PAC-10 EXPANSION: Utah, Colorado and conference payouts

From the beginning, the company line on expansion has been that it wouldn't be done unless the amount of revenue for each team grew significantly. Now that Larry Scott is done, for now, it's time to see if the pie grew enough to make adding Colorado and Utah worth it.

The thought by many of us when considering adding Utah and Colorado was that it locks up two of the larger markets outside the Pac-10 footprint without creating a travel nightmare.

Jon Wilner wrote an interesting piece yesterday analyzing whether the perceived benefit in adding those two teams was a reality. After talking to some marketing and media sources, the conclusion he came up with is that the move was more likely a push. According to his numbers, adding Colorado and Utah brings no significant increase in revenue per school over standing pat with 10.

Before breaking down Wilner's piece, it's important to note that he's looking at the worst case scenario figures if nothing changes between now and the time the contract is negotiated. Everything, both on Larry Scott's side and Wilner's side, is hypothetical at this point.

It’s not what they bring to the negotiating table with ESPN or Fox. It’s what they allow the Pac-10 to do: Hold a football championship game.

This was obviously one of the reasons the Pac-10 has wanted to move to 12 members. Currently, an NCAA rule is in place that only allows a conference championship game to be played in conferences with 12 or more members. While some may think there's a simple workaround, that just isn't the case. The NCAA has not shown a propensity to grant waivers for 10 or 11 team conferences.

The payoff for a championship game comes in the form of between $10-15 million a year that the conference wouldn't have had without adding 2 teams. This is a huge deal when talking revenue.

Three media/marketing industry sources said that Utah and Colorado bring very little, if anything in terms of additional TV revenue. Said one: "From a national cable perspective, they have no value."

While I'll defer to the media sources, I still don't buy this one. Based on DMA numbers, the Denver market holds about 1.5 million viewers. If Colorado carries the Denver market, beating out CSU, it immediately becomes the 5th biggest market in the Pac-10. Salt Lake City has around 1 million viewers according to the same number. Although these may not be your typical sites, adding that many eyes has to be worth something.

The other thing that adding two schools and two markets does is increase the overall inventory of games the conference has. Don't like WSU-OSU this weekend? Fine, you have 5 other games to choose from, with the ability to place any of them on a regional, national, or Pac-10 network. Adding inventory and increasing flexibility seems like it would be attractive when negotiating a media deal.

So that’s $150-160 million, or about $13 million per school — and the figures do not include BCS payouts and NCAA Tournament money.

[...]

Because if they could have taken the 10-team route to a title game, it would have meant essentially the same total revenue for the league but with two fewer mouths at the trough.

By my estimates, each school would have been in line to receive $15.5 million.

This is the basic conclusion. The conference could have stayed at 10, petitioned for a title game, and raked in a higher amount per school. As I said earlier, the conclusion is based on the fallacy that the NCAA would allow a title game in a 10 team league.

Personally, I think Wilner took the low-end numbers in all of this, which is a fine way to calculate it all out in hypotheticals. It's better to plan for the worst than to hope for the best.

Either way, this is a significant increase from the $8-9 million per year each school is making now.

Moving to a 12 team league wasn't simply about DMA rankings and market shares. While those play a big role, the addition of two teams allows for a divisional split and a better chance of competitive athletics on a yearly basis. Market presence plays a role in TV contracts, but having an attractive product, as we saw with the SEC, also plays a huge role. Moving from 10 to 12 teams increases the odds of fielding a competitive league and decrease the chances that the whole league will have down years, as we saw in basketball.

The final piece that makes me optimistic about the next 12 months is the following quote from Larry Scott (side note: read the whole article for some great quotes from Scott.)

"If you want to say we've swung for the fences, we're thrilled," Scott said. "This is the second inning at best. You'll start seeing this summer some of our other plans and innovations start to be unveiled.

In Scott, the Pac-10 has a commissioner with a deep understanding of marketing and television. He took the women's tennis tour from an afterthought to the spotlight during his time as tour commissioner. I have no doubt he can bring the best deal to the table for the expanded Pac-10 conference.

The process behind adding Colorado and Utah was solid. Scott added two good sized television markets that are continuing to grow while also adding programs with the potential to elevate the competition in the league. In the end, the league added 2 teams that fit the overall mission of the conference, both on the field and off.

While we don't know what the end result of the television negotiations will be right now, it looks like Scott has put himself in the best position he could leading up to the new contract.

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