Longhorn Network doomed? Texas' TV money stacking up fine against SEC's

According to one media analysis, the Longhorn Network is charging two cents per month per cable subscriber outside of the state of Texas. Meanwhile, the year-old SEC Network already boasts a whopping 64 monthly cents nationally.

Cue the I-told-you-so's by detractors of the single-school network model and the chest-thumping by fans in the SEC (such as those of Texas A&M, which left Texas' conference for the SEC).

HELL YES! START THE CHANT, Y'ALL! That damned Longhorn Network is dead. Right?

Nope.

But that's not what I heard. I heard LHN isn't going to survive!

The Longhorn Network is a joint partnership by ESPN and Texas, and it's a long one. Starting in 2011, the parties are bound for 20 years.

"We very much look at it in year four of 20 as way too early or premature to pass any kind of success or failure determination, that's for sure," ESPN senior vice president of programming acquisitions Burke Magnus said.

But I heard ESPN is losing money on The Longhorn Network!

Maybe. Probably for now. We don't know.

The latest DOA claim is built around figures from analysts at SNL Kagan, first reported by FOX Sports' Clay Travis as part of a declaration that LHN is "all hat and no cattle." (FOX Sports is a television partner of Texas' parent Big 12 Conference.) In Texas, subscribers are paying 29 cents for LHN, and outside, a meager two cents.

SB Nation confirmed the data with SNL Kagan, albeit with one discrepancy. FOX reported that 6.5 million subscribers were in the "Texas footprint," while SNL Kagan told SB Nation that number was 7.5. That matters, whether you're multiplying by pennies or dimes.

ESPN claims 20 million households receive LHN, but SNL Kagan doesn't include those in its estimates. When asked why, a spokesperson replied: "We aren't including national subscribers that are outside the network's footprint because those subs only pay roughly two cents a month. Longhorn Network is also available on U.S. military bases for free, which may also be included in the 20 mil sub mark."

The larger picture is that right now, LHN makes far less per cable subscriber than the SEC Network. According to Sports Business Journal, LHN asked for 40 cents per subscriber when it sought initial distribution, and SECN asked for $1.30.

ESPN declines to comment on revenue specifics. But with a $300 million investment and an estimated $13 million annual operating budget on top of low subscriber fees, it's safe to assume LHN is nowhere near profitable right now. But neither was it expected to be.

But this is bad for Texas, right?

For UT? No.

Even if LHN never increases its fees by another cent, that scrappy little school is gonna make it. Under the ESPN contract, LHN pays Texas an average minimum annual royalty of $15 million. Once that $295 million investment on studios, offices, fiber-optic cable and personnel is recouped by ESPN, 70 percent of LHN revenue will go to Texas.

Our Rock M Nation took a stab at that number and pegged Texas' LHN income at around $12 million this year.

But that's not as much as the SEC Network payout!

Some SEC fans have compared the LHN's $15 million or so to the $31.2 million per-school figure the SEC announced recently. But that $31 million is from the whole pot of revenue streams, not just SECN.

Each conference has tiers of media deals. CBS gets the SEC's best game each week, meaning it has part of the SEC's first-party rights, while the SEC Network has SEC third-party rights. LHN has Texas third-party rights, and Texas also gets Big 12 money from ESPN and FOX.

Sports Illustrated's Andy Staples did the bar napkin math and estimates the SEC Network delivered around $6.5 million to each school. That means Texas has a richer third-party TV deal. For the moment.

The Big 12 just announced a distribution of $25.6 million for every school, except new members West Virginia and TCU. Texas gets that $25.6, plus LHN's guaranteed payout. If that payout is $6 million or more (half Rock M Nation's estimate), Texas is making more money off TV than Texas A&M is in the SEC.

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Yeah but no one outside of Texas fans want to watch LHN, and even they're probably not interested.

ESPN won't admit it, but LHN hasn't had much to work with. In the 1,380 days since Matthew McConaughey spoke LHN's first words -- "Ours is the color of the sunset and leather" -- the network has seen Texas go 31-21 in football. The basketball team hasn't made a Sweet 16 since 2008.

"The one thing that we would never take to the bank on any rights deal we do is how things will pan out competitively. That's out of everyone's control," Magnus said. "It's been interesting that there's been a fair amount of transition at the university [two new revenue-sport head coaches, new athletic director, new president], but when we got into this, we got comfortable with a very long term approach. Channel deals tend to be of that ilk; you don't make a three- or five-year deal.

"The reason we were so comfortable with Texas and remain so is that regardless of the last four years of performance on the field, their track record speaks for itself over decades. We don't worry about that because if we did, that's all we would worry about, whether it was Texas or the SEC or the NFL or the NBA.

That's OK, no one can see the Longhorn Network in Texas anyway.

Nice 2012 joke! LHN has actually saturated its home state after years of public wrangling.

When the Longhorns played Rice in 2011, only 2.1 percent of Texas households were able to see. When SB Nation first visited LHN in 2013, the network boasted 12 million viewers nationwide and was a luxury in-state.

Major providers like Time Warner and DirecTV have joined. LHN is available via at least four providers in every market in the state. Nine of the state's 10 biggest carriers have LHN, with Comcast (only available in the Houston metro) as the holdout.

The SEC Network is already in 65 million homes and it hasn't been a year.

And the Pac-12 Network is available in 11 million homes since launching three years ago.

Is that only because the SEC is a superior product, or also because the Pac-12 used an unconventional strategy? The Pac-12's perceived failure and the SEC's success hinge partly on issues that have little to do with the merit of the teams they represent.

In other words, you can't claim bragging rights based off cable television.

"It's difficult to compare in a fair and accurate way," Magnus said. "A comparison of LHN to a conference network is apples and oranges, although Longhorn does stack up from a distribution perspective pretty favorably compared to some conference networks."

Well, I read that the Longhorn Network's failure is why the SEC Network has succeeded. They learned from mistakes and all that.

ESPN claims they had nothing to do with each other and that talks about an SEC network began long before LHN staffing.

"This is what we do. We launch networks. Before these, we launched ESPNU. LHN didn't inform the SEC Network," Magnus said. "We even waited during the original rights deal with the SEC to wait until the idea of a conference network best made sense. So the two are completely disconnected, however you want to look at it."

Doesn't matter anyway. To hell with Texas.

And that's the real spirit here.

If you're a fan of a Big 12 member that isn't Texas and feel your conference will be left behind because LHN blocks a Big 12 network, that's a fair opinion.

If you don't like Texas, you hate the concept of LHN regardless of cable subscription availability.

If you're an SEC fan, know that the company you resent for creating a school network is the company helping to make your conference insanely rich. And that company is comfortable playing the long game to build LHN.

Ten years from now, no one will think it was a good idea for a Texas network to try and be a national cable network.

Given the tumult of the media landscape, the bundled-cable model won't exist when the current contract ends in 2031. There's a stronger chance we'll be watching sports through brain implants than cable boxes, relieved of Comcast or Charter or TWC.

No matter what, ESPN owns Texas' rights.

If you’re dropping a technoliquid solution on your cornea to experience Rice-Texas in 2029, Texas will profit from it. And ESPN probably will, too.