The number was there for all to see, displayed in red type on a large screen for the University of California Board of Regents as they gathered Wednesday to discuss UCLA’s entry into the Big Ten:
$9.8 million.
According to no less an authority than the UC Office of the President, $9.8 million was the projected hit to the Pac-12’s annual media rights revenue resulting from USC’s accompanying departure in the summer of 2024.
It represented a 30% decline in the conference’s total future valuation, from $41.67 million per school per year with the Trojans as a member to $31.82 million without them.
But like so much else about the Pac-12’s financial situation in Year One, ALA (After L.A.), the figure cited was merely an estimate.
Even the UC Regents are flying blind on the data, as unsure of future valuations as the fans and media.
Is USC really worth 30% of the Pac-12’s media rights all by its lonesome?
How much of the full amount could the Pac-12 recoup if UCLA’s move is blocked by the regents?
What could the Pac-12 reasonably expect from its media partners in the next contract cycle without either Los Angeles school?
And is the Big 12 really a more lucrative option for nervous Pac-12 campuses?
Over the past two weeks, the Pac-12 Hotline has attempted to gain deeper insight into the all-important valuation equation.
To that end, we reached out to four sources in the sports-media industry, granted them anonymity and asked for honest assessments of the Pac-12’s situation.
None of the analysts are employed by Sports Media Advisors or Endeavor, which are currently representing the Pac-12 and Big 12, respectively.
The sources asked to speak without attribution because of the sensitive nature of the information and to avoid jeopardizing current and/or future relationships within the sports media space.
In order to make the material easier to digest, we will refer to them simply as sources A, B, C and D.
There is nothing controversial or critical. It’s candid, objective, data-driven analysis based on a working knowledge of college football dynamics and decades of experience in media rights negotiations.
In addition, the Hotline dove into TV ratings data published by the invaluable website SportsMediaWatch. Most of the figures cited are from SMW; a few were provided by sources.
Let’s dig in …
Section I: How much is USC worth to the Pac-12?
Assigning a percentage to USC’s share of conference revenue is complicated by the fact that media valuation takes two forms: brand value and market value.
During the era of the College Football Playoff, which began in 2014, the Pac-12 averaged 1.5 million viewers across Fox and ESPN/ABC broadcasts.
Remove USC from the equation, and average viewership drops to 1.4 million — a decline of just 7%.
But there is a brand value attached to USC football that’s more difficult to measure. Does that brand value push USC’s total worth all the way to 30%?
Not according to our sources, who point to 12 years of underperformance by the Trojans and the commensurate increase in brand value among three schools (Oregon, Washington and Stanford) that filled the void left by USC.
Section II: What about the LA market in totality?
The same audience figures that show a 7% decline in games that don’t involve USC carry a twist: Remove UCLA from the calculation, and the average Pac-12 viewership actually goes up.
Why? Because with their markets and their success, Oregon, Washington and Stanford have done far more to drive ratings over the past decade than have the Bruins.
“Nobody knows media and markets better than the NFL,” Source B said. “And if you’re the NFL looking at a map, you absolutely aren’t going to forget about Seattle and San Francisco.”
The Ducks and Huskies are comparable to USC and, in fact, carry more media value than any schools in the reformatted Big 12 based on a combination of metrics that include both average and total viewership across Fox and ESPN networks.
Filter for just the 2021 season, and the data is even more intriguing: The 28 Pac-12 games broadcast by Fox and ESPN/ABC without either Los Angeles school averaged more viewers than the games with the L.A. schools.
“I don’t put as much stock in the whole notion of ‘losing or keeping L.A.’ as others do because, in reality, (the Pac-12) isn’t losing L.A,” Source A said.
“It’s not a zero-sum game. KABC (the ABC affiliate in Los Angeles) isn’t going to stop airing Pac-12 games. Certainly, their ratings for Pac-12 games won’t be as high without USC and UCLA, but 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 figure for a Pac-12 that includes USC and UCLA, what’s a reasonable expectation for the conference without both L.A. schools?
“I’d say $70 million to $75 million is about right,” Source C said, “because you have to weigh losing both market and brand value.”
Section III: What if UCLA reversed course?
The most significant development at the UC Regents’ meeting on Wednesday was a clear indication from general counsel Charlie Robinson that the board has the authority to block UCLA’s move to the Big Ten.
That seems unlikely given potential financial ramifications and the dangerous precedent it would set for future UC campus business. But clearly, the likelihood of a reversal by UCLA is not zero.
(The chance of USC having a change of heart, on the other hand, is sub-zero.)
For that reason, the Hotline believes it worthwhile to examine a valuation scenario in which the Bruins remain in the conference for the next media rights cycle, beginning in the summer of 2024.
Would their presence fully offset the market impact of USC’s departure?
“Obviously, it will help some, but not to the same level as USC,” Source A said.
How much is some?
Whereas the Trojans represent both brand and market value, the Bruins are largely a market play as a Power Five program in a region with 5.7 million TV homes (per Nielsen data).
Their football brand is limited, forever eclipsed by the basketball program — and college basketball does little to drive media valuations.
In gauging lost value with only USC departing, multiple analysts pegged the number at approximately 15 percent.
In other words, our hypothetical assignment of $100 million to the Pac-12 with both L.A. schools would drop to $85 million if the Bruins were retained but the Trojans departed.
Navigate, a sports and entertainment market research company, pegged the Pac-12’s future broadcast rights in the $500 million range (annually) in a valuation estimate made prior to the departure of the L.A. schools.
That would have translated to $41.67 million per campus per year — the figure cited Wednesday in the presentation to the UC Regents.
Trim the total amount by 15%, then divide by 11, and we’re left with $38.63 million per school.
By that estimate, USC’s loss would equate to a drop of $3.04 million per school, not $9.8 million.
(Note: Navigate has not published valuation projections for the Pac-12 since the L.A. schools announced their departure.)
The unknown in this scenario — and it’s a significant unknown — is how the Big Ten might respond to a UCLA reversal.
Would it grab Stanford instead, to avoid dealing with the bureaucracy of public institutions?
Or might the behemoth simply swallow Stanford, Cal, Oregon and Washington and create a West Coast division?
Or maybe the Big Ten would stand on 15 for the time being?
It’s impossible to know but essential to keep in mind.
Section IV: The Pac-12’s target valuation number
How much should the remaining Pac-12 school expect to collect annually without both Los Angeles schools?
A reduction of 30 percent in average value (referenced at the bottom of Section II) would result in $350 million annually for the remaining 10 members, based on Navigate’s pre-departure estimate of $500 million.
However, the conference could have a competition problem. ESPN appears likely to bid on the media rights, but without a second network to drive up the price, the Pac-12 could be forced to accept less than $350 million.
“If they could get to $325 million with (an escalator) of 5%, that’s pretty good,” Source A said.
How might the Pac-12 push its average valuation into the mid-$300 millions?
One pathway: Offering ESPN (or other networks) a premium game on both Friday and Saturday nights — or 26 broadcast windows in prime time on the West Coast with no Power Five competition.
“Those games have a captive audience,” Source A said. “I would rather have a couple million viewers when I am the game than have to fight the SEC and Big Ten” on a Saturday afternoon.
Section V: Comparisons with the Big 12
The national media has portrayed the Pac-12 and Big 12 as engaging in a death struggle, with some justification.
New Big 12 commissioner Brett Yormark brazenly stated in mid-July that his league was “open for business,” while Pac-12 commissioner George Kliavkoff accused the Big 12 of attempting to “destabilize” his conference.
But an objective valuation assessment leads to only one conclusion:
Financially and competitively, the Pac-12 and Big 12 are more alike than different — and neither of them is on the same tier as the Big Ten or SEC:
With Oregon and Washington, the Pac-12 has the most valuable football properties in either reconfigured conference. Meanwhile, the Big 12 has more stability, if only because it now lacks the high-end chess pieces that eventually might be of interest to the Big Ten or SEC.
The Pac-12 is the only conference that can regularly fill the valuable fourth broadcast window (7:30 p.m. Pacific), whereas the Big 12’s geography forces it to start games in the same windows as the Big Ten and SEC.
Then again, the Big 12 benefits from having been plundered first: With Texas and Oklahoma leaving last summer, the conference was able to scoop up the top available schools: BYU, Houston, Cincinnati and UCF. In contrast, the Pac-12 has few quality options for backfilling.
What do the numbers say?
In addition to better brands (Washington and Oregon), the Pac-12 has better markets:
The 10 remaining schools account for six of the nation’s top 30 media markets, according to Nielsen DMA data from 2021. (Add San Diego State, and it would be seven.) The Big 12 will have just four.
The Pac-12 also drives ratings more effectively than the Big 12:
Over the past five full seasons, the Pac-12 games had 17 games without USC and UCLA involved that generated a 2.0 rating (3.5 million viewers) or better. The Big 12 without Texas and Oklahoma had just nine.
Yes, the Big 12 had loads of broadcasts on the ESPN and Fox networks with lower reach (ESPN2, Fox Sports 1), but the conference “was on those channels for a reason,” Source B said. “The teams that don’t have the audience get put on the less-distributed channels.”
It’s also worth noting that when the Pac-12 considered expansion last summer, it retained advisors from Endeavor to determine the media valuations for every school in the reconfigured Big 12, as well as those that have since joined the Big 12.
The conclusion: None of them brought enough new revenue to justify expansion.
A year later, the Big 12 has retained Endeavor to provide the same modeling.
“The center of college football is the Big Ten and SEC, and the other three (Pac-12, Big 12 and ACC) are on the outside looking in at various grades,” Source D said. “The ACC is hemmed in (by its grant-of-rights agreement). As for the Pac-12 and Big 12, neither is really in a good spot. There isn’t a perfect outcome for anyone.”
Annual media rights valuations in the $325 million to $350 million range seem reasonable for both leagues; any difference coming on the margins.
And because of differences in membership, the new Big 12 would need a significantly higher valuation figure in order to distribute more revenue to each campus.
If the Pac-12 received $300 million annually, each of the 10 schools would collect $30 million (excluding whatever is spent on conference operations).
If the Big 12 received $350 million annually, each of the 12 schools would take home $29.2 million.
“You can’t change the fact that the SEC and Big Ten will be light years ahead, but the Pac-12 can remain competitive,” Source A said. “The worst thing the schools can do is to pooh-pooh their situation.
“It will be in position to be competitive.”
