Great news on Pac-12 finances

[Buffnik]

SAN FRANCISCO – The Pac-12 Conference today reported record performance in total revenues and member distributions for the financial year 2016-2017, driven by strong year-on-year growth in media rights. For the first time ever, Pac-12 revenues topped the $500M mark at $509M total revenues, a 4% increase over the prior year. Member distributions also reached an all-time high at $371M, an 8% increase over the prior year.

For the four-year period since 2012-2013 when the Pac-12 began its media rights agreements with ESPN & Fox and launched the first and only member-owned conference network, annual member distributions have increased by 63% ($228M to $371M) and annual total revenues have increased by 53% ($334M to $509M total revenues). The compounded annual growth rate for member distributions and total revenues over the four-year period was 13% and 11%, respectively. The ESPN and Fox deals signed in 2012 resulted in more than four times the annual revenue of the prior Pac-12 media deals.

“The Pac-12 is committed to supporting the academic mission and athletic values of our universities, and we are pleased with the continued financial growth that supports this mission,” said Larry Scott, Commissioner of the Pac-12 Conference. “This commitment is core to our Pac-12 Networks, which annually showcases to a national audience 850 live Pac-12 events, including an unprecedented number of football, basketball, Olympic and women’s sports.”

“The strong financial performance recorded by the Pac-12 Conference provides valuable resources to our universities to support our educational and athletic goals, including opportunities for the over 7,000 student-athletes competing on our Pac-12 campuses,” said USC President and Chairman of the Pac-12 CEO Group Max Nikias.

The Pac-12 Networks is the only conference network wholly-owned and controlled by its university members, providing an unprecedented platform to showcase the full breadth of Pac-12 sports to fans nationally across a variety of linear, digital and social platforms. The ownership model, under which the universities retain full equity in the enterprise, also provides a platform for innovation and the flexibility to adapt to and achieve full value from a rapidly evolving media landscape. Revenue and expenses, but not equity value, from the Pac-12 Networks are included in the Conference’s reported financial results.

 

[Buffnik]

 

[DrunkRalphie]

Fire Larry!

 

[Bison]

First year of deal: $19M per member.
This year: $30.9M per member.

 

[Buffnik]

First year of deal: $19M per member.
This year: $30.9M per member.

Things are actually tracking well. The big thing is that with new leadership at PACN there are some moves that must be made to increase distribution of the networks while also finding some savings and increasing revenues. Recent words about greater focus on football and about increasing the Pac-12 MBB conference game content while pushing for better MBB non-conference scheduling was music to my ears. Politically, I understand the idea that there are 7 networks and a promise to give Olympic sports a ton of exposure. But it makes sense to me if they could re-arrange as a PACN main national station as they have, offer a PACN2 for live game overflow and then give us a couple PACN Apps - the 1st for network content and the 2nd for for any live game content beyond that.

 

[CUFan]

This is good news. However, there is some use of long term stats in the narrative: "...annual member distributions have increased by 63% [since 2013]." CAGR over the same period for distributions of 11%, while the most recent year was 8%. Sometimes long term stats are used to hide more recent trends. While the difference between 8% and 11% is not too alarming, you do have to wonder if they are using the long term stats for a reason. And what remains troubling is the PAC still significantly lags nearly every other conference. Nik hit the nail on the head, when he wrote that some of the new blood in the PAC offices need to implement real change or the PAC is going to fall further behind.

Additionally, I think this sentence is the key: "The ownership model, under which the universities retain full equity in the enterprise, also provides a platform for innovation and the flexibility to adapt to and achieve full value from a rapidly evolving media landscape." Somehow the PAC needs to actually take advantage of this, which it has not to date.

 

[Buffnik]

This is good news. However, there is some use of long term stats in the narrative: "...annual member distributions have increased by 63% [since 2013]." CAGR over the same period for distributions of 11%, while the most recent year was 8%. Sometimes long term stats are used to hide more recent trends. While the difference between 8% and 11% is not too alarming, you do have to wonder if they are using the long term stats for a reason. And what remains troubling is the PAC still significantly lags nearly every other conference. Nik hit the nail on the head, when he wrote that some of the new blood in the PAC offices need to implement real change or the PAC is going to fall further behind.

Additionally, I think this sentence is the key: "The ownership model, under which the universities retain full equity in the enterprise, also provides a platform for innovation and the flexibility to adapt to and achieve full value from a rapidly evolving media landscape." Somehow the PAC needs to actually take advantage of this, which it has not to date.

The first step would be a willingness to admit a mistake.

At the time that PACN was forming, FS1 was going with a business model of having all its programming be local. The rationale was that a Rockies game in the Denver market would beat a national broadcast of the Dodgers vs Yankees within that market. And, if they spread that over every metro in the country with targeted content they would kick the crap out of ESPN without paying for the big ticket national brand broadcasts.

This failed spectacularly. FS1 has shifted and is now growing like crazy while all its sports networks competitors are suffering serious ratings decline.

PACN must come to the same conclusions that FS1 did. The focus must be on making the main network content as compelling as possible to the average sports entertainment viewer in all markets. Multiple regional networks does not work for several reasons, but the biggest are that it loses brand identity and that production costs are way too high, more than eating up any "local interest" revenue gains.

 

[Bison]

Agree with @Buffnik above...local markets are important especially since the network gets more per subscriber within the conference footprint than outside the conference.

 

[MiamiBuffs]

Things are actually tracking well. The big thing is that with new leadership at PACN there are some moves that must be made to increase distribution of the networks while also finding some savings and increasing revenues. Recent words about greater focus on football and about increasing the Pac-12 MBB conference game content while pushing for better MBB non-conference scheduling was music to my ears. Politically, I understand the idea that there are 7 networks and a promise to give Olympic sports a ton of exposure. But it makes sense to me if they could re-arrange as a PACN main national station as they have, offer a PACN2 for live game overflow and then give us a couple PACN Apps - the 1st for network content and the 2nd for for any live game content beyond that.

Thank god we fired Larry Scott.

 

[BuffsRising]

Things are actually tracking well. The big thing is that with new leadership at PACN there are some moves that must be made to increase distribution of the networks while also finding some savings and increasing revenues. Recent words about greater focus on football and about increasing the Pac-12 MBB conference game content while pushing for better MBB non-conference scheduling was music to my ears. Politically, I understand the idea that there are 7 networks and a promise to give Olympic sports a ton of exposure. But it makes sense to me if they could re-arrange as a PACN main national station as they have, offer a PACN2 for live game overflow and then give us a couple PACN Apps - the 1st for network content and the 2nd for for any live game content beyond that.

The pac 12 network is contractually obligated to cover a high number of live events per year. That is why they cover so many olympic sports. If we can get out from under that without giving back money to the cable companies it would help enormously.

 

[Not Sure]

I know we bitch because SEC distributes more, but I have a real hard time complaining about a $31MM distribution from the conference.

 

[leftybuff]

Balance sheet after dark?

 

[Buffnik]

The pac 12 network is contractually obligated to cover a high number of live events per year. That is why they cover so many olympic sports. If we can get out from under that without giving back money to the cable companies it would help enormously.

Not as many as they do. They have increased it every year for reasons other than carrier contracts. We’re so far over that it’s irrelevant.

 

[Buffnik]

Wilner's new Pac-12 Hotline newsletter just dropped. Great take, as usual, on the revenue reported.

Pac-12 distributions: Power Five comparisons

I’ll admit to being surprised the Pac-12 issued a news release Thursdaywith its revenue figure for fiscal 2017. It’s not something the conference has done in the past and was clearly designed to trumpet the record total ($509 million), which is certainly its right.
In fact, the second paragraph — all 95 words — details the increase in revenue and campus distributions over the past four financial reporting cycles.
My interest is less in the total revenue than the campus payouts, because the mission of the conference is, in theory, to serve the schools. They arethe conference.
Since the Pac-12 issued a look-at-our numbers release, that’s exactly what I did: I compared the Pac-12's percentage increase in campus distributions to those of the other Power Five conferences.
Sure, the numbers matter on an absolute level, but they also matter on a relative scale. If the Pac-12’s annual growth rate in campus distributions is 10 percent and the Big Ten and SEC are only increasing their payouts by two percent, that’s an advantage for the Pac-12, right?
Okay, so about those numbers ...
The Pac-12 said it has increased the dollars sent to its schools by 63 percent over a five-year window. (In raw dollars, the starting point is $228 million distributed in FY13, increasing to $371 million distributed in FY17.)
How does that compare?
Over the same span, the Big 12 has increased its payouts by 69 percent.
The Big Ten has increased its payouts by 79 percent.
The SEC has increased its payouts by, um, 99 percent.
What should we make of that?
Don't dismiss the nuance: Each conference has its own culture and challenges, its own financial structure and reporting processes. But it sure appears that the Pac-12 has not performed as well as its peers when it comes to the rate of increase of its campus payouts.
(I’ll plead ignorant on the ACC, which has a more complicated distribution process and has lagged the other conferences in revenue.)
The Pac-12 has been in status quo during the 2013-17 timeframe — the same Tier I deal with ESPN and Fox, the same structure for the Pac-12 Networks, the same number of teams in the conference.
Meanwhile, the Big Ten and SEC have undergone some changes that served to boost revenue:
*** The Big Ten added Maryland and Rutgers, which caused a revision — but not an overhaul — of its Tier I deals.
The overhaul came later and will be reflected in its FY18 figures, when the Big Ten is expected to announce $50 million in payouts per campus.
(That, by the way, will constitute a 140 percent growth rate over the timeframe used by the Pac-12.)
*** The SEC hasn’t expanded in the past few years, but it did launch the SEC Network with an entirely different business model than the Pac-12 used.
Whereas the Pac-12 owns 100 percent of its network, the SEC owns zero percent. Instead, it secured a revenue-sharing arrangement with ESPN that has produced a cash windfall for the campuses and is a key reason for the 99 percent increase in payouts cited above.
*** The Big 12, meanwhile, has been churning along, with no structural changes but a slightly higher percentage increase than the Pac-12.
(Not bad for a conference left for dead a few years ago.)
Interpret the numbers however you’d like, but remember the nuance.
There’s no question the Pac-12 has made enormous strides financially, as it pointed out unabashedly in its news release.
There’s also no question the other conferences have, too. — Jon Wilner.

 

[Deleted member 807]

A year from now, what growth do we expect to see?

FB struggled last year (as seen by in bowl game performance.)

MBB was a dud in the tournaments this year.

Getting 8% on an underperming revenue sports seems like a floor to me. If FB and MBB generates some national contenders and gets more exposure, seems like double-digit growth isn’t an unreasonable expectation.

 

[BerkeleyBuff]

How is this all good news? Our financial growth, as a % of revenue, is last among the P5 in the past several years.

 

[Not Sure]

Listen, I get that the SEC is doing better and growth isn’t the same as the B1G and SEC, but for crying out loud, we got a $31MM distribution from the conference. We didn’t have to sell one ticket or sell one parking spot for that. That’s a lot of money.

 

[Buffnik]

Listen, I get that the SEC is doing better and growth isn’t the same as the B1G and SEC, but for crying out loud, we got a $31MM distribution from the conference. We didn’t have to sell one ticket or sell one parking spot for that. That’s a lot of money.

I believe that is double or more what we got in our Big 12 days.

 

[hawg1]

Anybody got any sense how that 31 is, on turn, distributed throughout CU AD? Does school get a cut?is it just plowed into the top line for the whole AD or distributed by sport?

 

[Not Sure]

I believe that is double or more what we got in our Big 12 days.

It’s well over double. IIRC, we were getting somewhere in the area of $9MM/year in the B12.

Understanding that times have changed, and that had we stayed we still would have gotten more, I doubt we would be up to $31MM in the B12.

 

[AeroBuff99]

Anybody got any sense how that 31 is, on turn, distributed throughout CU AD? Does school get a cut?is it just plowed into the top line for the whole AD or distributed by sport?

As far as I know all revenue is plowed into the top line for the whole AD, that includes ticket sales, media contracts, ads, licensing, etc. Each sport is not its own little enterprise.

 

[Duff Man]

Listen, I get that the SEC is doing better and growth isn’t the same as the B1G and SEC, but for crying out loud, we got a $31MM distribution from the conference. We didn’t have to sell one ticket or sell one parking spot for that. That’s a lot of money.

What are your goals for CU athletics on a national level?

 

[Not Sure]

What are your goals for CU athletics on a national level?

My goals are irrelevant. In fact, I have no goals for CU athletics on any level. That’s not my job. I just want to be proud of the team and the school.

The only people who need to establish goals for the athletic department are RG and maybe Dr. Phil.

 

[ahoelsken]

The pac 12 network is contractually obligated to cover a high number of live events per year. That is why they cover so many olympic sports. If we can get out from under that without giving back money to the cable companies it would help enormously.

Can't you backload the Olympic sports to where most of that stuff is airing right now?

 

[Duff Man]

My goals are irrelevant. In fact, I have no goals for CU athletics on any level. That’s not my job. I just want to be proud of the team and the school.

The only people who need to establish goals for the athletic department are RG and maybe Dr. Phil.

What produces pride in your team?

 

[Not Sure]

What produces pride in your team?

What is this? An interrogation?

I want the team to win. There, you happy? I’m not convinced that money always equates to wins. If it did, Texas would never lose a game. It helps, yes. But I think we can win plenty with $31MM per year and rising.

 

[Duff Man]

What is this? An interrogation?

I want the team to win. There, you happy? I’m not convinced that money always equates to wins. If it did, Texas would never lose a game. It helps, yes. But I think we can win plenty with $31MM per year and rising.

Just asking questions. I think scraping by compared to peers has not gone well for CU in the past.

 

[Not Sure]

Just asking questions. I think scraping by compared to peers has not gone well for CU in the past.

If $31MM is scraping by, I need to find a different hobby. I can’t justify a school “needing” that kind of money to compete in my mind. If that’s truly the path we are on, where we have to pull in $50, $75, $100MM+ and it keeps going up just to be competitive, then I’m out. That’s insane.

 

[Duff Man]

If $31MM is scraping by, I need to find a different hobby. I can’t justify a school “needing” that kind of money to compete in my mind. If that’s truly the path we are on, where we have to pull in $50, $75, $100MM+ and it keeps going up just to be competitive, then I’m out. That’s insane.

Well, not sure you need double of $31MM, but closing the gap with the top conferences would help.

 

[Buffnik]

If $31MM is scraping by, I need to find a different hobby. I can’t justify a school “needing” that kind of money to compete in my mind. If that’s truly the path we are on, where we have to pull in $50, $75, $100MM+ and it keeps going up just to be competitive, then I’m out. That’s insane.

Well, if a B1G school is bringing in $50M then it can afford to poach any coach from a Pac-12 school the same way a Pac-12 school can poach coaches from a G5. Their HCs will make double what ours do while their coordinators are paid like our HCs and their position coaches are paid like our coordinators. And if we get to the point where stipends for athletes can be set at the conference level instead of equal across the NCAA, a recruit could conceivable make 2x or more for signing with a B1G member vs signing with a Pac-12 member.