George Kliavkoff, whose career includes executive positions at Major League Baseball, NBCUniversal and MGM Resorts International, stands accused of being bad at math.
The Pac-12 commissioner caused quite the stir Tuesday when he opined that UCLA stood to lose money by joining the Big Ten.
“We are sure they are financially better off staying (in the Pac-12),” he said during an appearance on ‘Canzano and Wilner: The Podcast,’ “and we are sure there was no other criteria in the decision, other than financial.”
On the surface, the comments seem to contradict the laws of time, physics and media rights valuations:
— The Pac-12’s next media contract cycle is expected to generate $35 million-to-$40 million annually (per school) in revenue.
— In the Big Ten, the Bruins will receive at least $70 million per year.
But Kliavkoff was insistent.
“We think the incremental money they are going to receive from the Big Ten’s media rights deal will be more than 100 percent offset by additional expenses,” he said, “so you end up taking the money you earned and it goes to airline and charter companies and coaches and administrators.
“It doesn’t go to supporting the student-athletes.”
His comments on the podcast, which was recorded Monday night, came three days before the University of California’s Board of Regents is scheduled to discuss UCLA’s move to the Big Ten in the summer of 2024.
The agenda for the closed session Thursday morning (10 a.m.) reads as follows:
“UCLA Big Ten Membership – Potential Legal Issues and Financial Impacts”
The regents aren’t expected to take action. The meeting is listed as a discussion — just as it was when the regents met in the middle of August at UCLA.
That suggests two possible outcomes:
— The regents decide to take action against UCLA at a later date. (They have the authority to revoke the move, although that course of action could carry significant legal and financial consequences — in addition to setting a dangerous precedent within the UC system.)
— They agree to continue discussing the matter as a next step toward the ultimate goal of letting it dissolve into the political ether.
Which way it goes, we cannot say. The University of California Office of the President did not respond to a request for comment about the meeting and explanation of possible procedural steps.
What’s not up for debate is that Kliavkoff’s math was met with disbelief from anyone with a surface-level understanding of the jackpot awaiting the Bruins in their new home.
Over the past two months, the Hotline has examined the situation from every angle. And we have done so with the help of a contact in the sports-media industry who has access to revenue-and-expense modeling for Big Ten membership but zero allegiance to the Bruins or the conference.
An honest broker, in other words.
The Pac-12 and UCLA have, of course, run the numbers 10 times over and reached different conclusions. The conference believes the move is a net negative for the Bruins, as Kliavkoff stated so confidently, while the school believes membership in the Big Ten will be a financial boon.
Why the disparity? Because the accuracy of any financial modeling depends entirely on the accuracy of the inputs.
And as we see it, there are two critical inputs:
1. UCLA’s annual expenses as a member of the Big Ten, including airfare, administrative costs and salaries for coaches comparable to their peers in the new league.
2. The Pac-12’s annual revenue with UCLA remaining in the conference, which creates direct access to the massive Los Angeles media market.
In our opinion, that’s where the models diverge. The conference has estimated higher for both; the Bruins, lower for both.
Which is accurate?
Let’s start with the Pac-12 revenue. The conference and its potential media partners (ESPN, Fox, Amazon, etc.) have run their projections with and without UCLA as part of the next grant-of-rights agreement.
We don’t have access to those projections and are left to offer estimates based on numerous conversations with sports media sources.
Without the Bruins involved, the Pac-12’s annual media rights revenue is likely in the $40 million per school range. That could mean $37 million or it could mean $43 million, but we’ll use $40 million for this exercise.
The central question is where that revenue number goes with UCLA in the conference. Does having a campus in Los Angeles produce a small bump into the low $40 millions, or a significant bump to the $50 million range?
USC is the more valuable property, of course, with a brand that can drive ratings. But UCLA’s presence likely would help with the three cash streams in the sports media ecosystem (retransmission fees, pay-TV subscriptions and advertising).
Meanwhile, UCLA’s expenses in the Big Ten will increase significantly. Chartered flights alone could add $8 million-to-$10 million annually.
The Bruins also have benchmarked their administrative costs and coaching salaries against those of schools in the Big Ten and, based on our understanding, believe that any increases would be limited.
The Hotline doesn’t necessarily agree. Why? Because everything in college athletics always costs more than you think and because each Big Ten school will ramp up spending once the cash starts flowing from the new media contract.
What about the numbers?
First, one caveat: Whether the Bruins are in the Big Ten or the Pac-12, it’s important for readers to understand that total media revenue each year comes from three primary buckets: broadcast of regular-season football and men’s basketball games; the College Football Playoff; and March Madness.
We don’t know how revenue from the expanded CFP will be divided among the Power Five conferences or within each Power Five conference. Nor can we project the cash from NCAA Tournament units that have yet to be earned.
So we’re sticking with the regular-season broadcast revenue here.
And Kliavkoff’s math comes mighty close to working if you make one major assumption: That the Pac-12 will collect significantly more than the public projections (including ours) suggest.
We’ll peg UCLA’s revenue number in the Big Ten as $70 million annually. Now, let’s back out $10 million for the massive amount of travel for the Bruins’ teams (chartered flights) and another $5 million for the administrative costs, including coaching salaries, that come with doing business in the Big Ten.
To be clear, we think the $10 million estimate is probably high based on where the Bruins currently stand when benchmarked against the averages in the Big Ten.
But if the modeling includes $10 million in airfare and $5 million in administrative costs, that brings UCLA’s net down to $55 million.
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And if the Pac-12’s media rights are worth closer to $50 million than $40 million with a campus in Los Angeles, then it starts to approach a wash.
Again, we don’t necessarily agree with that Pac-12 revenue figure. It feels high by at least 10 percent. But that’s how you make the math work.
Now, there’s one more piece to the calculation: The UC regents, who possess the power of the purse.
The Hotline doesn’t expect the regents to force the Bruins to subsidize Cal for revenue lost resulting from UCLA’s departure. But until there is definitive evidence that no subsidy is forthcoming, we won’t completely dismiss the possibility.
Combine an unexpectedly high revenue number for the Pac-12 with UCLA in the conference with a subsidy imposed by the regents — even if it’s a few million annually — and the model outputs start to converge.
So that’s our view:
The most reasonable scenario suggests UCLA’s revenue bump in the Big Ten, as compared to staying in the Pac-12, works out to $10 million-to-$12 million annually.
But if the Pac-12’s media rights with a campus in L.A. are worth significantly more than we believe, the math gets interesting.
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