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Please note: Some questions have been edited for clarity and brevity.
It seems expensive for the Pac-12 to poach Mountain West schools, but could the conference offset the penalty by reducing payouts to any new MW members? What valuation for ‘Pac-2’ media deal would justify MW schools paying an exit fee and possibly a temporary $1 million to $2 million reduction? — @TroutTyler
A great question that has multiple layers of financial complexity, so let’s start with the basics and drill down from there.
According to the terms of the scheduling agreement between the Pac-12 and the Mountain West, the former would owe the latter a poaching penalty of approximately $10 million per team.
That cost comes in addition to the exit fee departing MW schools would owe their former conference. How much? Figure on roughly $20 million if the departing schools give more than one year of notice and $35 million to $40 million if they give less than one year of notice.
(Assume the situation will be resolved at least 12 months in advance.)
Washington State and Oregon State will have at least $65 million at their disposal — the amount withheld from the 10 departing universities — that can be used to cover the poaching penalty for up to six MW teams.
But that doesn’t account for the departure fee owed by the outgoing MW schools to their conference.
There are at least three options for covering that cost:
— Help from central campus, a path that obviously would require approval from the university presidents.
— A one-time loan from the Pac-12, which potentially could dip into a war chest that includes $100 million in Rose Bowl revenue.
(Washington has taken this approach to deal with a near-term budget shortfall, accepting loans from both the Big Ten and Fox that must be repaid in the 2030s.)
— Diverting distributions from the Pac-12 over time.
This strategy would work only if the departing schools negotiate a multi-year payment plan with the remaining MW members, which will assuredly take a hard-line approach.
The media value is difficult to sketch, because it depends entirely on the configuration of the new Pac-12.
A rebuilt league that features WSU, OSU and six arrivals from the MW would carry a different valuation than a rebuilt league that features Stanford and Cal (if the ACC implodes) or a rebuilt league that features selected schools from Conference USA or elsewhere.
The MW’s current deal with Fox and CBS will spin off about $5 million per school in the final years of the contract cycle.
Unless Stanford and Cal are involved, the value of a reconfigured Pac-12 probably won’t exceed $10 million per school per year. (Even with the Bay Area teams, the deal might not top that amount.)
For the sake of this exercise, let’s presume the rebuilt Pac-12’s media deal is worth $8 million per school per year, on average.
If the new schools diverted $2 million annually to repay the MW over six …read more
Source:: The Mercury News – Entertainment
