Original Article: On3, by Eric Prisbell, February 23rd, 2023

While the appeal of its on-field inventory is debatable, the Pac-12’s media rights saga has all the ingredients of a must-see drama: A distressed league fighting for survival, Big Tech companies potentially reconfiguring a fragmented viewing paradigm and an inexperienced commissioner whose legacy largely hinges on securing a palatable deal.

Amid breathless speculation, an empty Pac-12 statement of unity and an interestingly timed story about another supposedly intrigued Big Tech partner, interviews with five prominent TV industry sources paint the picture of a weakened conference facing a pivotal decision: Maximize dollars or exposure?

“It’s a very interesting decision for them – they probably can’t do both,” Neal Pilson, the former president of CBS Sports, told On3 on Wednesday. 

Debate has stirred for years over when deep-pocketed Big Tech titans would encroach on live sports media rights. That time is now. Amazon is building an ever-growing portfolio that includes spending $1 billion annually for the NFL’s Thursday night package and securing deals to showcase the WNBA, New York Yankees, Overtime Elite, the UEFA Champions League and more. And it may try to get a slice of the NBA when the league’s deal with ESPN/Turner Sports ends after the 2024-25 season. As one longtime TV source said, “I see Amazon specifically coming in for live sports. It is more than dabbling.” Apple TV+, meantime, has secured a 10-year, $2.5 billion deal for Major League Soccer games and is spending $85 million annually for Friday night MLB games. 

But what the tech giants possess in dollars they lack in exposure – at least at this point. Yes, the landscape-shifting cord-cutting trend is continuing. Total pay TV subscriptions – cable and satellite – dropped by 6.3 percent in Q3 last year, showed data from research firm MoffettNathanson. More than 34 million homes exist entirely outside the cable network ecosystem; pay TV penetration is now roughly just 61 percent. And, yes, there are now more than 200 million Amazon Prime Video subscribers, including more than 150 million in the U.S. Apple TV+ has a much smaller market share (7 percent) and, as of last year, was estimated to have some 25 million paid subscribers

How much does exposure matter to the Pac-12?

If the Pac-12’s dilemma is whether to give the bulk of its best inventory to a streaming platform or a traditional linear network – assuming financials are comparable – the linear network still offers the best opportunity to maximize exposure. ESPN, for instance, would provide the Pac-12 significantly more visibility and, invariably, promote the bejesus out of the league throughout the fall. As Pilson said, “Rights-holders are beginning to realize that the timing still isn’t perfect for taking your full package off linear television.”

But that’s assuming the network offers the Pac-12 an attractive financial package. Pac-12 schools receive $21 million annually from their current deal with Fox and ESPN, which expires July 1, 2024. With a new deal, the hope is the league’s remaining 10 schools could receive an amount at least in the vicinity of $31.6 million annually. That is the figure Big 12 teams secured in the league’s latest rights deal, which accounts for stalwarts Texas and Oklahoma departing for the SEC and the conference replacing them with BYU, Cincinnati, Houston and BYU.

In a typical conference, TV executives say, the top three or four brands account for more than 50 percent of TV viewership. As one said, “The networks will pay you whatever you need them to pay you for top inventory. What they don’t want to do anymore is pay $9 million a game for Michigan-Ohio State and also pay $9 million a game for Rutgers-Maryland.” And without UCLA and especially USC, the Pac-12 is a shell of itself. 

Regardless, the Pac-12 inventory would fill a much-needed, late-night broadcasting hole for ESPN. John Kosner, the former ESPN digital executive and the chief executive of the media consultancy Kosner Media, noted that ESPN has served college football fans for years with all-encompassing Saturdays, starting in the morning with College GameDay and ending late into the night with West Coast action. Heck, it even spawned a hashtag: #Pac12AfterDark

“They definitely want to maintain their late, West Coast, prime Saturday night windows,” Kosner told On3 on Tuesday. “Having their Big 12 renewal – at least with that conference’s current composition – is not enough. Look for ESPN to be part of the mix for the Pac-12.”

But at what price? Disney is laying off 7,000 employees and plans to cut $5.5 billion in costs; it’s uncertain how much of that will come from ESPN. And CEO Bob Iger said on an earnings call with analysts this month, in reference to sports media rights, “We’ve got some decisions that we have to make coming up – not anything particularly large, but on a few things – and we’re simply going to have to get more selective.”

Streaming vs. linear

Pilson said it would be a mistake for the Pac-12 to walk away from a linear network if its offer is comparable to that of a Big Tech company. With diminished exposure, the Pac-12 would risk becoming even less relevant than it is now. But Pilson stressed it is a matter of degree, adding that, ”If your linear offer is 80 percent your streaming offer, you go linear. If it’s 40 percent, now it is a lot more of a difficult choice.”

He doesn’t believe Apple or Amazon should be the Pac-12’s first choice. The only reason the Pac-12 should give the tech company the bulk of its inventory, he said, is if it can’t make an acceptable deal with a linear channel.

“You’re not talking about college kids; you’re talking about alumni and fans of the Pac-12 who are used to watching it on linear television,” Pilson said. “And they don’t know how to connect their large TVs to the Internet. They will be forced to watch on their laptops or their phones. And you’re going to see a significant decline in their total audience if they move their package principally to Apple or Amazon.” 

Kosner said Apple might prefer a more comprehensive package than Amazon, but it’s important to keep in mind that its MLS deal left room for the league to put certain marquee games on Fox broadcast TV as well (not everything is exclusive to Apple). As for Amazon, Kosner said, it’s not clear that Amazon wants, or needs, all of the Pac-12’s football inventory – just the week’s best games. It is more likely, he said, that Amazon would team up with one or more linear broadcasters, most likely ESPN. And it’s important to keep in mind the potential market penetration for Amazon in the coming years and the rate at which that grows.

“Through Prime, Amazon will have distribution that rivals or exceeds broadcast during the course of a new deal,” Kosner said, “so it’s not as if the conference is turning its back on its fans. Sharing a deal with a top linear broadcaster could afford the conference the wider distribution it would be looking for in terms of recruiting and overall exposure.”

Amazon wants to fortify its live sports content business, and any decision to acquire Pac-12 rights makes sense “for the right price,” said a TV executive who has made mega-rights deals in recent years. “They can sell a lot of goods and services to the Pac-12 fan base. Getting Pac-12 games should not affect at all the NBA bidding rights. Amazon has enough money for both, and live sports is key to appointment viewing.”

How would a Pac-12 package benefit Amazon? Kosner said it would give the platform a Saturday night single-game or doubleheader opportunity for Power 5 football, which it could promote heavily on its Thursday night NFL broadcast. As for Apple, nestled in Silicon Valley, it has been a target of the Pac-12 since Larry Scott’s tenure as commissioner. The league, Kosner said, could provide an opportunity to create another comprehensive package similar to Apple’s MLS agreement. “Still,” he said, “it’s hard to imagine Apple taking all of that on beyond football and men’s and women’s basketball.”

Is expansion in the cards?

If the Pac-12 can’t enhance its inventory, the other question is whether it should create more of it. It is exploring adding at least two more schools, potentially San Diego State and SMU because of the southern California and Dallas markets, respectively. But neither school is a prime attraction even in its own region. The fundamental question is whether adding those schools would grow the pie enough to make expansion financially beneficial for the other 10 schools. 

If it added both, each Pac-12 school would receive one-twelfth of the revenue instead of one-tenth. And TV sources said those additions are unlikely to motivate linear or tech companies to substantially bolster their offers. From a TV perspective, Pilson said, adding those two schools would be an “error.” He said, “I don’t think from the television point of view – whether it’s streaming, cable or network – (adding San Diego State and SMU) would make any difference at all.”

Another longtime TV source countered, pointing out that since future Pac-12 deals likely would be heavy with subscription-driven streaming platforms, possessing as much live inventory as possible is necessary. That’s what San Diego State and SMU provide. As they become competitive within the league, general interest would grow with them. 

“People ask, ‘Why would the Pac-12 want SMU or San Diego State – they barely average 400,000 viewers (per football game)?’ ” he said. “Of course that’s all (while) playing average Group of 5 competition on ESPN2, ESPNU, FS1 and CBS Sports Network in time slots against multiple big games on major platforms. What do people think they should be averaging?

“The school will rise to the conference, not the other way around.”

What about Oregon and Washington?

Yet another concern for second-year Pac-12 commissioner George Kliavkoff is whether a deal – both in dollar amount and platform – will appease the wandering eyes at Oregon and Washington, both of whom could maintain aspirations to jump to greener (as in more dollars) pastures of the Big Ten. In August, the Big Ten finalized a seven-year rights deal with Fox, NBC and CBS worth a record $7 billion. It’s expected to pay about $70 million annually to each of the 16 schools.

Bob Thompson, the former Fox Sports Networks president, tweeted this week that “any movement by any Pac-12 team is going to be determined by their TV deal. If it is close to others, nobody is going anywhere for a few (dollars) more.” But he also has said that going all-in on streaming at this point is “not a good idea. Dip your toes in the water. … If they go 100 percent streaming, do schools move? Guess we’ll find out.”

At the end of a phone call with On3, Pilson reflected on how dramatically the media rights landscape has transformed since he entered the industry decades ago, when just three networks ruled the ecosystem and jousted over live sports rights.

“All you had to worry about were the other two guys – and it was still a very tough business,” Pilson said. “You had a third of the audience, and you were always worried and concerned that the other guys were going to take your property.

“We thought it was tough then. But it’s almost impossible now.”