Any Payment to Pac-12 Expected For Services Not Rendered?

ESPN and Fox owed the Pac-12 hundreds of millions for the 2020 football season: Will they still pay?

Jon Wilner (OC Register)  —  The Pac-12 just took the momentous, unprecedented step of canceling the 2020 fall football season.

The drama, however, is just beginning.

The conference stood to collect $276.4 million in media rights fees from ESPN and Fox in the 2020-21 college sports cycle, according to a copy of the term sheet obtained by the Hotline.

The vast majority of that payment was rooted in the 45 football games that were scheduled for broadcast on ESPN, ESPN2, ABC, FOX and FS1.

“I think (the networks) will prorate their rights fees to (the Pac-12), but I don’t believe it will be 100 percent of what they’re supposed to pay,” Patrick Crakes, a former senior vice president for programming and content strategy at Fox Sports, told the Hotline last week.

Crakes, who now runs his own business, was on the Fox Sports executive team when the company and ESPN agreed to the $3 billion agreement with the Pac-12 in 2011, but he wasn’t directly involved in the negotiations.

He believes there are several moving pieces that must play out before the Pac-12, ESPN and Fox reach a final settlement.

Part of the end game depends, of course, on whether the Pac-12 successfully moves the season to the spring — an option filled with logistical hurdles over and above containment of the pandemic.

(At this point, the Pac-12 is hopeful of playing a conference-only schedule starting in January if health conditions allow. How many could be on ESPN and Fox is obviously unclear.)

Football accounts for approximately 80 percent of the value of media rights contracts.

If there is no spring season — if there is no Pac-12 football played until the fall of 2021 — the conference could be at risk of losing every cent tied to football.

Remove 80 percent of the $276.4 million, and $55 million would hinge on the networks’ ability to broadcast the men’s basketball inventory.

That’s $4.6 million per school in media rights for FY21 tied to basketball, as opposed to the $23 million per school in Tier 1 payments that would come with a normal, fully-loaded sports calendar.

Based on his experience with sports contracts, Crakes believes the conference could be left with zero compensation.

“If they don’t play in the spring, yes, the networks have contractual language that impacts what they pay in the event of lost game inventory,’’ he said.

“The language says they technically don’t have to pay.”

Except, he added, for what comes next.

“The reality is, they’re married to the conference.”

Fox and ESPN have four years remaining on their Tier 1 contracts with the Pac-12. That’s a long time to sleep on the couch if they take a hardline stance on the lost football inventory in 2020.

Unless, of course, they don’t mind a lengthy stretch of cool relations.

The willingness of Fox and ESPN to compensate the conference for games not played could provide a glimpse into their negotiating plans for the Pac-12 for the next contract cycle, which begins in 2024-25.

“While we all acknowledge this is a business relationship first, it is also a partnership,’’ Karen Weaver, a Drexel University professor who specializes in sports media rights, told the Hotline last week (via email).

“How the parties work together to get through this crisis will be telling. I suspect the rights might be a little more valuable to Fox than ESPN, just because they are more oriented to college football’s regular season.”

Added Crakes: “What problems do (the networks) want to cause with the Pac-12 if they want to renew in 2024?”

But outside forces could shape how ESPN and Fox approach a compensation package — for the networks and the conference are only two pieces of what Crakes called a “three-link value chain.”

That third link: The distributors.

Comcast, DISH, Cox, and other distributors pay ESPN and Fox monthly fees for the programming that airs on their systems. Those fees, in turn, are the foundation for the media rights payments that ESPN and Fox send to the conference.

The extent to which Comcast and Co. squeeze ESPN and Fox could impact their ability to compensate the Pac-12 for services not rendered.

“My concern is this emerging trend of refunding customers for the (regional sports networks) not broadcasting baseball games during April, May and June,’’ explained Weaver, whose dissertation was on the launch of the Big Ten Network.

In July, Variety reported that Comcast planned to “refund the programming fees its subscribers paid for regional sports networks” for canceled Major League Baseball games.

Refunds to customers for canceled college football could impact the distributors’ payments to ESPN and Fox, which could limit the compensation to the conference.

(The networks generate more annual revenue from distribution fees than from advertising.)

“If the channel is negotiating with the distributor,” Crakes said, “this becomes part of its conversation with the conference.”

The final unknown in the looming negotiations between the Pac-12 and its network partners will play out in plain sight:

What happens this fall with the SEC, Big 12 and ACC?

If they play through the pandemic, the Pac-12 (and the Big Ten) will have some explaining to do.

Their ability to lean into Force Majeure — the inability to fulfill contractual obligations due to circumstances beyond their control — would seemingly become more tenuous if peer conferences play through the fall.

The decisions to shutter football would look more like a choice than necessity.

“If the ACC, SEC and Big 12 play, the optics are poor because the Big Ten and Pac-12 could end up as the only Tier 1 fall sports that canceled,’’ said Crakes, who noted Fox’s deep relationship with the Big Ten through their partnership on the Big Ten Network.

It’s an oversimplification to conclude the Pac-12 has the majority of its $276 million in rights fees riding on the SEC, Big 12 and ACC canceling their football seasons.

But don’t assume there’s no relationship, either.

Said Crakes: “The negotiations look different than if all the Power Five canceled.”

ocregister.com

__________

TrojanDailyBlog members  —  Always feel free to add information or topics to the TDB which don’t necessarily pertain to any particular moderator post or member comment.

SUBSCRIBE HERE TO RECEIVE NOTICE OF NEW COMMENTS OR REPLIES.
Notify of
15 Comments
newest
oldest most voted
Inline Feedbacks
View all comments
LawyerJohn
LawyerJohn
Offline
August 26, 2020 2:51 pm

The bean-counters at the t.v. networks paying for something they are not obliged to pay for?– Right!

gametv
gametv
Offline
August 24, 2020 5:10 pm

My take on the situation at USC is that Helton loses whether the season is delayed until Spring or is cancelled. His big problem is that he has some top talent that will be leaving the team, but his incoming 2020 class was so bad and his 2021 class is good at some positions, but still doesnt fill up the talent cupboard sufficiently. I think he is better off if the season is cancelled, than if they go in Spring.

RialtoTrojan
Noble Genius
RialtoTrojan
Offline
August 23, 2020 9:32 pm

The fact that some conferences are playing while others are is purely political and you can just look at the way people perceive sports and the pandemic in region where it going to be played. The people are watching the NBA and the bubble working and believe the players are actually safer playing football than sitting in class. The hang up comes in states where the nanny government is imposing rules that regulate what everyone does. On the west coast if you want to play football, you need to do it during a protest and losing team can loot the… Read more »

ATL D.D.S.
Noble Genius
ATL D.D.S.
Offline
August 24, 2020 7:31 am
Reply to  RialtoTrojan

Look at the governors of the states involved (of the top of my head): Cali, OR WA, MN, MI, PA, NJ, IL all flaming blue governors. DeWine of OH thinks he is a Democrat. You bet it is political.

Jamaica
Noble Genius
Jamaica
Offline
August 24, 2020 10:32 am
Reply to  ATL D.D.S.

Governors will be quick on the trigger in shutting down any functions that get enough attention on public health danger. And right now, the medical authorities are all declaring the same warnings. All it will take is enough teams in each of the remaining conferences still planning to play, to be government-ordered shut down. That will end all hope of fall football. Alabama & Auburn can only play themselves so many times if they are the last holdouts, which could be a good probability.

ATL D.D.S.
Noble Genius
ATL D.D.S.
Offline
August 24, 2020 7:33 am
Reply to  Allen Wallace

I will say “Glory to God” when Huggs is packing for his next position as a AD at a YoungLife camp.

LawyerJohn
LawyerJohn
Offline
August 26, 2020 3:01 pm
Reply to  Allen Wallace

I loved that game. And sucla made it uncomfortable at times. Also, nothing like sitting on the 50 for beggar’s prices. But the Matthews’ sucla shot is what I carry around with me: “Matthews step back jumper for the win….He got it!”

Steveg
Noble Genius
Steveg
Offline
August 23, 2020 10:41 am

I keep asking myself what happens if the conferences that are going to play then after a couple of games have to shut it down, what will they do. I surely do not think the Pac12 made a solid decision, neither did the Big10 in arbitrarely shutting down. I hate politics in sports and it has played a huge part here in the Pac12 no matter how they spin it. The liberal academics continue to destroy our nation.

TrojanRJJ
Noble Genius
TrojanRJJ
Offline
August 23, 2020 3:19 pm
Reply to  Steveg

Steveg, You know I agree. But, it is just not the “social regressive academy” (which is by and large tax payer supported); it is also the media (both online and traditional) and the government bureaucracy.

Jamaica
Noble Genius
Jamaica
Offline
August 24, 2020 10:41 am
Reply to  Steveg

We all feel the same. But no State supported Universities are going to risk losing those benefits they receive. Football will not cover that much overall compensation.

TrojanRJJ
Noble Genius
TrojanRJJ
Offline
August 23, 2020 8:06 am

Interesting issue. If I understand this (and obviously I have not read the contracts), if the SEC/Big12/ACC play, then ESPN and Fox can say to the Pac 12, you voluntarily chose not to play these games, therefore, no obligation on our part to pay you. Gives a huge incentive for the SEC to play. It can further isolate the Pac as competitor (Larry Scott and the Pac 12 Presidents have done a great job on their own) and can hurt the Big 10. I would invest in Covid controls and play.

Steveg
Noble Genius
Steveg
Offline
August 23, 2020 10:51 am
Reply to  TrojanRJJ

Fully agree. It seems they would rather look ignorant than attempt to play and take the money. Watch and see how they complain about not having funds in the near future.

Golden Trojan
Noble Genius
August 22, 2020 6:03 pm

Very interesting domino effect. I am paying for sports channels on Dish that now have virtually no content. Why should I pay for that? Dish already has had to cut off the local San Diego ABC and Fox Sports San Diego due to dead locked negotiations. So no Padres games for me. If I was ESPN and Fox, I would stiff the Pac 12 and Big 10 if SEC, Big 12, ACC and Notre Dame play. I should get a refund as well. Hey liberals in academia, here’s a lesson for you, there are unintended consequences for your actions, which… Read more »