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Will Verizon kill the super-conference era?

Cable providers are paying massive fees to broadcasters for the privilege of offering their content to subscribers, but with those fees come inflated bills to consumers. Now, Verizon is proposing to fight the inflation.

ESPN charges your cable company around $4.69 per household receiving basic cable on their system. With a vast majority of US households having either Cable or Satellite television access, basic cable networks like ESPN can rake in the cash from those subscriber fees, even before they sell a single hour of advertising time. For ratings superstars like ESPN, the nearly-universal demand for their product drives their success, but for smaller networks, the fees often won't match-up to the interest.

Reports place the subscriber fees for the lucrative Big Ten Network, within the conference's footprint, at around 70-cents per household -- significantly less than the ESPN fees, but not an insignificant chunk of change. Not all households in that footprint will necessarily be tuning into the network on a regular-basis however, and the leagues' best games will still often appear on larger sports networks like ESPN.

The interest level and outcry from Big Ten alumni in their local markets, or the fear of that outcry, has pushed the network onto the basic tier for most subscribers living in the TV markets that they cover.

Verizon, however, has noted that the viewership of many basic cable networks doesn't match-up as much to their distribution. Instead, the telephone company-cum-cable-co has proposed a new system, where networks are paid on a sliding scale depending on how many viewers watch at least five minutes of their programming in a given month -- you get paid for getting actual viewers.

Viewership on the networks would be measured directly and completely by the provider's set-top boxes as well, rather than via Nielsen ratings.

For ESPN, that system would have little effect. The Worldwide leader is one of the top-three cable networks for primetime viewership and that isn't likely to change much. For the Big Ten, Pac-12 and soon, the SEC, that move could take a significant chunk out of the profits their networks are, or were expected to, turn in.

It isn't a major secret that the Big Ten targeted Maryland and Rutgers to join because of the massive population in the corridor between Washington, D.C. and New York City. The basic cable subscriber-base in that region was likely to add a tremendous pile of cash to the conference coffers through subscriber fees paid out by the cable providers in that region -- even if nobody was watching their games and other content.

It also proposes to takes a chunk out of regional networks like YES, which is a New York Yankees-themed cable channel that makes insane money by being the Pinstripes' cable proxy in the New York TV market. Even if you're a Mets fan, you're paying at least $3 per month for the right to flip past the Yankee game on your cable dial. If Verizon were to have a say, you would pay at least somewhat less than that.

As TheBigLead notes, "[s]hould the environment shift to the "unique viewer" model, these conference networks would be sunk."

So would the rationale for the jumbo-sized leagues. Instead, when the lions share of television revenue is derived from the actual ratings of your content, quality games and brand name programs matter more than offering a broad third-tier of content and a lot of television households. If conference network power is diminished going forward, the conferences that expanded based on that revenue model may find themselves regrettably over-extended.

Until that time, the model only exists to encourage further incursions into large and growing television markets in search of bigger dollar figures earned just by planting a flag.

If Verizon gets its way, the super-conference era could be halted before it ever truly began. Without guaranteed subscriber fees, there is little or no need for a flag to be planted in the New York television market, or in DC. There would be little or no drive for conferences to expand into the Virginia and North Carolina markets either. Not unless those additions improved their overall product and TV ratings.

Expansion to super-conferences has been driven by revenue from television, and in the cases of the Big Ten and other conferences that have or will have league-owned networks, that expansion has been driven by a drive to add a presence in larger television markets. Without the existing subscriber-fee model, it is unlikely that the push toward 14-team leagues and more would have taken off.

Verizon's plan could slam the brakes on the super-conference era before it ever arrives.