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P12 exploring new revenue opportunity - selling equity in the conference - Printable Version

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P12 exploring new revenue opportunity - selling equity in the conference - Spiny_Norman - 12-29-2018

Quote: Pac-12 Conference leadership pitched university presidents and chancellors a strategic plan aimed at bailing out the struggling conference and helping it keep pace with its Power Five Conference peers.

The “Pac-12 NewCo” plan was introduced to the conference presidents and chancellors at their mid-November meeting and was subsequently discussed in a conference call in December, per sources. Private investors would own 10 percent equity in the newly formed entity in exchange for a $500 million investment.

https://www.oregonlive.com/sports/oregonian/john_canzano/2018/12/want-to-buy-a-stake-in-the-pac-12-conference-its-exploring-taking-on-private-equity-partners.html

I don't have a problem with this proposal. The P12 is always going to be at a competitive disadvantage because of geography. P12 media rights will never be worth as much as other conferences. But I don't really understand why this would be attractive to an investor.

RE: P12 exploring new revenue opportunity - selling equity in the conference - 82lsju - 12-29-2018

(12-29-2018, 11:36 AM)Spiny_Norman Wrote:  But I don't really understand why this would be attractive to an investor.

+1

RE: P12 exploring new revenue opportunity - selling equity in the conference - chrisk - 12-29-2018

(12-29-2018, 11:36 AM)Spiny_Norman Wrote:  
Quote: Pac-12 Conference leadership pitched university presidents and chancellors a strategic plan aimed at bailing out the struggling conference and helping it keep pace with its Power Five Conference peers.

The “Pac-12 NewCo” plan was introduced to the conference presidents and chancellors at their mid-November meeting and was subsequently discussed in a conference call in December, per sources. Private investors would own 10 percent equity in the newly formed entity in exchange for a $500 million investment.

https://www.oregonlive.com/sports/oregonian/john_canzano/2018/12/want-to-buy-a-stake-in-the-pac-12-conference-its-exploring-taking-on-private-equity-partners.html

I don't have a problem with this proposal. The P12 is always going to be at a competitive disadvantage because of geography. P12 media rights will never be worth as much as other conferences. But I don't really understand why this would be attractive to an investor.

Instead of sharing ownership of its network with a sports broadcaster like the other conferences, it is looking to cash out with a 3rd party. Not sure why schools, particularly Stanford, would jump for about $40M up front. It doesn't seem like a difference maker.

RE: P12 exploring new revenue opportunity - selling equity in the conference - winflop - 12-30-2018

Smacks of desperation for cash and another sign of just how big a failure Larry Scott has been. But not surprising given the growing gap vs other Power 5 conferences that will only get worse in the future with the loss of U-Verse for P12N.

Whether it's a good investment depends on:
- How would investors realize returns on their investment? Doubtful via dividend as this would just further reduce payouts to the schools
- Whether Larry Scott continues to be the comissioner
- Whether P12N will be spun off

RE: P12 exploring new revenue opportunity - selling equity in the conference - OutsiderFan - 12-30-2018

It doesn't seem to me on the surface it would be a very good idea to take a 10% equity position in a college conference as an investor. The Pac-12 Network has very little value, so the notion it could be spun off for a profit is a bit looney, IMO.

So what additional assets could the conference create? Maybe - and I know this sounds nutty - the Pac-12 could use some of this newfound money to buy its own equity stakes in high schools that produce the best athletes, and as part of such a deal, get some sort of exclusive marketing rights at those schools? Could even be refusal to allow other college conference coaches from going on campus at those schools.

It would only make sense that the next step in the commercialization of professional amateur sports would be vertical integration of this sort, and you would have a first mover advantage if you acted quickly, before other conferences could. The point here is if the Pac-12 did raise $500 million of equity financing, what value would be created with it that would produce larger annual payouts for member schools?  Just handing out $40 million to each university would be incredibly dumb, a totally shortsighted move that wouldn't change the competitive market realities at all.

To me the reality is Pac-12 fans just don't have the same passion and can't register the same market demand the other conferences get. This is never going to be overcome, so if the conference wants to keep pace with its peers revenue-wise, it's going to have no choice but to look at getting into lines of business outside its core identity as an NCAA athletic conference.

RE: P12 exploring new revenue opportunity - selling equity in the conference - BostonCard - 12-30-2018

Cashing out on a stake is extremely stupid.  Selling a stake in order to invest the money somehow makes more sense, but I’m very skeptical that the PAC-12 can invest that money wisely.  Maybe if it had to build its network from scratch, there is some logic to this, but the network is already up and running.

BC

RE: P12 exploring new revenue opportunity - selling equity in the conference - winflop - 12-30-2018

More than anything else, this is a sign of desperation to bridge the increasing revenue gap vs. other Power 5 conferences that is only going to get larger with the P12N's loss of U-Verse.

Also yet another indication of Larry Scott's failure as commissioner.