Texas Inks $300-Million Deal With ESPN for New TV Network

Jim Sigmon, U. of Texas at Austin

William Powers Jr. (second from right), president of the U. of Texas at Austin, says collaborations with corporate entities are crucial in tough financial times.
January 19, 2011

The nation's wealthiest athletics program is about to become a whole lot richer.

On Wednesday, the University of Texas formally announced a $300-million deal with ESPN to create a television network devoted to coverage of Longhorn sports and, to a lesser extent, cultural and other nonathletic events on its Austin campus. While not the first of its kind—Brigham Young University, in Utah, also has a television network—Texas's deal is by far the biggest.

Annual payouts for the first five years of the 20-year agreement are expected to be at least $10-million, with roughly half of each payment, or about $5-million a year, going toward academics, university officials said. The money earmarked for academics will, at the outset, finance two $1-million endowed faculty chairs in physics and philosophy. The rest will go to athletics and its $140-million annual budget, which is the largest in the country.

The timing of the announcement was sobering: Also on Wednesday, Texas lawmakers wrestled with proposed cutbacks of nearly $772-million in the state's two-year budget, including nearly $100-million for the Austin campus.

The university's president, William Powers Jr., said the new network—which has yet to be named—exemplified the kind of collaboration with corporate entities that universities can, and should, exploit in tough financial times.

"The situation that higher education is in, I think, will require more private-public partnerships of this sort," Mr. Powers said in a news conference. Much the same way that intellectual property developed at the university is later commercialized, he said, the network "will be a model for what it will mean to restructure and reinvent higher education as we go forward."

Some observers said the channel, and the way it will be structured, represented an innovative approach to strengthening ties with fans and alumni while positioning the university for future investments. Karen Weaver, the athletic director at Pennsylvania State University-the Abington College, who has researched media rights in college sports, said Texas's venture not only opened up a new revenue stream that could prove valuable for future bond ratings, but did so almost entirely without assistance from its most lucrative sport.

"This is an asset that they've created out of nothing," Ms. Weaver said. "They've basically leveraged a $300-million revenue stream out of the 200 live events that they're going to show each year, and only one of those events is a football game."

The Details

Taking a cue from the Big Ten Network, which began in 2007, Texas's network will largely be a platform for showcasing its men's and women's Olympic sports: Of the 200 or so athletic events that will air when programming begins in September, the vast majority will be in baseball, softball, golf, soccer, and other programs that currently receive little air time.

With the university's football and men's basketball games already wrapped into the Big 12 Conference's separate media-rights agreements, the network will only show one Longhorns football game a year, plus eight men's basketball games. Original programming, archived or "classic" games from years past, and other campus events like musical performances will round out the 24-hour, seven-days-a-week schedule.

"Whatever there is to do, we're going to do it," said Burke Magnus, ESPN's senior vice president for college sports programming, speaking at the news conference. He said the network, which will be based in Austin and will employ 50 to 100 people, could also feature a Longhorns-themed sports-news program modeled after ESPN's popular SportsCenter.

But the channel's reach will go well beyond television, Mr. Magnus said. Online broadband, for instance, will feature live coverage of games, especially when there are events that overlap with each other. Down the road, the programming will also include coverage of high-school football around the state of Texas.

Kevin O'Malley is a television consultant and former CBS executive who has helped broker many collegiate media-rights deals but wasn't involved in this one. Texas, he said in an interview, is uniquely positioned to succeed despite the inherent difficulty of creating a new television network. In particular, he said, the university's strong brand, fervent fan base, and location in a large and populous state all work in its favor.

"It's probably fair to say that not very many schools would have considered this possibility," Mr. O'Malley said. "Texas may be the institution that could carry it off."

Still, the fledgling network will not be without its challenges, he said.

One concern is a matter of inventory. The network's reliance on Olympic sports to fill airtime means that events will be concentrated during certain times of the year, leaving other periods wide open, he said.

And then there's the question of where the network will end up "in the cable pecking order" as it works out its distribution among cable companies—and how it will attract and retain subscribers, Mr. O'Malley said. (Although it has since become quite profitable, the Big Ten Network, for instance, had great difficulty working out its distribution among various cable companies in the months leading up to its 2007 start.)

If Texas is one of the few universities that can create its own television network, do other athletic programs even dare to dream about it?

Probably not, said Tom Stultz, senior vice president and managing director of IMG College, which is the athletic department's multimedia-rights partner. "You have to have the passion for the university and the number of households in the state to make the numbers work," he said at the news conference. "There will be a very limited number of opportunities to do this, if any."