No reporter covers the business of college sports better than the Sports Business Journal’s Michael Smith.
Along with colleague John Ourand, who focuses on pro/college sports media, Smith has repeatedly provided news on the Pac-12’s pursuit of an equity investment and strategic partner.
His latest work, published 10 days ago, indicated the Pac-12 has received multiple $750 million bids.
The Hotline reached out to Smith and asked if he would lend his perspective, based on conversations with his sources and contacts in the sports business space.
He kindly agreed to answer a few questions.
For Pac-12 fans trying to make sense of the conference’s unprecedented endeavor, the more informed voices you hear, the better.
Few, if any, are more informed than Smith.
The Hotline thanks him for the time and insight …
(Questions edited from those sent to Smith to ensure clarity for readers.)
Q: Do you sense any consensus within the Pac-12’s power structure to execute a sale of equity in its media rights? Or do you think the lean is to maintain the status quo?
Smith: I do not sense there’s a consensus, but there is enough interest to keep the process moving forward.
Q: When do you expect a resolution? Could the Pac-12 reach a decision to sell or hold this summer. Or might the process stretch into the fall (or even the winter)?
Smith: “All indications are that (commissioner) Larry Scott has been inclusive among university CEOs, CFOs and ADs. That means the process moves a little slower.
“I do not expect the selection of a strategic partner to get done by this summer.
“We’re talking about getting 12 schools on board for something that’s never been done before. There are skeptics who need to be convinced.”
Q: What is driving the valuation of the media rights within the investor community?
Smith: “The conference’s media rights are driving the value. The Pac-12 is encouraged that its rights have attracted bids that are based on the $5 billion valuation.
“I don’t think they entirely knew what to expect, but even if the CEOs decide not to accept a bid, they feel good about what they’ve learned, regarding the valuation.
“There also is a scarcity component, in that no other college conference is doing this.”
Q: Scott believes finding the right strategic partner is more important than the financial component. Could you sketch a model of what you think would be the ideal partner for the conference?
Smith: “The Pac-12 is not interested in private equity firms just looking for an investment and a return. The bids that get the conference’s attention are coming from marketing agencies, tech companies, media companies — the type of bidders who can enhance the Pac-12 as a strategic partner.
“The two words I’ve heard most often throughout this process are ‘added value.’ What kind of added value can a strategic partner bring?
“Different bidders bring different strengths. Sorting through that takes time and vision.”
Q: How would you define success for the Pac-12 in this endeavor?
Smith: “They say they’ve already succeeded because they’re emboldened by the feedback and the bids.
“Even if the conference decides not to take on a partner, Scott and the CEOs believe they have validated their decision to pool all of the rights so that they have maximum flexibility.
“They believe they can monetize that through investment or higher rights fees, linear or streaming.”
Q: How are executives in other major college conferences viewing the Pac-12’s exploration? If this proves a successful venture, might other conferences might follow the same path?
Smith: “The Pac-12 is an easy target right now for skeptics who perceive this investment model as a Hail Mary to keep its schools competitive financially.
“I don’t see any other conference lining up to try this. But I would not dismiss this idea as a last-ditch effort to save the conference, either.
“If the Pac-12 takes on an investment partner at $750 million, that’s an additional $12 million or so, per school, per year, over the next five years.
“That’s a game changer. And it bridges the gap to get to the next media deal.
“There are components of this plan that make a lot more sense to me now than six months ago.”
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