BY Art Thiel 06:30AM 02/21/2019

Thiel: Psst — wanna buy a part of the Pac-12?

Pac-12 has least revenues and most expenses among Power 5 conferences. Commish asks, how about selling off 10 percent of the conference?

Commissioner Larry Scott has a plan to revive Pac-12 finances — sell off 10 percent of the shop. / Salt Lake Tribune

As long as Seattle-area college sports fans keep eyes on the Huskies’ success this season in football and men’s basketball, there’s not much urgency to ask about that smoke rising on the Pac-12 Conference horizon. Then again, the University of Washington is perhaps only a Jaylen Nowell ankle sprain or a torn labrum for Jacob Eason from feeling the heat like everyone else.

By now, the smoldering emergency is well-known: Several seasons of mediocrity in the revenue sports combined with an ill-conceived business model for the Pac-12 Networks has left the alleged Conference of Champions with the least revenues and the most operating expenses among the Power 5 conferences.

A partial result is the prospect next month of a single league entrant in the most important event on the sports calendar of the big-amusement schools: The NCAA men’s basketball tournament. The fact that the lone entrant may be Washington, back in the field for the first time since 2011, is solace only for the crowd one bus ride from Montlake.

While it’s a little difficult to draw a direct line between non-competitive revenues and blown free throws or dropped touchdown passes, there is no arguing some grim data points.

It’s been 15 years since the Pac-12 won a national football championship, longest drought among Power 5 conferences. The league has missed the most College Football Playoffs (three of five) among its peers, and was 3-4 in the bowl season after going 1-8 the year before, both the worst among the Power 5. Football attendance is at its lowest since 1982 (an average of 46,733).

A year ago, the league was out of the men’s hoops tourney after the first round for the first time in 32 years.

And the Pac-12 returns the least amount of media revenues (73 percent) to its members. That’s mostly due to the expensive commitment to televise all non-revenue sports to six regional mini-networks, despite drawing audiences mostly of relatives and pets.

Oh, one other expense: Commissioner Larry Scott’s salary of $4.8 million is way more than any of his peers. He must think he’s an MLB middle reliever, or some such exaltedness.

The data was compiled by CBSSports.com in an extensive story this week about the woes of the west. In an interview, Scott largely dismissed concerns that the Pac-12 was going Venezuela, saying the absence of competitive success was merely cyclical.

“If you’re going through a down cycle like I think we are now in football and basketball, people try to look for reasons,” Scott told CBS Sports. “I’ve been hearing that for 10 years. I’ve seen (down cycles) happen with the Big 12. I’ve seen it happen with the ACC. I’ve seen it happen with the SEC in basketball. I’ve seen it happen with the Big Ten. I think, in a way, it’s our turn.”

Even if that’s true, there’s no dispute that the weak TV revenues will continue, because the TV deal Scott made at the birth of the Pac-12 Networks with ESPN and Fox still has five years to run. Nor is Scott likely to add revenues from subscribers of DirecTV, the region’s largest satellite distributor that refuses to pay the Pac-12 ask.

But Scott believes the Pac-12 will be in good position after 2024 to feast on next-gen media revenues from streaming and other delivery innovations, such implantation of chips in our temples so we can hear 24/7 from Bill Walton, reciting the playlist of the Grateful Dead’s 1968 concert at the Fillmore.

The trick is getting to 2024 before Scott, and the university leaders who support his tenure, get run off the continent’s left edge by annoyed athletic departments, regents and fans.

So Scott has proposed a novel idea to the schools — selling a 10 percent stake in the conference business operations for $500 million.

While you were bringing home pallets of nachos for the Huskies in the Rose Bowl and the Seahawks in the playoffs, the Oregonian’s John Canzano on Dec. 29 broke the story of the ploy.

Called “Pac-12 Newco,” the plan was explained to presidents and chancellors at a mid-November meeting and was subsequently discussed in a conference call in December. Private investors would receive 10 percent equity in the newly formed entity in exchange for a $500 million investment, which could be distributed immediately to the schools.

The figure means that Scott has valued the Pac-12 media property at $5 billion. How he came to that figure when the Pac-12 has been losing cable subscribers, and its two glam schools, USC and UCLA, are having the worst combined time in 75 years, is hard to say. The Pac-12 distributed $31 million in media revenues the last fiscal year, $19 million less than the Big 10.

I keep imagining Scott sounding and acting like that annoying hump-day camel on the Geico TV commercial.

In this case, taking on private equity partners is a little like the casino advancing cash to a drunk sports gambler playing catch-up after a series of bad beats. It is unlikely to end well for the patron. The private-equity guys want to beat the rate of return available in the stock market, or they hold Scott by his ankles out of a hotel room window.

But who knows? Rights fees for all sports continue to go up, and the Pac-12 has a West Coast monopoly on this particular entertainment. So a burgeoning media powerhouse like Amazon might want to deliver free Kindles loaded with Pac-12 content to every person in China.

And unleashing Walton on the unsuspecting Chinese might be the best non-lethal weapon America has devised.


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YourThoughts

  • Roy S

    I’d be interested in ponying up only if Walton would host me for a weekly Breakfast of Champions for the Conference of Champions at his place. He can pick the toppings.

    • art thiel

      Hell, I’d PAY to be part of that confab.

      He’s a bright dude who doesn’t have to give a shit, but he’s polite about it.

      • Husky73

        I love that word. Back in the day, there was a confab on the mound. It was sometimes followed by a rhubarb.

  • Parts

    This smacks of desperation, he’s going to get everyone a one time infusion of 41 million dollars and that’s going to fix the disparity between the pac 12 and the rest of the “power 5”? What am I missing?

    • art thiel

      That’s the problem — he’s counting on athletic departments to not spend down the $41M before the new deal can be struck. It’s like taking a kid to Baskin and Robbins and tell him he has to wait for dinner.

  • Husky73

    The quality of Pac 12 Network play-by-play announcers and color commentators is weak. More often than not, I turn the sound to zero and listen to the radio broadcast. Brock Huard does a good job. Bill Walton is unfathomable. His stream of consciousness act is not funny, not insightful and not entertaining. He is distracting and annoying. He’d be equally relevant if he were sitting in a tree somewhere in Buena Park, rather than courtside. I do have my TV set up for tonight’s Stanford-UCLA water polo match, which I will view with my cat.

    • art thiel

      Well, I have a soft spot for Walton, and a hard spot for guys like Vitale, who are blatant shills for their coach-friends. Walton is an acquired taste, and he does get lost, but at least he’s not informing our policy on Russia, Venezuela or North Korea.

      • Husky73

        MAGA = Morons Are Governing America

        • 1coolguy

          Out of respect for Art’s column, lay off the political comments

          • Husky73

            1cool….Your point is well taken, and I shall. However, I have about four more…..but, I shall stifle myself.

        • DonMac

          Out of respect for Husky73, I like his definition of MAGA!

      • David Schartow

        I personally enjoy Walton. He cracks me up. I understand he’s not for everyone. The man is knowledgeable about basketball when you can get him to stay on subject and he clearly loves college hoops as do I since there is no other I will watch.

        • art thiel

          Having heard enough color analysts drone their way through cliches, bromides and triteness, Walton has the great virtues of not taking himself too seriously, and not being afraid to leave the planet for a few moments.

      • dingle

        I’d donate to a fund created to Launch Dick Vitale into Space. Jim Nance can go, too.

    • WestCoastBias79

      I love Bill Walton. He’s a national treasure. It’s like watching a game with your lovable hippie uncle who did WAY too many drugs.

  • DonMac

    Larry Scott has been exposed through multiple reports to be a fraud but somehow the supposedly enlightened presidents of the PAC-12 hang on every word this huckster utters and then give him whatever he wants. It’s sickening for me as a Coug fan to see the hemorrhaging red ink in WSU’s athletic budget but instead of leading the charge to get rid of Scott, WSU headman Schulz falls in line with the other pliant presidents while the PAC-12 is getting killed by the SEC and the Big-10. I don’t believe in spending money you don’t have in hand but WSU did based on promises made by Larry Scott regarding the windfall of revenue the PAC 12 network would bring each of the member schools. So, like some naive soul, WSU runs out and spends millions they didn’t have and now they struggle to even make the bond payments on their new football facilities. Meanwhile, WSU can’t afford an indoor practice field which is a joke and they have a dumpy basketball arena with a head basketball coach who should have been fired long ago but WSU can not afford the buyout. Thats’s on WSU but Larry Scott certainly hasn’t nor will he likely ever help matters for WSU. For Scott to now suggest selling a share of the PAC-12 network to private equity investors is frightening at best. These people have generally been shown to be nothing but vultures who go in and take over a business that is struggling but has attractive assets and the first thing they do to make a profit for themselves is to fire workers and then start selling off the assets. In time, the business goes belly-up but not before the private equity gang puts the leveraged dollars they used to buy the business on the books as a liability of the business and once every cent has been extracted they have the business declare bankruptcy and then go away after having made a killing. That sounds like another really sound plan Larry, where are the adults in the room?

    • art thiel

      When it comes to private-equity vultures, you’re preaching to the choir. As an ex-newspaperman, I have watched as the vultures have stripped the print-media carcass and left the bones to bleach. They are not interested in values beyond cash sale and tax breaks.

      Do keep in mind, however, that eight of the 12 presidents have begun after July 2015, meaning they aren’t as invested in Scott as the predecessors who helped launch P12 Nets in 2012.

      • Husky73

        Art– If you have not seen it, watch the documentary Breslin and Hammill on HBO.

        • art thiel

          Heard about it. Thanks for the reminder to lean on someone to record it.

      • DonMac

        I hope you’re right Art and what happened to the P-I sucked then and now.

  • Alan Harrison

    This was a dumpster fire from the get-go. Although the choice of Larry Scott to be the commissioner of the league was an obvious one given the wildly successful, too-good-to-be-true, slam dunk acceptance of World Team Tennis (Art, I know you can tell, but just in case – for other readers – that was sarcasm.). I think it’s reprehensible that I have the ability to see more Big West men’s basketball games in a week than the Pac-12. (Go UCI Anteaters!) The Pac-12 Network isn’t even streamable as a stand-alone, which is also crazy. At this point, the conference might as well get fees from BYU, Air Force, Nevada, and UNLV to make it a Pac-16 with 2 schools per state. That money could hire away someone who could actually make a deal with, say, Jeff Bezos and his Amazon TV empire. Until then, it’s Rainbow Warriors-Gauchos tonight at 8 on ESPNU and Mustangs-Anteaters tonight at 7 on ESPN3 (again, go Anteaters – Zot!). Oh, and by the way, the Big West may well get just as many men’s basketball tournament entries as the Pac-12.

    • art thiel

      If it hadn’t been for Scott, you would have never been an ‘Eater believer.

      He and his bosses made a fundamental mistake in over-valuing the 90 percent of the content that isn’t football or men’s basketball. The presidents thought all the other sports were recruiting tools for the entire campus, a sort of valentine. They didn’t think of it as programming that was worthless to top carriers like DirecTV.

    • Pete Tsarria

      Hey, careful on the WTT; I was a proud supporter of the Sea-Port Cascades back in the day, as well as the Seattle Smashers pro volleyball team! (I’m probably the only one…) 😏

      • Husky73

        I was all for anything that included Chris Evert.

      • art thiel

        Thanks for sharing your secret, Pete. We’ll keep it confidential.

      • Archangelo Spumoni

        There are about 18 humans remaining on the planet who still remember the magnificent juggernaut SeaPort Cascades with Margaret Court headlining said juggernaut.
        I still distinctly remember Wayne Cody doing the sports radio thing and (apparently with a straight face–you couldn’t tell) trying to drum up support for the Mighty Cascades.

  • 1coolguy

    So my question is: What does Scott have on the majority of votes of the PAC-12 presidents that he would propose such a ludicrous idea and think we would not be summarily fired?

    • art thiel

      He has to try something to play catch-up. In the business world, borrowing against the future is often done. But universities aren’t corporations.

  • WestCoastBias79

    Selling off assets in the business world is usually step one on the path to insolvency, and usually the move of some B-School genius looking to inject some fools gold into the balance sheet to juice his bonus right before bailing. This is dumbfoundingly short sighted. Larry Scott’s tenure has been abject failure down to the officiating. I almost admire his ability to leverage what he’s done to get his salary.

  • Archangelo Spumoni

    Avoiding “political” comments here, trying not to upset certain fair-haired readers:

    Unfortunately for a certain superpower and the rest of the civilized world, this Scott mess with the school administrators who are eventually his purse strings holders, looks like a certain national government we may know of, a certain orange chief executive, a certain crime family, etc. Gross incompetence, rampant world record prevarications, mismanagement at all levels, an unending string of convictions, pleas, world record resignations, indictments, national security violations, the 1st crime family being investigated for racketeering under RICO, etc.
    Incompetence at the top and a compliant Senate afraid of being primaried as long as they get their vig.
    The compliant Senate is sorta like Scott’s remaining supporters–how far down do they go?

    • rosetta_stoned

      But enough about the Clintons …