College Football Wars | The Fumble | 3

0:10It's January 12, 2015, and the atmosphere is electric inside AT &T &T Stadium in Arlington, Texas. But today, the stadium's usual residents, the Dallas Cowboys, are nowhere to be seen. Instead, it's the Pac-12's Oregon Ducks and the Big Ten's Ohio State Buckeyes that are about to play football. And both teams hope to make their mark on history by becoming the first winner of the college football playoff national championship. The game opens in style. The Oregon Ducks receive the kick and then relentlessly drive their way up the field. Soon, they're on first down within seven yards of the goal line.

0:49The two sides crouch face to face, ready to butt heads. The center fires the ball backwards and into the hands of the Ducks quarterback. The offensive and defensive lines collide. The quarterback scans the field as the receivers run. The defense pushes again. One breaks loose and moves in from the left. Then, two more slip past. The quarterback feels the pressure and runs forward, narrowly slipping past the three Buckeyes closing in to sack him. As he runs, he extends his left arm and readies the throw with his right. And then he sends the ball flying over the heads of the defense, past the five-yard line, then over the goal line, into the end zone and right into the hands of wide receiver Keenan Lowe.

1:30It's a touchdown, the first ever touchdown in a college football playoff championship. And on the sidelines, Oregon's Donald Duck look-alike mascot bursts into a celebratory dance. But the joy is short-lived. It's not the Ducks' night. The game ends in victory for Ohio State, 42-20. But it's college football that's the biggest winner. It's now got an equivalent to the NFL Super Bowl, and it's already a major draw. The 80 ,000 seats in AT &T Stadium are full. Advertisers are paying more than a million dollars for 30-second commercials. More than 33 million households are watching the game on ESPN.

2:13It's the most watched show in the cable sports network's history. College football is no longer just a regional affair. It's primetime. Every college with a strong football team now expects a major windfall. And that means there will be trouble if the commissioners of the Pac-12 and the Big Ten fail to deliver.

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4:43From Wondery, I'm David Brown, and this is Business Wars.

5:10On the last episode, the Pac-12 sealed a 12-year media rights deal with ESPN and Fox, DirecTV snubbed Pac-12 networks, and the Big Ten convinced Maryland and Rutgers to join its ranks. Now, this quiet is growing among the Pac-12 colleges as rivals capitalize on the new college football playoffs to secure ever bigger media rights deals. This is Episode 3, The Fumble.

5:44April 2016, Rosemont, Illinois. In the Big Ten offices, Commissioner Jim Delaney checks his phone and smiles. ESPN President John Skipper's calling, just as he hoped he would. The Big Ten is in the middle of renewing its media rights for the first time since 2006. He thought it'd be a cakewalk, not least because the Big Ten now includes Maryland, Nebraska, and Rutgers, and the college football playoffs are delivering big TV audiences. But then ESPN lowballed him. It was a shock. ESPN's been broadcasting Big Ten games since it started back in 1979. Delaney answers Skipper's call. Hey, John, I guess you read about us and Fox Sports.

6:29I gotta say, I was surprised. Yeah,$240 million a year. My colleges are very happy. But that's the price for our best games. But it's not too late to try and better it. I'm not going to try. Like I said, we're trying to spend less, not more. But we are interested in the other half. Well, I'm pleased to hear that. But we got interest from NBC and Turner Sports in those games. You still need to be competitive. I'm thinking significantly less than what Fox is paying you. We think somewhere above$200 is fair. No way. We paid$100 million last time for the best games. We're not paying double that. Well, that was ten years ago.

7:13College football is more valuable now. You need to get to$200. I'm not going to go that high. $190 subject to negotiations and all that. Okay. I can live with that. I think our teams can start working out the details. Great, great. See ya. Delaney grins as he puts away his phone. He's now lined up meteorites deals worth a whopping$2.64 billion over the next six years. That's nearly three times as much revenue as under the last deal. And that's all in addition to the millions the Big Ten network makes. Once these deals kick in, the universities and the Big Ten will get annual payouts of around$51 million a year.

8:00The next richest conference, the Southeastern Conference, lags behind with$43 million, while the Pac-12 colleges scrape by on a mere$32 million. Delaney cemented the Big Ten status as the champions of the college football scene, and with his own retirement nearing, it's the perfect high to leave on. But Delaney's not just making sure he's getting a big deal. He's also getting a short one. The six-year term is designed to ensure the Big Ten is first in line to renew when the next round of TV talks begin. And that means the Big Ten will be able to secure its future before the Pac-12 even gets out of the long-term deal it signed back in 2012.

8:48March 2017. Pac-12 Network's head office, San Francisco. In an office, one team member pulls her chair over to a colleague's desk. She sits and peers at the numbers on her colleague's screen, going over the latest budget figures. I'm not sure that figure there is right. We definitely spent more money than that. Let's verify. Sure. Just then, a new email lands in the male employees' inbox. The subject line catches their attention. To all staff, major announcement. The two employees glance at each other. There's only one major announcement they and everyone else in the office can imagine. that today is the day when, after years of fraught talks, the Pac-12 finally persuades satellite TV provider DirecTV to carry its networks.

9:36And everyone in the office knows that deal could revive the Pac-12's financial health. You think this could be the DirecTV deal? What else would it be? The male employee opens the email. They both lean closer to the screen and then recoil. The email carries a photo of Pac-12 Commissioner Larry Scott with the Las Vegas Strip behind him. And he's got news. His contract's just been extended until 2022. The employees share a disgusted look at the tone-deaf email. Then, without a word, the mail employee sends the email straight into the trash, and they get back to the budgets. But Scott's contract extension is about to add to the Pac-12's budgetary pressures.

10:24His new deal will see his pay rise to around$5 million a year, even as the Pac-12's business withers. Scott seemed like a visionary when he secured the biggest media deal in college football history from ESPN and Fox. But its length is now a problem. What looked like great money in 2012 now feels mediocre. And by the time the 12-year deal ends, it will feel like a disaster. Pac-12 Networks is also a problem. Its fancy San Francisco offices cost millions of dollars a year in rent, and without the widespread distribution offered from providers like DirecTV, it's struggling to deliver strong profits.

11:09All of which makes the Pac-12 look bad. Compared with the other major college football conferences, the so-called Power Five of the Pac-12, the Big Ten, the SEC, the Big 12, and the ACC. While other conferences distribute as much as 90 % of their revenues to colleges, the Pac-12's high overheads mean its schools get just 73%. Other vital signs are fading, too. No Pac-12 football team has won the national championship for 13 years. Its teams keep missing out on being selected for the college football playoffs, and the attendance at its games is shrinking. But Scott's got a plan in the works.

12:00Mid-November 2018, Pac-12's offices, downtown San Francisco. In the conference room, Scott is hosting one of his regular meetings with college presidents and chancellors, But today, he's proposing an irregular idea. He stands at one end of the conference table and brings up a slide. I call this plan Pac-12 NUCO. The university officials look at the over-designed diagram on the slide. In the middle, a green box is titled Pac-12 NUCO. Lines flow in and out of the box, connecting it to other boxes with titles like distribution agreements and financial strategic investors. Scott explains. We've already created capitalized value through the creation of the Pac-12 networks.

12:45Now we expand on that strategy by catalyzing equity value creation from raising third-party capital to fund a new business plan that enables the potential acquisition of third-party commercial assets, including... Sorry, Larry. Can we go back a step and slow this down? One chancellor interrupts. I'm a little lost here, and I want to be sure I'm getting this. What you're suggesting is we bring in private equity? Yes. By selling a majority stake of the Pac-12? In Pac-12 NuCo, of which the conference will own 90%. The remaining 10 % will be sold to investors for$500 million. One of the university presidents blinks in shock.

13:26You're valuing the Pac-12 at$5 billion? At the lower end. It could be worth as much as$8.5 billion. The money we raised from the equity sale would go straight to your colleges. Well, what's in it for investors? All commercial assets of the Pac-12, including merchandising and broadcast rights, will belong to Pac-12 NuCo. By better exploiting those rights, the value of the company will grow, and with it, the value of their investment. The president sits back. I have to say, Larry, I'm not comfortable with this. We're universities. We're non-profit institutions. Bringing in private equity blurs the lines.

14:09We would have legal obligations to investors to do what's best for their profits. And that could be at odds with our duties as educational institutions. A few of the other university officials nod in agreement. We keep control of the company. We'll own 90%. Now, I believe this is the best path forward financially. One of the chancellors replies. Well, I think it's a proposal we all should spend some time considering before making a decision. The meeting moves on, but Scott senses his plan is dead on arrival. A few months later, that hunch is confirmed. The Pac-12 colleges reject his plan to bring in private equity.

14:50But that leaves the conference back where it started. Trapped in its Fox ESPN deal, with no way out until 2024. But with its media deal and networks failing to deliver the revenues the colleges expect, morale within the Pac-12 starts to corrode.

15:13It's February 2020, and USC's new athletic director, Mike Bone, is on the phone being interviewed for the Peristyle podcast. With its huge Los Angeles fan base, USC is critically important to the appeal of the Pac-12. But today, Bones feeling downbeat about the conference's performance. We all know that the Pac-12 media rights deal has not met our expectations. And we're falling drastically behind. The show's host, Ryan Abraham, listens as Bones lays bare the stark reality. Schools in the Pac-12 get$11 million a year less than the average Power 5 college. And the gap's growing, putting USC at a competitive disadvantage as schools in other conferences have more money to lavish on their sports programs.

16:02Abraham follows up Bones' bleak assessment with the obvious question. If the Pac-12's not delivering the goods, does that mean USC might leave the Pac-12? I think right now, and Larry would agree with this, that everything's on the table. After the podcast comes out, Bone tries to clarify his comments, emphasizing that he's not actively looking for USC to leave the Pac-12. But if the right offer came its way, he would be open to exploring that. It's a shot across the bow of the Pac-12, a warning to its commissioner Larry Scott that USC's loyalty isn't guaranteed. And he's not the only college official growing impatient with the Pac-12's performance.

16:46But Scott's going to have little opportunity to address those concerns. Because COVID's about to sweep the world and send college football off the field.

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18:43It's August 2020, and in Rosemont, Illinois, two dozen parents of college football players are standing on the small patch of grass outside the offices of the Big Ten. They're wearing face masks and holding signs bearing slogans like Let Them Play and We Want to Play. One dad approaches the nest of microphones that has been set up by the TV crews that have come to witness their protest. That dad is Randy Wade, father of Ohio State defensive back Sean Wade. And he's flown in from Jacksonville, Florida, to challenge the Big Ten's decision to postpone this fall's football season due to the COVID-19 pandemic.

19:19Let us play! Let us play! Let us play! But no one from the Big Ten's here to listen to their chants. The conference's offices are empty, just like many thousands of offices nationwide. As the chants die down, a reporter asks Wade a question. What do you hope to achieve today? Well, I'm just a dad who wants to spark a conversation. We don't have to play in the fall. We want to play in the fall. We don't like the way the decision went down. We, as parents, want some transparency about what's going on. Communication, transparency, and safe football.

20:03But the Big Ten isn't the only conference cancelling games. On the same day that Big Ten Commissioner Kevin Warren postponed its football season, the Pac-12 said it would do the same. But not every college league is following suit. The Southeastern Conference and Big 12 are still hopeful that the fall season will go ahead. And that's left some players in the Big Ten and Pac-12 feeling cheated. As young, healthy individuals, they are among those considered least vulnerable to COVID, and their window to make their mark is brief. For those players hoping to make the jump from college football to the NFL, the COVID clampdown threatens to be a career killer.

20:45But the Big Ten and the Pac-12 refuse to budge. Their physicians have advised them to delay the season, and many of their schools are in states that introduce tight restrictions to limit the spread of COVID. But no games means no money for the colleges. The Big Ten and Pac-12 need to find a way to get players back on the field. And Pac-12 Commissioner Larry Scott believes he's got the answer.

21:16September 1st, 2020. San Diego, California. In the factory of the Cuidel Corporation, Scott stares at the small machine on the laboratory desk in front of him. It's called the Sophia II, and it's about the size of a book made from black and light blue plastic. It's got a touchscreen display and a barcode scanner, and Scott hopes it's going to save the college football season. The president of Cuidel waves a small card with a barcode in front of the machine scanner. He then opens a small drawer and loads in the rapid COVID test he prepared earlier. Once loaded, there are two options, an immediate result or, for maximum reliability, the walk-away option.

22:01Scott peers at the touchscreen. How's that different? Walk-away tests the patient's sample at 3 minutes, 5 minutes, 8 minutes, 10 minutes, and finally at 15 minutes before delivering a positive or negative result. Scott feels his hope rising. He needs fast and accurate tests to convince health officials in states like California and Oregon to allow the season to go ahead. This is a game changer. And it's FDA approved? Yes. How soon can we get these machines? Well, uh, we could have machines in all the Pac-12 colleges by the end of this month. The rapid tests will take a bit more time, but we could secure those by early October.

22:44Scott works out the schedule implications. Once the colleges have the tests, they could lobby their local health officials for approval to return to the field. That'll take time. Players and schools will also need weeks to prepare for the games. But if all goes well, the Pac-12's football season could be back in action around Thanksgiving. This is great. But really, we want the Big Ten to align its season around the same time as ours so we can schedule in non-conference games with their schools. So how tight are supplies? Can you supply us both? I'll need our people to confirm, but I think it's possible.

23:23The priority is to supply tests to essential workers, but my understanding is we may be able to find a way to get you the tests, and hopefully we can do that for the Big Ten too. Scott smiles and looks again at the Sophia 2. He knows the colleges in the Pac-12 are losing faith in him. But if he can save the football season and restart the flow of TV money into college athletic departments, he's going to be a hero. 36 hours later, Scott holds a virtual news conference and announces a partnership with Quidel that will enable Pac-12 college football to return as early as the fall. It's big news, not just for the players and the fans, but for the colleges in the Pac-12, too.

24:10Because Scott didn't even tell them the games were back on the calendar before making the announcement. The lack of communication angers athletic directors. They've long felt left out of the loop by Scott and the Pac-12 officials in San Francisco. But since the pandemic began, Scott seemed to have turned over a new leaf. Now, he's back to his old habits again, keeping them on a need-to-know basis. But it's not just the secrecy that's rubbing the colleges the wrong way. The 12-year media rights deal Scott signed with ESPN and Fox looked like a major victory in 2011. Now, it's a ball and chain that's left the schools in the Pac-12 worse off than the colleges playing in other Power 5 conferences.

24:57On top of that, there's Scott's inability to secure widespread distribution for the Pac-12 networks. Then there's how much Scott's paid. He earns$5.3 million a year, the most of any conference commissioner in college sports. And the frustration over his performance is about to dial up a notch. On September 16th, the Big Ten announces its football season will begin in late October. The move stuns the Pac-12 colleges. It was Scott that alerted Big Ten Commissioner Kevin Warren to how Quidel's kits could save the season. And Warren's picked up that ball and run with it. Now the Pac-12 is the only Power Five conference yet to confirm its teams will play in the fall.

25:45It's getting pressure not just from fans and players, but from President Donald Trump, too. So I just want to congratulate Big Ten. It's going to be great. We're going to love watching that. And again, I want to recommend Pac-12. You're the only one now. Open up. Open up, Pac-12. Get going. Pac-12's colleges are left wondering how Scott managed to fumble the opportunity he found. But on September 24th, eight days after the Big Ten did the same, the Pac-12 announces it will return to the gridiron for a shortened season. Meantime, some breaking news here. the Pac-12 announcing moments ago that it will resume football beginning with a seven-game conference schedule November 6th.

26:30But even this isn't enough to stop the griping. The Big Ten is starting its season two weeks earlier. It's enough to give the Big Ten's teams an edge when it comes to being selected to take part in the college football playoff. It's not a great place to be for the self-proclaimed Conference of Champions, which hasn't had a team selected for the playoffs since 2016. But the Pac-12's troubles keep coming. In the days before its season kickoff, several players test positive for COVID, forcing two of the six opening games to be canceled. And with its condensed schedule butting up against the start of the college football playoffs, The Pac-12 has no time to reschedule those lost games.

27:17Then comes another blow. Just before their opening weekend game with Oregon, Stanford quarterback David Mills and two other players test positive for COVID and are forced to sit out the game. But then it's discovered there was a testing error and the positive result was wrong. It's a rocky start to a brief season. And when it comes to the playoff selection, the Pac-12 misses out again. By then, the colleges that oversee the Pac-12 have their knives out for Scott.