Larry Scott and the PAC 12 Still Can't Cut a Deal with DirecTV

It's summer (just about) so it must be time for me to take what is becoming an annual look at the business of the PAC 12. Fortunately, Commissioner Larry Scott has provided me with a convenient segue. Adam Jude reported last night that Comcast, the nation's largest cable television provider, has communicated to subscribers that the main PAC 12 Network channel will transition from their premium sports package to the basic level "Digital Starter" package beginning in July. Even better, that channel will be available in HD.

Whoop, whoop! High Def! Welcome to the 2000's, PAC 12.

While this is surely good news for many rank and file fans, there are caveats. First, the PAC 12 local channels - which were previously included in Comcast's starter packages - are flipping into the premium pay sports packages. Second, these changes only apply to regional cachement area of PAC 12 schools. Ergo, if you happen to be a Husky fan living somewhere else - for example ... oh ... I don't know ... Minnesota - you are still SOL. And, of course, if you happen to be a DirecTV subscriber three years of promises to get PAC 12 content onto their network remain unfulfilled.

Surely, this was a good day for the embattled PAC 12 Network president Lydia Murphy-Stephans. Murphy-Stephans, who is the second president to man the job of running the young PAC 12 network, has struggled to make Larry's Scott business model of exclusive ownership of the conference's network successful. Her tenure has been characterized by poor ratings, the DirecTV debacle and a declining position in the race for media dollars going forward.

When the PAC 12 launched the P12N four years ago on the premise of owning its own content, it was a bold move that gambled on the notion that the PAC's content would become more valuable over time and put Larry Scott in the position to capture all of the financial value of that content when bidders came to call. To date it, hasn't worked out that way. Scott has not worked out favorable deals with the carriers. The biggest cable companies have not been persuaded to roll the P12N out on a national basis, premium tier placement has limited consumer reach and DirecTV, a subscriber behemoth thanks, in part, to its exclusive control of NFL Ticket, has never come close to reaching a deal with Scott and his team. As Scott and the conference presidents have remained steadfast in their "go it alone" strategy, other conferences and schools have opted to enter into lucrative partnerships with producers such as ESPN and Fox. These partners have been able to lever their girth with the carriers to maximize reach all for a split of the subscriber revenues. To date, the deals that both the Big Ten and SEC struck have generated more revenue for those conferences than Scott's P12N has for the PAC 12. With the Big Ten about to renegotiate their deals and the Big 12 looking ready to scrap the Longhorn Network in favor of something pan-conference, the race for media share of wallet seems to be getting away from Larry Scott.

The DirecTV deal is one that continues to chafe fans and dog Scott. Last fall, following the merger of DirecTV with AT&T, there was optimism that a deal would finally break the gridlock. However, AT&T wanted equity in the P12N, a price per subscriber far below that offered to the cables, and full media rights for each school in the conference. We can debate all day whether or not Scott can afford to meet the price point DirecTV is demanding (no matter what you hear in the media about the impact on other deals, they certainly could). However, the campus rights issue is most definitely a deal-breaker.

Most schools already have their own media and marketing deals in place with various entities such as Learfield and IMG College. These agreements are negotiated at the school level and span areas such as digital media, ticket sales, digital signage, promotions, and product marketing. UW has such a deal with IMG College that runs through 2024-25. For UW or any school to unwind those kinds of agreements in order to get into a bigger deal with DirecTV would be highly cost-prohibitive. Plus, in this age of cord-cutting and on-demand media, it is very conceivable that the individual schools would be best off retaining their own control of their rights. Arizona State is experimenting with that concept starting this year.

Despite the gaffes and missteps associated with making his unique media business model work, Larry Scott continues to set the pace for compensation among all the conference commissioners. USA Today reported earlier this month that the PAC 12 Commish's total annual compensation has now pushed him over the $4 million mark - a first among major college conferences. This despite the fact that the PAC 12's total revenues trailed that of the SEC, the Big Ten and the ACC. In fact, the SEC's 2014-15 revenue of $548 million beat the PAC 12 by more than $100 million while casting significant doubts that Scott's model of not finding a major media partner for his network can actually compete.

To put this in a nutshell, the conference presidents continue to reward Larry Scott more for the promise of his vision than the results that he has delivered.

Is it rational? Perhaps.

The truth is that nobody can really predict how quickly the market for college sports media rights is going to evolve. There are a number of moving parts that need to be accounted for. Growing demand by consumers to cut the cord and have on-demand content available is certainly a game-changer. This mega-trend is already affecting ESPN which recently reported a loss of over seven million subscribers year over year.

In addition to the mega-trends, the moves other conferences will make over the next year are sure to change the landscape even more. The Big Ten is currently accepting bids for its first-tier rights starting in 2017. The ACC is on track to launch its network - 100% owned by ESPN - sometime in 2017 or 2018. The Big 12 looks like it is ready to leverage its entire conference in negotiating a deal to start a conference network that would supersede Texas's Longhorn Network.

Oh, and the threat of conference realignment is still on the table.

So, yeah, it is too early to proclaim the PAC 12 network a failure. While yesterday's news is good news for fans, its almost meaningless in the grand scheme of things. The PAC 12 is still in a race for its life and holding on by a thread. Still, the wisdom of the decision to retain full ownership of the network and to protect the ownership of campus rights remains up for debate. It might still work out famously for Larry Scott in the long run.

And, if it doesn't, he can fret about all the way to the bank.