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College football fans across the country—especially those in the Midwest and on the West Coast—are still reeling from this week’s announcement that the Big Ten and the Pac-12 are postponing their fall football seasons due to the coronavirus pandemic.
As two of the major “Power 5” collegiate athletic conferences, the moves mean that fans of universities including Ohio State, Michigan, USC, and Oregon will have to wait until spring at earliest before seeing their favorite teams back on the field.
While the three other Power 5 conferences—the SEC, ACC, and Big 12—currently plan to proceed with their fall seasons, the absence of some of the sport’s biggest institutions will have major economic consequences for the multibillion-dollar industry that surrounds college football.
But one group of stakeholders that should manage just fine, despite having considerably fewer games to show, are the broadcast networks. While the likes of Disney, Fox, and ViacomCBS have invested billions of dollars for the rights to air the nation’s premier college football contests, analysts at Bank of America said this week that a slimmer slate of games should be “relatively digestible” for those media giants and their shareholders.
One reason is the exposure that all three have to the NFL, which plans to begin its season as intended next month. BoA analysts cite the “potential for the NFL to fill in some of the programming gaps” on college football Saturdays—though there may be some regulatory hurdles to overcome before that’s possible.
There are also potential benefits to saving some college football for the spring, assuming the Big Ten and Pac-12 are able to resume their seasons then. “If some games are played in the fall while others are played in the spring, ratings could improve on a per-game basis due to scarcity, while also creating a more attractive spring slate for advertisers,” BoA analysts wrote.
And while fewer games in the fall will lead to a “meaningful” decline in revenues for broadcasters, due to “lower advertising dollars and certain affiliate rebates,” the networks will also likely be spared significant expenses associated with their college football slates. They would be “unlikely to pay [broadcast] rights fees” to the conferences—which often amount to hundreds of millions of dollars annually—or would receive rebates or compensation, perhaps in the form of “contract extensions for lost value” if games do not take place, according to BoA.
Of the major media conglomerates, Disney has the most exposure to college football. Through ESPN, it holds the rights to the end-of-season College Football Playoff, majority ownership of both the SEC Network and the ACC Network, and the rights to games across all of the major conferences.
ViacomCBS, meanwhile, currently pays around $60 million annually to be the SEC’s flagship broadcaster. Should the SEC reverse course and decide to cancel its season, the company will face a negative EBITDA impact of around $50 million this year, according to BoA analysts—though that could be “partially offset by replacement programming.”
Fox currently pays roughly $550 million per year for the right to air games across the Big 12, Pac-12, and Big Ten (including majority ownership of the latter’s Big Ten Network). Interestingly, BoA notes that the broadcaster “would likely see profitability improve” if all of its college football games were canceled, as TV affiliate revenues “would still accrue despite lower expenses.”
From a stock market perspective, the size and scope of all three broadcasting companies means it’s unlikely that any college football cancellations would hurt their bottom lines considerably, according to TG Watkins, director of stocks at Simpler Trading.
“I think these publicly traded companies are probably big enough that they’ll still do fairly well,” Watkins tells Fortune, citing Disney—which derived the largest chunk of its revenues in its last fiscal year from its Parks division (37.7%)—as an example. “Obviously it’s a big deal, but they’re well-diversified enough that they can pivot and look to provide content wherever they can.”
But while may be alright regardless of what happens, college football fans are left to wait and see whether they’ll be able to watch their favorite teams in action—be that this fall, next spring, or at all.
