The Journal. - A League of Champions Implodes

Episode Date: August 9, 2023

The Pac-12, the so-called “Conference of Champions,” is melting down. Its revenue had been lagging behind the Big Ten and Southeastern Conferences, which now dominate college sports. But just as the Pac-12 was trying to revive itself and its revenue prospects, a rapid series of defections by member schools have left it hobbled. WSJ’s Laine Higgins unpacks what happened. Further Reading: - The Pac-12 Melts Down, as Five More Schools Depart for Other Conferences  - He Inherited ‘Multiple Dumpster Fires’ at the Pac-12. Then It Went Up in Smoke.  Further Listening: - A Tipping Point for Paying College Athletes?  Learn more about your ad choices. Visit megaphone.fm/adchoices

Lane Higgins is our college sports reporter, and she says college sports run in her family. She was a swimmer at UPenn, and her dad played football at Michigan. We literally have home video of me in my diaper at 18 months old with the Michigan Pompams running around the house saying, Hail, like, Hail to the victors.

So this is to say college sports were a huge part of my upbringing. And over the weekend, college sports got a huge jolt when one of the most iconic leagues had a complete meltdown, the Pac-12, a West Coast conference with powerhouse teams like Oregon, Arizona, and Stanford. Historically, the Pac-12 has been one of the marquee conferences in that they have a lot of great brands competing for them, and they've won a lot of championships. You're watching the Pac-12 on ESPN. Pac-12 championship from Las Vegas. USC and Utah, here we go. Colorado and Washington. There it is. Touchdown, Arizona.

There's not much precedent for a conference just blowing up like this. And it looks like it might not exist beyond 2024, which is just absolutely bananas. The league's downfall is a story of big TV money, last-minute betrayals, and some Game of Thrones-level maneuvering that will upend all college sports from field hockey to football. field hockey to football. Welcome to The Journal, our show about money, business, and power. I'm Kate Linebaugh. It's Wednesday, August 9th. Coming up on the show, the ruthless fight over money in college sports. Need a great reason to get up in the morning?

Well, what about two? Right now, get a small organic fair trade coffee and a tasty bacon and egg or breakfast sandwich for only $5 at A&W's in Ontario. When Lane was a swimmer in college, she remembers just how tricky it was to juggle school with sport. We took a bus everywhere. So you end up having to study for a midterm on a coach bus in this like packed thing with 40 people while there's a movie going on ahead of you and it's cold and you're hungry and you're tired and like it's hard. That travel component has long been a factor in how college sports are organized.

They're split into conferences under the NCAA, the body that oversees all college sports. And a conference is essentially just the grouping of, say, a dozen teams that you compete against in sports. And that's just to keep things standardized. The conference is your unifying identity. So there's a degree of familiarity in a way that there's not when you have a random opponent that you might not play again for 20 years. So because of that, it's the basis for rivalries and lots of other things. So historically, they started out being split up regionally. What were the benefits of that? Part of the benefit was that there was this element of provincialism, kind of, where you care a lot about the state next to you.

I mean, growing up in Minnesota, we had some opinions about Wisconsinites and Iowans. And whether or not that was related to their university or not, that feeling translates to the sport rivalry as well. The practicalities of it was that it was easier to compete against schools that were close by. And it would cost less money. It was, you know, if you're the University of Minnesota Twin Cities, you're probably going to go play the University of Minnesota Duluth or Mankato because that's who's close by and that's what makes sense.

You could take a bus. Yeah, exactly. There are five college conferences at the top of the pack, known as the Power Five. They are the wealthiest conferences and the ones that tend to win the most championships. And their names are incredibly confusing. Oh, yes. If you are not in the flow of college sports.

So the Big Ten is sort of Midwestern. The SEC is Southern. Pac-12 is Western. The ACC, Atlantic Coast Conference, is Eastern, and then there's the Big 12. They're kind of like the Texas, Oklahoma, Kansas, like Western Midwest area, I would say. Central time zone, maybe? Yes, central and mountain time zones. Among this kind of Big Five conferences, what's the reputation of the Pac-12?

The Pac-12 has this aura of sort of untouchability or success. I mean, it's this league that's seen as, you know, the West Coast cool. And as part of that, like, they also have won a zillion championships. Like, if you look at the list of Olympians that compete for Team USA, odds are a lot of them went to Pac-12 schools. In the last few years, the regional lines separating the conferences have been getting blurred, and that has to do with how they make money. The biggest source of money in college sports tends to be around football, but specifically television broadcast rights related to football. The money in college sports has exploded in TV. And the thinking is the more money you have to play with, you know, the better coaches you can get because you can

pay them more, the better players you can get because you can spend more on recruiting and you can have nicer facilities to lure them. That operation, that one sport, football, tends to fund the rest of the entire athletic department. And it just kind of, all of the money that you bring in in the current model of college sports is immediately reinvested into the program as part of this arms race to win championships. This arms race really kicked off in the early 2000s. At that time, the Big Ten, the powerhouse Midwestern conference, struck a deal with Fox to launch its own TV network. That was just a complete cash cow for the Big Ten. And it vaulted them well ahead of their peers in terms of how much money they were taking in.

And since then, every other conference of the Power Five has followed suit. They all launched their own TV channels and TV networks. And that was basically a way for them to take more ownership and demand more money for the rights to air their contests. And that was a game changer for the industry because it went from these schools making a fair amount of money to these schools making boatloads. All that money prompted conferences to start thinking about how to make even more money. And one strategy was to expand their conferences into other regions, even if that meant stepping on the toes of their rivals.

even if that meant stepping on the toes of their rivals. Like in 2012, when the Big Ten went beyond the Midwest and added Maryland and Rutgers. The former commissioner of the Big Ten was a savvy guy, and he thought that he could get more money for this Big Ten network if he was in more homes. And what's the easiest way to get people on the East Coast or the West Coast to pay attention to you? Add one of their teams. So that's why the Big Ten added Maryland and Rutgers, you know, schools in New Jersey and the Eastern Seaboard. It's because they wanted the D.C. and New York TV markets.

So that decision to expand was driven in part by eyeballs. Yes. was driven in part by eyeballs. Yes. And then as these contracts grew bigger, some schools in other conferences were looking around and saying, wait, if I'm only making 10 million here, but I hitch my wagon to you and I can make 20 million, I'm going to do that.

I don't care if I'm not going to play my rival this year. I want more money to be able to compete for championships. What did other conferences do after that? So that prompted, every time someone moves, it's like dominoes. Every time you take a school from another conference, they try to backfill it with someone else. And it trickles down from the top of the power five. And it often goes with plucking schools from the bottom five conferences and elevating them to fill the holes left behind. For the last decade or so,

that's been the status quo in college sports. A ruthless game where the big conferences grow and the smaller ones are depleted. All fueled by a desire for bigger and bigger TV deals. And this game finally took down one of the biggest conferences. That's next. Wherever you're going, you better believe American Express will be right there with you. Heading for adventure? We'll help you breeze through security. Meeting friends a world away? You can use your travel credit.

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available in refreshing lemon, lime, passion fruit, and strawberry flavors. Buy a stick in store at Costco, Walmart, Amazon, and other Canadian retailers. retailers. In May of 2021, the Pac-12 hired a new commissioner, in part to help them keep up in this battle for media rights. A man named George Klyovkov. They hired him ostensibly because his background was in streaming. He was a media executive. He helped launch Hulu. That was his bread and butter. So they thought that, look, the media industry is changing and the future is probably in streaming. So when it comes time for us to sign a new deal, we should have one with a big streaming component because that's where the money is. That's where the future is. But as Klyavkov was trying to figure out a new streaming future for the Pac-12, the rival Big Ten was one step ahead.

Last summer, the Big Ten was negotiating a huge TV deal with Fox, CBS, and NBC. It would be worth $7.5 billion. And the conference wanted to bring in more schools. Two of the schools it was targeting were in the Pac-12, UCLA and the University of Southern California. Fox is sort of in the ear of USC and UCLA saying, hey, look, if you join the Big Ten, you'll be making a lot more money. Just something to think about. And eventually, that's something that, you know, the gears start turning, the work is done, and they shock George Klyavkov and say, hey, we're actually leaving for the Big Ten. What does the Pac-12 do? So once they leave,

that sort of forces George's hand in thinking, well, the best way to get the remaining 10 schools to stay together is to get them a media deal where they have a number that they can put up against, you know, everyone else and say, we're strong, we're still making money, and we don't need to leave because there's still value in the conference. And this is when George, with his streaming background, really was, it was supposed to be his time to shine because this was when the Pac-12 presidents wanted him to go out and get a digital partner like an Amazon or an Apple and try to get a big dollar sign for them. The schools gave Klyavkov a July 31st deadline. He was working on two options. One would be a traditional cable deal. The other, a streaming deal with Apple.

The Apple deal had some risks. The Pac-12 games would be exclusive to Apple TV+, meaning fans wouldn't be able to watch the games on cable. And schools were guaranteed some money, but bigger payouts would depend on subscriptions. Some of the schools had concerns. And then four days before this deadline, Colorado was like, you know what, it's just too uncertain for us. We're leaving for the Big 12. And then that makes everything

just explode. Colorado left for the Big 12, which set the stage for one of the most chaotic and dramatic days in college sports history. Colorado left the conference, and that gave some of the other Pac-12 schools cold feet. And then... Oregon and Washington start to get a little jittery. And they actually had been feeling that way and feeling nervous about their future in the Pac-12 since the previous summer when the LA schools left. And there's this uncertainty about what exactly is going to happen. Then Oregon and Washington are like, I don't know, we just can't do it. And they inform the Pac-12

on Friday morning that they're leaving. Big news now from the Big Ten. The Big Ten has now cleared the way for Oregon and Washington to apply for membership and join the conference. With them leaving, that means the Apple deal's off. So that means that everyone is up a creek. At this point, rival conferences could smell blood in the water. And in the background, the Big 12 commissioner had been very openly and aggressively courting some Pac-12 schools. And once Colorado already left, he sort of doubles down and is like, look, guys, you're going to make more money with us. And, you know, we're not as risky. Now's the time to jump.

to jump. On Friday, three more schools, Utah, Arizona, and Arizona State, announced they would also be leaving the Pac-12. For those counting at home, that's five schools out in less than 12 hours. Five schools out of the nine that we're remaining, which is insane. Like, you usually get one or two schools moving, but that many all from the same conference is bonkers. After a chaotic weekend, the Pac-12, once an iconic college sports league with over a century of history, was reduced to a conference of only four schools. The changes will take effect next year. In a statement, the PAC-12 called the situation disappointing. I think they're just reeling still. Like, it's a little bit hard to tell what the future is going to be. And I think they're just kind of rolling over and saying, look, we tried. And because the PAC-12 commissioner, George Klyavkov, serves at the pleasure of the presidents,

he's basically saying, look, I'm folding. Like, there's nothing more I can do. Like, you should decide what's best for you. And if that means that you want to stay together and you want me to expand and work really hard at that, I'll try. But if it means that you think you're better off just going to another conference, I won't stop you. What's been the reaction among athletes in the Pac-12? A lot of these athletes that are currently in the Pac-12, some of them have come out on Twitter and online and said, look, I chose this conference because I'm from Oregon. My family's from Oregon and they can see me play.

It's easy for them to get on the West Coast. Now they can't watch me play. And that was a decision that mattered to me. And now, you know, it's not my choice and I'm not going to have that support. So this is a real thing that probably will make people transfer and, you know, maybe consider not even doing sports. And that will hurt these schools in a different way. Yeah, because there's some pride around the other sports too, right? Like beach volleyball at the LA schools is incredible. Swimming at Stanford is incredible.

And what's driving all this is football. Football's relatively easy to schedule. Everyone has six home games, six away games. But if you are a sport that's like tennis or basketball or softball, where you play every single other person in the conference at home and away in the season, that's a ton of travel. And it means that like if you're spending that much more time traveling, you're tired, you're maybe missing more class. It probably limits what majors you can take. What does this say about the businessification of college sports? I think there's definitely this feeling that like

everything is driven by the money and no one is taking a step back to think, hey, wait, didn't we get into this because we wanted kids to represent our school and play sports? And aren't we making it a lot harder for them to do that and actually be students while they're competing? So there's kind of this push and pull where the industry is professionalizing and people are all about trying to help these athletes and increase, you know, the support for them, but at the same time making it a lot harder for them to go about being a student athlete. That's all for today, Wednesday, August 9th.

The Journal is a co-production of Gimlet and The Wall Street Journal. If you like the show, follow us on Spotify or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow. This means that Michigan and Oregon are going to be in the same conference? Yes. Isn't that strange? So Kate and Ryan's teams are going to be playing each other. Oh, absolutely. Ducks versus Wolverines.

Now that's going to be a conference game, which is just something about the Pacific Northwest being a Big Ten, which is like, culturally, this is a weird fit. Right. Well, this is a realignment based on media rights. Yes. Yes.