When the University of Oklahoma (OU) takes the field tomorrow night against Missouri State, the only way for Sooners fans to see the game will be to tune into SoonerSports.tv (the school’s digital network) or purchase the pay-per-view broadcast through a participating cable, satellite or telco provider. Pay-per-view distribution is nothing new to OU supporters. For the last 20+ years, Fox Sports Southwest has sold one home Oklahoma football game as a PPV event (i.e. tomorrow night’s PPV broadcast has nothing to do with any revenues lost to the Coronavirus pandemic). But with the broadcast network entitled to keep 100% of the revenue generated from PPV buys, it’s fair to wonder how OU benefits from the unique broadcast arrangement (beyond monetizing their portion of the commercial advertising inventory). Athletic Director Joe Castiglione explained that the proceeds generated from PPV sales of the ‘retained game’ help Fox Sports Southwest fund its relationship with the school (think: lucrative annual rights fee payment) and the game serves as “the impetus [for the school] to get many more events on television; it’s the motor to [the OU] institutional network.”
Our Take: To understand why the ‘retained game’ (the one home football game Big 12 schools retain the broadcast rights to) is critical to SoonerSports.tv’s existence, one should understand how the member institutions regained the rights to it in the first place. Back in 2008, when just about every Power 5 conference began exploring the viability of a conference-owned network (the B1G Network launched in ‘06), the Big 12 schools decided they wouldn’t be following suit unless the launch was done in collaboration with one of the league’s existing media partners. So, when Fox and ESPN decided not to participate (together the two networks inked a 13-year, $2.6 billion deal with the conference in ’12, taking on more Tier 1 and Tier 2 inventory in the process), they returned the schools’ Tier 3 rights (including the one football game); games and events that were not going to otherwise receive airtime (as they’re the conference’s least desirable/valuable games/events).
Without a conference-wide network, Big 12 schools were left to monetize the Tier 3 rights they clawed back on their own. Some sold them to Learfield/IMG College, while others did deals with a local RSN; Texas, in a joint venture with ESPN, launched Longhorn Network (a linear cable channel). Oklahoma went another route. In partnership with Fox Sports Southwest, the regional sports network that is currently a Sinclair Broadcast Group property, the school launched a subscription-based digital network (SoonerSports.tv) and made the ‘retained game’ its primary draw. There was just one catch: Fox Sports Southwest wanted to continue offering the ‘retained game’ via PPV, as they had been doing for years. Castiglione explained, “[Fox Sports Southwest] developed what they saw as a very good return [on those games] and [the ability to hold onto those PPV rights] likely figured into their decision to become our media partner in SoonerSports.tv.” In other words, there was no SoonerSports.tv without allowing Fox Sports Southwest to continue cashing in on the ‘retained game’.
While Fox Sports Southwest will reap all of the PPV buy revenue generated this weekend, it’s not as if Oklahoma will come away empty-handed. A pair of sources familiar with the terms of the joint venture suggested Fox Sports Southwest pays OU between $5 million and $10 million annually for rights to the ‘retained game’ and the balance of the content they carry from SoonerSports.tv (+/- 1,000 hours). OU also benefits from the exposure provided by Fox Sports Southwest and Fox Sports Oklahoma—the networks carry SoonerSports.tv programming in-market—and the school keeps nearly all of the revenue generated from the digital network (which has +/- 8,000 out-of-market subscribers). From an academic standpoint, SoonerSports.tv gives OU’s journalism students fertile training ground to hone their skills.
For comparison purposes, one media rights consultant, who asked to remain anonymous as he/she works with schools in the league, suggested there are Big 12 programs that are only able to command $700,000 or $750,000 for the broadcast rights to their retained game. So, while not an apples-to-apples comparison (because OU is including the balance of their Tier 3 inventory in the deal with Fox Sports Southwest), it’s not unreasonable to suggest that the rights fee Oklahoma receives—which doesn’t exist without the rights to the retained PPV game—is multiples greater than what their competition receives. It should be noted that as of 2018, with the launch of the Big 12 digital network on ESPN+, there is now a viable way for all member schools to monetize their Tier 3 rights.
Considering the significant revenue gap, it’s fair to wonder why other Big 12 schools have not chosen to follow OU’s path. The media rights consultant explained that direct-to-consumer digital distribution is just not a viable strategy for most universities. “OU can do it because they’re good enough at football and big enough nationally [from a relevance perspective], that they can command subscriptions and PPV buys (which incentives Fox Sports Southwest to participate),” they said. “UT aside, the rest of the schools in the conference—their content is not that premium.”
One can certainly understand why fans would be less-than-pleased to shell out $54.99 (or $79.99 for an annual subscription to SoonerSports.tv) for the right to watch OU steamroll a cupcake (and why 32K fans concurrently viewed an illegal Twitch stream of the Oklahoma/Army PPV game in 2018). But as Castiglione said, “It’s one of the underpinnings of creating SoonerSports.tv. It was our thruway to TVs everywhere.”
Correction: This article was revised to clarify that Fox Sports no longer owns Fox Sports Southwest, the regional sports network which is now a property of Sinclair Broadcast Group.
Shareholder Transition Likely Responsible for HOFV Surge
Hall of Fame Village (HOFV) surged 22% on the best volume in a month Wednesday. HOFV is a mixed-use real estate development adjacent to the Pro Football Hall of Fame in Canton, Ohio. It’s unclear why shares spiked—though some have speculated an appearance by CEO Michael Crawford on a Fox Business show that day or reports from the day prior that Erica Muhleman was joining the company as Executive Vice President of New Business Development, Marketing & Sales could be the reason. However, Crawford appeared at 3:23 in the afternoon (Eastern time) Wednesday, after shares had been bought up in the session as high as $4.80, or 28% over the prior day’s close and it would be highly unusual for executive news outside of the CEO and Chairman roles to move markets.
The likelier catalyst: The company is experiencing a shift in who owns its shares. Hall of Fame Village went public by SPAC at the end of June this year. Its acquirer, Gordon Pointe Acquisition, itself went public in January 2018 with the stated goal of acquiring a financial technology firm. Gordon Pointe signed a deal to acquire Hall of Fame Village shortly before its two-year window to make an acquisition closed (SPACs have two years to find a company to buy or must return money to shareholders and disband). Shareholders who bought Gordon Pointe expecting a fintech play have been exiting the company, driving shares down from $12.30 at the start of July to as low as $3.75 this week. Most likely, the company is in the midst of shifting from unhappy SPAC speculators unloading shares to bargain hunters and institutions with a genuine interest in the company’s effort to create a football Disneyland in Canton. HOFV Shares fell 7.2% Thursday in decent volume trading to finish at $4.26.
JohnWallStreet Index: 1,117.59 (-0.54%)
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Note: We established the JohnWallStreet index at a base level of 1,000 ($100,000 theoretical investment/100) before the open of trading on August 3rd. In other words, the JSSI index represents performance from the start of August to date.
JSSI Biggest Movers (Sept. 10):
- PENN 62.46 (+7.41%)
- HOFV 4.27 (-7.17%)
- MSGN 9.79 (-6.76%)