By Johnie Freatman
For as long as collegiate athletics have been in existence, its various sports have fallen into two categories: the haves, or revenue-producing sports, and the have-nots, which actually lose money for their universities. Thanks to a truly remarkable television deal structured by the Pac-12 Conference, this structure will become dramatically different and all athletes from member schools will get television exposure.
Though the revenue-producing sports will still be king, the Olympic sports of the Pac-12 will now have an amount of coverage never before seen. This is just one of a wide-range of effects that have resulted from a confluence of events that resulted in a deal so remarkable that industry professional Jeff Fellenzer believes the creation of the Pac-12 network will serve as a “case study” in the sports business world for years to come.
According to Larry Scott, commissioner of the Pac-12, there will be 850 sporting events broadcast during the first year of the Pac-12 Network. While some of these will be football or men’s basketball games, the majority will be non-revenue sports, such as swimming, water polo, baseball and tennis.
Fellenzer, also a “Sports, Business, Media” professor at USC, discusses an effect that one would normally only associate with basketball or football players.
“If you’re a swimmer and thinking about coming down from the state of Washington to California, it’s going to seem even more attractive for you to do that when you know family can see some of your biggest meets on television. That’s powerful” he said.
Considering that the Pac-12 has already produced more Olympians than any other conference, its results could be even more powerful if athletes from states without Pac-12 schools consider these ramifications.
While it is yet to be seen what kind of ratings these events will generate, Fellenzer envisions a certain kind of consumer having interest in non-revenue sports.
“There are things that make Olympic sports attractive and viable entities, especially for people who have interest in the Pac-12’s history. The schools and athletes that have come out of the schools are probably second to none. There are more champions and Olympians than any other conference. The Pac-12 brand top to bottom is second to none in the country,” said Fellenzer.
If the conference gains even more of a vise grip on elite Olympic-caliber athletes due to the “recruiting advantage” that the network generates, that brand will become even stronger.
In regards to non-revenue sports, the network’s arrangement is a win-win for everybody involved. The athletes will get more exposure, each school will receive drastically increased publicity, and the conference as a whole will become even more competitive nationally by conveying the content on their own network.
Furthermore, Courtney Brunious, Assistant Director of the USC Sports Business Institute, believes that a presumed increase in interest from added exposure will lead to increased sponsorship revenue for the Olympic sports programming as well.
“While the revenue sports have had decades of exposure via a constant television presence, which has led to the current popularity we see today, the non-revenue sports haven’t had that luxury. The ability to broadcast these sports on a consistent basis will now only serve as a springboard for additional monetization,” he said.
While the current forecast is very positive, it took a perfect storm of events for it to become that way.
There has always been an arms race of sorts between the six “power” conferences in college sports: Pac-12, ACC, Big East, Big 10, Big 12, and SEC. In 2009, the SEC was coming off consecutive NCAA basketball championships by a member school and was in the third year of what is now six straight college football championships.
Commissioner Mike Slive parlayed this success and media interest into a television contract with ESPN, among others, for 15 years and $2.25 billion, an average of $150 million per year. It was by far the largest deal in college sports history and many thought none would ever approach it.
Dan Beebe, the Big-12 Commissioner at the time, said “I’m not sure if that kind of deal will continue to be available to the rest of us with that kind of money.”
In the meantime, the Pac-12 (Pac-10 at the time) was languishing near the bottom of the power conferences with a media rights deal that was worth less than $54 million per year.
It would be two years before Pac-12 commissioner Larry Scott brokered his landmark deal- a time span in which the media landscape drastically changed.
During this time, the usage of DVRs and other recording mechanisms increased greatly. Instead of watching television live, the average person began recording it and watching later so they could skip commercials.
Since commercials and ad revenue are the lion’s share of a television network’s revenue, this strongly disrupted the industry. Television could no longer stay in front of emerging technologies.
However, sports was the one type of programming that became somewhat bullet-proof.
As Fellenzer explains, “there’s not much programming left that people can’t just record, use DVRs, skip through commercials, and see parts of programs they want. They tend not to do that as much with sports. They like to watch it live so (as a result) sports has become a much more sought-after commodity.”
This concept was first truly grasped by the Big Ten, which negotiated a landmark t.v. rights deal that is currently worth $232 million annually, a fee paid by the networks that televise the conference’s games.
On top of that, the conference created The Big Ten Network, an innovative way to televise more content while giving attention to non-revenue sports that might not be as attractive to the major networks.
Cognizant of the increasing value of live sports programming, this was essentially a no-lose proposition for the Big Ten: they can broadcast their own events and conceivably monetize them as the value for live sports continues to skyrocket.
Said Brunious, echoing some of Fellenzer’s sentiments, “The live nature of sports generally offers a large captive audience, which in turn is very attractive to advertisers and sponsors, which leads to higher fees.”
Indeed, specialty markets like this with niche sports may be the next foray for advertisers and sponsors as the price tag for advertising in revenue sports continues to increase.
This became a point of contention between The Big Ten and Fox, a primary media partner, as Big Ten Commissioner Jim Delany constructed the deal.
Seeing the potential value in a conference network’s product, Fox demanded partial ownership as part of the $232 million annual media payment to the Big Ten.
After sitting on the sidelines and watching other conferences surge past the Pac-12 in media rights fees, it was now Larry Scott’s turn. As it turned out, his patience may have been one of the reasons for the deal he ultimately brokered.
“The Big Ten was the first in the line for these type of deals. The Pac-12 and other conferences undoubtedly learned a great deal from the Big Ten and were able to improve upon what had been done to fit their own needs,” Brunious said.
As such, Scott developed some nonnegotiable aspects of any t.v. rights deal: according to Scott, the Pac-12 (or more specifically, Pac-12 Media Enterprises) would own 100 percent of the Pac-12 Network and any networks participating in the t.v. rights deal would need to submit to the conference’s system of allocating games. The big networks would get many of the marquee games but wouldn’t simply be able to “cherry pick” as the conference would have ownership of up to half the football games for broadcast on the Pac-12 Network.
Scott had high hopes for the negotiations but with some of these “non-starters” of sorts, Fellenzer says “I still don’t think, and Larry Scott has confirmed, I don’t think anybody expected it to be what it was. I think he felt if they could get close to SEC (money), they would do really well.”
All of this changed when a bidding war broke out between long-time rivals Fox and ESPN. While Scott isn’t forthcoming in revealing details about the negotiations, it’s safe to say this drove up the price considerably.
“The market generally sets the price and with competing networks vying for control over collegiate athletics, the price was bound to be higher than what would have been seen by a single bidder,” says Brunious.
Whether the market was originally for lower than the Big Ten deal due to Scott’s stipulations, Fox and ESPN eventually settled on a media rights partnership- one worth $3 billion over 12 years for the Pac 12, or $250 million a year to be divided equally among member schools.
Forget about the SEC. This surpassed the value of the Big Ten’s deal… and the media deal of every other conference in the country.
At the time the deal was finalized, Lisa Love, athletic director for Arizona State, said “I think it’s fair to say 18 months ago, never in our wildest dreams would we have envisioned being in the position that we’re in today.”
Not only have Scott and Co. applied financial lessons from the Big Ten Network, they have done other things to make the Pac-12 Network truly unique.
While some may consider those who would tune in to the Pac-12 Network a niche audience, the Pac-12 will be even more geographically tailored than the Big Ten and other networks of its type by forming six “regional networks” to accommodate the national network.
According to Stewart Mandel of Sports Illustrated, “In Pac-12 states, the national and/or appropriate regional network (Washington, Oregon, Northern California, Southern California, Arizona or Colorado/Utah) will be available on basic cable from day one.”
For example, if somebody lived in San Francisco, they would not only get the national network but the “Northern California” one as well. This is ingenious because if a fan only cares about watching Stanford play but an Oregon game is being televised on the national network, the aforementioned fan can still access the game through the other channel.
While the Big Ten Network’s cable distribution was originally hampered by difficult negotiations with cable companies and the Longhorn Network “is still only available to a scant few (Mandel),” Mandel says the Pac-12 Network has “already secured distribution deals with the four biggest cable companies — Comcast, Time Warner, Cox Communications and Bright House — in its geographic footprint.”
According to Scott, the network will already be capable of reaching 40 million homes when it launches this August.
This is no small task considering the barriers that must be overcome for a cable network to carry to carry a college sports network.
According to Brunious, obstacles include “The appropriate digital footprint, what tier the network gets placed on, and how much the per-subscriber fee is are all up for negotiation upon launch.”
As was the case with the Big Ten Network, Brunious adds that these negotiations are often very lengthy.
“Deals have to be made with each individual cable/satellite company, which as we’ve seen with other networks continues to take time…even lasting way past the launch in many cases,” Brunious said.
While fine-tuning remains for Scott and Co, especially on expanding distribution, one thing is virtually assured: no longer will fans of Pac-12 athletics have to settle for a box score or an occasional radio broadcast.
Not only will the parents of the swimmer “(moving) from Washington to California” be able to watch their daughter’s swim meets, at least 40 million others will as well.
Brunious, Courtney. Personal interview. 5 May 2012.
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Fellenzer, Jeff. Personal interview. 1 May 2012.
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