Longhorn Network

[RunInRed 19,632]

Costliest college network in the country has lost millions

AUSTIN — At the Longhorn Network’s sleek set outside Royal Memorial Stadium, production assistants in burnt orange ski caps hustled about, Texas Heisman Trophy winner-turned-commentator Ricky Williams prepped for his on-air segment, and six blocks away technicians in a $13 million studio prepared to transmit the Kansas-UT football game to regional viewers.

Five years ago, ESPN signed a 20-year, $295 million contract with the University of Texas, broke ground on the swanky studio, and agreed to absorb LHN production costs pegged at an estimated $26 million a year, the contract details state.

At the time the deal was signed, Texas — the national champion in 2005 — was a year removed from an unbeaten, 13-0 regular season and a title game loss to Alabama. But its 5-7 record in 2010 was a harbinger of things to come. Since then, the Horns have not acted the part of a marquee program, going just 36-28, dipping once again to 5-7 in 2015 and missing a bowl game.

On this blustery November day, the Longhorns were matched up in a meaningless game against winless Kansas while bitter Big 12 foe Oklahoma and in-state rivals TCU and Baylor were jousting for inclusion in football’s final four playoffs.

Another old adversary, Texas A&M, angered by the Longhorns favored treatment by ESPN, had bolted the Big 12 several seasons earlier and joined the Southeastern Conference.

Asked about the Longhorns’ sudden decline, ESPN executive vice president Burke Magnus replied, “Nothing suggested that could happen.”

But it has, bringing into question the wisdom of ESPN’s sizable investment in the only single-school, around-the-clock sports network in the country, which thus far has lost $48 million, according to SNL Kagan, a media research firm.

The football team’s mediocre performance, matched by the men’s basketball team, has cost head coaches of both programs their jobs. Just a few months ago, the school bounced its athletic director, Steve Patterson, who was supposed to turn things around.

“Did we think about that?” Magnus asked recently, referring to UT’s struggling programs. “Certainly not. But the nature of our business is constantly cyclical. In the NBA, the Lakers, Knicks and Celtics are all down and we’re having to build stories out of small-market teams like the Golden State Warriors. When all is said and done, we will be very happy with the deal we did.”

The Longhorn Network has been controversial since well before it launched, on Aug. 26, 2011, when Burnt Orange alum and sideline dreamboat Matthew McConaughey cooed grandiloquently: “Ours is the color of the sunset and leather. The shade of pride and heat. It’s the salute of a citizenry and sign of a nation. … For one school. One star. One state. Welcome to the Longhorn Network.”

But five years into the deal the Longhorn Network is under as much scrutiny as ever.

Though LHN was a financial windfall for the university, the network has lost money for five consecutive years, according to a financial study this year by SNL Kagan. (ESPN is owned jointly by the Walt Disney Co., a public company that has an 80 percent stake, and privately owned Hearst, the owner of the San Antonio Express-News.)

The Kagan study says LHN was “on the verge of being a bust” because of its early lack of full distribution by cable and satellite providers but was rescued when DIRECTV signed on last year, bringing in an estimated 1.8 million new subscribers within the LHN footprint of Texas, Louisiana, Oklahoma and New Mexico. That grew LHN’s reach to some 7.5 million subscribers, according to Kagan. So, despite a losing football team, Kagan projects the network will achieve its first profit in 2016, at roughly $2 million on net revenue of $32 million.

ESPN disagrees with Kagan’s LHN subscriber numbers, but declines to say why, countering that LHN has 20 million subscribers. Most of those customers subscribe to a tier of programs that includes LHN. That doesn’t indicate if they’re watching LHN or not.

Nielsen, the standard for rating TV viewers, doesn’t track LHN. Instead, the UT channel is rated by Rentrak, which reports that LHN’s most-watched programs for 2015 were the only two Longhorns football games it televised. For UT vs. Rice, Rentrak says LHN was seen nationally in 423,000 homes; against Kansas, about 334,000.

ESPN’s Magnus said those numbers are comparable to what they get for football games on the ESPNU or ESPN2 channels.

The Longhorn Network makes most of its money through subscriber fees and advertising. Those subscriber fees, reported to be 29 cents per customer per month, plus advertising, have apparently been unable to offset some considerable costs on ESPN’s side.

According to its contract with the university, ESPN’s payments to Texas started at $10,980,000 per year, increasing by 3 percent annually until 2031, or an average of just under $15 million each year.

ESPN further projected its production and overhead costs to run $26 million annually, increasing 3 percent to 4 percent per year, plus ESPN was to build the LHN studios in Austin, located on the former downtown site of Concordia University, off Interstate 35.

The accumulated loss so far “is a rounding error for a company the size of ESPN,” said Tom Stultz, a former executive with the global sports marketing firm, IMG, whose subsidiary, IMG College, is a partner in the Longhorn Network and does all of its ad sales.

“ESPN is in this for the long haul,” said Stultz, now president of JMI Sports, “and they derive other benefits from the network other than just financial rewards. They develop new talent. They produce valuable content for the middle of the country and one huge state, and with conference realignment always in play, they are joined at the hip for 20 years with Texas.”

http://www.expressne...st-6721906.php?

[TexasTiger 15,953]

Rounding error...

[wdefromtx 4,222]

Didn't BSPN lay off a bunch of people a couple of months ago? Just sayin'

[Randman5000 4,461]

Pretty sure that helped Nebraska jump to the B1G and led to that whole conference realignment a few years ago. I dislike A&M as a school and their crappy college town but have to side with them on the disaster of the LHN

[Never2Yield 1,228]

Rounding error...

a la Office Space ...