The quantity was there for all to see, displayed in crimson sort on a big display screen for the College of California Board of Regents as they gathered Wednesday to debate UCLA’s entry into the Huge Ten:
$9.8 million.
Based on no much less an authority than the UC Workplace of the President, $9.8 million was the projected hit to the Pac-12’s annual media rights income ensuing from USC’s accompanying departure in the summertime of 2024.
It represented a 30 % decline within the convention’s whole future valuation, from $41.67 million per college per yr with the Trojans as a member to $31.82 million with out them.
However like a lot else in regards to the Pac-12’s monetary scenario in Yr One, ALA (After L.A.), the determine cited was merely an estimate.
Even the UC Regents are flying blind on the information, as not sure of future valuations because the followers and media.
Is USC actually value 30 % of the Pac-12’s media rights all by its lonesome?
How a lot of the total quantity may the Pac-12 recoup if UCLA’s transfer is blocked by the regents?
What may the Pac-12 fairly count on from its media companions within the subsequent contract cycle with out both Los Angeles college?
And is the Huge 12 actually a extra profitable possibility for nervous Pac-12 campuses?
Over the previous two weeks, the Hotline has tried to achieve deeper perception into the all-important valuation equation.
To that finish, we reached out to 4 sources within the sports-media trade, granted them anonymity and requested for trustworthy assessments of the Pac-12’s scenario.
Not one of the analysts are employed by Sports activities Media Advisors or Endeavor, that are at present representing the Pac-12 and Huge 12, respectively.
The sources requested to talk with out attribution due to the delicate nature of the data and to keep away from jeopardizing present and/or future relationships inside the sports activities media house.
In an effort to make the fabric simpler to digest, we'll discuss with them merely as sources A, B, C and D.
There may be nothing controversial or essential. It’s candid, goal, data-driven evaluation based mostly on a working data of faculty soccer dynamics and a long time of expertise in media rights negotiations.
As well as, the Hotline dove into TV scores knowledge printed by the invaluable web site SportsMediaWatch. A lot of the figures cited are from SMW; a number of have been offered by sources.
Let’s dig in …
— Part I: How a lot is USC value to the Pac-12?
Assigning a proportion to USC’s share of convention income is difficult by the truth that media valuation takes two varieties: model worth and market worth.
In the course of the period of the School Soccer Playoff, which started in 2014, the Pac-12 averaged 1.5 million viewers throughout Fox and ESPN/ABC broadcasts.
Take away USC from the equation, and common viewership drops to 1.4 million — a decline of simply seven %.
However there's a model worth connected to USC soccer that’s harder to measure. Does that model worth push USC’s whole value all the best way to 30 %?
Not in line with our sources, who level to 12 years of underperformance by the Trojans and the commensurate improve in model worth amongst three faculties (Oregon, Washington and Stanford) that crammed the void left by USC.
— Part II: What in regards to the L.A. market in totality?
The identical viewers figures that present a seven-percent decline in video games that don’t contain USC carry a twist: Take away UCLA from the calculation, and the common Pac-12 viewership really goes up.
Why? As a result of with their markets and their success, Oregon, Washington and Stanford have completed much more to drive scores over the previous decade than have the Bruins.
“No person is aware of media and markets higher than the NFL,” supply B mentioned. “And should you’re the NFL taking a look at a map, you completely aren’t going to overlook about Seattle and San Francisco.”
The Geese and Huskies are corresponding to USC and, in truth, carry extra media worth than any faculties within the reformatted Huge 12 based mostly on a mixture of metrics that embrace each common and whole viewership throughout Fox and ESPN networks.
Filter for simply the 2021 season, and the information is much more intriguing: The 28 Pac-12 video games broadcast by Fox and ESPN/ABC with out both Los Angeles college averaged extra viewers than the video games with the L.A. faculties.
“I don’t put as a lot inventory in the entire notion of ‘dropping or retaining L.A.’ as others do as a result of, in actuality, (the Pac-12) isn’t dropping L.A,” supply A mentioned.
“It’s not a zero-sum recreation. KABC (the ABC affiliate in Los Angeles) isn’t going to cease airing Pac-12 video games. Definitely, their scores for Pac-12 video games gained’t be as excessive with out USC and UCLA, however they aren’t going to drop to zero. And cable operators (in Southern California) aren’t going to drop Disney networks (e.g., ESPN).”
So if we simplify the numbers and use $100 million as a hypothetical valuation determine for a Pac-12 that features USC and UCLA, what’s an affordable expectation for the convention with out each L.A. faculties?
“I’d say $70 million to $75 million is about proper,” supply C mentioned, “as a result of you must weigh dropping each market and model worth.”
—- Part III: What if UCLA reversed course?
Probably the most important growth on the UC Regents’ assembly on Wednesday was a transparent indication from common counsel Charlie Robinson that the board has the authority to dam UCLA’s transfer to the Huge Ten.
That appears unlikely given potential monetary ramifications and the damaging precedent it might set for future UC campus enterprise. However clearly, the chance of a reversal by UCLA just isn't zero.
(The prospect of USC having a change of coronary heart, however, is sub-zero.)
For that motive, the Hotline believes it worthwhile to look at a valuation state of affairs by which the Bruins stay within the convention for the following media rights cycle, starting in the summertime of 2024.
Would their presence totally offset the market influence of USC’s departure?
“Clearly, it would assist some, however to not the identical degree as USC,” supply A mentioned.
How a lot is “some”?
Whereas the Trojans symbolize each model and market worth, the Bruins are largely a market play as a Energy 5 program in a area with 5.7 million TV houses (per Nielsen knowledge).
Their soccer model is proscribed, endlessly eclipsed by the basketball program — and school basketball does little to drive media valuations.
In gauging misplaced worth with solely USC departing, a number of analysts pegged the quantity at roughly 15 %.
In different phrases, our hypothetical project of $100 million to the Pac-12 with each L.A. faculties would drop to $85 million if the Bruins have been retained however the Trojans departed.
Navigate, a sports activities and leisure market analysis firm, pegged the Pac-12’s future broadcast rights within the $500 million vary (yearly) in a valuation estimate made previous to the departure of the L.A. faculties.
That will have translated to $41.67 million per campus per yr — the determine cited Wednesday within the presentation to the UC Regents.
Trim the overall quantity by 15 %, then divide by 11 and we’re left with $38.63 million per college.
By that estimate, USC’s loss would equate to a drop of $3.04 million per college, not $9.8 million.
(Notice: Navigate has not printed valuation projections for the Pac-12 for the reason that L.A. faculties introduced their departure.)
The unknown on this state of affairs — and it’s a major unknown — is how the Huge Ten would possibly reply to a UCLA reversal.
Would it not seize Stanford as an alternative, to keep away from coping with the paperwork of public establishments?
Or would possibly the behemoth merely swallow Stanford, Cal, Oregon and Washington and create a West Coast division?
Or possibly the Huge Ten would stand on 15 in the interim.
It’s unimaginable to know however important to bear in mind.
— Part IV: The Pac-12’s goal valuation quantity
How a lot ought to the remaining Pac-12 college count on to gather yearly with out each Los Angeles faculties?
A discount of 30 % in common worth (referenced on the backside of Part II) would lead to $350 million yearly for the remaining 10 members, based mostly on Navigate’s pre-departure estimate of $500 million.
Nonetheless, the convention may have a contest downside. ESPN seems more likely to bid on the media rights, however with out a second community to drive up the worth, the Pac-12 may very well be compelled to just accept lower than $350 million.
“If they may get to $325 million with (an escalator) of 5 %, that’s fairly good,” supply A mentioned.
How would possibly the Pac-12 push its common valuation into the mid-$300 tens of millions?
One pathway: Providing ESPN (or different networks) a premium recreation on each Friday and Saturday nights — or 26 broadcast home windows in prime time on the West Coast with no Energy 5 competitors.
“These video games have a captive viewers,” supply A mentioned. “I might somewhat have a pair million viewers when I'm the sport than should struggle the SEC and Huge Ten” on a Saturday afternoon.
— Part V: Comparisons with the Huge 12
The nationwide media has portrayed the Pac-12 and Huge 12 as participating in a dying battle, with some justification.
New Huge 12 commissioner Brett Yormark overtly acknowledged in mid-July that his league was “open for enterprise,” whereas Pac-12 commissioner George Kliavkoff accused the Huge 12 of trying to “destabilize” his convention.
However an goal valuation evaluation results in just one conclusion:
Financially and competitively, the Pac-12 and Huge 12 are extra alike than completely different — and neither of them is on the identical tier because the Huge Ten or SEC:
— With Oregon and Washington, the Pac-12 has probably the most helpful soccer properties in both reconfigured convention. In the meantime, the Huge 12 has extra stability, if solely as a result of it now lacks the high-end chess items that ultimately could be of curiosity to the Huge Ten or SEC.
— The Pac-12 is the one convention that may recurrently fill the precious fourth broadcast window (7:30 p.m. Pacific), whereas the Huge 12’s geography forces it to start out video games in the identical home windows because the Huge Ten and SEC.
— Then once more, the Huge 12 advantages from having been plundered first: With Texas and Oklahoma leaving final summer season, the convention was in a position to scoop up the highest accessible faculties: Brigham Younger, Houston, Cincinnati and UCF. In distinction, the Pac-12 has few high quality choices for backfilling.
What do the numbers say?
Along with higher manufacturers (Washington and Oregon), the Pac-12 has higher markets:
The ten remaining faculties account for six of the nation’s prime 30 media markets, in line with Nielsen DMA knowledge from 2021. (Add San Diego State, and it might be seven.) The Huge 12 could have simply 4.
The Pac-12 additionally drives scores extra successfully than the Huge 12:
Over the previous 5 full seasons, the Pac-12 video games had 17 video games with out USC and UCLA concerned that generated a 2.0 ranking (3.5 million viewers) or higher. The Huge 12 with out Texas and Oklahoma had simply 9.
Sure, the Huge 12 had a great deal of broadcasts on the ESPN and Fox networks with decrease attain (ESPN2, FS1), however the convention “was on these channels for a motive,” supply B mentioned. “The groups that don’t have the viewers get placed on the less-distributed channels.”
It’s additionally value noting that when the Pac-12 thought of growth final summer season, it retained advisors from Endeavor to find out the media valuations for each college within the reconfigured Huge 12, in addition to people who have since joined the Huge 12.
The conclusion: None of them introduced sufficient new income to justify growth.
A yr later, the Huge 12 has retained Endeavor to supply the identical modeling.
“The middle of faculty soccer is the Huge Ten and SEC, and the opposite three (Pac-12, Huge 12 and ACC) are on the surface wanting in at numerous grades,” supply D mentioned.
“The ACC is hemmed in (by its grant-of-rights settlement). As for the Pac-12 and Huge 12, neither is basically in a great place. There isn’t an ideal consequence for anybody.”
Annual media rights valuations within the $325 million to $350 million vary appear cheap for each leagues; any distinction approaching the margins.
And due to variations in membership, the brand new Huge 12 would wish a considerably larger valuation determine with a view to distribute extra income to every campus.
If the Pac-12 obtained $300 million yearly, every of the ten faculties would acquire $30 million (excluding no matter is spent on convention operations).
If the Huge 12 obtained $350 million yearly, every of the 12 faculties would take dwelling $29.2 million.
“You'll be able to’t change the truth that the SEC and Huge Ten might be gentle years forward, however the Pac-12 can stay aggressive,” supply A mentioned. “The worst factor the colleges can do is to pooh-pooh their scenario.
“Will probably be in place to be aggressive.”
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