The Big Ten is looking at up to $1 billion in lost revenue following its decision to cancel the fall football season due to the coronavirus pandemic, according to a recent NJ Advance Media analysis.
A significant chunk of those projected losses? Media rights fees. Full-share Big Ten members were expected to receive about $55 million from network partners like FOX and ESPN for the 2020-21 academic year, and the bulk of that money is driven by football. It’s a nuclear scenario for the conference, as well as the broadcast partners who are now without some of their most valuable revenue, and it could spark rash decisions on both sides.
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But Irwin Kishner, the co-chairman of the sports law group at New York law firm Herrick, Feinstein and an attorney with experience in media rights deals, believes both conferences and networks need to tread carefully and work together to overcome the challenges presented by COVID-19.
“It’s a great product,” Kishner said in a recent interview. “I don’t think it’s going anywhere any time soon, notwithstanding this one in a hundred years asteroid that hit Earth.”
Kishner provided NJ Advance Media with a general analysis of how major television deals like the Big Ten’s typically work, the financial issues the league could now face, how an alternate season in early 2021 could impact the conference and more. Here is the conversation in a question-and-answer format, edited for clarity:
The Big Ten has canceled the fall season. Does that mean its TV partners now no longer owe them any rights fees?
“It depends on how the contract is drafted. The vast majority of these contracts, if not all of them, have force majeure (for unforeseen circumstances or unexpected events) clauses. Very few of them have pandemic-specific clauses. Most of the way these deals work is that the conference usually gets paid upfront for the rights, and then there is a rebate for failure to provide. Often these payments are structured – before the season starts, you get a payment, then into the season you get another payment, and then at the end of the season you would be entitled to some sort of rebate based on the actual number of games.
“Rarely, if ever at all, did anyone contemplate that an entire season would get canceled. In professional sports, you are always worried about labor issues like lockouts. You do draft around those things. The question is, what does the force majeure clause provide? Typically, depending on which side you’re on and who your lawyers are, there is often not a force majeure forgiveness for making those payments. Typically, you are not excused from making the payments in respect of the rights. It really comes down to a matte of contractual interpretation to what the deal provides for specifically, and the specific emphasis on how the force majeure clause works. But the net-net is, you’re still not getting paid. The only question is whether there is a way of keeping the money for a while and then having to refund it. If you’re not putting the games on, you are subjecting yourself to a significant loss of revenue.”
So the Big Ten may already have received some money, but it will eventually need to give it back?
“That is correct. It’s not like there’s anything drafted in that says, ‘If there is a pandemic, we get to keep it or split it.’ The networks need the programming because a lot else flows from it, including sponsorships and those things.”
From a legal standpoint, do the Big Ten (and Pac-12) face challenges with force majeure clauses as long as the ACC, Big 12 and SEC – which have some geographic overlaps or close to it – and the other still-scheduled leagues manage to play games this fall?
“That gets to another issue, which is performance. You could argue from the network side that [the Big Ten] is breaching (the contract). You said you would put this on, you have to put this on, on what basis are you not putting this on. That’s a breach argument to hold [the Big Ten] liable for damages, void the contract, all those other things could flow. And (other leagues playing) could have an impact.
“They could say, ‘There is no national order or municipal order or state order saying you can’t play right now.’ So in other words, you could play right now, but [the Big Ten] has decided in the interest of student safety and so forth and so on, it’s in the best interest not to put football games on. You can then argue as the network, ‘Why are you not putting those football games on? You have to, there is no reason, law, regulation preventing you.’ That could be a breach.”
The networks are just as much a part of the big business of college sports as the schools. Given the long-term nature of right deals and the fact we will have Big Ten football again … perhaps “bailout” is not the right term, but could it make sense for the partners to help the league and still pay up to some extent?
“I think these networks are having just as much stress on their systems as the universities. I really think it behooves everyone to behave well and not engaged in any ‘scorched earth’ policy. I do think it makes sense for people to be communicative, open the dialogue and figure out how to manage our way out of this. I do ultimately believe stadiums will be full again, and if everyone is going to engage in acrimonious, litigious-type strategies, it’s just going to enrich lawyers – inappropriately, perhaps – and not get to what really needs to get done, which is act in the best interest of students while trying to put a great product on the field and hopefully generate a lot of money by doing so.”
If the Big Ten does manage a winter or spring season, can it recoup most of its losses? Or maybe make more given the unique situation providing inventory at that time of year? Ohio State-Michigan after the Super Bowl seems a lot more enticing for a network than an NBA regular season game …
“I think if you can come up with enough of those rivalries and those marquee games, there is always going to be interest. It’s going to take a little bit of fancy footwork to put that stuff together, but I think it’s doable. More money, I think that is getting a little aggressive. Getting to a place of normalcy in the following season is I think where we are driving toward, but hopefully people will be creative and pick up a couple of bucks along the way.”
Football aside, how critical is it, for both colleges and networks, for the college basketball season and March Madness to be played?
“I would think it would be extraordinary painful if you have to cancel the tournament again. Ultimately, 10 years from now, will this just be a bad memory? Yes. Will we get past it? Yes. I do think there is a way to put that tournament on. I think the NBA and NHL have proven how to do it. You walk in there two weeks before, quarantine, testing and you stay there for a month. It can be done. Maybe you don’t do the 68-team format, maybe you do a 32-team format. There has to be some way to come up with something that makes some real sense.”
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James Kratch may be reached at [email protected]
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