Examining the Economic Effects of Conference Realignment

Even though the creation of “super” conferences appears to no longer be imminent, the realignment of the Big Ten and Pac-10 certainly created some ripples in the sea of college athletics. But if the pair of leagues had expanded to 16 teams as many speculated, those ripples of change would have become waves that would have washed away the current Bowl Championship Series (BCS) setup.

Sport economist and University of Alberta professor Brad Humphreys believes the formation of four “super” conferences could have signaled the end of the current BCS setup.

“If you are a fan of the current bowl/poll system, traditional rivalries, and the rest of that, then the current outcome—with only Nebraska, Colorado, and (Utah) moving—and the same basic BCS conference configuration is a good thing,” Humphreys said. “If you want a playoff, then a 16-team ‘super’ conference configuration is better, as the BCS is probably untenable under that configuration.”

The Pac-10 made a serious run at reconfiguring its league membership from 10 to 16 institutions, but was ultimately turned down by Texas and a collection of Big XII members. It was also being speculated that the Big Ten would consider growing to a 14- or 16-team league. But for now, the Big XII will have 10 members and the Big Ten and Pac-10 will each have 12 members.

The Big Ten (which despite its name had 11 members) got to 12 teams by plucking Nebraska from the Big XII, while the Pac-10 grew by adding Colorado from the Big XII and Utah from the Mountain West. Now both those conferences are able to host a conference championship game in football, which they were previously unable to do since the NCAA mandates a membership of at least 12 schools in order to have a conference championship contest.

But just how beneficial financially is the coveted conference championship game in football? It depends on the TV deal and fan turnout, according to Humphreys.

“While the lure of holding a conference championship game in football is what started all this moving, I think the overall profitability of those games is uncertain,” said Humphreys, an associate editor of the International Journal of Sport Finance. “Sure, the SEC championship game is a huge financial success, but I don’t think the ACC championship game has produced the kind of revenue that was expected.”

The Mountain West has been the only other conference to undergo a significant makeover this summer, but it took one step forward and then one step back. Football power Boise State left the WAC for the Mountain West, but days later Utah, another football power, left the Mountain West for the Pac-10.

While the Pac-10 and Big Ten will enjoy a significant bump in exposure and revenue, the Big XII would appear set to take a financial hit. But Big XII commissioner Dan Bebee made some backroom deals and promises to keep the Big XII from imploding, with the biggest being a promise that revenue generated from TV packages would nearly double for every institution. Additionally, schools are allowed to create their own TV networks, a deal that essentially only Texas could feasibly pull off.

“To me, the biggest issue going forward is how much TV revenue the ‘new’ Big XII earns,” Humphreys said “The Big XII commissioner somehow put together a football TV deal that produced more money for fewer teams. I don’t understand the economics of that deal, and we will have to see if it happens. If not, then the ‘new’ Big XII may not last long.”

And if any members of the “new” Big XII feel promises aren’t being kept, don’t be shocked if the Pac-10 ultimately does grow from 12 to 16 teams. The Big Ten, as well, may have long-term plans to grow to 14 or 16 members.

But Humphreys pointed out that conference commissioners should do their homework in order to determine whether growth in membership will equal growth in revenue.

“The most important question seems to be what sort of scale economies are realized when a football conference expands to 16 teams,” Humphreys said. “Do revenues grow by more than costs when a conference increases beyond 12, or do costs grow by more than revenues? I don’t know the answer to that question, and I don’t think anyone running a college football conference knows the answer.”

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