George Kurifkov, a former executive at Major League Baseball, NBC Universal, and MGM Resorts International, has been accused of being bad at math.
The Pac-12 commissioner caused a stir on Tuesday when he said UCLA could suffer losses by joining the Big Ten.
“I’m sure they’re better off financially staying[on the Pac-12],” he said. Appearance on “Canzano and Willner: Podcast” “And I’m sure there were no other criteria for non-financial decisions.”
On the surface, the comments appear to contradict the laws of time, physics, and media rights assessments.
— Pac-12’s next media contract cycle is expected to generate between $35 million and $40 million annually (per school).
— In the Big Ten, the Bruins receive at least $70 million annually.
But Kryavkov insisted.
“We believe the incremental money they receive from Big Ten media rights contracts will be more than 100% offset by additional costs,” he said. companies and coaches and managers.
“It does not support student-athletes.”
His comments on the podcast taped Monday night came three days before the University of California’s Board of Trustees was scheduled to discuss UCLA’s move to the Big Ten in the summer of 2024.
The agenda for the closed session on Thursday morning (10:00 am) is:
“UCLA Big Ten Membership – Potential Legal Issues and Financial Implications”
The regent is not expected to take action. The meeting is listed as a discussion, as was the board meeting at UCLA in mid-August.
This suggests two possible outcomes:
— The Regent decides to take action against UCLA at a later date. (Although they have the power to reverse this move, their course of action could have serious legal and financial consequences — in addition to setting a dangerous precedent within the UC system.)
—They agree to continue discussing the issue as a next step towards the ultimate goal of dissolving it into the political ether.
I don’t know which way it will fall. The University of California Office of the Chancellor did not respond to a request for comment on the meeting and a description of possible procedural steps.
What is incontrovertible is that Kliavkoff’s calculations are incredible from anyone with a surface-level understanding of the jackpots that await the Bruins at their new home.
Over the past two months, the hotline has been investigating the situation from all angles. And we did this with the help of our sports media industry contacts, who have access to Big Ten membership revenue and expense modeling, but no loyalty to the Bruins or the Conference.
In other words, an honest broker.
Of course, Pac-12 and UCLA repeated the numbers ten times and came to different conclusions. As Kurifkov confidently stated, the conference sees the move as materially negative for the Bruins, but the school believes Big Ten membership will be a financial boon.
What are the reasons for the disparity? Because the accuracy of financial modeling depends entirely on the accuracy of your inputs.
As you can see, there are two important inputs.
1. Annual fees for UCLA as a member of the Big Ten. This includes airfare, administrative costs, and a coach’s salary on par with his new league colleagues.
2. Pac-12 Annual Earnings with UCLA Remaining in Conference. This creates direct access to the huge Los Angeles media market.
In our opinion, that’s where the model diverges. The conference estimates higher on both. Bruins, both low.
Which one is correct?
Let’s start with the Pac-12 earnings. The conference and its potential media partners (ESPN, Fox, Amazon, etc.) performed predictions with or without UCLA as part of the following entitlement agreements.
We do not have access to these projections and are forced to provide estimates based on numerous conversations with sports media sources.
Without Bruins involved, Pac-12’s annual media rights revenue could be $40 million per school. This could mean he’s $37 million or he’s $43 million, but for this exercise we’ll use $40 million.
The central question is where that earnings number will go with UCLA at the conference. Will having a campus in Los Angeles result in a slight lift to the low $40 million range, or a significant lift to the $50 million range?
Of course, USC with a brand that can enhance its reputation is a more valuable asset. But UCLA’s presence could benefit three cash streams in the sports media ecosystem: retransmission fees, pay-TV subscriptions, and advertising.
Meanwhile, UCLA spending in the Big Ten will increase significantly. From $8 million a year on charter flights alone, he can add $10 million.
The Bruins also benchmarked administrative and coaching salaries against Big Ten schools’ administrative and coaching salaries, and based on our understanding, we believe the increase will be limited. .
Hotlines don’t necessarily agree. why?Because it’s all about college track and field everytime That’s because each of the Big Ten schools will increase spending as cash starts flowing from new media deals.
what about the numbers?
First, one caveat. Whether the Bruins belongs in the Big Ten or the Pac-12, it’s important for readers to understand that their total media revenue each year comes from his three main buckets. college football playoffs. and March Madness.
how the revenue from the expanded CFP will be distributed among the Power Five conferences, or internal Each Power Five meeting. Also, you cannot predict cash from NCAA Tournament Units that you have not yet earned.
So we’re sticking with regular season broadcast revenues here.
And Kliavkoff’s mathematics works almost perfectly. If You make one major assumption. That said, the Pac-12 collects far more than public projections (including ours) suggest.
Estimate UCLA’s revenues in the Big Ten at $70 million annually. Well, let’s get his $10 million back on the Bruins’ team’s enormous travel costs (charter flights), and another $5 million on administrative costs, including coaching salaries, that come with Big’s Ten business.
For clarity, I think the $10 million estimate is probably high. Based on where the Bruins are currently standing compared to the Big 10 average.
However, if the modeling included $10 million in airfare and $5 million in administrative costs, UCLA’s net worth would be $55 million.
And when the media rights value of Pac-12 is closer to $50 million than it is to $40 million on the Los Angeles campus, it starts to get closer to the wash.
Again, I don’t necessarily agree with the Pac-12 earnings numbers. Feel at least 10 percent higher. But that’s how the math works.
Now there’s another piece to the calculation. It’s his UC regent who has the power of the purse.
Hotline doesn’t expect the Regent to force the Bruins to make up for Cal to make up for lost revenue from UCLA’s exit. However, until we have definitive evidence that subsidies will not be available, we cannot completely deny the possibility.
Combine the unexpectedly high sales of Pac-12 and UCLA at the conference with the subsidies imposed by the regent (even millions a year) and the model output begins to converge.
That’s our view:
The most rational scenario suggests an increase in UCLA’s revenues of $10 million to $12 million annually in the Big Ten compared to staying in the Pac-12.
But math gets interesting when the media rights of Pac-12, which has a campus in Los Angeles, are worth far more than we believe.
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https://www.mercurynews.com/2022/09/21/would-ucla-really-lose-money-in-the-big-ten-the-pac-12-commissioner-thinks-so-we-plunged-into-the-numbers/ Consider Kliavkoff’s claim that UCLA will suffer losses in the Big 10