Pac-12 Unable to Reap Benefits of Apple’s Innovative Ideas

The Pacific-12 Conference, which has been in existence for 108 years, was on the verge of collapsing until Apple Inc stepped in. Apple offered to pay each of the conference’s nine remaining member schools up to $25 million annually to broadcast their games on Apple TV. However, this offer proved insufficient as five of the member schools decided to join other athletic conferences that offered more profitable agreements. Consequently, the self-proclaimed “Conference of Champions” met its demise.

The shocking death underscores the extent to which lucrative media rights have revolutionized college sports. But more than that, Apple’s failure to win the Pac-12 is a reminder that the future of sports broadcasting, for now, looks far less lucrative than the broadcast and cable-based arrangement that media and technology companies hope to replace. cord cutters.

Ten years ago, the Pac-12 seemed invulnerable. It had three of the top six college football teams in the country. Even better, the conference had just signed a $2.7 billion football-focused deal with ESPN and Fox that more than tripled its media rights revenue. At the time, it was the largest college sports media rights deal in history, and it set up a lucrative future. Last year, the Pac-12 distributed about $37 million to each school, most of which came from media rights.

But as impressive as those numbers were in 2011, they were overshadowed by more recent deals. Last year, the Big Ten Conference agreed to a seven-year, $7.7 billion deal with Fox Corp., Paramount Global’s CBS and Comcast Corp.’s NBC that will initially pay about $60 million for each school; at the end of the transaction, the distributions will be approximately 100 million dollars. In particular, the contract also includes the rights to stream games. While the value of this streaming was not disclosed in the details of the deal, it is critical for networks buying broadcast and cable rights. Currently, more than 70% of US households already use streaming services such as YouTube, and the numbers are growing as cord-cutting accelerates. For example, ESPN (which was not part of the Big Ten deal) has lost about a quarter of its subscribers, about 25 million households, over the past decade.

But at least for now, the economic rationale for investing in streaming is natural at best. For example, in 2021, Amazon.com Inc. agreed to pay the NFL about $1 billion annually for the rights to Thursday Night Football. In its first season on Amazon last year, Thursday Night Football saw a 41% drop in viewership from 2021, when Fox, NFL Network, Amazon and local channels shared broadcast rights. It’s not just Amazon. ESPN, the streaming service launched by ESPN, earns about $5.53 per subscriber, compared to $9 for cable subscribers; the service lost $400 million last year.

Such losses have encouraged streamers to cut back on purchases of scripted and unscripted content and spurred technology and media layoffs in 2022 and 2023. The timing for the Pac-12, whose 12-year deal expires next year, could not have been worse, and the conference struggled to find anyone, which wanted its rights at a price close to what other conferences have fetched recently. Instead, last month, as time ran out to make a deal, several base-feeding offers emerged that cost the conference less per year than the Big Ten pays a single team.

Enter Apple and its offer of exclusive streaming rights. The money was surprisingly good, especially for a subscription-based service. Out of the gate, Apple would have paid $25 million per school annually. Then it would have escalated. Throw in 1.7 million Pac-12 subscribers, and the deal would have cost $31.7 million per school. Throw in 5 million Pac-12 subscribers, and the payouts could have topped $50 million — money competitive with what schools in other conferences earn with more traditional media deals. Bringing in such paying subscribers will not be easy. For example, with the help of Lionel Messi, Apple has acquired more than a million subscribers to its Major League Soccer season ticket. There is no Messi in the Pac-12.

It would have been Apple and company’s determination to change the sports viewing experience through virtual reality and the upcoming VisionPro headset. At the launch of the device in June, Apple highlighted how the headset can put the user behind the basket in an NBA game. The experience was so profound that it is as profoundly different from watching regular sports broadcasts as TV broadcasts are from audio. — radio broadcasts only.” Apple hasn’t disclosed details of what it promised or showed the Pac-12, but Arizona State President Michael Crow, who reviewed Apple’s bid, described it as “a technological 23rd-century Star Trek story that really has incredible features”.

It sounds exciting, maybe even worth experiencing. But is it worth paying to watch, especially if you’re not a die-hard Pac-12 football or basketball fan? Last Friday, five Pac-12 schools were so uncertain they left the conference in search of better money. After a few years, they may regret leaving. So far, they’ve signed up for flat fees for broadcast and cable TV. When it comes to college sports, even Apple couldn’t turn the Conference of Champions into a streaming winner.

More on Bloomberg’s opinion:

• Private Equity and College Sports Can Be Teammates: Adam Minter
• Ivy League schools sure look like a cartel: Stephen L. Carter
• NCAA Athletes’ Salary Win Could Make Them Worse: Allison Schrager

This column does not necessarily reflect the opinion of the editorial board or of Bloomberg LP and its owners.

Adam Minter is a Bloomberg Opinion columnist covering Asia, technology and the environment. He is the author of the most recent work, “Secondhand: Travels in the New Global Garage Sale.”