Pac-12 TV revenue: Past, Present and Future

Good morning, Cougar fans, and welcome to spring time. Hopefully this post greets you along with sunny and pleasant weather. If you're a parent with kids entering Spring Break, hopefully you've already figured out what the heck you're going to do with the little monsters for the next week. I'll be loading the kids into the family truckster and heading north to Nashville for the week. Something tells me they won't be fired up to check out the Grand Ole Opry. Before we get there though, let's talk about something we can all identify with...money.

Over the last week or so, Jon Wilner wrote a series of articles detailing the Pac-12's finances, focusing primarily on the television deal Larry Scott negotiated a few years ago, along with the creation of the Pac-12 Networks. Every one of the pieces is compelling. Wilner's final piece can be found here, and the links to the entire series are at the bottom. They are absolutely worth your time.

As Jacob Thorpe detailed back in January, WSU Athletics operated at a $13 million deficit last year, despite the fact that revenues increased. This was due to a few factors, including Ken Bone's buyout, debt service on the new facilities and raises for the football coaches. In that same article, Bill Moos says that he doesn't expect the athletic department's budget to be balanced until 2019. If you're like me, you didn't foresee such a scenario when the Pac-12 signed its landmark (at the time) television agreement. After all, enough money should be rolling in by now to easily balance the budget, right? Not so fast.

Admittedly, Wilner's figures are not based on a lot of concrete numbers, so he had to do a good bit of estimation. However, it isn't hard to see that the Pac-12's revenue stream will likely be dwarfed by that of the Big Ten and SEC in the coming years. The question is, why? In my view, the Pac-12 is behind its peer conferences largely because of the Pac-12 Networks. Scott and the CEOs decided to start the networks from scratch, whereas the Big Ten (Fox) and SEC (ESPN) had the heft of a major network and the complimentary infrastructure to work with. I'm no television executive, but I'd guess that it's much easier to start a brand new TV network when you have the help of an established goliath.

Since the Pac-12 started from scratch, it had a monumental overhead bill that the others didn't. After three years, that hasn't changed much. As a result, the member schools are only seeing about $1 million each per year. That is far less than the Big Ten and SEC. A huge part of that is the absence of a carriage deal with DirecTV. Had Larry Scott aligned the conference with a major network, I can almost guarantee that Pac-12 Networks would be on the country's largest satellite provider. We saw what happened with ESPN and the SEC Network, as DirecTV balked for months, but ultimately signed on in time for the network's launch.

Now, I'd be remiss if I didn't bring up the other side of this. The advantage the Pac-12 has in starting up the networks from scratch is that the conference sees every cent of revenue, and doesn't have to share it with anyone else. This means that as the networks mature, the revenues are sure to grow, and Scott won't have to cut a check to ESPN or anyone else. Here's the rub: Is that going to happen any time soon?

Personally, I believe that Scott got out over his skis when he opted to to start the networks without any outside help. I also think he oversold the CEOs and ADs, and gave them revenue estimates that have yet to be realized. This is a big reason why the schools signed on to Scott's vision, and it wouldn't surprise me if people like Moos, who needs the extra cash more than anyone else in the conference, might have a bit of remorse about how things have unfolded.

Wilner draws these conclusions:

The picture isn’t as stark as it seems. There’s a fair amount of nuance to the situation because the Pac-12 owns 100 percent of its networks, whereas the B1G and SEC have partnered with FOX and ESPN, respectively.

The Pac12Nets are an enormous asset, and full ownership gives the conference the flexibility to adjust to, and take advantage of, the inevitable changes in consumer behavior and technology.

You could make the case that to this point in time — through the initial three years of this endeavor — the league is better off for having 100 percent ownership: The massive revenue gap hasn’t yet formed.

(The calculation there is unrealized income … what the Pac12Nets could have generated with a distribution partner … against the increase in value of 49 percent of the asset over the past three years.)

And because the market for live sports continues to climb, the Pac12Nets will likely be worth more in three years than they are now … and more in five years than in three years … and more in 10 than in five.

Exactly how much more, we don’t know. It’s impossible to know.

But here’s where it gets dicey:

The best approach for the conference over long haul is not necessarily the best approach for the athletic departments on the front lines over the near- and intermediate haul.

Can the league continue to hold 100 percent of an under-performing asset while the schools, if my estimates are correct, are trumped by their rivals to the tune of $8 million to $10 million annually?

Ultimately, the conference must do what is best for the student athletes – not only those currently enrolled, but all who will come through the gates in coming years.

Scott and the CEOs must monitor closely and be ready to adjust.

There are no easy answers or linear paths – the marketplace is constantly changing — other than to say the current situation cannot continue indefinitely.

From a WSU perspective, it is absolutely essential that the revenue starts coming in sooner than later. WSU, much like the conference, simply can't expect to keep up with its competition if it lags so far behind in revenue. Other schools have larger donor bases (at least in terms of big-time donors at the top) that enable them to build things like indoor practice facilities. WSU isn't there, and unless we see a large influx of cash from television and/or some high end donors materialize, it isn't likely to get there any time soon.

That's my (likely over-simplistic) view. What do you all think?

Football

Spring position breakdown: Pac-12 North offensive lines - Pac-12 Blog - ESPN
The Cougars stayed relatively healthy on the offensive line with left tackle Joe Dahl, left guard Gunnar Eklund and right guard Eduardo Middleton all starting all 12 games.

Q&A: Washington State defensive coordinator Alex Grinch - ESPN
The Pac-12 Blog caught up with new Washington State defensive coordinator Alex Grinch recently. Grinch comes to Washington State via Missouri, where he coached safeties the last three seasons. He won two SEC East Division titles and two bowl games with the Tigers. Before Missouri, Grinch spent three seasons coaching defensive backs at Wyoming.

Louisville safety Gerod Holliman among NFL draft statistical leaders | The MMQB with Peter King
Rang’s take: "It’s coming from Mike Leach’s offense, so you can generally throw those numbers out the window. But he’s a lot taller and has a stronger arm than some typical Mike Leach quarterbacks. I’m intrigued by him, and I think he’s a draftable prospect."

Baseball

Cougars Drop Series Opener to No. 6 USC, 10-3 - Washington State University Official Athletic Site
Bobby Stahel scored four times and Brent Wheatly worked seven strong innings as No. 6 USC defeated Washington State 10-3 in the Pac-12 Conference opener for both teams Friday evening at Dedeaux Field.

Beer

Forget Guinness: Here's A Real Irish Beer For Saint Patrick's Day
I've often gone the generic route and had a couple Guiness on St. Patrick's Day. Not this year. I found a bomber of Rogue Irish Lager, which I'll crack open on 17 March, among other brews.

Non-Sports

Fury entered here: What led to the shooting of a Brigham and Women’s doctor on Jan. 20 - Metro - The Boston Globe
In the immediate aftermath, the killer of Dr. Michael Davidson, a beloved Brigham surgeon, seemed like an ordinary man who snapped. A deeper look provides a much darker picture.

Recruiting

National Signing Day: Couple announces unborn baby's sex - Extra Mustard - SI.com
I thought this was pretty darn funny. However, it brought to mind something I recently discovered, which bothers me to no end. I'm probably really late to this, but I had no idea there was such a thing as a "gender reveal" party. Apparently people throw a party, solely under the guise of telling everyone if their coming baby will be a boy or a girl.

Is this where we are as a society? Are we so narcissistic as to believe that we need to gather a group of people in order to tell them that the child we're bringing into the world will be a boy or a girl? Even worse, are we so conceited as to assume that, outside of immediate family, other people give a damn as to what the sex of a child will be? Really? Is getting a truckload of gifts at a baby shower not enough? No wonder ISIL hates us. Ok, I'm better now. If you wouldn't mind, please remove yourself from the grassy area of my property. While you're at it, never ever have a "gender reveal" party. Thank you in advance.