Wilner: Kliavkoff’s risky strategy, an alternate Pac-12 universe (with ESPN), the MLS on Apple, unequal revenue shares and more

The Hotline mailbag is published every Friday. Send questions to pac12hotline@bayareanewsgroup.com — and include ‘mailbag’ in the subject line — or hit me on Twitter: @WilnerHotline.

*** Please note: Several topics related to Pac-12 media rights and expansion will be answered separately, in forthcoming articles.

(Some questions have been edited for clarity and brevity.)

Since you’re reducing the odds for Pac-12 survival — and will continue to do so as long as there is no new media deal — does this indicate that you think commissioner George Kliavkoff made a mistake in waiting so long? If so, what should he have done differently? — @chetvancouver

In short, yes: We believe he erred in drawing the process out and addressed the timeline in a column published six weeks ago titled: Kliavkoff sees “no need for a rush”, but the strategy carries risk (this is realignment, after all).

Dragging the process out created doubt, anxiety and an opening for disruptive forces. Realignment is a rock fight. You cannot presume Robert’s Rules of Order and common sense will carry the day.

Now, let’s dig into the details, where valuable context can be found.

The terms of the current media rights contract gave Fox and ESPN an exclusive negotiating window of 90 days. It was triggered in early July and meant the Pac-12 had two options: Renew with both networks under the basic terms, only with changes to the valuation and annual payouts; or wait until October and take the inventory to the market.

Our understanding is the conference could only negotiate the existing packages with each partner. The Fox inventory could be negotiated only with Fox and the ESPN inventory only with ESPN.

But my understanding is that Fox wasn’t interested in a major partnership, and I’m not sure how interested the Pac-12 was in a major deal with Fox after what transpired on June 30.

The network extracted what it wanted from the Pac-12 when it helped orchestrate the departures of USC and UCLA to the Big Ten. (One source in the sports media world quipped that the Big Ten is essentially “Fox Inc.”)

And we have no doubt that a renewal of the deal with ESPN and Fox would have included essentially the same kickoff windows and weekly selection process, which have been sources of deep frustration for campus officials and fans for years.

The Hotline isn’t privy to the specific language in the contracts or other crucial details. But it appears the only means of consummating a deal early would have required Kliavkoff to wait for the 90-day window to close, in early October, then seek an all-in deal with ESPN. Why? Because once the exclusive window expired, he could have entered formal negotiations with ESPN for the Fox portion of the inventory.

Which brings us to the type of alternate-universe discussions we love on the Hotline:

What if Kliavkoff had negotiated an all-in partnership with ESPN that paid the Pac-12 a comparable amount to the deal the Big 12 signed in late October with ESPN and Fox?

What if he had gone to the presidents on Oct. 15, for example, and said: “ESPN will pay $31.7 million per school if we accept the deal right now”?

That sounds great from an access standpoint: All the football and men’s basketball on ABC, ESPN/ESPN2 and ESPN+. (The streaming component would have been significant, as it will be for the Big 12 in its new agreement with ESPN.)

But we wonder how the schools would have reacted to the financial component.

At that point, the Big 12 had not yet renewed its deal. The Big Ten had established a revenue ceiling for the Power Five at $70 million per school (reportedly), and the SEC had its own massive deal with Texas and Oklahoma coming aboard. But there was nothing at the other end of the Power Five valuation spectrum.

There would have been no benchmark for a $31.7 million deal.

Our guess is that the schools would have pushed back — certainly, that would not have gone over very well with Oregon and Washington.

It’s easy to envision Kliavkoff getting roasted for moving too quickly, for not taking the rights to the open market and aiming for a deal worth considerably more than $31.7 million per school.

Would the Pac-12 presidents have accepted a deal that paid Big 12 money before the Big 12 had Big 12 money?

Yes, the Big 12 presidents were willing to accept that valuation, but their conference had been rocked by instability for more than a decade, it needed security for the existing schools, and it needed to lock in the newcomers.

It was a smart move then and now. But that doesn’t mean the Pac-12 presidents would have accepted a similar arrangement when the only number on the valuation landscape was the Big Ten’s mega-deal.

We will never know, but it’s a fascinating topic.

Now, moving on …

The Hotline presumed (erroneously, as it turned out) that Kliavkoff was working on parallel tracks throughout the fall — that he was lining up two deals: One with UCLA remaining in the conference; and one without the Bruins.

Once the UC Regents rendered final judgment, we expected the Pac-12 to move quickly.

In other words: Kliavkoff would be ready to announce a deal in the window between the final UC Regents meeting (Dec. 14) and the holidays, or soon after the new year.

Once 2023 dawned and it became clear the conference didn’t have the framework of a deal in place — once it was evident the process would extend through these winter months — the risk of disruption and destabilization increased.

And here we are.

I keep hearing the blame placed on former commissioner Larry Scott for the current Pac-12 predicament. At what point do we start to accept George Kliavkoff’s own shortcomings instead of shifting the blame elsewhere? — @jgunnel3

Scott’s media strategy over the course of a decade created the circumstances for a crisis.

If the Pac-12 Networks don’t exist … if they don’t have the costly regional feeds … if they are available on DirecTV … if the annual revenue is more substantial … if he accepts ESPN’s late-2010s offer to take over the networks … there’s a good chance USC doesn’t develop a wandering eye.

Kliavkoff was caught by surprise on June 30, when the L.A. schools bolted. Should he have known? Perhaps. Without knowing the details of his conversations with USC president Carol Folt, we cannot know for sure.

However, Kliavkoff is entirely responsible for the media rights negotiations that have played out over the past eight months.

This is the reason he was hired: To steer the conference into the next contract cycle, maximize its media valuation and find creative ways to generate new revenue.

If he cuts a bad deal, the reckoning will come. Swiftly.

What percentage of a typical athletic department budget is covered by media rights? — @draywilson29

Good question, and one that has particular relevance these days.

Annual revenue varies across the Pac-12, with Washington and Oregon well above $100 million and Washington State and Oregon State well below (to cite two examples).

But if we use $100 million as an example, the media revenue accounts for about 35 percent under the Pac-12’s current agreements.

That figure can be broken into four different cash streams:

— Media contracts with Fox and ESPN for regular-season games and conference championships

— Pac-12 Networks distributions

— College Football Playoff revenue

— NCAA Tournament revenue

Of the four, the deal with ESPN and Fox accounts for approximately 66 percent of the total — and the same is true for the other Power Five leagues.

Which is why conferences and schools place so much emphasis on the broadcast contracts.

Is the Pac-12 monitoring the MLS’s rollout with Apple TV? The video quality is excellent, the game times are standardized, and some can be viewed by all Apple subscribers, not just MLS subscribers. — @Guerra11

I assume the conference is monitoring. And it’s worth noting (for those unfamiliar) that Apple doesn’t produce the MLS games or the Friday night baseball broadcast.

Major League Soccer handles the former; Major League Baseball, the latter.

And our strong suspicion is that any streaming deal with Amazon or Apple would feature production by the Pac-12, using Pac-12 Networks infrastructure.

The networks won’t exist as a media company in the next contract cycle, which begins in the summer of 2024, but the technology and staff are moving to a facility in the East Bay.

Presumably, that decision was made with streaming partners in mind.

Is there a model for revenue sharing that rewards successful programs but doesn’t create a caste system? Say bonuses for Tier One appearances or prestige bowls, New Year bowls, or playoffs? — @TheBrandtofWV

There is, in fact, a model for unequal sharing of the primary broadcast revenue: The Pac-10.

Under the media rights agreement in place prior to 2012, the campus distributions were based on network TV appearances. Naturally, this benefitted USC and UCLA.

When the conference added Colorado and Utah, split into divisions and signed the $3 billion deal with ESPN and Fox, it shifted to an equal-share model. (The L.A. schools weren’t happy but agreed nonetheless.)

Our view: Unequal shares of the revenue from the primary media deals is a bad idea and could create, as you noted, a “caste system.” Everyone needs to feel like an equal partner in the boardroom.

But we see nothing wrong with a performance-based model from the postseason revenue. In other words, teams that make the expanded CFP should receive larger shares of that jackpot; teams that fare well in the NCAA Tournament should receive a greater portion of that revenue.

A performance-based model might appease the top schools (Washington, Oregon and Utah in football, and Arizona in basketball), and it could incentivize others to plow resources into their teams.

Why are Pac-12 athletic directors and presidents, and the journalists who cover the Pac-12, backing the conference into a corner by saying they have to have a media deal done or on the table in the next two to four weeks? Seems that puts a lot of unnecessary pressure on the league, no? — @yukon8ter

Speaking only for myself, the Hotline covers the news and developments with no regard for “backing the conference into a corner.” We call ’em like we see ’em.

Any backing that has occurred is of the Pac-12’s own doing — it made the choice to draw the negotiations over eight months and two calendar years.

That said, we know of just two instances in which campus officials have applied a timeline to the process:

— Washington State president Kirk Schulz told the Hotline last week that “we need to get it done in March — in mid-March, hopefully.”

— A few days later, Arizona State athletic director Ray Anderson told ArizonaSports.com: “We’re all anxious to have something resolved here in the next couple, three weeks.”

Both timelines suggest a resolution in mid-to-late March.

Key point:

The current fiscal quarter (the early months of 2023) is precisely when the Pac-12 would have negotiated a new media deal if it hadn’t opted to expedite the process in the immediate aftermath of USC and UCLA announcing their departures.

New media agreements are often finalized 15-18 months before the existing contract expires. This is the normal negotiating timeframe for a deal that, like the Pac-12’s agreement with Fox and ESPN, expires in the summer of 2024.

The spattering of Pac-12 basketball on CBS in recent years: Is that just a time filler or a gateway to something more? — @emild650

My understanding is CBS shows a few Pac-12 basketball games each season as part of a sub-licensing agreement with the current rights-holders, ESPN and Fox.

It’s not a gateway.

Do USC and UCLA have an equity stake in the Pac-12 Networks that the rest of the schools will have to compensate them for when they leave? — @SGoughPE

Each of the L.A. schools owns 8.3 percent (1/12) of the conference’s media company, same as everyone else.

But the networks are only viable for the duration of their distribution agreements (with Comcast, DISH, etc.), which expire at the end of the 2023-24 fiscal year.

There will be no compensation when the Bruins and Trojans move to the Big Ten on Aug. 2, 2024, because there will be no Pac-12 Networks.

In a scenario where the Pac-12 falls apart, will schools like Washington State or Oregon State have a chance of getting an invite to a Power Five conference? — @CelestialMosh

The Hotline doesn’t speculate on coaching candidates until the school in question has a vacancy, and we won’t speculate on the fate of those schools unless there is hard evidence of the Pac-12 dissolving.

*** Send suggestions, comments and tips (confidentiality guaranteed) to pac12hotline@bayareanewsgroup.com or call 408-920-5716

*** Follow me on Twitter: @WilnerHotline

*** Pac-12 Hotline is not endorsed or sponsored by the Pac-12 Conference, and the views expressed herein do not necessarily reflect the views of the Conference.