One could argue that half the schools in the Pac-12, specifically Washington and those in California, might be better off financially were the conference to end its partnership with AT&T.
In the late summer of 2013, the Pac-12 announced a sweeping partnership with AT&T that included marketing rights to Pac-12 events, telecom services for the conference and U-verse distribution for the Pac-12 Networks.
AT&T acquired DirecTV two years later, but carriage negotiations with the Pac-12 subsequently broke down and the parties have been at an impasse ever since.
The terms of the AT&T deal were not released. But according to a timeframe laid out two years ago by commissioner Larry Scott, the contract expires this summer — every facet of it.
That left two options:
- The Pac-12 and AT&T double down on their partnership, with a DirecTV carriage agreement as the centerpiece.
- The parties end their relationship … and any chance of the Pac-12 Networks being shown on DirecTV for the foreseeable future.
A middle ground — a continuation of purgatory for the Pac-12 — wasn’t an option, based on comments by networks president Mark Shuken.
Shuken was asked in March about the looming expiration of the AT&T deal:
“The AT&T sponsorship works very well for both entities. The fact that DirecTV does not carry the networks does not work for us, and we’re not inclined to treat those as separate initiatives.
“We’re hopeful that DirecTV will choose to launch the networks the way everyone else carries the networks. But I would rather work with another wireless partner than an entity whose television partner doesn’t choose to carry the networks.”
Shuken told The Hotline on Wednesday that the Pac-12 Networks are in active negotiations to extend their partnership with AT&T through the 2018-19 sports season.
Carriage on DirecTV for the networks is not part of the discussion, however.
“We’ve isolated the conversation to one of continuing the current terms with U-verse alone,” he said, “instead of continuing the conversation about DirecTV.”
Seeking context, the Hotline has reached out to numerous contacts in recent months — contacts with knowledge of the conference’s business affairs — and the responses were unanimous:
No one expected the Pac-12 and AT&T to double down on their partnership with a new deal.
Everyone expected AT&T to walk.
“I guess you never know, but my assumption is that they’re each going their own way,’’ one source said.
Another source explained that the conference and AT&T have been destined for separation since Sept. ’15, the last time they seriously engaged in negotiations over DirecTV carriage.
At the time, AT&T had just completed the takeover of DirecTV and pitched a deal to Scott that provided distribution for the networks on DTV in exchange for wireless rights across all 12 campuses.
Scott recommended the deal to the presidents and chancellors. They rejected it by an 11-0 vote (Washington State abstained), an outcome that undermined Scott’s reputation with the campuses and the Pac-12’s relationship with AT&T.
“When that went down is when it all started unraveling (with AT&T),” the source said. “Can they repair it? I don’t know.”
What happens if the parties agree to end their relationship, which they might have already done, quietly and privately?
(The conference doesn’t comment on business partnerships during ongoing negotiations. If the sides have walked away from the table, perhaps Scott will addresses the matter at media day.)
The situation is a tad more complicated than you might think.
On a practical level, the official close to DirecTV negotiations would have limited impact:
The Pac-12 Networks haven’t been on the satellite provider for one second of their existence; they wouldn’t be on DTV this fall if the contract, for instance, had another year remaining; and the athletic departments haven’t budgeted for a deal.
But on a psychological level, the permanence of the DirecTV separation would sting deeply — it would sting fans and officials throughout the conference, the pain resonating all the way up to the commissioner’s suite.
Losing U-verse distribution, meanwhile, would be a modest blow only. The service, which is being phased out by AT&T in favor of DirecTV and DirecTV Now, has approximately four million subscribers, with less than half residing inside the Pac-12 footprint.
In other words, U-verse makes up a small percentage of the approximately 20 million subscribers to the Pac-12 Networks and, we could thus presume, a small percentage of the conference’s total media rights revenue.
In fact, one could argue that half the schools in the Pac-12 might be better off financially were the conference to end its partnership with AT&T.
That sounds nonsensical, but consider:
Under the terms of the agreement reached in 2013, AT&T became the official wireless sponsor of the Pac-12.
To take that step, the athletic departments had to severe existing wireless agreements at the local level and bundle their rights into a package that the conference handed over to AT&T.
Most Read Sports Stories
- The Seahawks have questions as training camp opens, we have some answers | Analysis
- Storm’s Natasha Howard denies domestic-abuse allegations, accuses wife of stabbing her and taking nearly $600,000
- 'I love you, Seattle fans': Finally, Mariners legend Edgar Martinez joins the Baseball Hall of Fame WATCH
- Famously calm Edgar Martinez begins to feel nerves ahead of long-awaited Hall of Fame induction | Larry Stone
- Sports on TV & radio: Local listings for Seattle games and events
In return, the Pac-12 received distribution on U-verse, telecom services and cash compensation from AT&T.
The specifics have not been made public, but the AT&T portion of conference’s annual distribution to the campuses is believed to be $1 million to $2 million per school per year (out of more than $30 million).
Were the AT&T deal to disappear, the athletic departments could sell those wireless rights on the open market.
For the California schools — and perhaps for Washington and Arizona State, as well, because of market size — those wireless rights would be worth more than the $1 million to $2 million annually produced by the AT&T deal, according to two Hotline sources with experience in the sponsorship space.
UCLA, for example, would be better off receiving full value for wireless rights in the Southern California marketplace and no U-verse carriage than with a below-market paycheck from AT&T (via the conference) and the limited eyeballs generated by U-verse.
“(The current deal) benefits the Washington States and Oregon States,” one source explained.
So if DirecTV carriage is removed from the calculation — if the current state of affairs were to continue — then half the athletic departments likely would benefit financially from the end of the AT&T partnership. (And it could be more than half, if we consider Utah and Oregon.)
Of course, it’s difficult to price out the psychological hit to the conference that would accompany its DirecTV hopes fading to black.
Like we said at the top, the situation is complicated.