The Pac-12 began evaluating candidates for expansion long before USC and UCLA announced their intentions to leave the conference.
The process commenced in the summer of 2021, after Texas and Oklahoma agreed to join the SEC and the Big 12 lurched toward the brink of extinction.
Pac-12 presidents ultimately passed on extending membership invitations and concluded none of the available schools (in the Big 12 or elsewhere) met the competitive, financial and institutional criteria.
Now here we are, 21 months later, and the Pac-12’s geographic footprint features a crater in Southern California as the conference negotiates a new media rights contract and considers expansion.
The candidate list includes SMU. It is not known whether the conference sized up the Mustangs in the summer of ’21, but the calculation deployed back then is essentially the same one being applied now.
Does SMU fit academically? Could its football program eventually clear the competitive bar? And does the school, based in Dallas, add media value for the 10 remaining Pac-12 campuses?
To answer the financial piece, the Hotline sought context from a sports media expert.
Patrick Crakes negotiated media deals during his tenure as Fox Sports’ senior vice president for programming, research and content strategy. Crakes now runs his own firm, Crakes Media. He isn’t affiliated with the Pac-12 or SMU but remains well-versed in the college sports landscape.
We have separated the issue of SMU’s valuation into three sections.
*** The fit
First, the Pac-12 must determine whether SMU fits institutionally. That broad term refers to the academic profile and campus culture, the research activity and financial resources available for athletics, the geography and travel accessibility, and the flow of students into and out of the university.
From which regions does SMU draw its applications for admissions? Where are the alumni concentrated? What impact would SMU’s membership have on the ability of other Pac-12 schools to enhance their academic profile?
And how does all that fit into the media valuation?
The Mustangs appear suitable on numerous levels:
— SMU is No. 72 in the latest U.S. News and World Report rankings and is an R2 research school, the second-highest categorization. (It is attempting to gain R1 status.)
— It has a significant endowment ($2 billion) and wealthy donor base.
— And despite the name, the school is not controlled by the United Methodist Church.
“The Pac-12 has to figure out what the conference is all about,” Crakes said. “It has a lot of big research universities; it does a lot of what the Big Ten does. And SMU fits into that.
“You have to think about how the schools work together. Does it look inappropriate for a school to be next to Stanford, for instance? In SMU’s case, I don’t think so in the context of some of the other Pac-12 schools.”
But the Mustangs, a member of the American Conference, have just one 10-win season this century and are of “questionable competitive strength,” Crakes added.
As a result, the Pac-12’s evaluation would have to cast an eye to the future: What could the Mustangs become if they joined the conference?
(In that regard, the calculation with SMU is similar to the decision to partner with a streaming company on the media rights deal.)
As a private school, SMU would have unfettered ability to plow resources into the football program.
And with a wealthy donor base that could be energized by the move into the Power Five, the school’s potential to generate an effective NIL collective — an essential piece to recruiting — would be significant.
As one source told the Hotline: “Besides USC and Oregon, nobody in the conference could beat SMU’s resources.”
*** The calculation
In determining a school’s media value, the Pac-12 and its potential broadcast partners would assess the power of a school’s football brand and its placement within the local media market.
SMU’s football program hasn’t moved the needle since the 1980s, before receiving the death penalty from the NCAA for recruiting violations. And in the Dallas media market, the Mustangs are far down the pecking order.
But those aren’t the only criteria for calculating value.
“UCLA football is way down the L.A. market, just like Rutgers is way down the New York market,” Crakes said. “But the Big Ten Network is on well-distributed tiers in Manhattan.
“(Networks) value what their most important customers want. And SMU is worth something going into a major conference.”
Streaming services would estimate the number of viewers willing to pay a monthly fee to watch a particular team. But for legacy media companies like Fox and ESPN, the process seemingly is more complex. Their calculation includes retransmission fees, which are payments made by the affiliate stations to the parent network in exchange for the broadcast rights in the local market.
Let’s say USC is hosting Notre Dame on broadcast television. The ABC affiliate in Los Angeles is KABC. Any USC fan with Spectrum would watch the game on KABC through the Spectrum pay-TV bundle.
“At least 80 percent of all viewing to broadcast networks occurs inside the pay-TV bundle,” Crakes said. “So for example, the pay-TV distributor (Spectrum) pays KABC to put the station inside the bundle, and then KABC pays the network a percentage of that to compensate the network for acquiring top-level content.
“SMU would probably generate a case for some kind of increases to current retransmission fees in Texas. But how much?”
As a member of the Pac-12, the Mustangs would be competing in Texas with the SEC (Texas, Texas A&M and Oklahoma, which has a strong following in the state) and the Big 12 (TCU, Baylor, Texas Tech and Houston).
According to SMU, the school has 114,000 living alumni worldwide, with about 60,000 across in Texas and 44,000 in the Dallas-Fort Worth area. (By comparison, TCU has 99,000 living alumni.)
“How much is it worth to a pay-TV distributor to make SMU part of the Pac-12? It’s probably worth something,” Crakes said. “The Pac-12 gains a market, but it’s third in the pecking order with the SEC and then the Big 12.
“It comes down to whether they think SMU is accretive. You’re gaining a time zone. You’d get six games in the Central Time Zone. It’s not strategically earthshaking, but it’s incremental.
“Adding SMU is as fine an idea as any I’ve heard.”
*** The value
Every valuation calculation ends with the same question: Is the school accretive? In other words, would the addition of SMU create more media value for the Pac-12’s remaining schools?
Imagine the conference had the option to sign a six-year media rights contract for $300 million annually, or $30 million per school per year, without SMU.
For SMU to add $3 million to each school’s annual intake, the Mustangs would require a valuation of $33 million annually, or $198 million over the course of the contract cycle. (Eleven schools at $3 million each for six years, if the Mustangs received a full share.)
Is the appetite for SMU football in Texas enough to convince ESPN, for example, to commit to $33 million annually?
Would the Central Time Zone kickoffs help the broader value of Pac-12 inventory?
Would SMU generate enough cable subscriptions and retransmission fees across the Lone Star State to justify the outlay?
“Does SMU create value for the Pac-12? I think it probably helps,” Crakes said.
At $3 million per school per year?
“I’m not sure about that,” he added. “Being conservatively optimistic, maybe adding SMU is worth $1.5 million (annually) for the other schools. That’s $99 million (over six years).
“Then in the next deal, they become an incremental chip on the table.”
The next deal.
That’s a critical point in the Pac-12’s expansion strategy. The conference must consider SMU’s value when the next media rights cycle comes to an end (in the late 2020s or early 2030s), and it starts the negotiating process all over again.
“They need to get better in football,” Crakes said.
“But if you end up doing something like merging with the ACC down the road, you have the Dallas market, which is nice.”
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