Pac-12 survival guide: Media valuations suggest expansion doesn’t make financial sense

Just as it was 11 months ago, the Pac-12 is exploring expansion. The backdrop, however, could not be more different.

In the summer of 2021, the conference was operating from a position of stability and strength.

Now, it’s at risk of fracturing.

In the summer of 2021, it decided not to expand.

Now? It could come to the very same conclusion.

The available options don’t add significant financial value for the continuing members and aren’t ideal institutional fits, leaving Pac-12 presidents and chancellors with a decision:

Expand for the sake of bulk, because there’s safety in numbers, or hunker down?

With just 10 schools, the conference would be the smallest in the Power Five. The presidents could deem that a palatable existence if the Pac-12 partners with the ACC — a development reported Wednesday night by Sports Illustrated and originally sketched on the Hotline earlier this week.

But what if there’s no partnership with the ACC and no desire to expand?

This installment of our series on Pac-12 survival — a series designed to address every option so readers aren’t surprised by any outcome — examines what lurks behind Door No. 3.

Let’s call it the Stand-on-10 option.

First, we apologize if you were told there would be no math, because this discussion is all about the math. It’s a back-of-the-envelope look at the dollars and sense that come with hunkering down.

For help, we turned to a trusted source in the sports media industry, someone with experience on the deal-making side.

“I’d consider not adding any schools — split up whatever money fewer ways,” the source said.

“There’s not a lot to be gained by combining with others. Sure, it’s possible. But I think the Pac-12 will do better on a per-school basis (by not adding).

“Even if they can’t do better and the money is even, I’d still prefer that option and being with like-minded institutions, making rules that are in our best interests.”

How would the math work?

Let’s start with the assumption that the conference, if whole, would have generated $500 million annually in the next contract cycle from three revenue streams: broadcast rights to football and men’s basketball games, plus revenue from the four-team College Football Playoff and the NCAA Tournament.

Without USC and UCLA, that figure drops substantially.

A second Hotline source, one familiar with Pac-12 finances, estimated that USC alone was worth 30 percent of the conference’s value. Because UCLA occupies the same media market, the impact of its departure is somewhat limited.

Let’s set the total reduction at 40 percent.

That would leave the 10-team conference with approximately $300 million in average annual value, or $30 million per continuing member.

In order for expansion to be financially worthwhile, the Pac-12 would need to add schools that carry more than $30 million in annual media value.

There simply aren’t any available.

“There is really no more water that can be squeezed out of the rock,” the media industry source said. “The value of any individual school that’s outside the Pac-12 — while some might have slightly more than others — is minuscule.”

Why? Because of their value, or lack thereof, on the most profitable broadcast platform: over-the-air television.

“Look at it this way,” the source explained. “There are only so many window openings on the schedule. Those are going to be filled by the big brands, no matter which league they’re in. Because they have more than others, the Big Ten and SEC are going to take most of them.

“Then other big-brand games like Clemson-Miami or Oregon-Washington, are going to have a place in those windows.

“(But) Cal vs. Oregon or San Diego State vs. Arizona is going to find a secondary platform, where the bulk of (college football) is going to be.

“Unless (expansion involves) a school that can find its way to the main-platform windows, its value is the same as the others in the bulk bin.”

From that standpoint, few teams currently in the Pac-12 — or the Big 12, for that matter — are capable of elevating the media value for the collective.

And there are zero options outside either conference. There is no more water to squeeze.

The conference could add San Diego State to maintain a foothold near the talent-rich Southern California recruiting basin.

But those are moves for size and presence, not for dollars. (The best option, as we wrote last summer, would have been Houston, which is now headed for the Big 12.)

The Big 12 has a similar decision, by the way: Raiding the Pac-12 for the Four Corners schools (Arizona, Arizona State, Colorado and Utah) wouldn’t generate significant new media value. Instead, it would add bulk while kneecapping a rival league.

If ESPN or another broadcast partner is feeling generous, perhaps the Pac-12’s continuing members could receive the same media payments with additional mouths to feed as they would without expanding.

But a substantial bump in revenue is unlikely.

Instead, any decision to expand will be based on institutional fit and the strength-in-numbers calculation.