PHOENIX - Commissioner Larry Scott may have sold $3 billion worth of goods this week, but there's still some pretty good stuff left in the Pac-12 Conference store.
Thanks to leverage from the demand for college sports, increasing marketplace competition and the conference's scheduling flexibility, the soon-to-be Pac-12 did not have to give away all of its prime content in a 12-year deal with Fox and ESPN that averages $250 million annually.
Instead, it squirreled away for a yet-to-be-launched Pac-12 Network the rights to many key basketball and football games - games that it hopes will generate demand for cable/satellite and internet providers to carry the new network.
ESPN and Fox will still have rights to most of the big football and men's basketball games, under a draft-like formula among the three entities that was not fully disclosed, but the Pac-12 Network will receive either a first, second or third selection every week in football and also a share of prime basketball games.
"They have reserved some quality selections for their network," said Burke Magnus, ESPN senior VP of college sports programming. "We don't take everything off the top. Larry was very clear that they needed - wisely - to retain some quality selections for the network because that's what's going to be what helps drive it."
A key model for the Pac-12 Network was the Big Ten Network, which was launched in 2007 and now brings in over $9 million per school annually through a partnership with Fox. But the Big Ten Network struggled initially with distribution - getting some cable/satellite partners to carry it - and Scott is banking on big games to force providers to carry the Pac-12 Network.
Moreover, the Pac-12's immense leverage also meant it did not have to offer an equity partnership to either Fox or ESPN in the Network, as the Big Ten Network did with Fox, which owns 49 percent of it.
Scott said the Pac-12 will need partners eventually in helping with distribution and production, and to help with initial start-up costs that could reach about $100 million, but said an equity stake was not certain.
"I guess it's possible, but one of the very pleasing aspects of this is we thought … that we would have to package the network (to Fox or ESPN) - and it turned out, we didn't," Scott said. "It turned out we were able to deal with the broadcast and cable package on its own merits."
By not giving out ownership and thus keeping more profit, after it gets through a year or two of expected losses, the Pac-12 Network could be able to dole out as much as a low eight-figure annual check to each conference school in the long run - on top of the $20.8 million average the Pac-12 will distribute to each school from the Fox/ESPN contract.
But even without receiving equity, Fox Sports president Randy Freer said the deal works for his network.
"The Big Ten Network has been around for a while, and we learned a lot through that," Freer said. "Our priority in this deal was for FX whereas when we were (negotiating with) the Big Ten, our priority was being in business with the Big Ten and doing opportunities there. There's different priority lists at different points in time."
Not only did Fox get the FX content it wanted, but Fox and ESPN also filled several key windows they had been hoping to fill.
"We thought this out," said Chris Bevilacqua of Evolution Media Capital, which has been advising the Pac-10. "What creating value is about is maximizing platforms not only for our Pac-12 Network but also for our partners. You've got to be able to make it work inside of their business strategies, giving them the help they need and the flexibility to move it in and out of certain windows."
That's why the Pac-12 will host a weekly late Saturday football game at 7:30 Pacific time for ESPN and why the traditional Thursday-Saturday basketball window will be widened to include Wednesdays and Sundays.
The Pac-12 Network will carry a total of 36 football games in other windows, and over 100 basketball games, but that will ultimately represent just a share of its content. Scott said the network will also show other sports and nonsports content, attempting to maximize the conference's athletic and academic exposure.
"We are under no illusion that people aren't going to watch the Pac-12 network for football and basketball and other sports tremendously," Scott said. "But once we have this platform, we intend to make a big commitment to academic programming and other nonsports programs. We think there's very compelling programming there."
The Pac-12 Network
• Launch: August 2012
• Content: About 350 total events annually, including 36 football games and more than 100 basketball games, plus academic and other nonsports programming. It is expected to carry some premium football and men's basketball games as well as all those that are not chosen by Fox or ESPN. Games likely will not be carried on local or regional channels any more.
• Partners: Yet to be determined
• How you'll get it: By buying a cable/satellite package that includes the Pac-12 Network. Similarly, the online version will be available only to those receiving internet service from a provider that has contracted with the Pac-12 Network (in the manner that ESPN3.com is distributed only through partnering ISPs).