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PAC-12 reaches media agreement with Fox & ESPN for $225-250 Million Dollars

The Pac-10/12 and Larry Scott have agreed to a media deal with both Fox and ESPN. The deal is reportedly worth $225 million dollars according to ESPN and $250 million dollars according to the New York Times and Jon Wilner making it the most lucrative deal for a conference in college sports to date. This is surprising news for three major of reasons:

  1. The amount of money is not only staggering, it is record-breaking. And it is even more than was expected (read more below).
  2. The fact that BOTH Fox and ESPN are in the deal is HUGE boon for the Pac-12 and an unusual compromise that maximizes the conference's exposure AND income. 
  3. That the Pac-12 still has content available to create a Pac-12 network is perhaps the most brilliant strategic move of the deal and guarantees protection against future expansion and network capacity limitations.

The man that made it happen:

Scott_pac-10_v2_medium

via www.sportstalkwithbo.com

After the jump a more detailed analysis of these factors and what they mean for the Pac-12. 

Money, Money, Money, Money, Money, Monaaay......MooONAY!

 

The Pacific-10 Conference will start its own network on cable television in 2012 but will also sell most of its marquee football and basketball games to Fox and ESPN for about $3 billion over 12 years, more than quadrupling what the two companies have been paying.

That's right...QUADRUPLING. This is clearly WAY more than the paltry ~$60 million the Pac-10 was making before. But it is also record-setting in that it is more than ANY OTHER CONFERENCE. Even the....wait for it.....SEC! Yes that's right. The Pac-12 has beaten the SEC. And for good reason. The quality of programming that the Pac-12 has in its arsenal is second to none. It's not even close. The discrepancy when looking at non-football/basketball sports is so massive that this is really a no-brainer. There is clearly HUGE value in the "Olympic" sports of the "Conference of Champions."

Here is a breakdown of the top schools in terms of total number of NCAA Team championships (keep in mind football is not awarded an NCAA championship):

  1. UCLA.......................106
  2. Stanfurd....................100
  3. USC..........................92
  4. Oklahoma State.........50
  5. Arkansas...................41
  6. LSU...........................42
  7. Penn St......................40
  8. Texas.........................40
  9. North Carolina.............37
  10. Michigan.....................33
  11. Cal.............................30

Notables:

ASU............................22
Colorado...................22
Utah...........................20
Oregon......................18
Arizona......................17
Nebraska..................16
Notre Dame..............15
Ohio State.................15
Duke..........................12
Harvard......................10
UW...............................8
Texas A&M..................8
WSU.............................5
Alabama......................5
Oregon State..............3
South Carolina............2
Vanderbilt.....................1

 

What about in the Individual titles you ask?

  1. Stanfurd...................437
  2. USC..........................361
  3. Texas........................308
  4. Michigan....................290
  5. UCLA........................262
  6. Ohio St......................228
  7. Florida.......................219
  8. Cal............................194
  9. LSU...........................175
  10. Georgia......................166
  11. Oklahoma State..........164
  12. Illinois.........................146
  13. Arizona......................144

So clearly, there is a massive amount of programming that will be available of very high quality sports. The Pac-12 is a Content Treasure Trove. And it is for this reason that ESPN/Fox were willing to pay out the nose AND not get the full equity:

The ACC recently signed a deal for $155 million a year and the Big 12 reached a deal with Fox that made its total annual package worth about $130 million. The Pac-10, which will be renamed the Pac-12 in July with the additions of Utah and Colorado, topped those deals, as well as the $205 million the SEC gets and the $220 million paid to the Big Ten.

This new deal gives the Pac-12 the edge against other schools with the averages broken down here:

  1. Pac-12 - $20.83M or $18.75M depending on source
  2. Big Ten - $18.33M
  3. SEC - $17.08M
  4. Big-12 - $13M
  5. ACC - $12.91M

Keep in mind that not only is the Pac-12 tops....there is EVEN MORE ROOM FOR GROWTH WITH THE PAC-12 NETWORK!!!

Jon Wilner reported that the Pac-12 was seeking a $300 million dollar deal that would include EVERYTHING. So Larry Scott seems to be valuing the Pac-12 network worth at least $50-75M in profit for the Pac-12. That's an additional $4.16-6.25M. That right there, ladies and gentlemen, is a Baseball team and a Men's Gymnastics team. I suspect, however, that it could be worth far far FAR more (The Longhorn Network's payout of $15M a year is for ONE school).

How did the PAC-12 and Larry Scott pull off such a crazy good deal? Well, first the presidents made the right decision to consolidate all their programming:

The conference took the first step toward achieving its revenue and exposure goals in October, when the presidents agreed to bundle all media rights at the conference level.

A little luck and some great timing:

"It was a confluence of events," Scott said. "We were the last to go, which put a tremendous premium value on our rights. It’s all about market dynamics."

One important aspect to note is the LENGTH of the contract. 12 years. Set to run until 2024-2025. That is a VERY long time. One must consider the economics of college sports, the current expansion climate, and the BCS trouble. No one expects the BCS to change anytime soon, but over the next 12 years? A lot can happen. But keep in mind that all the other major conferences are also in very long-term deals (10+ years)

How the addition of another four teams may affect the contract is also undoubtedly a major component of the current contract negotiations. Larry Scott is no dummy, however, so the contingency plans along these lines may actually provide incentive to EXPAND the conference. This means there needs to be room to grow on the actual networks to accommodate all those games....ahhh, well read on to see where that comes into play.

 

ESPN joins the fray and splits with Fox! #WINNING

ESPN gives the Pac-12 the national exposure that Larry Scott understands is CRUCIAL to maintaining competition, creating a stronger brand, getting cred in the polls, and hitting one of the largest alumni bases in the country. What's surprising about this is that most prognosticators felt that there was no way ESPN would take such a massive deal under its belt when it didn't have enough slots. But Larry Scott understood getting on ESPN was necessary for the grand vision. The solution? Sell ESPN part of the package and Fox the other part.

It is surprising that Fox would be willing to split its share, but this just goes to show that Larry Scott is a hard nosed negotiator. Another feather in his "Don't-mess-with-me cap."

Of course this does mean that PAC-12 fans will have to do some hunting to find their game...but really, that's been the case with pretty much all sports now for some time. Just try and come up with which networks show the Superbowl, NBA playoffs, MLB world series, NFL games, etc....unless you're Notre Dame, you're almost always going to be channel flipping. Co-branding isn't as important as availability. And this is why the ESPN aspect is such a massive WIN.

The games to be shown will alternate between years:

The conference’s football games will be shown on ABC and Fox — a combined five will be in prime time each season — and on ESPN, ESPN2, ESPNU and Fx. Basketball will be shown on ESPN, ESPN2, ESPNU and Fox Sports Net. ESPN will also carry a package of about 15 Olympic sports.

ESPN and Fox will also rotate the conference’s annual football championship game, while the basketball tournament will alternate between the ESPN networks and Fox and Fx.

 

The PAC-12 network: The Network of Champions

What's so great about this deal and makes Larry Scott a true genius? He still got the money he wanted without giving away the farm AND there is room to create a Pac-12 network. Again the New York Times:

But a critical difference between the conferences’ deals is that the Pac-10 will retain full ownership of its network. Fox Cable Networks owns 49 percent of the Big Ten channel. Another recently created college channel, the Longhorn Network, which will focus on University of Texas sports, culture and academics, is owned by ESPN as a result of a 20-year, $300 million payment.

"We didn’t feel we had to give equity to get the broadcast and cable packages we got," Larry Scott, the Pac-10’s commissioner, said in a telephone interview.

Translation: "We fully intend to keep equity, create our own network, and in two to three years when the everyone else is locked into contracts we will create a network that will make us even MORE money and create a World-wide presence that will make the Longhorns and the Big-Ten drool."

How big will this network be? The NYT reports:

The Pac-10’s new channel will carry at least 350 sports events. The conference is also creating a digital channel, like ESPN3, to carry at least 500 events annually, and a properties division to handle sponsorships.

I'm sure you're reading that and saying...wait that math doesn't add up. And you would be correct. Larry Scott is going to use those 150 slots to schedule in events from other places like other college conferences (C-USA, WAC, MWC, etc). This means the small schools could get in on the action via the Pac-12 network. I'm not sure how the money would flow in these cases, but I'm sure Larry Scott is devising ways to make it a win-win for everyone.

The other scenario is that those 150 slots could be filled by four additional schools. As in four additional schools that would make up the Pac-16. What Larry Scott has done by keeping equity is assured that expansion of the conference could be accommodated in a manner that benefits the CONFERENCE not the networks exclusively. Either way, it is another win-win scenario and another feather in the "genius cap" for Larry Scott.

I'm very curious to see how Larry Scott might get additional programming on there. Especially from the academic side. Are we going to see science shows with graduate students in LeConte talking about dark matter? Forestry professors at Oregon leading hikes into the wilderness to discuss climate change? USC with reality-TV cheerleader vs sorority girls shows?

The question now is who will operate the channel? It looks like Comcast/NBC has said "no thank you"

The deal is a blow to Comcast/NBC, which was vying to pick up the rights for Versus but pulled out last week. Comcast/NBC still is in play to operate a conference channel, but sources said it has told the conference that it is unwilling to actually own such a channel.

My best guess....whoever is has the capacity and the know-how to deploy a college based network and who is looking to expand their revenue base in two to three years. I suspect NBC will pay out the nose to get the olympics in 2014/2016. Perhaps Larry Scott chose ESPN for another reason...might they be the partner for The Network of Champions?

The opinions expressed in a FanPost are, in every way, reflective of the opinions of every California Golden Blogs Marshawnthusiast. Moreover, they are reflective of every employee of SBNation, including Tyler "Blez" Bleszinski.

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