Pac-12 Commissioner Scott: Networks Will Be Profitable In First Year
CNBC Sports Business Reporter
In his brief tenure as commissioner of the Pac-10 (now Pac-12), Larry Scott has done an incredible job. He brought in Colorado and Utah, pulled in a 12-year, $3 billion TV contract with ESPN & Fox and recently announced a national Pac-12 Network along with six regional channels to more intensely cover the conferences' 12 schools. Those networks will launch in 2012. We sat down with Scott today to talk about the remarkable business that is college sports.
Darren: A lot of people were surprised at that $3 billion number. My take is that it's about sports in general. You offered a lot of content and sports is just the hottest commodity in television right now. Cable networks love it because almost everyone watches it live, meaning the commercials are more valuable.
Scott: We definitely hit our negotiations at a time when there was plenty of competition for programming and the value of sports is just so unique in that it's less susceptible to our TV-watching future. The passion for sports is beyond anything else and that's why companies aren't scared to make heavy investments over long periods of time to protect and enhance the model that they built and are building.
Darren: Why do the regional networks as well?
Scott: I think it was an artful construct that was just unique to our architecture. We have two natural rivals in five markets and it worked out with Colorado and Utah in that they're in the same basic media market. So with the national network and the regional networks, we give our alumni and fans the best of both worlds.
Darren: When someone starts a network they often give a piece of equity to the carriers like Cox, Time Warner and Comcast so that they can guarantee distribution. How much equity did you give up there?
Scott: Zero. The money that the carriers make is off the affiliate fees, but they don't own any part of our networks.
Darren: I've never heard that before.
Scott: That's what I've been told. It's very unique to have been guaranteed over 40 million households in the first year without giving up equity. We've broken new ground.
Darren: Not giving away anything also means costs won't be shared. Broadcasting even the Olympic sports are expensive. How do you know the math works?
Scott: We did very expensive modeling. It's why we hired Chris Bevilacqua and CAA, who have obviously helped in lauching networks. We're also not the first to do this. There has been CSTV, the Mountain West and the Big Ten and they've been friends and very open about production costs. It is very expensive to broadcast these events, but the proposition is very valuable.
Darren: How valuable?
Scott: We don't have to have any advertising on our networks and we're going to be profitable in Year One.
Darren: How did you not sell everything when you did the $3 billion deal with ESPN and Fox?
Scott: Not only do we get games, but for two weeks during the football season we get first pick and for four weeks during the basketball season, we get first pick. Quality of games is very important to the success of the networks.
Darren: There's a debate over whether the Longhorn Network should be able to broadcast high school games. If the NCAA decides they can, will your networks do the same?
Scott: If others can do it, we will do it. We will obviously be present at a meeting next month when this is discussed.
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