PAC 12 Networks in an increasingly digital world

Imagine for a moment that you, the Washington Huskies and PAC 12 sports fan, could design your own idea of “perfect” content access to PAC 12 college athletics. You would not be constrained by the plethora of media deals, carrier restrictions and monopolistic practices that make up the current landscape of sports media. You could simply design a system that meets all of your needs while providing the stakeholders in bringing you that content a fair profit.

What would you do?

Most likely the bar is set at “access to every event via audio or video”. Ok, that one is obvious enough.

You would probably also require the ability to view the content over any cable or satellite provider so that you would not be beholden to any single provider or anchored to any single sports bar.

I’m guessing that digital would also be a major requirement. After all, you may well be a “cord cutter” who only cares about having access to Husky games but could do without ESPN’s endless parade of SportsCenter programs or the Starsky and Hutch channel. “Any mobile device” compatibility would certainly be a must-have as part of your digital requirement.

What else? International access would be good for those of you who travel or live abroad. On-demand might be useful if you are one of those not keen on subscribing to something. Maybe you are one of those consumers who like interactive digital content to augment your viewing experience.

Maybe you’d like to see a certain blogging personality added to the on air-talent pool.

(thought I’d slip that one in there).

The point here is that were you to design your ideal college athletics content ecosystem from scratch, it would hardly resemble the muddled environment that we see in front of us today.

Truthfully, we are not close to witnessing that ideal world materialize. But change is coming and we are inching along in the right direction.

The catalyst for this change is rooted in the fact that consumers of college sports - people like yourselves - are also consumers of other forms of media and entertainment content. The progressive adoption of digital and streaming technology in your worlds are compelling competition among the various platform and content providers to create more value for you across all of your areas of interest.

While you may not see the changes occur over night, the market will organize itself to meet your needs in the most efficient and profitable means possible. Such is the basis for the Invisible Hand.

Signals that the Invisible Hand is moving pieces around the board in the world of sports media are all around us. The organization of college sports networks (Big Ten Network, PAC 12 Network, etc) and specialty networks (MLB TV, WWE network, UFC network, etc) are such signs. So is the emergence of OTT (over the top) streaming networks such as Hulu, YouTube TV and Sling Networks. Turner Sports, through its Bleacher Report brand, is planning on launching a “pay per view” sports content streaming network with innovative pricing models.

The transformation of ESPN from a focus on traditional content to digital content is another such sign. The worldwide leader has been hemorrhaging subscribers for years. A series of very public layoffs in the last year have highlighted ESPN’s struggles in getting their expenses in-line with a stagnating revenue line. However, they continue to struggle with the massive, long-term content deals that they have with various college and pro sports entities.

More recently, ESPN and its parent company Disney have begun moving off their perch at the top of the traditional sports and media universe. First came news that Disney was buying out most of Fox in a deal valued at $52.4 billion (with a “B”). While stunning given its value, the tactic was actually predicted by the The Simpsons in 1998. D-oh.

As part of this deal, Disney will end up owning Fox’s 22 regional sports networks (though my understanding is that some will have to pared off in order to meet regulatory requirements). While it is understandable to assume that Disney wants to own this content to feed its national beast, it could also be the case that Disney and ESPN are finally recognizing that providing local content to local audiences may not be efficiently delivered through traditional, national platforms.

In addition, the launch of ESPN+ later this year will put the network squarely into the OTT market and, by extension, in direct competition with its legacy business model. ESPN+ will be built on the same platform that MLB TV is built on (Disney bought the company BamTECH) and is expected to eventually feed into a comprehensive OTT offering that Disney hopes will compete across media segments with the Netflix’s and YouTube TV’s of the world.

So, what does this all mean for the PAC 12 and Washington Husky fans?

To answer that question, we need to establish a fact base to draw from.

1. The current PAC 12 contract with ESPN and FOX is a 12-year deal that goes to 2023.
2. The PAC 12 contract signed in 2011 gives both ESPN and FOX rights to 22 football games each over the course of every season. There are additional considerations for Men’s and Women’s Basketball as well as a few other sports.
3. The PAC 12 network owns all of its digital and streaming rights for games that the networks have not picked up. They deliver that content via their own PAC 12 Network business.
4. By way of comparison, ESPN has different deals with different conferences regarding streaming rights. For example, SEC content is streamed via WatchESPN and, presumably, will be part of ESPN+. However, Big Ten streaming content is owned by the Big Ten and delivered via another service.
5. New competitors for the streaming sports content are popping up everywhere. The Turner Sports offering, YouTube TV and Netflix - among others - will all be legit players in this space.

The first obvious implication in all of this is that we still have a little time before anyone will be ready to negotiate an extension of PAC 12 television rights. When that finally does happen, you can expect ESPN, FOX and whomever else is at the table to reduce the value of the total contract in order to create more financial flexibility for themselves in light of market trends away from traditional delivery. The days of weird start times and channel swapping when previous games on the same channel run late will continue for the foreseeable future as we wait to see how extension discussion form.

Of more interest is the question on what to do about digital rights. While these rights are not nearly as valuable as traditional television broadcast rights in today’s market, it is clear that they will be the basis for how a major portion of the market will consume sports in the near future. Right now, the PAC 12 does enjoy a solid negotiating position. After all, they outright own these rights and they’ve already made the painful capital investments in developing a broadcast capability. If and when a larger player - like and ESPN+ or Turner Sports - wants to do business with the PAC 12 for digital, the PAC will be in a great position to negotiate.

We might also consider the question about the PAC 12 staying the course as an independent content provider. Whether or not the PAC 12 will be in a position to address the OTT market as an independent entity in the future remains to be seen.

The next few years will be critical in assessing what demand in the future will really look like, how valuable television broadcast rights really will be to the PAC and what value there might be in partnering with a diversified content provider like Disney in the OTT market versus partnering with a pure play or simply going it alone. I don’t have a clear line of sight to the answers to any of those questions. But I know that they will be critical as PAC 12 Commissioner Larry Scott and new PAC 12 Networks president Mark Shuken chart the path forward for the struggling network.