Pac-12 TV Contract: You can't spell delusional without LA

While the northwest sings the praises of the new Pac-12 media deal and prepare to swim in our giant money bins, it seems that all in Pac-12 land aren't happy with their newfound millions.  Namely, fans of the Los Angeles schools are worried about the equal revenue sharing.  They feel that being in the Los Angeles media market entitles them to special treatment, and that they're not getting their fair share of the cut:

From Conquest Chronicles:

But I am still left scratching my head that USC (and to a lesser extent UCLA) left so much on the table.

The L.A. schools bring so much to the table with their traditions in football and basketball respectively.

USC moves the needle nationally. Their brand alone has to generate better than 20% of what the Pac-12 will be getting in this deal. UCLA is probably between 10-15%. Why would USC leave so much on the table? The TV networks could care less how the money is split as the deal is the deal.USC and UCLA will now get 17.5% of the revenues...much less than the greater than 30-35% hat they bring in their brand recognition.

I won't comment on what they were thinking in the Morgan Center but as I noted last month what was USC thinking?

Everyone makes money here but I could care less about the other schools...they are making a good nickel because of USC and UCLA's brand. USC could have leveraged its position much better than it did. The rest of the conference would have been ecstatic simply tripling their revenues but with USC's (and UCLA) silence in not leveraging their brand the rest of conference quadrupled their earnings.

And from Bruins Nation:

Like it or not USC has a "brand" in college football. We have that in hoops. We do have a decent football history even though it has taken a huge hit under Dan Guerrero's leadership in last decade. Still UCLA has its share of draw and a lot of potential upside when it comes to college football. So one would think the athletic directors of both schools - Dan Guerrero and Pat Haden - would fight for their schools' fair share in this new deal.  Did they do that?

......

The answer is not clear. No one here has any confidence in Dan Guerrero and his dysfunctional athletic department for several reasons. We are not sure whether we can trust Guerrero and his staff to spend the extra revenue wisely. We also should raise questions about was Dan Guerrero sleeping at the wheel again and end up costing UCLA millions of dollars.

It takes a special kind to multiply their revenue by a factor of three or four and still complain, doesn't it?  However, a quick look at the facts shows that neither LA school had the leverage that their fans thought they did.

Any decision made with regards to conference financial decisions require a 75% vote from the schools.  In the past, that meant three schools could set a policy of unequal revenue sharing, and that's been the status quo for the past 25 years.  Obviously, the LA schools would band together, but the other player was Washington, long being a national power and in a large TV market itself, it would always require the vote of one of those three to set the financial policy, and not until one of those felt they had squeezed enough extra revenue would a deal be agreed to.

However, two things have changed.  The first is that Washington is no longer a football darling, and no longer drives the kind of revenue that would allow it to benefit from this model.  The second is that the Pac-10 is now the Pac-12, meaning that the LA schools would now need four, not three, votes to obstruct a revenue sharing plan.  Even if Washington were still on board (and they are absolutely NOT on board), who else could they find?  The only other school with the brand and financial position to pull it off would be Oregon, and there is simply no incentive for them to give any extra advantages to the Los Angeles schools. 

There was simply no way that USC and UCLA could force equal revenue sharing within the framework of the rules.  That left one option, a particularly messy option, in declaring independence.  This option seems to have gained traction with fans after BYU did it last summer.  However, in neither case would this have resulted in a better financial situation for the schools.

First off, declaring independence is a death knell to all sports except for football.  BYU got away with this because they were already in a midmajor basketball conference in the Mountain West, and moving basketball and the non-revenue sports into the WCC wasn't much of a step down.  However, going from the Pac-12 to a midmajor?  You just lost scores of recruiting battles with every other school in the Pac-12.  UCLA and USC would have had to look to the WCC or the Big West as options for their other sports, and it would have killed their programs.

Really, the only way you can pull off going independent is if you can make enough revenue from football to make it worth it.  This was easy for BYU, as the pathetic Mountain West TV contract had them pulling in well less than two million dollars a year, has a large regional following due to their status as the major LDS institution, and their own TV network with which to distribute content (both of the last two factors will also help it from being murdered in recruiting in their non-revenue sports).  For USC or UCLA, this meant they would have had to, on their own, be able to pull in the value of the media deal (20.8 million per season) plus the value of their share of the Pac-12 Network.  Also keep in mind that in doing this, you lose all rights to your away events, the rights to those events being owned by the conference of the home team.

UCLA's claim is the first to go.  This is a pathetic football program with no national following.  They can't come close to selling out their home stadium (which they don't even own), so they can't count on the gate as a giant revenue producer.  Their basketball program has some value, but nowhere near that of a Duke or a North Carolina, and that value plummets without a Pac-12 schedule to play.  UCLA had exactly zero chance to make it on their own.

USC is a much more interesting case.  Their basketball rights are worth almost nothing without the conference affiliation, but their football team is the biggest brand in the Pac-12 and are capable of both scheduling and competiting on a national level on a regular basis.  In fact, there is evidence that USC AD Pat Haden explored independence, as they met with companies about outsourcing their media rights after the Pac-12 had agreed to pool them.  Undoubtedly, he came to the obvious conclusion.  If the Pac-12 media deal is worth about $21 million per season, and lets say, conservatively, that the Pac-12 Network is worth $3 milion per season after it is established (and I think this is a very low estimate, the Big Ten keeps $6.5 million per team after giving FOX half), the USC would have to get $24 million on their own just to break even, and substantially more than that to make the virtual destruction of their other athletic teams worth it.  Given the greatly devalued overall program, that would virtually all have to come from football, meaning they would need to average $4 million per broadcast (given six home games), and do that on a year in and year out basis.  And that's just to break even.  It is unlikely that USC could sustain on a yearly basis (and those numbers make UCLA's claims all the more laughable).

Given that hard reality, Pat Haden and Dan Guerrero did the only thing they could do:  smile and talk about how happy they were with the new money coming in.  It was the obvious play here. 

So get over yourselves, LA fans.  Yes, the conference needs your media market, but you also need this conference.  Larry Scott knew this and, ultimately, the decision makers at UCLA and USC did, too. 

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