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College Hotline - Pac-12 finances: SEC and Big Ten revenue comps, Pac-12 Networks profit,...

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  1. RSSBot

    RSSBot News Junkie

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    The Pac-12 on Wednesday released its 990s for the FY2015, which provide the only official look into the conference’s finances.

    I tweeted some key numbers at the time but was on assignment, as they say, and am only now posting a thorough assessment.

    The headline numbers:

    *** $439 million in revenue (an increase of 17% over FY14)

    *** $25.1 million distributed to each school (Hotline estimates for this category, made last summer, proved to be dead-on, by the way)

    Again, these are the FY15 numbers, released 10 months after FY15. That’s SOP for the conference, but it means:

    1) They’re lagging numbers.

    Heck, at this point FY16 numbers would be lagging, in a sense, because interest has already turned to FY17 and FY18, at least for me.

    2) We must be careful to compare them to FY15 numbers for the other major conferences, especially the Big Ten and SEC.

    There’s a lot to cover. Let’s break this down into categories.




    *** Comparisons to peer conferences

    Here’s a quick FY15 comp:

    SEC
    Total revenue:
    $527.4 million
    Percentage of revenue distributed to schools:
    86.8
    Distribution per school: $32.7 million
    (Note: The revenue includes only nine months of income from the SEC Network.)

    Big Ten
    Total revenue:
    NA
    Percentage of revenue distributed to schools:
    NA
    Distribution per school:
    $32 million
    (Note: Conference finances have not been disclosed. The per-school distribution figure cited above is based on public records request by the Lafayette Journal Courier.)

    Pac-12
    Total revenue:
    $439 million
    Percentage of revenue distributed to schools:
    68.5 (see expenses section below)
    Distribution per school:
    25.1 million

    Big 12
    Total revenue:
    $267.8 million
    Percentage of revenue distributed to schools:
    88
    Distribution per school (continuing members): $23.3 million
    (Note: Distributions do not include the Tier 3 rights, which have not been pooled and remain owned by the schools — The Longhorn Network, for example. In some cases, the per-school income is higher than that of the Pac-12 average when T3 rights are included.)

    Takeaway: We’re seeing the evolution of not two but three tiers of college football when it comes to wealth. First tier: The SEC and Big Ten. Second tier: Pac-12, Big 12 and ACC. Third tier: Group of 5 schools.

    *** Larry Scott and staff compensation

    The headliner number in the Pac-12 990s, for some, is commissioner Larry Scott’s pay: He earned $3.94 million in reportable compensation in his dual role as commissioner of the league and chief executive of Pac-12 Enterprises, plus another $108k in “other” comp. That makes him the first $4 million commissioner.

    Is Scott overpaid? Of course he’s overpaid. All the Power 5 commissioners are overpaid.

    In regard to Scott specifically: He was the first $3 million commissioner, too. But that was back when he was re-configuring the conference, creating a network and helping overhaul the college football postseason. Momentous issues are no longer on the table; these days, it’s more about conference management and changes on the margins.

    But Scott isn’t the only conference employee compensated far beyond the norm for collegiate athletics. In fact, nine other employees earned at least $427,636, including Lydia Murphy-Stephans, president of the struggling Pac-12 Networks, who took home a cool $1.25 million.

    (Note: I have bundled two employees into one position: Kevin Weiberg and Jamie Zaninovich split the deputy commissioner position in 2014; the combined salary is in excess of $427,636.)

    The conference has maintained for years that the market rate for TV execs is much higher than for traditional conference management positions, and many of the top-paid Pac-12 employees are, in fact, on the TV side. (I have no idea what Murphy-Stephans’ counterpart at the Big Ten Network earns, for example.)

    But not all of them are on the TV side. No, no, no.

    In addition to Scott, four conference-side employees earned more than $427,636.

    Why am I using $427,636 as the benchmark? Because that’s the salary of SEC associate commissioner Mark Womack, the second-highest paid employee in that league.

    That’s right. Four Pac-12 employees on the conference side, and nine total (again: excluding Scott), earned more than the second-highest paid employee at the SEC, which …. psst! … is generating a heck of a lot more money than the Pac-12.

    (It could be more than four/nine. The conference is only required to report the salaries of its “key” employees.)

    The Hotline doesn’t begrudge anyone a dime. You’re worth what you earn. This is on the campuses — in particular, the presidents and chancellors, because they give Scott free reign to spend money how he wants to spend money.

    But if the bosses were so inclined, they should ask themselves this: Does any aspect of the Pac-12 perform so much better than all the other Power 5 leagues that it should dole out those kind of salaries?

    (I think we all know the CEOs are not so inclined.)

    *** Asia push

    The conference reported $726,892 in expenses for program services in the Pacific Rim.

    Note: That figure does not include the Washington basketball game, which was in FY16.

    *** Pac-12 Networks

    As usual, the conference lists the Pac12Nets’ revenue but not its expenses, which are conveniently bundled into overall conference expenses.

    The networks revenue figure for FY15 was $116,552,895, an increase of $10 million over FY.

    We can estimate the expenses because we know, based on Washington State’s budget disclosure, that the Pac12Nets distributed $1.4 million to the campuses in FY15.

    Multiply that number by 12 schools, and we get $16.8 million distributed. Subtract that from the revenue figure and expenses for the Pac12Nets were, at most, $100 million.

    *** Conference expenses

    We know the Pac-12 reported $439 million in revenues and distributed a total of $301 million to the campuses.

    That leaves $128 million, of which as much as $100 million can be assigned to Pac12Nets expenses.

    Is $28 million in non-TV network expenses on revenues of $439 million too much? Absolutely not.

    But I believe the Pac12Nets expenses are far below $100 million — much closer to $80 or $85 million, based on my reading of 990s going back to the inception of the Pac12Nets and general understanding of production and live-event costs.

    The percentage of total revenue distributed to the schools is likely much closer to what we see with the SEC and Big 12 — somewhere in the 10% to 12% range.

    Bottom line: The Pac-12 goes to great lengths to guard its expenses, unfortunately. After all, approximately 90 percent of its undergraduate enrollment is at public schools.

    *** What’s next

    From this corner of the galaxy, it appears the Pac-12 is approaching its revenue ceiling.

    Sure, the number will continue to climb because of the escalator clause in the Tier 1 contract, and in good years, the College Football Playoff will provide a boost. But we’re not talking about a pending $5 or $10 million per-school bump.

    (There is no plan to sell equity in the Pac12Nets at this point, as far as I know.)

    And look at the competition:

    The SEC Network is printing money — the conference’s $527 million in revenue included nine months of the network — and that will only increase as it matures.

    The Big Ten just signed a Tier 1 deal with Fox that’s worth as much ($250 million annually) as the Pac-12 deal with Fox and ESPN — and it’s only for half the Big Ten football and basketball inventory.

    In other words: The revenue streams for the SEC and Big Ten are growing at a much faster rate than those of the Pac-12.

    Sure, a deal with DirecTV would help, but it wouldn’t come close to eliminating the gap.

    Really, the league’s best hope is to renegotiate its Tier 1 deal and hope changes in technology and consumer behavior allow it to reap the rewards of 100% ownership in the Pac12Nets. But that’s eight years away.

    Think about that — about the possibility that for eight more years, the average Pac-12 school will receive $10 million less than the average Big Ten or SEC school.

    I flunked math in fourth grade (and fifth) (and sixth), but even I can do the calculation:

    $10 million gap per school X 12 schools X eight years = $960 million shortfall in total conference revenue.

    Basically: One billion.

    xxxxxxxxxxxx

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    The post Pac-12 finances: SEC and Big Ten revenue comps, Pac-12 Networks profit, Larry Scott’s pay and much more appeared first on College Hotline.

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    by Jon Wilner
     
  2. J.R. Ewing

    J.R. Ewing Club Member Club Member

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    Bump. Good read
     

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