TCSDaily | 5.27.10
By Alan W. Dowd

The Big Ten Conference touched off a brushfire in December by letting its fellow collegiate athletic conferences know it’s planning to expand. When word leaked in April that the conference was ready to pursue an “accelerated timetable,” that brushfire became a full-fledged firestorm, engulfing conferences and colleges from New Jersey to Nebraska. Just how big the new Big Ten will grow is anybody’s guess—and there is plenty of guessing going on—but equally interesting is how individuals and organizations are reacting to the Big Ten’s growth spurt. Some reactions are self-righteous and hypocritical. Others are hysterical. Still others reflect contentment with the status quo—and fear of what change might bring. In this sense, the Big Ten expansion process is showing us a glimpse of creative destruction at work.

“Creative destruction” is a term coined by economist Joseph Schumpeter in the 1940s, who described it as a process “that increasingly revolutionizes the economic system from within, incessantly destroying the old one, incessantly creating a new one.” Creative destruction, in Schumpeter’s view, reflects the “evolutionary” nature of capitalism—a system that “never can be stationary.”

As participants in, and contributors to, this constantly evolving system, collegiate athletic conferences like the Big Ten are recognizing that they have to move and evolve to survive. And the Big Ten and other big-time athletic conferences have been evolving for many decades. In fact, Big Ten commissioner Jim Delany notes that there have been more than 250 changes of conference affiliation since 1990. The Big Ten itself, which actually includes 11—yes, 11—universities in the Midwest, originally consisted of just seven schools.

Most observers blame/credit the Big Ten’s decision to add PennState in 1990 for triggering a shakeup that transformed the college-sports landscape: The intervening years have seen the Atlantic Coast Conference (ACC), Big East Conference and Southeastern Conference (SEC) grow; the Southwest Conference die; and the Big Eight morph into the Big Twelve.

In short, as Sports Illustrated observes, this is “a period of high anxiety,” especially for the Big East and Big Twelve, which border the Big Ten. When the Big Ten reaches across those borders, it will have a lot to do with money and market share.

The New York Times reports that only 21 percent of top-division college athletic departments operate in the black. The other 89 percent of schools average deficits of $9.87 million.

Big Ten athletic departments don’t have to worry about big deficits, owing largely to the fact that the conference has two strong revenue streams: a healthy TV contract with ABC/ESPN (a billion-dollar deal covering 10 years) and its very own TV network (the Big Ten Network). The Chicago Tribune has done the math and concludes that each Big Ten member receives $9 million from the ABC/ESPN contract and some $8 million from the Big Ten Network. “Add revenue from bowl games, the NCAA basketball tournament and licensing, and you arrive at the estimated $22 million-a-year distribution figure.” That’s $22 million per member. And if the Big Ten expands, according to the Tribune, “Conference officials have seen estimates of television revenues doubling by 2015-16.”

Moreover, adding a conference championship football game—an inevitability once the league expands to 12, 14 or 16—would add an estimated $15 million to league coffers.

Now, contrast the Big Ten’s position—blessed by certain historic advantages and strengthened by forward-looking innovations like the Big Ten Network—with that of the Big East and Big Twelve.

According to the Providence Journal, the Big East generates just $4-6 million for its eight football schools. “The eight schools that don’t play football in the conference…don’t share a dime of football money. They pocket somewhere around $1.7 million a year from the conference.” All told, the Big East earns only $33 million from television revenue.

The Dallas Morning News reports, “Under the Big Twelve’s distribution formula, teams receive $7 million to $12 million.” ESPN adds, “Schools like Texas and Oklahoma, which have the majority of their games on television, receive bigger television checks than schools like Baylor and IowaState, which are rarely televised.”

In other words, not all schools are created equal in the Big East and Big Twelve. That feeds the green-eyed monster. And that leads some to look for greener pastures.

Perhaps coincidentally, perhaps not, the Big Ten is reportedly eyeing schools from those two conferences. One, three or five could be added to the Big Ten’s roster. If the Big Ten were to go really big, Sports Illustrated argues it’s possible that the ACC, SEC, Pac Ten and Big Ten would emerge from the firestorm as four, 16-team behemoths, decimating the Big East and the Big Twelve in the process. 

So it’s not surprising that most of the Big Ten’s loudest critics come from Big East and Big Twelve country. They use words like “Armageddon” and “tsunami” to describe the Big Ten’s coming growth spurt. One columnist says a bigger Big Ten will “destroy storied rivalries.” Another howls, the Big Ten’s “message seems to be: Join us or perish.”

The critics fail to recognize conference expansion—and in some cases, conference destruction—as the natural byproduct of the evolutionary free-market system. “It is what capitalism consists in and what every capitalist concern has got to live in,” Schumpeter coldly observed.

Conferences may be comprised of nonprofit institutions of higher learning, but conferences are in every way capitalist concerns. (See the dollar signs above.)

Even so, some of the strongest criticism of Big Ten expansion comes from the Big East, which recently hired former NFL commissioner Paul Tagliabue to help fend off the Big Ten hordes.

Tagliabue calls Big Ten expansion plans “very disruptive to everyone outside of the Big Ten.” He predicts expansion is “going to have a terrible negative effect on everyone other than the schools in the Big Ten.” He claims the Big Ten’s desire to grow is triggering “depreciating value and a ton of negativity.” He warns about “a big negative reaction out of Congress or someone else” and blames the Big Ten for forcing other conferences to drift “in artificial suspension” while the Big Ten weighs its next move.

Dan Beebe of the Big Twelve worries that some of his member schools don’t fully appreciate what the Big Twelve has given them. “It would be a shame, given that all boats have risen with this tide created by the Big Twelve, that they think they can have a better future somewhere else,” he recently said.

Of course, given the Big Twelve’s aforementioned revenue-distribution formula, the feeling of under-appreciation may be mutual. Presidents, athletic directors, coaches, boosters and players notice when the pie is unevenly split.

But while the Big Twelve and Big East worry about surviving and holding on, the SEC—to its credit—looks at a new round of expansion and realignment as an opportunity. “I won’t just sit back and ignore what is going on around me,” SEC commissioner Mike Slive has said. The SEC will “make sure it maintains its position as one of the nation’s preeminent conferences,” according to Slive.

In other words, the SEC is ready and willing to change, grow and improve.

Expansion opponents, on the other hand, act as if the current configuration of collegiate athletic conferences was handed down from Mount Sinai. Nothing could be further from the truth, of course.

The Big East, for example, didn’t always have 16 members. For that matter, it wasn’t even a football conference until the 1990s. Indeed, it’s worth noting that the Big East had no qualms about expanding by raiding Conference USA.

The critics and those who want to cling to the status quo seem to forget that growth is natural and essential, which brings us back to creative destruction. Capitalism is a self-fueling engine, as Schumpeter explained it, that creates new goods, “new methods of production,” “new markets,” “new forms of industrial organization” and, for that matter, new collegiate athletic conferences.

The Big Ten is simply creating a new way of doing things—and if the market tells us anything, a better way—by launching a TV network, enlarging its footprint, improving its brand and expanding its customer base. All of these are interrelated, and all of them are contributing to a kind of creative destruction in big-time college sports.