On July 16, 2012, the NCAA issued unprecedented sanctions against Penn State University, the Penn State University Athletic Department, its football program, and its legendary coach Joe Paterno relating to the criminal conviction of Jerry Sandusky and the actions of high-ranking Penn State officials in not reporting incidents related to Sandusky’s criminal acts. In addition to the NCAA sanctions, there will also likely be significant civil and federal claims made against the university. These sanctions and claims raise a number of concerns for, not only Penn State University, but also for other stakeholders in college athletics. For one, the effect that the problems at Penn State will have on the Big Ten Conference and its Regional Sports Network (RSN), the Big Ten Network, is an issue to consider for all sports properties and television operators who own or are thinking of starting a RSN.

The Penn State football program received the following NCAA sanctions:

  • $60 million fine;
  • Vacating of wins from 1998-2011 (112 wins);
  • Four-year postseason ban;
  • Four-year scholarship reduction (80 total);
  • Players may transfer and play immediately at other schools; and
  • Athletic department on probation for five years

The Big Ten conference supported the NCAA’s actions, saying in a news release it is condemning and censuring the school for "egregiously" failing on "many levels -- morally, ethically, and potentially criminally." The conference banned Penn State from the Big Ten Conference football championship for four years and allocated roughly $13 million, representing Penn State’s share of the Big Ten Championship game revenue over that period, to charity.

Penn State officials quickly responded that they accepted and would not contest the sanctions imposed by the NCAA and the Big Ten conference.

Penn State also faces potential federal sanctions as the result of the Sandusky case. Among other things, the US Department of Education is reviewing the case to determine whether there were Clery Act Violations. The Clery Act was passed by Congress in 1989 and requires colleges and universities that participate in federally funded financial aid programs to keep and disclose information about crime on and near their respective campuses. Violations of the Clery Act can result in fines to an educational institution or, in extreme cases, loss of federal funding to that institution. In addition, there will be civil claims from the victims of Jerry Sandusky that will result in large cash settlements being paid to the victims.

The Penn State football program, like most other Division I schools in major conferences, is the primary revenue source for the athletic department at Penn State and is responsible for funding many, if not most, of the other Division I sports teams at Penn State. It is likely that the sanctions imposed on the football program at Penn State and the resulting loss of revenue from the football program for many years will have serious implications throughout the Penn State athletic department, including the possibility that the budgets for other Penn State athletic programs will be significantly reduced or eliminated entirely.

The Big Ten Network, which relies largely on sports other than football to supply a large part of the programming, has become a very valuable asset for the conference and its member institutions. Other conferences, such as the Pac 12, the Big 12, and the SEC, have either begun the process of creating or are seriously contemplating creating such a RSN. It is still unclear how the Penn State sanctions will affect the Big Ten Network, however, it is certainly something that the owners of the Big Ten Network will need to consider. Although not a founding member of the conference, Penn State has one of the most storied sports programs of any school in the Big Ten. Penn State also has among the largest student bodies in the Big Ten, which would also that the alumni base is among the largest. Finally, Philadelphia and Pittsburgh, presumably two markets that are very interested in the Penn State programming featured on the Big Ten Network, are two of the top television markets in the Big Ten Network market footprint.

A college RSN that relies heavily on the fan base and programming from each of its member institutions would be well served to consider how to minimize the exposure that it faces if one of its member institutions has its football program sanctioned. One way to accomplish that is by spreading the risk, which the Big Ten, for instance, has done by recently adding University of Nebraska to its conference and RSN package. Obviously, the more schools that a conference has the less exposure it will have if one or more of its member schools is sanctioned or otherwise has issues. 

Another way that conferences and universities can protect themselves against risk exposure to their businesses, including an RSN, is by enacting a self-imposed code of conduct that establishes checks and balances and watch dog provisions similar to the measures that have been applied to corporate America through Dodd-Frank. This type of process, if implemented at the conference level and at all member institution schools of a conference with (or without) an RSN, would enable the schools and the conference to better identify, prevent, and monitor issues that could threaten its program and the business assets of the schools and the conferences. With so much financial and emotional investment in college sports, it seems that there should be a regulatory threshold established by the colleges and conferences and applied themselves rather than relying solely on the punishments administered by the NCAA, the US Department of Education, or other independent organizations.

Furthermore, one wonders if these colleges and conferences need an “ombudsman” role to keep an independent eye on what is happening at their member institutions. One of the most important statements made by the NCAA in delivering the Penn State sanctions was “These events should serve as a call to every single school and athletics department to take an honest look at its campus environment and eradicate the ’sports are king' mindset that can so dramatically cloud the judgment of educators." The internal checks and balances that an independent ombudsman would provide could begin to address this issue raised by the NCAA and would also be very useful business protection tool for college and conference RSNs and their media partners. The vulnerability of a Penn State, which went from one of the jewel sports programs in the country to one that is now facing so many issues in less than one year’s time, makes it clear that no institution is immune. Definitive preventative actions at all levels of college sports would be a prudent business protection strategy for all stakeholders involved in college sports.