% going to even distribution and 50% going to the team playing the network game.  Also, teams get bonus money for  for scheduling Thursday or Sunday games (more likely to get picked up by FOX or ESPeNis) and for playing opponents from other BCS AQ confrences.  Essentially, under the new model teams/schools get rewarded for playing better quality opponents that have a higher probability of getting aired on TV.  In my mind the old model was a little unfair, while the new model is a little more fair, butmore complicated.  Overall, I think this new deal is pretty good for everyone.  It provides  incentives for teams to get better and to promote themselves to a national audience via playing high profile opponents. 

 

The monkey in this new deal is the LHN.  I wasn't able to find how this would affect the money under this new agreement(and quite frankly, I don't have the time).  So unless something new comes out to challenge my understanting, I don't think the money consequinces to the Big 12 aspect of the LHNis a big deal.  As I understand it, all the money that ESPeNis payed ut is all thiers.  Any games they want to show on thier network would be untelevised games anyway because the network and cable have rights of first refusal.  Ut would be responsible for negotiating the money compensation with the opponent team. 

The biggenst revenue discrpencey factor of all the teams in the Big 12 are due to self generated revenue.  By that I mean the merchandise and ticket sales.  Ut, OU, and aTm generate the largest revenues in the Big 12, but the lions share of thier extra revenue comes from internatly generated sources.  In my opinion, thats not unfair.  They just do a better job of marketing themselves (ie. T-shirt fans)

 

I would liken the new Big 12 revenue aggrement to a compensation structure similar to "Salary plus commission".  From what I've seen all  the other confrences have a "Straight Salary" type of deal.  The free market economist in me wants to like our current Big 12 aggrement better than the other options.  It provides a base salary for budgeting purposes with an incentive component that benefits everyone equally, at least in opportunity.  So now the question I have to ask is; "Is this really about un-equal revenue sharing in the Big 12?" 

<em>This is a FanPost and does not necessarily reflect the views of Viva The Matadors' writers or editors. It does reflect the views of this particular fan though, which is as important as the views of Viva The Matadors' writers or editors.</em>

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