The Pac-12 started evaluating candidates for growth lengthy earlier than USC and UCLA introduced their intentions to depart the convention.
The method commenced in the summertime of 2021, after Texas and Oklahoma agreed to hitch the SEC and the Large 12 lurched towards the brink of extinction.
Pac-12 presidents in the end handed on extending membership invites and concluded not one of the out there faculties (within the Large 12 or elsewhere) met the aggressive, monetary and institutional standards.
Now right here we're, 21 months later, and the Pac-12’s geographic footprint contains a crater in Southern California because the convention negotiates a brand new media rights contract and considers growth.
The candidate listing consists of SMU. It's not recognized whether or not the convention sized up the Mustangs in the summertime of ’21, however the calculation deployed again then is actually the identical one being utilized now.
Does SMU match academically? Might its soccer program finally clear the aggressive bar? And does the college, based mostly in Dallas, add media worth for the ten remaining Pac-12 campuses?
To reply the monetary piece, the Hotline sought context from a sports activities media knowledgeable.
Patrick Crakes negotiated media offers throughout his tenure as Fox Sports activities’ senior vp for programming, analysis and content material technique. Crakes now runs his personal agency, Crakes Media. He isn’t affiliated with the Pac-12 or SMU however stays well-versed within the faculty sports activities panorama.
We've separated the difficulty of SMU’s valuation into three sections.
*** The match
First, the Pac-12 should decide whether or not SMU suits institutionally. That broad time period refers back to the tutorial profile and campus tradition, the analysis exercise and monetary sources out there for athletics, the geography and journey accessibility, and the movement of scholars into and out of the college.
From which areas does SMU draw its functions for admissions? The place are the alumni concentrated? What influence would SMU’s membership have on the power of different Pac-12 faculties to boost their tutorial profile?
And the way does all that match into the media valuation?
The Mustangs seem appropriate on quite a few ranges:
— SMU is No. 72 within the newest U.S. Information and World Report rankings and is an R2 analysis college, the second-highest categorization. (It's trying to achieve R1 standing.)
— It has a big endowment ($2 billion) and rich donor base.
— And regardless of the title, the college will not be managed by the United Methodist Church.
“The Pac-12 has to determine what the convention is all about,” Crakes stated. “It has a variety of huge analysis universities; it does a variety of what the Large Ten does. And SMU suits into that.
“You need to take into consideration how the faculties work collectively. Does it look inappropriate for a faculty to be subsequent to Stanford, as an illustration? In SMU’s case, I don’t assume so within the context of a number of the different Pac-12 faculties.”
However the Mustangs, a member of the American Convention, have only one 10-win season this century and are of “questionable aggressive energy,” Crakes added.
In consequence, the Pac-12’s analysis must solid an eye fixed to the long run: What may the Mustangs turn out to be in the event that they joined the convention?
(In that regard, the calculation with SMU is much like the choice to accomplice with a streaming firm on the media rights deal.)
As a non-public college, SMU would have unfettered skill to plow sources into the soccer program.
And with a rich donor base that may very well be energized by the transfer into the Energy 5, the college’s potential to generate an efficient NIL collective — a vital piece to recruiting — can be vital.
As one supply instructed the Hotline: “Moreover USC and Oregon, no one within the convention may beat SMU’s sources.”
*** The calculation
In figuring out a faculty’s media worth, the Pac-12 and its potential broadcast companions would assess the ability of a faculty’s soccer model and its placement inside the native media market.
SMU’s soccer program hasn’t moved the needle because the Eighties, earlier than receiving the dying penalty from the NCAA for recruiting violations. And within the Dallas media market, the Mustangs are far down the pecking order.
However these aren’t the one standards for calculating worth.
“UCLA soccer is method down the L.A. market, similar to Rutgers is method down the New York market,” Crakes stated. “However the Large Ten Community is on well-distributed tiers in Manhattan.
“(Networks) worth what their most necessary clients need. And SMU is price one thing going into a significant convention.”
Streaming providers would estimate the variety of viewers prepared to pay a month-to-month price to look at a specific crew. However for legacy media firms like Fox and ESPN, the method seemingly is extra complicated. Their calculation consists of retransmission charges, that are funds made by the affiliate stations to the mum or dad community in change for the printed rights within the native market.
Let’s say USC is internet hosting Notre Dame on broadcast tv. The ABC affiliate in Los Angeles is KABC. Any USC fan with Spectrum would watch the sport on KABC by way of the Spectrum pay-TV bundle.
“A minimum of 80 % of all viewing to broadcast networks happens contained in the pay-TV bundle,” Crakes stated. “So for instance, the pay-TV distributor (Spectrum) pays KABC to place the station contained in the bundle, after which KABC pays the community a proportion of that to compensate the community for buying top-level content material.
“SMU would in all probability generate a case for some sort of will increase to present retransmission charges in Texas. However how a lot?”
As a member of the Pac-12, the Mustangs can be competing in Texas with the SEC (Texas, Texas A&M and Oklahoma, which has a robust following within the state) and the Large 12 (TCU, Baylor, Texas Tech and Houston).
Based on SMU, the college has 114,000 dwelling alumni worldwide, with about 60,000 throughout in Texas and 44,000 within the Dallas-Fort Price space. (By comparability, TCU has 99,000 dwelling alumni.)
“How a lot is it price to a pay-TV distributor to make SMU a part of the Pac-12? It’s in all probability price one thing,” Crakes stated. “The Pac-12 good points a market, however it’s third within the pecking order with the SEC after which the Large 12.
“It comes all the way down to whether or not they assume SMU is accretive. You’re gaining a time zone. You’d get six video games within the Central Time Zone. It’s not strategically earthshaking, however it’s incremental.
“Including SMU is as positive an thought as any I’ve heard.”
*** The worth
Each valuation calculation ends with the identical query: Is the college accretive? In different phrases, would the addition of SMU create extra media worth for the Pac-12’s remaining faculties?
Think about the convention had the choice to signal a six-year media rights contract for $300 million yearly, or $30 million per college per yr, with out SMU.
For SMU so as to add $3 million to every college’s annual consumption, the Mustangs would require a valuation of $33 million yearly, or $198 million over the course of the contract cycle. (Eleven faculties at $3 million every for six years, if the Mustangs acquired a full share.)
Is the urge for food for SMU soccer in Texas sufficient to persuade ESPN, for instance, to decide to $33 million yearly?
Would the Central Time Zone kickoffs assist the broader worth of Pac-12 stock?
Would SMU generate sufficient cable subscriptions and retransmission charges throughout the Lone Star State to justify the outlay?
“Does SMU create worth for the Pac-12? I believe it in all probability helps,” Crakes stated.
At $3 million per college per yr?
“I’m undecided about that,” he added. “Being conservatively optimistic, perhaps including SMU is price $1.5 million (yearly) for the opposite faculties. That’s $99 million (over six years).
“Then within the subsequent deal, they turn out to be an incremental chip on the desk.”
The subsequent deal.
That’s a vital level within the Pac-12’s growth technique. The convention should contemplate SMU’s worth when the subsequent media rights cycle involves an finish (within the late 2020s or early 2030s), and it begins the negotiating course of yet again.
“They should get higher in soccer,” Crakes stated.
“But when you find yourself doing one thing like merging with the ACC down the street, you could have the Dallas market, which is sweet.”
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