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Sources: Pac-12 Offering 10% Equity In Conference To Private Investors

The "Pac-12 NewCo" plan, which would see private investors owning 10% equity in the newly formed entity in exchange for a $500M investment, was "introduced to the conference presidents and chancellors at their mid-November meeting and was subsequently discussed in a conference call in December," according to sources cited by John Canzano of the Portland OREGONIAN. A six-page document presented by Pac-12 Commissioner Larry Scott to his bosses during the November meeting outlines the conference’s current "lagging media rights projections and introduces an ambitious plan that involves taking on a strategic private investor." The conference’s broadcast rights, sponsorship rights, merchandising and all other commercial assets "would be consolidated under the umbrella of 'Pac-12 NewCo.'" The conference "would retain" 90% of the equity. The document states, "We estimate that a Capitalized NewCo could be valued at approximately $5 billion to $8.5 billion." The projections, however, include $36M in "annual revenue from DirecTV" beginning in '20 and a "one-time payment" in '24 from ESPN in the amount of $347M. Canzano: "Neither is certain." Also, the plan assumes Fox would "renew its current broadcast contract with the Pac-12 in a 10-year deal" worth more than $2B (Portland OREGONIAN, 12/30).

ART OF THE DEAL: MARKET WATCH's Mike Murphy noted the Pac-12’s fortunes have "stumbled in recent years, missing out on lucrative paydays from college football and basketball." Other power conferences such as the SEC and the Big Ten are earning $11-15M "more for its schools per year" (MARKETWATCH.com, 12/30). In Portland, Ken Goe wrote to pay the kind of money the Pac-12 is asking, investors would "have to believe in the direction" Scott is taking the conference (Portland OREGONIAN, 12/30). AWFUL ANNOUNCING's Jay Rigdon wrote the Pac-12's revenue issues "aren't a secret." The Pac-12 Networks has "languished, struggling to reach a distribution deal with DirecTV and other carriers." Scott makes $4.8M a year, which "puts him at the top of his particular category, despite the myriad issues the Pac-12 is facing." The plan to sell to private investors would obviously be a "short-term cash grab move for the league, with hopes that things turn around swiftly enough that they’d be looking at 90% of a much bigger pie instead of 100% of a pie without Pac-12 Network distribution." What is perhaps "most interesting about this is that it’s the kind of move that typically would be seen as a last resort for any successful private enterprise" (AWFULANNOUNCING.com, 12/29).

MEDIA MATTERS: In N.Y., Tracy & Draper note as the other four power conferences have "struck lucrative media deals to infuse their members with revenue in recent years, the Pac-12 has failed to keep up." That is "despite a footprint that includes four of the country’s 15 largest media markets." Without the same "financial resources as their competitors, many Pac-12 colleges have struggled to compete when it comes to hiring the top coaches, building the glitzy facilities and recruiting the star players that yield greater success." The financial shortfall is "largely the product of a bet that Scott ... and the Pac-12 made seven years ago while negotiating a series of multibillion-dollar media rights agreements and starting a conference network." Scott decided to "buck a trend with his conference-owned sports network by opting not to partner with a traditional media company." He "kept the Pac-12 Network and its affiliates independent." Meanwhile, Scott speculated that in addition to "traditional television broadcasters like ESPN, Fox, CBS and NBC, digital companies will compete to buy the Pac-12’s rights." He "name-checked just about all of them: Amazon, Facebook, Apple, Google, Netflix, DAZN and ESPN+" (N.Y. TIMES, 1/2).

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