Pac-12 schools each received just $29.5 million in conference distributions in FY18. By comparison, the Big Ten distributed $54 million to each of its longest tenured members (i.e. not Rutgers and Maryland), SEC schools (save Ole Miss which was serving a post-season ban) received $43.7 million each and the Big 12 paid out $34.7 million per school. The Pac-12’s existing media rights agreements do not expire until the Spring of ’24, so even if there is a pot of gold at the end of the rainbow (as Commissioner Larry Scott envisions) the conference will need to get creative if it’s to narrow the gap in the interim. One Pac-12 Athletic Director tells JohnWallStreet that the conference is doing just that. “Everything remains on the table” – including the possibility of ripping up the current rights pacts early so that the league can strike a lucrative long-term deal with a new partner.
Howie Long-Short: Despite the increasing revenue divide between the likes of the Big Ten and SEC and the Pac-12, our source maintains that membership remains united on the conference’s long-term media strategy (think: retain sole ownership of Pac-12 Network, ride out existing broadcast deals, cash in come ‘24). There is less of a consensus on “if [the conference] has the right leadership (see: Larry Scott) in place to fully capitalize [on the next round of rights negotiations].”
Nearly all of the talk over the last year surrounding the Pac-12’s short-term efforts to close the revenue gap have focused on the conference finding a strategic partner willing to invest in a holding company that would control all of its media and sponsorship rights come ’24 (see: Pac-12 NewCo). But discussions have plodded along slower than supporters of the concept had hoped and our source said there is little momentum at this point to sell an equity stake in future rights.
The WSJ reported in late December that the Pac-12 held preliminary discussions with Apple about a broadcast partnership (the company is said to be looking to “broaden the appeal” of the Apple TV app and TV+ service). Our source confirmed the scoop and added that the conference has also engaged in conversations with at least one other major tech co. He/she called the opportunity to align with one of the FAANGs “intriguing” because it could potentially solve the schools’ “short-term cash-flow” needs and “also position the Pac-12 for a bigger long-term rights deal.” It’s also considered to be the “wildcard scenario” with both the technology companies seeking an all-encompassing partnership (i.e. it would require pulling Tier 1 & Tier 2 football & basketball rights off of linear television). While it’s feasible that a deal could include “a FOX Sports or ESPN component”, the conference’s OTT partner would be the one “driving distribution” for the vast majority of programming. It would be premature to say the league is sold on pursuing a deal that will almost certainly result in fewer eyeballs watching games.
It’s fair to wonder how partnering with a FAANG could solve the Pac-12’s short-term revenue problems with the conference’s most valuable rights tied up in long-term deals (see: ESPN & FOX Sports). One wouldn’t think the conference has much to offer an OTT provider right now, beyond the programming that currently sits on Pac-12 Network (which likely wouldn’t bring in the $5 million to $10 million/year/school sought). But the A.D. we spoke to indicated that the conference is willing to explore “going in a completely different direction.” In other words, if someone came in offering to buy the conference out of its existing contracts and guarantee each school more money than it currently has coming the proposal would receive serious consideration. “Maybe it makes sense to be totally out in front of the trend. In four years [when digital programming is more prevalent] we could have something pretty valuable.”
To be clear, partnering with Apple or another FAANG company would not necessarily be a death knell for the Pac-12 Network (even though the deal would certainly include the conference’s Tier 3 and Tier 4 rights that currently reside on the channel). It is possible – if not likely – that P12N would continue to assist in the production (and perhaps even the broadcast) of games.
One thing not up for discussion amongst Pac-12 schools is the return of Tier 3 media rights (as the Big-12 has done). The belief is that those rights retain the most value as a package and that they’re simply under monetized on Pac-12 Network.
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