Original Article: Mercury News, by Jon Wilner, March 8th, 2023

Pac-12 media rights: How sports gambling and the sale of statistics could fuel revenue growth

The Pac-12 began planning to sell its data last spring, before everything changed.

A year ago this week, Pac-12 commissioner George Kliavkoff sketched a strategy for developing future revenue streams during a news conference at T-Mobile Arena in Las Vegas.

He had no idea that USC and UCLA would announce their departures to the Big Ten a few months later, undermining Kliavkoff’s pursuit of a media rights deal that could secure the future of the 108-year-old league.

But one component hasn’t changed an iota: The potential impact of gambling in general, and the sale of statistical data specifically, on college sports.

“Data is part of media rights, and media rights is one of the issues at the top of our agenda,” Kliavkoff said last year. “We will certainly discuss data rights as part of that package.”

A few days later, the Pac-12 partnered with Tempus Ex Machina, a data technology company based in San Francisco. The agreement created a foundation from which the conference could sell its data and statistics to media, gaming or technology companies.

“This is all designed to be ready for our media rights negotiations,” former Pac-12 Networks president Mark Shuken explained at the time. “We’re trying to get ahead of the future in terms of the fan experience and products and our ability to monetize our data.”

Now here we are, 51 weeks later, and the conference is in the final stages of negotiating a media rights deal and making a decision on expansion. The data piece should not be ignored as a potential source of cash.

In anticipation of sports wagering playing a pivotal role in the process, the Hotline reached out to John Kosner, a former ESPN executive vice president for media (digital and print).

We asked the Kosner Media chief about the impact gambling and data could have on ESPN’s negotiating strategy and the Pac-12’s media revenue.

(Note: The interview was conducted last year, when we thought the Pac-12 was close to announcing a media rights agreement. Kosner has subsequently reviewed his comments to account for any changes to the media and wagering landscapes.)

— Is there a way to estimate the value of a direct sale of Pac-12 statistical data to gambling companies?

It’s a new grant-of-rights that will increase as more and more states adopt not just legalized sports betting but legalized mobile sports betting. It’s worth noting that in the Pac-12 territory, sports betting is legal in four states:

* In Arizona and Colorado, mobile sports betting is legal, as is wagering at several physical locations;

* In Oregon, mobile sports betting is legal on the DraftKings app and is available physically at Native American tribal casinos;

* In Washington, sports betting and mobile sports betting are legal only at Native American tribal casinos;

And, of course, in California there is no sports betting at all, at least for now.

Could mobile sports betting impact TV rights in those markets? Would it encourage betting companies to be more aggressive about getting into the sports rights business? Probably!

Today, all of the Power Five conferences are looking to package an advanced data set featuring real-time information,  beginning with football and men’s and women’s college basketball.

That type of data feed has value to basketball and football operations staffs, as well as conferences, betting companies, TV broadcasters and in-venue operations. These rights command escalating seven-figure annual sums – helpful but not game-changing.

New money from advanced data is like sports merchandise. It’s incremental to the existing pie, but core aspects like tickets, sponsorships and media still represent the biggest revenue streams.

— So the value play is really a longer-term proposition: Gambling drives engagement, which can drive audience growth over time?

That is the assumption. I have seen estimates that the betting audience is 10 percent to 15 percent of total viewership, so consumption increases due to betting remains small and unproven.

A wild card here is the development of same-game parlay bets becoming the majority of sports betting. To the extent that these bets proliferate and become easier to market and fun to play and expand the betting audience to more casual fans, more growth is possible.

Meanwhile, TV ratings for sports, especially college and pro football, have been quite strong post-COVID. Many fans were betting illegally on college football and basketball prior to the Supreme Court decision (PAPSA, 2018), which initiated the current state-by-state legalized betting activity.

Of course, betting may also help to generate greater interest in viewing, going to games, and supporting teams, so each of these core revenue streams could also be enhanced. But it’s likely that this will happen gradually.

— How much will capturing the sports wagering audience motivate media companies to partner with the Pac-12, especially for 7:30 p.m. Pacific kickoffs? That’s a great time for bettors to recoup losses from earlier in the day.

The “fourth” national window in West Coast primetime is an attraction. It’s a key differentiator for the Pac-12 with its national brands like Oregon, Washington and Stanford, plus the Arizona schools, Utah and Colorado. That fourth window will continue to increase in value, especially as more and more states legalize sports betting and move to mobile betting.

I believe you will see schools, and other conferences, looking for new windows in order to appear on national TV – early evenings, weekday afternoons and even mornings over the next decade.

— Is there a way to connect the dots between the sports gambling viewership and ESPN’s strategic decisions on college football properties?

I believe it’s peripheral. ESPN wants to continue to program as much big-time college football, including the College Football Playoff, as it can. It needs to do so to fulfill its agreements with cable/satellite distributors and streamers, as well as to maximize its opportunities with advertisers and grow ESPN+ subscribers.

If there is a demonstrable correlation between betting volume and increasing audiences for college football and basketball, that is so much the better. But ESPN had the exact same strategy in place prior to the Supreme Court decision. Nothing has changed.

Over time, if we see a more formal tie-up between ESPN and the betting companies, that could impact ESPN’s strategies regarding college sports.

— Can you estimate the revenue potential within those decisions? In other words, the gambling piece could increase media rights deals by X percent?

This is just conjecture on my part, but I think the impact of betting into the near future is a less than 10 percent factor, similar to merchandise as I mentioned earlier.

The fierce competition for premium sports rights — former ESPN president John Skipper called these, “beachfront properties” — between TV and cable networks, tech companies like Amazon, Apple and Google and, soon, betting companies such as Fanduel (with Fanduel TV), is driving rights deals higher right now.

The wild card here is in-play betting, which I believe will develop during the second half of this decade.

That could be a game-changer for media rights, especially in light of cable’s demise and streaming’s ascendancy.

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