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Think the Pac-12 Networks are struggling with audience and revenue? The reality might be worse than you imagined

Conference in crisis: Emails reveal Larry Scott’s response to Pac-12 officiating controversy

Some faculties are receiving annual payouts from the networks that are a fraction of what they’d hoped for — and a fraction of what has been reported in the media — when the actual value of the content material is included in the calculation.

Halfway via their seventh yr, the Pac-12 Networks aren’t merely stagnating. They’re shrinking in attain and drastically underperforming income expectations, based on info obtained by the Hotline that sheds unprecedented mild on the monetary realities of the convention’s wholly-owned media firm.

Some faculties, for instance, are receiving annual payouts from the networks that are a fraction of what they’d hoped for — and a fraction of what has been reported in the media — when the actual value of the content material is included in the calculation.

“From Day One, I worried about them having all those channels and having to produce all that programming,” stated USF sports activities administration professor Dan Rascher, referring to the seven feeds (one nationwide, six regional) and 850 stay occasions per yr.

“That’s crazy hard to do without spending a lot of money on a lot of programming with low value.”

Whereas annoyed with the lack of income, coaches and athletic division officers advised the Hotline that the restricted attain of the networks is at the least as damaging to the soccer and males’s basketball merchandise.

“We’ve received to get eyes on the product,’’ Washington State coach Mike Leach stated. “It’s about publicity and cash, and you don’t have one with out the different.’’

On a relative foundation, the Pac-12 Networks don’t have a lot of both.

Launched in August 2012, the networks have reached some extent of their life cycle, in accordance with business analysts, when they need to be rising incrementally or holding regular. As an alternative, they’re dropping audience.

Info offered to the Hotline by SNL Kagan, the famend media analysis agency, signifies the Pac-12 Networks have misplaced seven % of their audience since the peak in 2016, with a lot of the decline attributed to the discontinuation of service on U-verse final yr.

With simply 17.9 million subscribers (per Kagan), the Pac-12 Networks may have fewer subscribers in 2019 than The Pursuit Channel, The Sportsman Channel, Fox Deportes and Z Dwelling, in line with Nielsen cable protection estimates from the fall.

ESPN analyst Brock Huard, the former Washington quarterback who hosts a radio present in Seattle, stated the lack of attain has forged a pall over the convention, notably in soccer.

“It affects everything. It impacts everything. It is your brand,” he stated. “It’s what you put on the market for the nation to see.

“We go on the street and exit to dinner as a (manufacturing) crew … and you go to Buffalo Wild Wings or a sports activities bar, something you can discover, and we need to watch these video games and the community isn’t on. You’ll be able to’t discover it.

“It affects everything.”

By comparability, the Massive Ten and SEC networks have three or 4 occasions the audience of the Pac-12 Networks and are believed to generate three or 4 occasions the income for the faculties, as properly.

That disparity is due, partially, to contrasting enterprise fashions:

The Massive Ten and SEC partnered with Fox and ESPN, respectively, which gave them leverage in negotiating distribution offers; the Pac-12, which has a smaller inhabitants inside its footprint, decrease scores for its video games and much less fan affinity, eschewed a companion and retained 100 % possession.

That strategy has created steep distribution challenges — DirecTV, to quote one instance — however commissioner Larry Scott and campus officers hope having full management of their content material will show visionary when the convention renegotiates its media contracts in a number of years.

“We are working collectively to be in the best position for the next go around,’’ UCLA athletic director Dan Guerrero said. “The quality of the network production is first-rate, and we feel there will be incredible interest in our content moving forward.”

Guerrero additionally acknowledged that the assets generated by the Pac-12 “are obviously not what schools had hoped for at the outset.”

The truth is, the assets haven’t even met the lowest expectations held by many campus officers, in response to extra than 20 interviews carried out for this story. (Most officers declined to talk on the document.)

The convention has by no means disclosed the monetary steerage given to the campuses in 2011-12, throughout the run-up to the launch of the networks.

Formally, the faculties have been suggested to keep away from budgeting for a selected income quantity and that in an excessive, worst-case state of affairs, the networks would nonetheless handle to interrupt even.

Nevertheless, in a pre-launch presentation attended by athletic administrators, Scott dazzled the room by offering three ranges of annual payouts (as soon as the networks had exited the start-up part).

In line with a supply who attended the presentation, these payout ranges have been:

Excessive finish: $7 million to $10 million per faculty per yr

Center: $5 million to $7 million per faculty per yr

Low finish: $three million to $5 million per faculty per yr.

When requested about that steerage, former Washington State athletic director Invoice Moos stated he didn’t recall the actual figures however remembered vividly the response in the room.

“We have been all giddy,’’ Moos stated. “And we wouldn’t have been a giddy over $2 million (per yr).

“We were just coming off the biggest Tier 1 deal in the history off college sports” — the $three billion settlement with ESPN and Fox — “and everybody was jumping up and down. (Scott) had just walked the walk, so why shouldn’t we believe him?”

The presidents and chancellors have been all in with Scott, to the level that his annual compensation of $four.eight million — he’s the highest-paid commissioner in collegiate athletics — is predicated on his twin roles as convention commissioner and media government.

Final fall, throughout his courtroom testimony in a high-profile lawsuit towards the NCAA, Scott defined: “An important component of determining my compensation is based on a unique dual role that I have serving as commissioner of the conference, but also executive chairman of a media company that’s wholly owned by our 12 schools where we’re unique in that regard.”

However after six payout cycles, the networks have but to even hit the low finish of the anticipated vary, based on monetary info obtained by the Hotline.

Particulars of the networks’ monetary efficiency are intently guarded, with solely the complete revenue offered on the federal tax returns. (In the 2017 fiscal yr, the listed revenue was $127,850,701.)

The convention doesn’t separate Pac-12 Networks distributions from the bigger annual payouts to the faculties, which embrace income from Fox and ESPN, March Insanity and the soccer postseason — it doesn’t minimize a separate examine, so to talk.

Nor does the convention distribute monetary particulars to the faculties, thereby avoiding the potential for these particulars to be topic to public data requests.

As an alternative, the annual payout figures are made obtainable for short-term viewing by campus monetary officers on a safe web site, in response to a number of sources.

“It’s very irritating,’’ one administrator stated.

The determine offered on the web site is a lump-sum quantity. Two Hotline sources with entry have copied down that quantity over the years, then divided by 12 to find out the payouts to every faculty.

These payout numbers are as follows:

2013: None listed
2014: $862,000 per faculty
2015 $1,677,500 per faculty
2016 $1,980,250 per faculty
2017: $2,522,167 per faculty
2018: $2,666,667 per faculty

Over the six accomplished fiscal years of the networks’ existence, the complete payout per faculty, as tallied by campus officers, is $9,708,584 per faculty — not even at the prime finish of the single-year vary referenced by the supply who attended Scott’s presentation.

“They informed us, ‘This is what we think it’s going to be,’’’ stated John Perrin, the longtime CFO of the Arizona athletic division who retired two years after the networks have been launched.

“And it hasn’t panned out anywhere near where they thought.”

However that’s not the finish of the monetary story, at the least from the faculties’ perspective.

Not solely are the annual payouts under the expectations of many athletic division officers. They are, in the eyes of some, merely a gross quantity.

The Pac-12 Networks wouldn’t exist with out a listing of content material, with out the video games themselves.

However as a way to purchase that stock, the convention wanted every athletic division to purchase again the TV rights to native soccer and basketball broadcasts — the video games not proven nationally on ABC or ESPN — from its sponsorship and advertising companion.

As soon as all the native rights had been repurchased from the likes of IMG and Learfield, they have been pooled collectively to type the content material spine of the Pac-12 Networks.

(The SEC went via the similar course of a couple of years in the past when forming its community.)

The quantity and period of the buy-back course of different by faculty and was based mostly on particular person contracts.

Some, like Washington and Washington State, have accomplished the repurchasing course of; others haven’t.

Normally, the value of repurchasing the native rights was substantial.

Over a four-year interval, for instance, UCLA had $5.6 million “carved out” of a bigger sponsorship deal with IMG as compensation for the lack of its TV rights, in accordance to a faculty official.

Again that work out of the $9.7 million distributed to every campus by the Pac-12 Networks, and the Bruins have acquired $four.1 million in internet income. That’s a mean of $683,333 per yr over six years of the networks.

Cal reported a much bigger hit over an extended buy-back course of, reimbursing IMG to the tune of $7.1 million over 5 years.

Take away that from the Pac-12 Networks’ payout, and the Bears have acquired a mean of $433,333 in internet annual income — or 1/20th of the quantity in the excessive vary of the state of affairs introduced to athletic administrators.

However no less than Cal and UCLA are completed with the buybacks.

Oregon State should compensate Learfield $1 million yearly by means of 2022 for the repurchase of its native TV rights.

Carve $6 million out of OSU’s complete payout thus removed from the Pac-12 Networks, and the Beavers are left with a mean of $616,000 per yr in internet distributions.

To place that determine in context with the value of doing enterprise in main school athletics think about this:

OSU defensive coordinator Tim Tibesar was paid $550,000 final season.

“When you’re trying to measure the true cost associated with the decision to do (the Pac-12 Networks),’’ a conference source said, “the buy-backs are not insignificant.”

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