Pac-12 For Sale

Posted by on Friday, January 4, 2019 in NCAA Football.

Interview with Inside Higher Ed.Pac-12 NewCo.

I wondered if you had some time to hop on the phone today to chat about this:

The idea of a private investor in the Pac-12 (nonprofit) is interesting to me. Also happy to accept your thoughts by email.

Pac-12 NewCo. sounds interesting but I doubt the plan will work beyond the watershed year of 2024 (see proposed cash flow chart), or attract investors as long as the 12 institutions retain “super voting shares to ensure ongoing operational controls.” (as stated in proposal).

The unique ownership structure of the Pac-12 is probably the major source of the current economic problem because the P12N is fully owned and inefficiently operated by the member schools. (This private equity proposal is all about treating the symptoms of the current P12N mess).

 In a September interview (unpublished) with Post-Gazette I discuss my crystal ball for the Power 5 Conferences mostly in terms of the new ACC Network but it also applies to the future of the Power 5 conferences especially the Pac-12. From my Sports Econ Blog with graphics:

 Pitt made $26.3 million from the ACC in the 2016-17 fiscal year while Connecticut — a former conference mate in the Big East that is now in the American Athletic Conference, a league Pitt may well have ended up in had it not landed in the ACC — made about $8 million that same year from the AAC. The raw numbers are obviously notable, but from an economic standpoint, just how big of a gulf is that between schools in one of college athletics’ five major conferences and schools outside of them?

The noticeable economic fissure between Power 5 and Group of 5 NCAA FBS Conferences is rapidly becoming a grand canyon that polarizes D1 college football into economic and athletic haves and have-nots. The driving force is clearly an inequality in media revenue (new and old) that currently divides FBS football budgets along a not so subtle $20 million red line. (See attached list of D1 football budgets and coach salaries).

The inequality in long-term media rights deals for D1-A conferences since 2012 is further aggravated by a more recent infusion of ESPN’s FBS College Football Playoff (CFP) largesse since 2015.

  • How much of a role did that pursuit of conference payouts, a good deal of which I’m guessing come from TV contracts, play in the widespread conference realignment of the past 10-15 years?

Recent realignment in college football is an unstable equilibrium punctuated by the chaotic infidelity of the mating game that surrounds TV rights negotiation. Under the polarizing economic pressure of unequal TV rights fees the 129 team FBS will be split right down the middle, and the current P5 conferences will break away to form a separate super-league. These musical chairs games will probably occur during the coincidental expiration of the current long-term TV rights deals (including Notre Dame-NBC and ESPN’s CFP deal) leading up to 2025.

On paper, the most economically and logistically efficient configuration would be four new power conferences comprised of 16 teams each. This would imply that one of the P5 conferences (prob Big 12) would be absorbed by the other 4. After the ACC Network deal in 2016, the merger candidates would now be the Big 12 because the league doesn’t have a dedicated network or the Pac-12 where the P12N is fully owned and inefficiently operated by the member schools.

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