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PAC Deal Framework
Tequilla
Member Posts: 19,817
I'll summarize the financial parts and a summary of the outcome in the next few posts
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- A pool of money ($70M) will be leveraged by the conference as a whole to cover the Comcast related debt and the estimated related buyouts of the newbies
Key Assumptions that I'm making in the calculation:- Scenarios run with adding 3 teams (assumes Arizona stays) and 4 teams (assumes Arizona goes to the Big12 as expected)
There are 3 basic tranches of payments: Big Fish (UW/Ore/Utah), remaining PAC teams, and NewbiesThe basic financial formula is as follows:
Base Rights Fee + Subscriber Bonus +/- "Newcomer Tax" = Recurring Annual Revenue over life of contract
Base Rights Fee = $20M
Subscriber Bonus = $6.7M (20M average subscribers x $1/subscriber per quarter x 4 quarters)
"Newcomer Tax" = $13.3M ($26.7M x 50%)
That leaves the 3 basic tranches of payments as follows:
Big Fish (assumes "Newcomer Tax" is split evenly amongst 3 schools) = $40M/annually
Remaining PAC teams = $26.7M/annually
Newbies = $13.3M
There are a couple of variables to consider in a sensitivity analysis (all assume no other assumptions change):
If the average subscribers increases to 30M, that would increase the payout tranches to $45M, $30M, and $15M respectively
If the average subscribers decreases to 10M, that would put the payout tranches at $35M, $23.3M, and $11.7M respectively
At 20M average subscribers, IF the UW/Oregon/Utah weighting was 40%/40%/20% instead of being split evenly, the payouts for UW/Oregon would move from $40M to $42.7M each and Utah's would drop from $40M to $34.7M
Key Takeaways:
IF Arizona is not included in the splitting of the "Newcomer Tax," then there's about a $5M gap between what would be available to them in the PAC vs the Big12 ... you'd have to expect Arizona to say enough and LEAVE
The revenue split of the "Newcomer Tax" increases the share that both UW and Oregon would get from the PAC to the point that it would be UNLIKELY for them to leave for the Big12 given that their addition to the Big12 would not result in a pay bump to move from low the low $30M range versus the $40M+ range
For the remaining members of the PAC, there's not much for them to complain about because their alternatives are almost assuredly worse than the numbers presented
For the Newbies, even with the 50% tax, the uptick in money and exposure is almost assuredly a win-win for them
Obviously the biggest variable would be the bonus tied to subscribers and given the tax on the Newbies the Big Fish are the ones that would bear the good/bad of those numbers the most
I'll save implications of what happens at the end of any agreement for the part that is tied to UW specifically
Base Rights Fee = $20M
Subscriber Bonus = $6.7M (20M average subscribers x $1/subscriber per quarter x 4 quarters)
"Newcomer Tax" = $13.3M ($26.7M x 50%)
That leaves the 3 basic tranches of payments as follows:
Big Fish (assumes "Newcomer Tax" is split evenly amongst 3 schools) = $44.4M/annually
Remaining PAC teams = $26.7M/annually
Newbies = $13.3M/annually
There are a couple of variables to consider in a sensitivity analysis (all assume no other assumptions change):
If the average subscribers increases to 30M, that would increase the payout tranches to $50M, $30M, and $15M respectively
If the average subscribers decreases to 10M, that would put the payout tranches at $38.9M, $23.3M, and $11.7M respectively
At 20M average subscribers, IF the UW/Oregon/Utah weighting was 40%/40%/20% instead of being split evenly, the payouts for UW/Oregon would move from $44.4M to $48M each and Utah's would drop from $44.4M to $37.3M
Key Takeaways:
UW, Oregon, and Utah are actually financially incentivized for Arizona to leave for the Big12
The revenue split of the "Newcomer Tax" with Arizona leaving not only furthers the divide to make the Big12 unrealistic but it effectively sets the bar for what the range that each would need to earn in the Big10 to make the move make sense (financially) ... effectively anything less than $40-45M a year from the Big10 is a non-starter if the goal is to stay whole over the next 5-6 years financially
All of the same attributes hold true for the remaining members of the PAC and the Newbies (assuming that the buyouts for them to move into the PAC are effectively handled through the slush fund as part of the agreement AND/OR through each respective school's funding
The buyouts of the Mountain West (as we know with San Diego St) are quite punitive and the mismanagement of that process for them (or any other candidates from the Mountain West) is effectively malpractice
Given that the leadership of UW has shown a consistent inability to be anything but shortsighted, they will view the media numbers as an absolute and not consider the implications of the decision on any other front whether it be financially or not ...
The bar for UW to leave for the Big10 (should the opportunity even be available) is ugly given the tie-ins with Olympia and what leaving Wazzu hanging looks like ... I think we all would agree that given how UW operates this is a scenario that they want to avoid at all costs
The positive of this deal is that it roughly establishes a floor that should be above the Big12's number (requiring them to raise funding that they likely don't have to bring UW in - and into a conference UW really doesn't want anything to do with) while also establishing an on-table offer that the Big10 can't negotiate at a lower rate than
The negatives to this deal though are vast (in no particular order):
1) It in no way, shape, or form reflects the changing environment of college athletics and the need to get into a P2 conference ... all recommendations would be to grab an available seat at first opportunity
2) Signing any GOR over any kind of long-period could create barriers that make achieving 1) costly IF further movement takes place before the GOR expires (or faster than you're expecting)
3) It includes a fundamental assumption that there will be clear access to the CFP in the next contract with the expanded field ... that's far from a guarantee
4) It fails to recognize the negative implications that will almost assuredly take place in recruiting as players will increasingly choose schools that are playing the biggest games on the biggest channels against the best competition
5) Full streaming of sports without network presence has yet to establish itself as a viable path as the bet MLS has made I don't think has performed well (Messi excluded ... and there's not a Messi coming to save the PAC) ... this will be another hit to recruiting
6) While money will not be terrible it will still be lagging significantly against the P2 and leave you at risk in terms of money and opportunity to win at the highest level (and everything that comes with that) to attract and retain high level staff at both the head coaching and assistant/coordinator levels ... very good chance you are viewed as a "stepping stone" for the duration of the agreement
7) Delaying entering a P2 conference (if an offer is available) will set the baseline of the program back (if you believe the points above) and as such the climb to be competitive in a P2 conference upon joining eventually will likely take the better part of a decade to get there if the path follows some more recent examples of such (see Utah, TCU, etc.)
8) Failure to consider the impact of remaining in the PAC on other revenue streams is a MASSIVE MISS ... I'd expect that the UW season ticket base will drop by double digit %'s at minimum (my guess is Year 1 drops around 10k from wherever this year's number is going to be at)
9) We've already seen evidence of this, but there's going to be a massive inability to schedule strong out of conference competition
10) The conference by the end of the deal will largely look like a G5 conference with a couple of strong programs on top of it as the gap increases as the minnows of the conference struggle with way below competitive revenue levels in a rising expense environment
Of course, the big unknown to all of this is what is actually the communication between UW and the Big10 ... I've noted throughout this ordeal that getting the required votes for UW's inclusion in the Big10 is far from a given as there's a lot of the middle tier of the Big10 that IMO doesn't have the motivation to bring in a program like UW (or Oregon) that will likely push them further down the pecking order. There are a lot of non-financial reasons that taking a Big10 offer (if on the table) is vitally important and will pay for itself in time.
IF there is no offer on the table from the Big10, then to me it really comes down to a gut call on what positions you better in 5-6 years to be positioned in a P2 Conference. The path forward with the PAC is kicking the can down the road with really no positive outcome when this contract expires as I don't see future poaching of the Big12 on the table. So you're all-in on the Big10 sending you a future lifeline. If you have assurances of that then you might be able to pull off staying in a PAC there to effectively blow you for duration of the contract. But if not, you need to get out. The subscriber provision could be a poison pill to Athletic Department financial planning and if it isn't at a high level then the view of PAC vs Big12 may shift (much less the Big10).
Unfortunately, I don't have any confidence in UW's leadership to make the right decisions and they'll make the short-term play, buy the sales pitch, and be blinded when some of those 10 big negatives materialize.
I'm frankly shocked that a plausible scenario for UW to remain in the conference presented itself ... absolutely the worst case scenario.
This will only make them increasingly uncompetitive by the END of the contract
I don't see any real tangible scenario where the subscriber numbers increase to the point that over the life of the agreement that it results in a financial windfall for the conference
But if the P12 subscriber number is say 2M (which is probably much closer to accurate given that Apple's currently got in the neighborhood of 30M subscribers), then UW's number comes back to being much more consistent with the Big12 number and SHOULD lead to a cleaner decision to LEAVE if there is such an option available.
Given the numbers that were believed for the P12 Network, I'll never underestimate the PAC leadership to be financially illiterate
Utah wouldn't even be part of the luxury group with Oregon and Washington, so he fucked that up in his big horseshit story.
UW is accepting a B1G invite so none of this matters. Both Arizona schools would laugh at anything close to this and kill this league.
No one gives a fuck about the coug that story came and went over 6 months ago.
This conference is officially ded now and the only person not to realize it is Commish ded man walking.
They were waiting on the 6+ month hybrid piece of shit he's been putting together that gets all the mid/lower tier teams some kind of linear exposure for less money.
Taking the golves off.