UT & ESPN Reach $300-Million Deal

By: Ralph K.M. Haurwitz , Austin American Statesman
By: Ralph K.M. Haurwitz , Austin American Statesman

The University of Texas has struck a 20-year, $300 million deal with ESPN for a new, 24-hour network that will broadcast Longhorn sports and some non-athletic content such as campus musical performances.

UT President William Powers Jr. said the agreement, which also involves IMG College, a company that handles marketing and licensing for the university, will create 50 to 100 network jobs based at Royal-Memorial Stadium, fund some academic initiatives and further cement the university’s sports brand, already one of the most lucrative in the nation.

“We see this as a very important part of sort of continuing to reinvent the models through which we do business,” Powers said. “This is reflective of being much more creative in how public higher education positions itself as we go forward, even aside from the athletics.”

The announcement of a new income stream for UT comes as state lawmakers begin to debate a draft budget bill that would impose deep cuts on funding for higher education.

Officials said ESPN has guaranteed the $300 million, with 82.5 percent, or $247.5 million, earmarked for the university. IMG is assured 17.5 percent, or $52.5 mlllion.

Although UT’s share works out to $12.4 million a year on average, payments will fluctuate somewhat. Powers said UT is assured about $10 million a year for the first five years or so. Depending on the network’s profits, UT and IMG could realize additional income.

The agreement is not a surprise. The UT System Board of Regents gave Powers permission on Nov. 11 to negotiate a contract with a broadcast partner, and ESPN was considered the front-runner. An ESPN executive told the American-Statesman on Jan. 9 that his company and UT were “very close” to concluding negotiations.

The agreement does not replace existing contracts involving ESPN-ABC and Fox for sports content of the Big 12 Conference, of which UT is a member. Powers said he anticipates that the new network would carry one or two football games, a larger but unspecified number of men’s basketball games and a variety of other men’s and women’s sports, including volleyball and swimming.

Non-athletic fare is likely to run for about three hours a day and include musical performances, plays, and documentaries by faculty members and students, Powers said. Details are yet to be worked out.

“This will be high-level, entertaining cultural, music, scientific, Discovery Channel, History Channel kind of stuff,” Powers said. “And we have a team put together working on it, and that will be done in collaboration with ESPN.”

UT stands to receive a $14 million to $15 million share of Big 12 Conference broadcast revenue during the current academic year. With the departure of the University of Nebraska and the University of Colorado from the Big 12, Powers has estimated that his school’s slice of the Big 12 pie would rise to about $20 million.

If the new network, which is scheduled to begin rolling in the fall, brings in just the guaranteed $10 million or so in the first year or so of the contract, the university’s total annual broadcast revenue would rise into the $30 million range.

Powers said half, or about $5 million a year, of the first five years’ guaranteed income from the new deal is earmarked for academic initiatives. The other half will go to athletics.

After five years, academics could receive a larger or smaller share, depending on the revenues, the economic climate and the judgments of the university leaders in place at that time, he said.

In the near term, academic uses of the revenue will include creation of two faculty chairs, each with a $1 million endowment - one in physics and one in philosophy. The UT president said he would work with faculty members and deans on other uses for faculty support, “and not just have it pay the light bills.”

Powers said the role of IMG, the university’s media licensing partner, will be substantial, with ongoing marketing duties. Those duties will include selling advertising for the network, said Don Hale, a spokesman for UT.

The agreement covers distribution of sports and non-sports programming through a variety of platforms, including cable TV, satellites and smart phones. Powers said he anticipates that the network would be included among some of the basic cable system channels in Texas and Oklahoma, and perhaps in parts of Louisiana. Elsewhere in the country, it’s likely to be offered as a premium, perhaps part of a sports package or as a stand-alone channel, he said.

ESPN will pay for all production costs and for construction of a studio in the north end zone complex at the stadium, he said. The plan, details of which remain to be worked out, is to create a studio with glass walls visible to passers-by.

“I think that would be exciting for the fans,” Powers said.

The studio will create internship opportunities for communications majors and other students, he said. Powers does not anticipate the creation of any new UT jobs as a result of the venture. The 50 to 100 employees based at the stadium studio will be employed by the partnership or ESPN and will work exclusively on the Longhorn network, he said.

The UT president acknowledged that the partnership with ESPN could raise questions about whether the university would favor the company when it comes to issuing news announcements concerning sports and related matters. He pledged to be fair.

“We’re partners with ESPN, no doubt,” Powers said. “We have not run into any problems during all of these negotiations with any pressure from ESPN News - ‘tell us first,’ or whatever. We’ll have to work to have an even playing field on the news side, and will.”

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