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.)
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.
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.”
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