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How much money does a conference actually NEED?!?

Good morning! Thanks for spending part of your day with Extra Points.

A quick bit of housekeeping before we get to the #content. I am traveling for work all of next week, which means I might not be able to publish any newsletters. I am hoping to pre-write a mailbag newsletter, so if you have questions you’d like answered, drop me a line at [email protected], or tweet me @MattBrownEP. I’ll do my very best to keep this publishing schedule going, but if I’m stuck in meetings until 9 PM PST…no promises.

Okay! Let’s talk about money.

The Pac-12 faces a revenue gap now. It could get much, much worse

For a variety of reasons, the Pac-12 doesn’t distribute nearly as much money to member institutions ($~33 million) as the Big Ten (~$55 million) or SEC (~$44.6 million) does. Part of that is because distribution problems with the Pac-12 Network, part of that is because of their geography and local markets, and partly for a bunch of other reasons.

The conference hopes that in a few years, when their current ESPN/Fox contract ends, the league will be in for a major payday. After all, unlike any other major conference, the Pac-12 controls all of their inventory.

Maybe that works out, maybe it doesn’t. But the Pac-12 also isn’t the only league hitting the rights marketplace in the next few years. The SEC, thanks to their recent deal that moves all of their inventory to ABC/ESPN, is about to get another massive payday. And the Big Ten’s tier 1 rights hit the market before the Pac-12’s, and those are almost certainly more valuable.

So, hypothetically…what if the Pac-12 actually gets a big fat increase in conference revenue, only to be completely dwarfed by the Big Ten and SEC?

Jon Wilner at The Mercury-News thinks that’s entirely possible, and projected how big that gap could get over the next few years. His entire missive is worth a read here, but here’s his educated projection for what conference distributions might look like over the next five FYs:

Big Ten School XBaseline figure: $55 million in FY19 payouts (from USA Today review of Big Ten financial data).Annual distributions:FY20: $57.8 millionFY21: $60.7 millionFY22: $63.7 millionFY23: $66.9 millionFY24: $80.7 million (new Tier 1 deal)Five-year total: $329.8 per schoolSEC School YBaseline figure: $44.6 million in FY19 payouts (reported by the SEC).Annual distributions:FY20: $46.8 millionFY21: $49.1 millionFY22: $70.9 million (new ESPN deal)FY23: $74.4 millionFY24: $78.1 millionFive-year total: $319.3 million per schoolPac-12 School ZBaseline figure: $33 million in FY19 payouts (estimate from published data).Annual distributions:FY20: $34.6 millionFY21: $36.3 millionFY22: $38.1 millionFY23: $40.0 millionFY24: $42.0 millionFive-year total: $191 million per school

Those are huge gaps. Even with a healthy increase baked into the Pac-12 projections (which may or may not happen), by FY24, the Big Ten could bring in almost double what a typical Pac-12 school might. And that isn’t just Ohio State and Michigan…that’s Northwestern, Purdue and Rutgers.

On one hand, I can absolutely understand why this would be a cause for panic. The Pac-12 has struggled on the football field and basketball court over the last few seasons, failing to make the College Football Playoff or any deep runs in the NCAA Tournament. Other conference institutions, perhaps assuming the Pac-12 Network would be more lucrative than it has been, set off on expensive capital projects that have tied up their financial flexibility. This is simply not a league where most schools can drop $5 million on a football coach.

I’m not sure there is anything the Pac-12 can do, short of inventing a time machine or somehow relocating half of their schools to the east coast, that can really meaningfully close that revenue gap. The league could fire Larry Scott tomorrow, partner with ESPN to distribute the Pac-12 network, even broker a deal to get their content on YouTubeTV, and they’d still be nowhere near what the Big Ten or SEC likely will be able to distribute in 2026. If schools feel they need near financial parity to really remain competitive or achieve their missions, they ought to just give up.

But I don’t think they need financial parity to have successful, competitive programs. To me, a much more interesting question is just how much money do you actually need?

Let’s set aside, for just a second, questions about athlete compensation, or federal antitrust legislation, or any other outside force that could constrain spending. Let’s make the potentially outlandish assumption that over the next few years, the status quo remains roughly the same. Just how big a deal is a revenue gap like this?

Commonly, writers point to the revenue gap as something that could impact recruiting. Right now, Pac-12 schools report spending, on average, ~800K on recruiting. At least one industry insider says that isn’t nearly enough. And if you were thinking of all the stuff an athletic department could spend money on, anything that could potentially lead to increased talent acquisition is probably your best investment.

But where does that money go?

Some of those recruiting costs are fixed. Schools can only host so many prospects on visits. There are real incentives to keep costs down on unofficial visits because you don’t want to stick visiting families with massive food bills. There’s only so much recruiting software licenses or video services you can buy. You’re only allowed to have so many assistant coaches out on the road.

The big variance, as far as I can tell from reading about how schools classify recruiting spending, falls into two buckets. One is travel. More travel money potentially lets coaches scout and visit more players, or spend more time with those players. The schools recruiting for keeps…your Ohio States, your Alabamas, your Georgias, are sparing no expense in getting their coaches out on the road, all over the country. Paying a little extra to get a direct flight (or better yet, the private jet), might make a difference.

The other big difference is in the size of the recruiting staff. How many recruiting coordinators do you have? How many people are making social media graphics? How many people are just breaking down tape, helping the assistants be more efficient with their time?

I don’t know where the diminishing returns point is with recruiting staff, but I do know enough that the job has become large enough that you need lots of people helping out behind the scenes.

But I’m much less convinced of the utility of other athletics spending. We have some reason to think that spending on whiz-bang fancy facilities doesn’t actually improve recruiting very much. And for all the hand-wringing about head coaching salaries, many Pac-12 schools have still been able to hire coaches people want. Chip Kelly was an in-demand coach when UCLA hired him. Mike Leach had other opportunities and stayed at Washington State for a while. Chris Petersen was one of the best coaches in the country and Washington was the school to pry him out of Boise. Kyle Whittingham is one of the best coaches in the country now. And even places like Oregon and Colorado hired assistants that would have attracted interest elsewhere. It’s not like this league is coached by bums that nobody else wanted.

Plus, hey, paying Chad Morris $4 million didn’t make things work out at Arkansas. And I bet there are plenty of schools paying their coaches north of $2 million that wouldn’t mind swapping with Jonathan Smith.

Money isn’t always the only reason why anybody takes a new gig. Pac-12 schools, generally, can offer lower fan pressure, an easier media environment, better weather, and for some kinds of people, a better quality of life. At the assistant level, especially in LA or the Bay Area, pay gaps might be more significant, but there are plenty of good football coaches who will be interested in Pac-12 head coaching gigs.

So how big a deal is that revenue gap?

Part of it depends on the institution and institutional priorities. If you don’t care if your school never competes for playoff bids, and you don’t recruit against Big Ten or SEC schools that often (and some Pac-12 schools don’t), maybe it doesn’t matter that much. Maybe some schools decide to reinvest in other, cheaper sports, where that money could go further, like lacrosse or baseball. Maybe some of that revenue difference could be picked up by donors. Maybe we have changes over the next decade that further limit the utility of amassing so much money, thanks to changes in player compensation, or federal spending caps.

Or maybe top Pac-12 schools will just have to figure out how to do less with more, something most of them have had to do for decades.

And hey, if you think the Pac-12 is in a pickle, facing a world where they might have to get by on $42 million a year…

Where does that leave the AAC? Or the Mountain West? If $42 million is tough…what about $8? Or less?

I wrote this close to a year ago, and my general thinking hasn’t changed. $40 million is a pretty huge gap, but better school level leadership would probably impact wins and losses more than just a huge check to individual conference schools.

Another idea that might help, one that would cost almost nothing?

How about a full-throated defense of NIL rights? My colleague Ryan Nanni over at Banner Society touched on this in their newsletter, the Read Option, on Tuesday. That’s another really good college football newsletter, that’s much broader than this one. You can subscribe to it here.

Let’s say Scott gets the schools on board and convinces the state governments of Oregon, Washington, Colorado, Arizona, and Utah to fast-track legislation mimicking California’s. The Pac-12 gets to put on its best forward-thinking face and proclaim they’re the conference that puts athletes first, the vanguard bold enough to abandon the old, unfair model of amateurism.They also give their schools a powerful recruiting weapon the rest of the Power 5 won’t have: the promise of actual, legal money. Sure, indoor practice facilities and fancy dining halls are great. But they’re not money! Five of the 10 best players in California this recruiting cycle committed to schools outside the Pac-12. Doesn’t it seem more likely they’d stay in the conference given the chance to make money off themselves right away?…And if they do roll over and adopt name, image, and likeness rights nationwide, the Pac-12 still gets to coast on the good press of being the agent of change. The revenue gap might still be there, but it won’t matter as much, because you’ll be able to tell recruits to come play out West so they can be in the next Fast & Furious movie. Let’s see Dabo Swinney recruit against Vin Diesel!

Instead, league administrators have been stubbornly against it. We’ll probably have a national solution sooner rather than later, but I think Nanni is right. Why not embrace the positive publicity that comes from really being on the vanguard of athlete rights, even if you can’t buy quite as fancy of a waterfall in the locker room as LSU or Clemson?

Money is great. Money can buy a lot of things. But I’m not entirely certain that money is always 100% the end all, be all, in determining college football success. What you do with that money is more important.

Maybe having that massive of a revenue gap is simply too much for the Pac-12 (or hell the Big 12 or ACC) to deal with, and that leads to other changes. Or maybe there are ways to better utilize that money coming in.

If nothing else, I’d love to see more athletic leaders be much more specific about what they are missing out on when they cry poverty, or freak out about what Ohio State and Florida are building.

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Mailbag questions, story ideas, feedback and more can be sent to [email protected], or to @MattBrownEP. Hopefully, I can have at least one newsletter out for next week. But if my meetings run long, I’ll see you again on the 17th.

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