The Big Ten Men's Basketball Tournament will move to Washington, D.C., in 2017, the conference announced this week. The traditionally Midwestern contest has shuffled between Chicago and Indianapolis since its inception in 1998, so a journey to the East Coast is a surprise. The Chicago Sun-Times calls it a "big mistake," the Indianapolis Business Journal says it "could rob Indy of millions," and Twitter blew up after the news broke. Despite the fan outrage, though, there's reason to believe the conference made a very smart business decision.
The dollars and cents
According to the St. Louis Post-Dispatch, the Big Ten paid out nearly $26 million to each of its member schools last year. That was highest in the nation -- better than the ACC, Big 12, Big East, and even the SEC. And the Big Ten Network -- jointly owned by the conference and Twenty-First Century Fox (NASDAQ:FOXA) -- is a major reason why. As the Dispatch explains, the network is responsible for roughly $6 million to $7 million in annual revenue for each Big Ten school.
The conference may not be No. 1 in the future, though. Both the SEC and Pac-12 are on the cusp of an influx in TV dollars, which, according to the USA Today, could boost their annual per-school payouts to $30 million or higher.
The Pac-12 is in the midst of a 12-year contract with Fox and Walt Disney's (NYSE:DIS) ESPN, while the SEC will unveil a new "SEC Network" this fall. The latter is part of a 20-year deal with ESPN, and is expected to have at least 20 million subscribers upon launch, AL.com reports. The Big Ten Network, by comparison, reached 16 million homes in its first year.
The real reason behind the move
Hence the reason the Big Ten is moving its conference tournament to D.C.: to boost the size of its fan base, and more specifically, its TV market. If that happens, it could rival -- or eclipse -- the $30 million payouts the SEC and Pac-12 look set to boast in the future. Next year's arrival of two East Coast schools, Rutgers and Maryland, is simply another arm of this strategy.
The Big Ten's commissioner, James Delany, shared his thoughts on the matter with reporters this week (via The Detroit News):
At the time Maryland came in, we set an aggressive goal to live in two regions in the country. Those were our words. We've been working hard over the last 18 months to match our actions to our words.... We have some distribution in the East and hopefully we will have complete integration in the East in the coming months.
Will living in "two regions" guarantee a larger financial footprint for the conference? No, but it's certainly possible. The East Coast contains 10 of the top 25 markets for college basketball, according to ESPN MediaZone, and as SB Nation's Matt Brown writes, "Washington D.C. ... has more Big Ten graduates than any other city outside of Chicago and NYC."
The bottom line
It's worth pointing out: the decision to go East isn't permanent. D.C. will probably join Chicago and Indianapolis in a tournament rotation after 2017. That, and the fact that Delany is making the move for the good of his member schools' pocketbooks, makes it tough for me to side with the critics.
It is easy to cry about the conference abandoning its roots. But many forget just how revolutionary the Big Ten has been throughout history. It was America's first collegiate athletic conference, a pioneer in the realm of gender equity and student-athlete welfare, and most recently, the first to create its own TV network.
It takes guts to innovate, and the Big Ten has proven it's capable of doing so again and again. This time shouldn't be any different.
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Jake Mann has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.