Forecasting SEC expansion plans

The SEC is not talking about its expansion plans, but it is not hard to figure out the SEC’s wish list. We can use the Big Ten’s experience to illuminate what the SEC will do.

To understand expansion one needs to understand the desperation of the Big Ten. That is right. The Big Ten is dying. The states within the Big Ten are the failed remains of a once great nation. Michigan is a disaster; a combination of autoworker unions, state employees and reckless government programs destroyed the state. Detroit makes Beirut look good. (Just read Michael Barone if you doubt the problems of Detroit.)

How can I claim the Big Ten is dying? Why not look to what the Big Ten’s commissioner thinks.

Demographics are the key. Demographic forces are the driving Big Ten expansion plans. Big Ten commissioner Jim Delany indicated as much when speaking to the press in May.

According to the AP, “Demographics, however, will play a bigger role. Missouri, Nebraska, Notre Dame and Rutgers have been reported as possible targets, along with Texas, Syracuse, Connecticut, Pittsburgh and Maryland. The only Southern school in that group is Texas, although the others would bring strong traditions, rabid alumni, exposure to large TV markets or combinations of all three.”

Delany then delivered a summary of the situation.

“Our schools have benefited by healthy economies, by strong job markets, by growth,” Delany said. “In the last 20 or 30 years, there’s been a clear shift in movement to the Sun Belt. The rates of growth in the Sun Belt are four times the rates in the East or the Midwest.”

Demography cannot be ignored. Fareed Zakaria in his excellent book The Post-American World likes to say, “Demography is destiny.” The graying of Europe is one of the big reasons the debt in Greece and Spain is much more severe than the United States—when your population is not replenishing itself and you have little economic growth then you have real problems.

Returning to the subject of Michigan, it can be seen as the extreme example of what is going on in the Big Ten states (or the Old Northwestern Territory.)

According to a Pew Center on the States report, “Michigan is still the eighth-most-populous state—but it has yet to come to terms with no longer being one of the most prosperous, said Donald Grimes, a senior research specialist at the University of Michigan and an expert on the Michigan economy. In 2008, Michigan ranked 37th for per-capita income, with peers that include Georgia (38th) and Montana (39th).

“’The state of Michigan still has to learn all the things that being a poor state means,’ Grimes said. When the federal Bureau of Economic Analysis releases finalized 2009 data, Grimes said, he expects Michigan to be among the 10 poorest states.”

According to a report from the Population Studies Center of the University of Michigan Institute for Social Research, “From the late 19th century until early 1970s, Michigan’s population grew more rapidly than the nation’s. Since then, Michigan has grown more slowly than the rest of the nation. The gap in growth rates appears to be widening and in the two most recent years, Michigan has been one of three states losing population. Maine and Rhode Island are the others.”

Also, “Industrialization in Michigan and the vehicle industry propelled the state to become the nation’s seventh most populated at the end of World War I… Michigan held that rank through 1970, but then Florida surpassed Michigan in population. Census 2010 will show that Georgia has more residents than Michigan and, at some early point in this decade; North Carolina will push Michigan down to rank number ten.”

Also, “Employment decline is the pattern across Michigan this decade.”

The situation is bad, but the Big Ten leadership understands this. Again, Delany’s comments tell us what we need to know. “In the last 20 or 30 years, there’s been a clear shift in movement to the Sun Belt,” Delany said. “The rates of growth in the Sun Belt are four times the rates in the East or the Midwest.”

To summarize, the Big Ten’s markets are nearing the limit of new revenue generation. The Big Ten understands that new revenue must come from new markets, and the best new markets are markets that are growing and not contracting. (For investors, think Chinese growth rates versus European growth rates.)

If the Big Ten understands this, you can bet Mike Slive and the Southeastern Conference understand it too.

So where should the SEC look?
According to Forbes these are the best candidates based on demographic growth,
North Carolina
2008 Population: 9,222,414
2007 Population: 9,041,594
Year-over-year Increase: 2%
Forbes also provided this: “According to the U.S. Census, North Carolina will gain 1.3 million persons between 1995 and 2025 because of in-migration, or people moving into the state from another state or country. Prevalent industries include biotech, pharmaceuticals and even finance.”

Texas
2008 Population: 24,326,974
2007 Population: 23,843,432
Year-over-year Increase: 2.03%
Forbes also provided this, “The Lone Star state’s proximity to Mexico keeps the population from contracting. From 2000 to 2008, Texas’ population increased by 16.7%.”

States like Georgia and South Carolina are also on the list. However, these states are already penetrated by the SEC, and according to a tweet by Cecil Hurt adding these teams would be unpopular with some SEC members. The same would apply to Florida. If we apply this rule, Clemson, Georgia Tech, Florida State and Miami would not be available for expansion.

Expansion then points to the states of North Carolina and Texas. We know the situation in Texas now; the Big XII has survived as a Big XII Lite or Little 12. At least it has survived for the moment. This indicates the SEC would likely again pursue Texas A&M and Oklahoma in the future—when the Big XII fails in the coming months or years. And odds are this conference setup will fail.

The state of North Carolina is the other attractive addition based on demographics. As Forbes pointed out above, it is growing and has a healthy diversity in its economy with biotech, pharmaceuticals and finance. The state’s wealth, its location and the University of North Carolina’s reputation all serve as important selling points. It is doubtful the SEC would consider any school in the state other than the University of North Carolina.

There could be incentives to move into a state like Virginia or Missouri; however, North Carolina and Texas make better financial sense for the SEC. It would make the most sense for the Big Ten to attempt to land the University of Virgina as a means to address some of the demographic issues afflicting the Big Ten.