Commentary: Pac-12 should change revenue model, follow ACC with unequal-share approach

Our realignment lesson for this month has become clear with a week to spare.

Wait long enough to finalize a media rights agreement, allow the process to cross two calendar years, drag across 11 months, wade through a swamp of speculation and destabilization efforts and – presto! – permission structures appear on the horizon.

Last week, the Wall Street Journal reported ESPN is being transformed into a streaming service, a momentous change in sports broadcasting that could increase the Pac-12’s comfort level with including a streaming component in its media rights package.

This week, the ACC presidents approved a change in the conference’s revenue model that rewards postseason performance. Schools that qualify for the College Football Playoff and thrive in the NCAA Tournament will receive a larger share of the postseason cash.

Will the Pac-12 presidents do the same as they work through a new media rights contract? They should. Realignment has changed the game on the coasts, leaving the two conferences to adapt or implode.

With Texas and Oklahoma headed to the SEC and USC and UCLA bound for the Big Ten, there are just five football programs with above-average media value that aren’t bound to either of the behemoths.

Notre Dame tops the list and, for now, appears quite content to remain independent. The others are Clemson and Florida State in the ACC and Oregon and Washington in the Pac-12.

The unequal-share model is a fraught approach with regard to regular-season broadcast revenue, creating the potential for an unhealthy caste structure within the Pac-12 boardroom. But if postseason revenue is based on success, the model serves three purposes:

• It maintains an all-for-one ethos among presidents and athletic directors;

• It pacifies the heavyweight programs and provides them with access to the resources needed to compete for titles. (In the Pac-12, that includes not just Oregon and Washington but also Utah football and Arizona basketball)

• It incentivizes others to invest in their revenue drivers.

The exact dollars are difficult to calculate. Florida State’s athletic director, Michael Alford, said recently that an unequal share model in the ACC could add more than $10 million in revenue to a school’s coffers. But without knowing the media value of the expanded College Football Playoff – and the revenue distribution process therein – we’re left to guess.

Will the automatic bids generate more cash than at-large berths?

How will each of the four rounds be weighted?

Will the championship be included in the distribution model? (There is no cash reward for reaching the NCAA Tournament title game.)

The Hotline ran the numbers back in September. But there’s no reason we can’t take another plunge eight (long) months later.

Then and now, our math makes three assumptions:

1. The New Year’s Six format, which includes both the playoff and the four bowls that don’t host semifinals, generates about $670 million annually. Estimates for the total revenue available from the expanded 12-team event – it begins with the 2024 season – have varied significantly. Our best guess is something in the $2 billion range.

2. Currently, the majority of playoff revenue (63%) is distributed across the Football Bowl Subdivision conferences in a fixed fashion; the remainder is allocated by participation. Given their outsized media value following recent expansion, the SEC and Big Ten assuredly will play the leverage game and insist on increasing the amount set aside for participation. We’ll split the payouts evenly: 50% in the fixed pot; 50% in the participation pot.

3. That leaves $1 billion annually for performance. In the interest of big, round numbers, let’s allocate $250 million to each of the four rounds. Divide that amount by the number of participants in each round and we’re left with $20.8 million per school simply for qualifying. (Four of the 12 teams have byes into the quarterfinals, but the SEC and Big Ten will push to include them in the opening-round cash outlay.)

If a team reaches the quarterfinals, its conference collects $31.25 million.

Advance to the semifinals, and the jackpot climbs to $62.5 million.

How would the Pac-12 divide that mountain of cash? The Hotline believes any participant should retain 50% of the total earned.

If Oregon simply qualifies by winning the conference, that’s $10.4 million sent straight to Eugene (half of $20.8 million).

If Washington reaches the quarterfinals, that’s $26 million delivered to Montlake (half of $52 million).

And if Utah bludgeons its way to the semifinals, that’s $57.3 million earmarked for Kyle Whittingham’s great-great-great grandchildren. (Or maybe the participation percentage decreases once you reach the semifinals.)

The same structure could be used for dividing NCAA Tournament units, which are based on the number of games played and carry forward for six years.

Let’s say Arizona were to reach the Elite Eight. Under the current model, those four units would be worth approximately $9 million over six years. Split 10 ways – UCLA and USC won’t be involved once they leave for the Big Ten – the Wildcats would collect about $900,000. But if they pocketed 50%, that’s $4.5 million.

It’s not football riches, but it’s five times the current share.

Granted, the presidents could settle on a different distribution model. And they would need to account for any new members if the conference expands. But basing postseason revenue on performance makes sense on too many levels to ignore.

Facing internal unrest, the ACC became the first to move; the Pac-12 should follow this summer when (if?) it agrees to a media rights deal.

While the Big Ten and SEC might seem content with equal-share models right now, we suspect every conference will adopt an eat-what-you-kill structure eventually.

Ohio State isn’t going to share its playoff cash equally with Rutgers forever.