The Media Learning Curve: March 25-April 1

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Following up on today’s column (linked here) on Vin Scully — and not making any judgments on his taste in autographs on display in the background of his booth (linked here) — we’ll allow this AP story on the Pac-12′s pursuit of a new TV deal take care of things we also think we need to know about:

By JOSH DUBOW
The Associated Press

The Pac-10 has spent more than a year preparing for this moment when it can put its television rights up to bid on the open market for the first time since its expansion.

With Fox’s exclusive negotiating window expiring Thursday, the conference can now shop the rights to some 2,700 events a year and a possible partnership in a Pac-12 network to a bevy of interested media and technology companies.

The conference has 12 teams with next season’s additions of Utah and Colorado, covers one-fifth of the country and is the last major college property on the market for at least a few years.

That is expected to lead to fierce bidding from incumbents Fox and ESPN, as well as Comcast and Turner Sports, that could make the Pac-10 one of the highest revenue-producing conferences in the country. It’s the second-lowest now.

College sports have fared well on the market in recent months, with the ACC reportedly getting $155 million a year for its rights and the Big 12 close to finalizing a deal with Fox, according to the Sports Business Journal, that will make its total annual package worth about $130 million.

That’s less than the behemoths from the SEC ($205 million) and Big Ten ($220 million) but far more than the less than $60 million the Pac-10 pulled in this year.

“Despite the recession, it seems like sports programming costs continue to escalate through the roof,” said Derek Baine, an analyst at the research firm SNL Kagan.

While Pac-10 Commissioner Larry Scott has not publicly discussed what he believes he can get in the new deal, he clearly is shooting high. One key mark will be $170 million per year, because USC and UCLA would get $2 million bonuses until that level is reached.

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“You’ve seen every conference significantly increase their value and that’s because ratings are tremendous,” Scott said. “If you compare the ratings and value in college sports to the NFL, proportionally based on ratings and viewership, college sports, even with some of the record deals we have seen recently, are still undervalued.”

Scott has laid out three major goals he’s looking to satisfy in a new television deal: increase revenue; increase national exposure for football and men’s basketball; and create a new network to promote women’s and Olympic sports.

The conference has expressed a willingness to move to more flexible scheduling to increase revenue and exposure. There has already been an increase in Thursday night football games and the schools are willing to abandon the traditional Thursday-Saturday basketball schedule that has limited broadcast windows.

The Pac-12 is very well positioned as the last major conference to put its product up for bid at a time when Comcast and Turner appear poised to try to make a splash in the college market.

In an era of hundreds of channels and DVRs that allow viewers to watch shows on their own schedule, live sports programming has thrived as a valuable property. That’s especially true for cable networks, which are able to use popular sports programs to increase the monthly subscriber rates cable and satellite pay for the rights for the networks.

For example, Turner is getting only 10 cents a month per subscriber for truTV, according to SNL Kagan — far less than the 50 cents TBS generates and $1.03 from TNT. Turner has put NCAA tournament games on truTV this year and could use the Pac-12 to help re-brand the network formerly known as CourtTV into a more lucrative network.

With more than 90 million subscribers, each increase of 10 cents per month in subscriber fees generates more than $100 million a year in additional revenue before a single ad is even sold.

“It gives you a lot more leverage when you’ve got sports on so that’s the name of the game, getting as much leverage as you can,” Baine said.

Turner is not the only company with a cable network it’s looking to upgrade. Fox has already decided to put college football games on FX in 2011 after not airing sports on the network since 2006 and could use a long-term deal with the Pac-12 to increase its 43 cents per month it charges.

Comcast already has a basic cable sports network in Versus, which shows some college football and basketball, as well as NHL, IndyCar racing, cycling and other minor sports.

While the most publicized move was the expansion, it was a decision a few months later that was even more important. The 12 schools agreed in October to give the conference all their television, digital, sponsorship and properties rights.

“No other college sports conference has ever done this before, and as a result this consolidation will not only allow for maximum flexibility in working with its future media partners toward maximizing exposure and revenue for the conference and their membership, but also to embrace new technology trends and other forms of distribution,” said Chris Bevilacqua, of Evolution Media Capital, who is advising the conference in these negotiations.

The Pac-12 has gone even further than the Big Ten did in giving most of the league’s television rights to the conference.

That means that anyone who wants to broadcast –or even stream online — one of the 2,700 annual sports events must get the rights from the conference — a key step in making a network work.

It’s a big difference from the Big 12, where Texas is starting its own network separate from the rest of the conference.

“It was absolutely essential that they held their conference together and didn’t allow a high-profile school to split off,” said Steve Solomon, the president of media consulting firm SJS Sports and a former ABC and NHL executive. “Because of the power in both the San Francisco and L.A. markets, they have the opportunity for their own network. But they will still have challenges with distribution.”

That was a hurdle the Big Ten dealt with when it launched its network in 2007. It took a year to get deals to appear on all the major cable systems in the conference’s territory but now it’s a major reason the conference takes in more money than any of its competitors.

The Big Ten partnered on the network with Fox. With Fox’s parent company News Corp. also owning a stake in DirecTV at the time, the conference was able to quickly do a deal with the satellite provider, helping make it the first cable network to reach 30 million subscribers within its first 30 days on the air.

With News Corp. no longer owning a take of DirecTV, Fox would not provide the easy access into homes for the Pac-12 that it did for the Big Ten. Comcast, on the
other hand, would be able to do that as the nation’s largest cable provider and the
dominant system in eight of the conference’s 12 markets.

With the Big Ten generating as much as $1 per subscriber each month in territory and being worth about $1.5 billion, according to estimates from industry insiders, it is the envy of other conferences.

Perhaps equally as valuable is the fact that now that the network is up and running, it gives the conference leverage in negotiations with TV partners in future deals.

“The Big Ten is certainly the model at this point for what possibilities there are with a network,” California athletic director Sandy Barbour said. “Yet I think the Pac-12 has an opportunity to take that to even a higher level based on our across-the-board success. I certainly think the Big Ten gets all the credit for being first movers. We have an opportunity to look at that and see what we like and also improve on it.”

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Here’s a look at the possible contenders for the Pac-12 television contract, what they bring the conference and what they can gain from the conference:

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== Fox: The network is the conference’s longtime partner and offers an over-the-air channel, a widely available basic cable network in FX, regional sports networks and the experience of being a partner in the launch of the widely successful Big
Ten Network. Fox recently agreed to pay $25 million for the rights to the inaugural Pac-12 football championship game and increased inventory from expansion next season. Fox has been aggressive in college sports of late, paying $23 million per year for the rights to the Big Ten football title game as well as closing in on a deal with the Big 12 and reaching one with Conference USA. Fox is already putting college football games on FX next year and keeping the Pac-12 would provide more programming for a network that is looking to use sports to become more profitable. With FSW having recently lost the rights to Lakers games to a new Time Warner channel, it would be tough to lose the rights to another premium sports property in Los Angeles — USC and UCLA. While Fox’s involvement was key in the launch of the Big Ten network in 2007, the company no longer owns a stake in DirecTV so it can’t guarantee access into homes. But with many other successful channels owned by parent News Corp., Fox has the ability to pressure cable and satellite providers.

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== Comcast/NBC: The recently approved merger between Comcast and NBC gives the company every ingredient the Pac-12 would be looking for in a partner. NBC offers the over-the-air channel that would give national exposure to the top
level games, Versus is a widely available basic channel that already carries college football and NHL games, the company has regional sports networks that broadcast in Northern California and Oregon. Perhaps most importantly, Comcast is the nation’s largest cable provider and is dominant in every part of the conference except Southern
California and Arizona — providing a path for quick penetration for the launch of the Pac-12 network.

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== ESPN: No partner can match the exposure ESPN offers as the leader in sports television in the United States. The Pac-10 has suffered in recent years in terms of perception with only a handful of basketball games on ESPN. While ESPN would help with exposure, it would have a hard time offering the national coverage for college football that the conference is seeking because it regionalizes most of its games on ABC. With so many college sports properties already under contract, ESPN also might
be the least likely bidder to break the bank to get the Pac-12. But ESPN could easily bid for a slice of the deal.

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== Turner Sports: Turner has expanded into college sports by sharing this year’s NCAA tournament with CBS. That has won acclaim and adding more college sports could help develop truTV (formerly Court TV) into a full-fledged network. That’s a similar strategy to the one that helped make TNT and TBS so successful. The conference would have to look elsewhere for a network partner and Turner can’t offer easy access to cable or satellite providers for a Pac-12 network.

== Others: The Pac-12 also could look for a financial partner for its network in a move similar to what the New York Yankees did when they brought in Goldman Sachs as a minority partner in the YES Network. That would give the conference more control of its product but would deprive it of the infrastructure that comes with a media company. Also, with much of the value in the deal in the digital rights to the approximately 2,700 events each year, the conference could look to find a partner in the high-tech world that would bring money and vast experience in new media.

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