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July 31, 2023

Colorado Loss a PR Hit, But Path to Increased Economics Exists for Pac-9

The University of Colorado recently announced it will return to the Big 12 Conference in 2024. The school is reportedly going to receive a full $31.7 million share of the conference’s media rights revenues.

The Buffaloes’ decision is a PR hit to the Pac-12. But it is not a death knell for the conference, nor should it prevent the remaining schools from getting the distribution deal(s) they have been after.

“Nine schools are cheaper and if somebody who talking to them was prepared to pay for ten, they will do a deal for nine and can easily write a contingency for adding a tenth down the road,” Patrick Crakes (principal, Crakes Media) said.

The best athletic programs in the Pac remain, the 10:30pm eastern television window still has value to linear programmers, streamers still want live sports, and there are now fewer full shares that need to be paid. So, if the conference can stick together and close the deal(s) being discussed, there is seemingly a clear path to the Pac-9 coming out ahead.

“This could work out to be, at the very least, break-even,” Crakes said, “and perhaps it results in increased economics depending on expansion and things like that.”

Colorado’s exit has upped the pressure on Pac-12 Commissioner George Kliavkoff to deliver his constituents a new rights deal. It also spurred a new wave of angst amongst fans and alumni of the remaining schools. 

But it seems highly unlikely to spark a mass exodus from the conference. While the Big 12 may want to expand further –it still does not have a school in the pacific time zone– finding the economics needed to fund another P5 program moving is more complicated than that. 

The established media ecosystem still pays the bulk of the conference’s rights fees, and linear networks can only air one game at a time. 

“Given all the increased Big Ten inventory and the number of partners that now have exclusive windows on traditional broadcast and pay TV channels, the networks are running into shelf space problems,” Crakes said.

While ESPN can park games on ESPN+, FOX is not going to want to pay a pro-rata share for additional inventory it cannot maximize. In addition to its football commitments, the network has a heavy load of baseball in October. So, unless the Big 12 schools are willing to come out of pocket to ensure another PAC-12 program P5 gets a full share, it is hard to make the math work. 

The B1G and SEC do not appear to be imminently interested in expanding further west.

If one understands the Pac-9 schools’ best option is to remain together, then one must believe the conference will be able to push competitive media rights agreements across the line. Its most valuable content remains, both in terms of schools and inventory to place in the late-night television window. 

There is no reason to believe any potential broadcast partner would be out on the conference now, either. 

Non-traditional distributors are still “going to be interested, as long as the price is right,” Crakes said. 

The same could be said about any potential linear partner. 

Colorado’s value to the conference in the last round of rights negotiations was the tonnage it brought to ESPN and FOX (and Pac-12 Network). But that inventory now has marginal, and diminishing, returns as the number of linear windows without competition from the SEC and B1G have shrunk. 

And it is not as if Colorado has been carrying the Pac-12 flag in football. The school won the Southern division one time in 12 years.

While the addition of Deion Sanders raises the program’s profile, media companies are not valuing any school’s presence in a conference based on its coach.

“There have been 44 head coaches in the Pac-12 since the last TV deal started,” Bob Thompson (former president, Fox Sports Networks and co-founder, BTN) said. “The life expectancy of all these [guys] is not very long.” 

If the Pac has been discussing a linear-heavy package, it may be content to stick with nine schools for the time being. 

“Maybe the total deal value goes down a bit from what they were talking about with ten or maybe the terms are shorter contingent upon adding a school the partner signs off on,” Crakes said. “Or maybe it stays flat.” 

If it stays flat, the remaining Pac-9 schools would each be able to take a larger share than had been anticipated. 

The loss of Colorado hurts more if the conference is planning to prioritize revenue over reach.

“If there is [going to be] a streamer heavily involved, they want some tonnage,” Thompson said. “Think of Apple and MLS, every single game is on AppleTV. They are not constrained by a window. They have as many windows as they have streams available.”

If the Pac-9 plans to put most of its content on streaming, it will likely want to add schools. The conference said in a statement it would embrace expansion opportunities once its rights negotiations concluded.

San Diego State seems like a logical addition to the conference. The school would add pay-TV value in Southern California, and give the Pac a re-established presence in the market.

“From a comparative level on a home basis, it’s approximate enough that the conference’s media partners would probably fine with it,” Crakes said. “When you swap out value for value, [the CU/Denver DMA for SDSU/San Diego DMA], I don’t know the Pac comes out deeply negative on that.”

You could make a similar argument with SMU too. 

It is likely any new entrant would not receive a full share, at least not initially; meaning the remaining nine schools will come out ahead of where they would have been had Colorado remained.

It's worth noting SDSU cannot leave the Mountain West until ‘26 without paying an exit fee. 

But remember, the objective here is not to out earn the Big 12. 

It is to remain relevant enough to ensure the conference has a clear path to the College Football Playoff when it expands in ’26, and to be positioned to become the third power three conference following the next round of expansion.

To do that, the Pac-9 must remain –or gain– relevance over the next three seasons, meaning it cannot put too much premium inventory on a streaming platform.

“At this point, you [still] have to try and find a happy balance,” Thompson said.