A New Chapter of College Football Begins in 2024

A New Chapter of College Football Begins in 2024

By Brent Shockley

Change has been consistent throughout the history of college football, but the sport as we know it will look very different in Fall 2024.  Four schools (Washington, Oregon, University of Southern California (USC), and the University of California at Los Angeles (UCLA) are leaving the Pac-12 Conference to join the Big Ten Conference for the 2024-2025 school year.  Utah, Arizona, Arizona State, and Colorado are departing for the Big 12 Conference.   Stanford and the University of California Berkley (Cal) are joining the Atlantic Coast Conference along with Southern Methodist University (SMU, located in Dallas).

The Universities of Oklahoma and Texas will depart the Big 12 to join the Southeastern Conference (SEC).  Many of the moves don’t make (common) sense and will result in collateral damage for others but they are driven by the billions from multi-year mega television deals.

Why is this happening?

The price of sports’ rights have been on an exponential rise since streaming and on-demand allowed consumers to bypass or completely ignore advertisers in watching dramas and/or sitcoms.  Sports are generally consumed in real-time, making it more valuable to advertisers in our streaming-happy society.  But as college sports media contracts continue to rise, the networks want a higher return on investment.  As a result, major brands in the sport are consolidating for more desirable TV matchups to attract more viewers. Conferences are dropping divisions to enhance scheduling flexibility. Many college football fans will initially struggle to adjust to the new reality of tougher schedules, more volatility in records, and, for those that wager, closer point spreads.

The future of college football will resemble the National Football League for (NFL) for good reason…. from the networks’ point of view.  NFL broadcasts represented 93 of the top 100 TV programs in 2023, up from 82 the prior year.  Three college football games made the top 100 list.  None from the National Basketball Association, college basketball, Major League Baseball, or the National Hockey League.

The CFP title game between Michigan and Washington drew 25 million viewers, second to the iconic Rose Bowl’s 27+ million viewers on New Year’s Day, which served a playoff semi-final between Alabama and Michigan.  The other playoff semi-final, the Sugar Bowl between Texas and Washington, drew nearly 19 million viewers in primetime.  Despite the frustration of fans regarding opt-outs of key players in the non-playoff bowl games to enter the transfer portal or preserve their health for the NFL draft, mid to lower tier bowls still rate higher than alternative programming (such as pro or college basketball) for networks like ESPN.

The 2024 college football postseason will look very different.

The College Football Playoff will expand from four teams to 12 teams next season.  The top four teams (with conference championships as part of the criteria) will get a first-round bye.  The other eight teams will compete in four games, the first on the evening of Friday, December 20th, and three games on Saturday, December 21st.  The initial round will be hosted on campus by the higher-ranked team.

The quarterfinals and semifinals will be played within the bowl system with the following schedule:

  • December 31, 2024 – Vrbo Fiesta Bowl (CFP Quarterfinal)
  • January 1, 2025 – Chick-fil-A Peach Bowl, Rose Bowl, and Allstate Sugar Bowl (CFP Quarterfinals)
  • Thursday, January 9, 2025 – Capital One Orange Bowl (CFP Semifinal)
  • Friday, January 10, 2025 – Goodyear Cotton Bowl (CFP Semifinal)

The reason for the Thursday and Friday semifinal games is to avoid the NFL’s Wildcard weekend which involves six games from Saturday through Monday.  The CFP national championship game will remain on Monday night but moved back on the calendar to January 20th.

The original four team playoff contract was not set to expire for another two years, but leaders amended the playoff to appease fans and to get additional revenue.  ESPN has been the exclusive broadcast partner for the current playoff system at $470 million per year and is reportedly in negotiations to pay $1.3 billion annually for the new 12 team, 11 game format.  There is support among many leaders and partners in college athletics to create a multi-network syndicate for the playoff, similar to the NFL or the NCAA Men’s Basketball Tournament.  Although ESPN may control the rights to the next playoff (reportedly over the next eight seasons), there could be pressure to sublicense some of the earlier round games to other networks.  The pressure would likely come from the Big Ten Conference, which recently signed a 7-year, $8 billion deal with Fox, NBC and CBS and ended its 57-year broadcast partnership with the ABC/ESPN after the 2022 season.  CBS and the SEC concluded a long-time relationship that gave CBS priority for its mid-afternoon telecast and exclusive rights to the SEC Championship game.  ABC/ESPN will be the exclusive broadcast partner of SEC athletic broadcasts going forward as part of a new 10-year media deal that starts in 2024.

Formula 1 in Las Vegas: The Race That Hopes You Don’t Sleep

Formula 1 in Las Vegas: The Race That Hopes You Don’t Sleep

Brent Shockley, Director at ValueScope

November 17, 2023 

Formula 1 In Las VegasFormula One/1 racing returns to Las Vegas this weekend for the first time in over 40 years.  The Heineken Silver Las Vegas Grand Prix 2023 is the start of a three-year contract with the city; although Formula 1 intends to support the race for at least 10 years and the entertainment and gaming hub of the U.S. intends on a “lifetime partnership” with the top class of international racing.  The nearly four mile track will wind through Las Vegas landmarks, hotels, and casinos with a straightaway section down the famous “Strip” at speeds reaching 212 miles per hour in cars that can range in cost from $12 to $20 million.  The Las Vegas Grand Prix is the next to last F1 race on the 2023 circuit.

The race promises to be a visual spectacle….for those in the U.S. that stay up to watch the event.  The Las Vegas Grand Prix will start at 10pm Pacific time on Saturday night, which is midnight or 1am for half of the U.S.  Typical F1 races are designed for 90 minutes but can often go up to two hours with delays.  To prep the drivers, practice runs are set for late Thursday and Friday evening with qualifying from 12am to 1am local Vegas time on Saturday ‘morning.’

The two F1 races in the U.S. this year (Miami and Austin) started in the mid-afternoon local time but this race was set later for the nighttime atmosphere of Las Vegas Strip and to appeal to international viewership, which greatly exceeds that of the U.S.  Global viewership for F1 races averaged 70 million in 2022.  By comparison, U.S. viewership averaged just over 1 million.  F1 interest in the U.S. has seen a significant increase since the debut of the Netflix series “Drive to Survive” in 2019.  Average U.S. viewership of F1 races jumped about 545,000 in 2017 and 2018 to 672,000 to 949,000 in 2021 and 1.2 million in 2022.

Formula One Group, founded in 1950, was purchased for $4.4 billion in 2016 by Liberty Media.  It operates as subsidiary of Liberty under the Nasdaq ticker FWON.K.  The subsidiary reports $2.8 billion of annual revenue and $560 million of EBITDA.  It’s current market capitalization is approximately $15 billion.  It is reported Liberty Media spent between $400 million to $500 million to stage the race, which included $240 million for a purchase of 39 acres on the northeast corner of Harmon Avenue and Koval Lane for the construction of part of the track and a three-story, 300,000 square foot paddock building constructed in less than a year.   The building is a permanent structure as the hub for future F1 races.

Despite the marketing hype beyond any Vegas headliner show or prior sporting event, preparations and demand for the race have hit a speed bump.  Locals, tourists, hotels, and businesses along the Las Vegas Strip have been frustrated throughout 2023 by construction to turn one of the World’s most famous streets into a racing circuit.  Hotels and casinos initially sold high priced ‘experiences’ in the thousands of dollars to include parties with A list entertainers, celebrity chefs and club type accommodations to view the race.  Joe Pompliano reports hundreds of private jets are set to descend upon Las Vegas paying overnight parking fees of $1,500 to $7,500 per night.   However, as the green light gets closer, general ticket sales have been disappointing, with prices dropping by 60% and hotels slashing room rates by up to 80%.

The city of Las Vegas continues to add major sporting events to its list of entertainment options and attractions.  The $2 billion Allegiant Stadium opened in 2020 as the home of the NFL’s Raiders franchise and will host Super Bowl LVIII in February 2024.  The Vegas Golden Knights, founded in 2017, are the defending National Hockey League champs.  The Las Vegas Aces are back to back WNBA champions and the city is host to part of the NBA’s Summer League. On Thursday, Major League Baseball owners approved the relocation of the A’s franchise from Oakland to Las Vegas.  A new baseball stadium along the Las Vegas strip is expected to be ready for the 2028 baseball season.  The city had no major sports franchises prior to 2017.

*The ValueSport blog is a look at the hybrid world of sports and business.  It is published by the professionals at ValueScope, a leading business valuation and advisory firm headquartered in the Dallas-Ft. Worth area.

Is it Time to Change the Name of the Most Valuable Player Award?

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Is it Time to Change the Name of the Most Valuable Player Award?

Is the Most Valuable Player really that?  Or, is he the Best Player?  Or, is that the same thing? 

The answer might not be as obvious as you think.

Consider the NFL as one of the better proxies for analysis, in part because of the hard salary cap.  The MVP is usually awarded to the player that does well personally (i.e. has some of the best stats like quarterback (QB) rating, total touchdown passes and touchdown/interception ratio, total rushing yards, etc.) and helps carry their team to wins and playoff berths.  You would think that those in consideration for the award are some of the highest paid players in the NFL.  Since they are often quarterbacks, let’s take a closer look.

It turns out of the 32 starting QBs, 12 make single digit annual salaries (yes, in the single digit millions) and 20 make double digit salaries (the vast majority over $20 million).  One would expect the MVP is most likely to come from the pool of 20 since there must logically be a correlation of salary to performance, and in turn team success.

In fact, of the 12 teams that made the playoffs this year, 6 QBs made single digit salaries and 6 made double digit salaries.  So, while 30% of the highly paid QBs made the playoffs, 50% of the lower paid guys got in.  The average salary of QBs who made the playoffs was $12.7 million, while the average salary for those that did not was $18.3 million.1

Further analysis shows that there is a negative correlation between salary and playoff seeding.  That is, some of the highest seeded teams (normally with the most wins) are the Chiefs (Mahomes), Texans (Watson), Rams (Goff), Bears (Trubisky).  In fact, the top 6 highest paid QBs are not in the playoffs at all (Aaron Rodgers, Matt Ryan, Kirk Cousins, Jimmy Garoppolo, Matthew Stafford, Derek Carr).

What’s the explanation?  In the era of the salary cap, being in the first four-year contract period (Prescott, Mahomes, Watson, Goff, Trubisky, Jackson), or taking a discount (Brees, Brady, Rivers, Wilson, Luck make $20 to 25 million) saves cap room to pay other good players, thus making the team better and, arguably, the QB more valuable.

When looking at salary relative to production, the difference is stark.  This year, Rodgers earned $1.3 million per passing touchdown thrown, while Prescott earned just $30 thousand.  In terms of salary per win, Rodgers was paid 82 times that of Prescott.

The point is value has to be considered in the context of cost (i.e. salary), as does the value of anything!  The more the cost, the less valuable, all other things equal.  Therefore, while good QBs might make more, they might be less valuable, or at least no more valuable than cheaper QBs. 

It turns out that maybe the most valuable quarterback is not the “best” (all other things equal) and/or highly paid so long as their lower salary helps create better play and wins, which apparently it does.  Sorry, Aaron Rodgers.

Nfl Mvp

1. Lamar Jackson and Nick Foles were utilized as the QB for their respective playoff teams.

For more information, contact:

Marty Hanan is the founder and President of ValueScope, Inc., a valuation and financial advisory firm that specializes in valuing assets and businesses and in helping business owners in business transactions and estate planning.  Mr. Hanan is a Chartered Financial Analyst and has a B.S. Electrical Engineering from the University of Illinois and an MBA from Loyola University of Chicago.

 

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