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Today At A Glance:

There is only one word to describe college football over the last several years: chaotic.

We have seen conference realignment, multi-billion-dollar media rights deals, NIL becoming the Wild West, and coaching contract extensions that are big enough to make their NFL counterparts jealous.

So with No. 1 Georgia and No. 3 TCU facing off in tonight’s National Championship game, today’s newsletter will break down everything you need to know about the future of college football.

I’m talking about the finances behind a 12-team College Football Playoff (CFP), the real reason so many schools have decided to switch conferences, and why coaching salaries will only get bigger. Enjoy!

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Expanded College Football Playoff (CFP) in 2024

Did you know that Division I FBS football is the only college sport for which the NCAA does not sanction a yearly championship event? Basketball, baseball, softball, soccer, lacrosse, ice hockey, cross country, volleyball, gymnastics, wrestling, and more all have NCAA championship events — but not college football.

This has led to what feels like a constantly changing process. For decades, the champion of college football was determined by the AP Poll and the Coaches Poll, which often left people frustrated and even led to many years of dual champions.

This changed in 1997 when the six biggest conferences joined forces to create the Bowl Championship Series, otherwise known as the BCS. They put together a complex formula that awarded teams a specific number of points based on their performances throughout the year, and the top two teams were then pitted against each other for a winner-take-all championship game.

The winner of the game was recognized as National Champion by the Coaches Poll, but the AP Poll did not always agree. This caused more fan frustration — did the best team really win the National Championship? — and it eventually led to the creation of The College Football Playoff (CFP).

The CFP was introduced in 2014. The idea was to replace algorithms with a 13-member committee to select and seed four teams to take part in the CFP. This opened the championship window to four teams (instead of two) and increased revenue for everyone along the way.

Current College Football Playoff (CFP) 4-Team Overview

Established in 2014
Created a 4-team playoff structure
Televised on ESPN for an average of $470 million per year (through 2026)
The 13 CFP committee members serve three-year terms and meet up to ten times annually to reach a consensus top 25 that make up the CFP rankings

This new format was an immediate success. The very first CFP National Championship was won by No. 4 seed Ohio State, proving that lower-seeded teams could win national championships if given the opportunity.

But more importantly, this drastically increased revenue across the board.

For example, ESPN’s current deal with the CFP pays about $470 million per year, and they also have separate contracts with the Rose, Sugar, and Orange bowls that add up to more than $600 million annually.

So while the initial goal was never to expand the playoff beyond four teams, those involved at the highest level of college football have seen the money that can be generated by expanding the tournament and decided to do precisely that.

Starting in 2024, The College Football Playoff (CFP) will expand from four to twelve teams. There will be four rounds instead of two, playoff games at on-campus stadiums, and a National Championship game at a neutral location.

New College Football Playoff (CFP) 12-Team Format

Starting in 2024
12 teams instead of 4 teams
Six conference champions (Power 5 champions and one Group of 5 champion) and six best non-conference champions (at large bids picked by the College Football Playoff committee)
- Guarantees a playoff berth to each Power 5 champion
The top four seeds get first-round byes
The first-round playoff games will take place at on-campus stadiums
Quarterfinal and semifinal games will take place at bowl game locations
- It’s expected that the current New Year’s Six lineup of bowl games (Cotton, Fiesta, Orange, Peach, Rose, Sugar) will serve as the quarterfinal and semifinal games, with a yearly rotation for the semifinals
The National Championship will take place at a neutral location

This new format is interesting on several levels. First, after kicking off the inaugural CFP with more than 34 million viewers in 2014, viewership has declined by an average of 5.2% during each of the last eight seasons — even dipping below 20 million in 2020.

College Football Playoff National Championship Viewership History

2014-15 (Ohio State beat Oregon): 34.2 million viewers
2015-16 (Alabama beat Clemson): 26.2 million viewers
2016-17 (Clemson beat Alabama): 25.3 million viewers
2017-18 (Alabama beat Georgia): 28.4 million viewers
2018-19 (Clemson beat Alabama): 25.3 million viewers
2019-20 (LSU beat Clemson): 25.6 million viewers
2020-21 (Alabama Beat Ohio State): 18.6 million viewers
2021-22 (Georgia beat Alabama): 22.6 million viewers

Of course, basic supply & demand principles would tell you that increasing the number of games should only drive viewership lower. But the CFP committee is betting that the inclusion of additional fan bases will bring more eyeballs to their product — and the increased revenue doesn’t hurt either.

Under their current agreement, ESPN owns the rights to the first two years of the 12-team playoff, and the extra CFP games are projected to bring in $450 million of additional gross revenue.

But this is where it gets interesting — because many people expected the CFP to explore a two-network deal similar to the NFL (aka sell games to both ESPN & Fox) starting in 2027. This could reportedly be worth $2.2 billion annually, increasing the average conference payout from $103 million to $323 million per year.

Conference Shakeups Bring Big Money Media Deals

In addition to the restructuring and expansion of the CFP, there were also quite a few notable conference changes announced last year, including moves across the Pac-12, Big 10, Big 12, SEC, and more.

For example, USC and UCLA are set to leave the Pac-12 and join the Big 10 Conference beginning in 2024. This gives the Big 10 a true coast-to-coast conference, and they sweetened the deal by providing both schools their full financial shares immediately, unlike Nebraska, Rutgers, and Maryland, which each had to wait the full six years before vesting with full financial shares from the conference.

This is a huge financial win for USC and UCLA compared to the Pac-12.

Revenue By Conference (2020-21)

Big 10: $679.8 million
Pac-12: $343.5 million

Average Distribution To Member Schools (2020-21)

Big 10: $47.9 million
Pac-12: $19.7 million

Furthermore, as of right now, Oklahoma and Texas are set to join the SEC in 2025. They may make that move a year early and join in 2024, just in time for the 12-team CFP expansion, but regardless, the exit fee will be $50 million plus.

Per Action Network: “Big 12 bylaws require Oklahoma and Texas to pay an exit fee the sum of the league’s distribution for two years — which is about $84 million per school, sources said. Historically, when a school leaves a conference, that exit fee is negotiated down to about 60%, meaning OU and Texas could possibly get out for about $50 million each.”

In response, the Big 12 announced that it was adding Brigham Young University, the University of Central Florida, the University of Cincinnati, and the University of Houston — but those schools don’t carry the same weight.

Still, a flurry of media deals have been signed over the last couple of years, and these moves have had a severe financial impact across their corresponding conferences.

Here’s a brief recap of where these conferences currently stand:

SEC
- The SEC signed a 10-year, $3 billion broadcast deal with ESPN that starts in 2024
  - Interesting note: The deal has a pro rata clause that requires ESPN to pay the same amount of money per school even if new members are added — which makes the timing of Texas and Oklahoma joining the SEC even more interesting (more below from Action Network)
  - Action Network: “How eager is ESPN to pay that increased amount to the SEC in 2024 instead of waiting until 2025? If OU and Texas join the SEC early, that could decrease the value of the Big 12’s final year of its current media rights with ESPN and FOX, which the Big 12 would oppose.”
  - “Would ESPN be willing to offset those smaller numbers to the Big 12 and also pay more to the SEC? Would OU and Texas agree to pay more than the expected $50 million buyout to get out early? Would — or even could — OU and Texas schedule nonconference road games at Big 12 teams in 2024 to help offset the decrease in the media rights for that year?”
  - “The Big 12 would like it to happen a year early, the SEC would like OU and Texas a year early, but FOX could care less, and I’m not sure what ESPN will do,” an industry source said.”

Big 10
- In August 2022, the Big 10 signed a 7-year, $7 billion TV deal with Fox, CBS, and NBC that starts on July 1, 2023 — and its 16 teams are in for a serious boost in revenue sharing because of the deal.
  - Per ESPN: “The Big Ten is projected to eventually distribute $80 million to $100 million per year to each of its 16 members. According to USA Today, the league distributed $54.3 million to most of its members during the most recent fiscal year (2019-20) not impacted by the coronavirus pandemic.”

Big 12
- In October 2022, the Big 12 extended its TV contract with ESPN and Fox on a new 6-year, $2.28 billion deal that starts in 2025-26. Big 12 schools are expected to receive $31.6 million each year for just the TV deal and nearly $50 million when you add in the NCAA. The deal also includes a pro-rata clause to pay new member schools the same amount of money (like the SEC’s ESPN deal) if the Big 12 were to expand.

Pac-12
- The Pac-12 is currently looking for a new media deal but is in “no rush” to sign one. Their current deals with Fox and ESPN — worth $250 million per year — expire in 2024. However, time will tell how this new deal shakes out given the imminent departures of USC and UCLA. Per Sports Illustrated, the Pac-12 is expected to add more schools in the wake of USC and UCLA leaving, which may be why the conference is waiting to sign a new broadcast deal. Of note, the conference has been linked to Amazon. And the conference will need to up the ante on its revenue, as it has ranked dead last in revenue distribution among Power 5 conferences, according to FOS.

Coaching Salaries Are Only Going Higher

As you can tell, the overarching theme throughout college football has undoubtedly been an increase in money. Larger TV deals, an expanded college football playoff, conference realignment, and NIL regulation are primarily driving this increase.

But the biggest beneficiary of this might end up being the coaches themselves.

For example, high-profile coaches like Nick Saban, Dabo Swinney, Kirby Smart, Lincoln Riley, and Brian Kelly are already making more than the majority of NFL coaches — and these salaries should only go higher given the current tailwinds.

So while many people continue to claim college football is all about student-athletes, it’s important to remind ourselves how big of a business college football really is.

Individual conferences are signing multi-billion-dollar media rights deals. Several coaches are the highest-paid public employee in their respective states, and college football is quickly becoming one of the world’s most profitable sports leagues.

The next few years should be a pretty clear reminder of that.

Have a great day. I’ll talk to everyone on Wednesday.

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Extra Credit: Live Sports Continue To Dominate US TV Viewership

Live sports remain the sole property keeping the cable industry afloat, accounting for 82 out of the top 100 most-watched US TV programs last year. That’s up from the previous record of 75 in 2021, and the NFL was this year’s biggest winner (again) — with 19 of the 20 most-viewed broadcasts in the United States.

Huddle Up is a 3x weekly newsletter that breaks down the business and money behind sports. Subscribers include investors, professional athletes, team owners, and casual fans. So if you are not already a subscriber, sign up and join 78,000+ others who receive it directly in their inbox each week — it’s free.

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