This story is featured in the 2Q issue of the PitchBook Private Market PlayBook.

Let's flash back to 2011.

Under commissioner Larry Scott, the Pac-10 athletic conference announced it had struck a television rights deal with ESPN and Fox worth roughly $3 billion over the next 12 years. Still new on the job, Scott, coming off a largely successful stint leading the Women's Tennis Association, was hailed as a business whiz for striking the biggest Tier 1 deal in the history of college sports.

Even better, the Pac-10 was set to become the first Power 5 conference to own 100% of its own TV network, while its rivals had to split revenue with their respective broadcast partners. And Utah and Colorado were set to join the conference a few months later, solidifying the soon-to-be Pac-12's future at a time when conference realignment dominated headlines.

In the ensuing eight years, Pac-12 Networks has underperformed financially, distributing an average of $2.8 million last year to its members, per reports. The football product, which earns the most viewership by far, has struggled, missing out on the College Football Playoff in three of the past five years. Scott himself has received a mountain of criticism from fans, with college administrators also lobbying barbs. Former Washington State athletic director Bill Moos last year went as far as to publicly question Scott's spending habits.

"Larry is a lavish guy; he likes extravagance," Moos told The Oregonian. "He runs the Pac-12 like he's the commissioner of Major League Baseball."

Scott believes a passive private equity investment could ease the financial pressure. In January, the conference announced it had hired The Raine Group, an investment bank specializing in large-scale sports media transactions, to sell a 10% equity stake in the conference and its TV network through a holding company for $500 million. In March, Sports Business Daily reported that the conference had upped the amount it was seeking to $750 million. And late last week, the conference reportedly received multiple bids of $750 million or more from private investors that valued it at $5 billion-plus. 

In a potential deal, the Pac-12 would package its media, sponsorship, merchandising and other rights into a holding company dubbed "Pac-12 NewCo." The investor would then get a 10% cut of the revenue, with Pac-12 leadership ultimately retaining control.

Asked in early May, Scott didn't provide any specific details about negotiations, though he did mention he was "very encouraged" by what he's heard from potential investors and that from what he's seen, college football has become " highly, highly valued at the top level." Negotiations are reportedly expected to wrap up before summer begins, though there's been no indication a deal is imminent.

"We'll see. I don't know exactly where we'll wind up, but the process is a really good one for us—learning a lot, understanding the interest," Scott told reporters during the Pac-12 spring meetings. "It's left me very, very optimistic about the value of our rights and the options we'll have going forward, whether it's now or later."

Regardless of whether the deal goes through, one industry veteran said a PE investment would be a good idea.

"In a way, the Pac-12 is kind of a turnaround story," said Salvatore Galatioto, co-founder of sports advisory firm Galatioto Sports Partners. "What (an investor) is really buying is media content value. They're looking at this as an underperforming asset and thinking that if they improve the (network) product, they'll get higher ratings."

Galatioto, 65, has more than two decades of experience working as advisor, arranger and agent on more than 80 transactions in the professional sports world, including brokering the sale of the Chicago Cubs to the Ricketts family and Joe Lacob's purchase of the Golden State Warriors. A Lehman Brothers alum, Galatioto founded his company in 2005, working with teams in the MLB, NFL and NHL.

The long-time exec said the biggest draw for a PE firm might simply be the Pac-12's location.

"There are a lot of pluses in the Pac-12," he said. "You're in an area in the country that has very positive demographics, at least the schools in the area. It's an area that typically has pretty high per-capita income. A lot of these teams are located in California, which has the largest economy in the US. Big alumni networks. So, if you can improve the (television) product, in theory, you have a pretty good geographic footprint to look at."

But why private equity? Why call on an industry that can have a reputation for extreme cost-cutting and other drastic measures in the name of maximizing profits?

Simply, the conference might need "extreme" to turn around its flailing network, which isn't available on DirecTV, AT&T or U-verse and often has its premier football matchups kicking off when most of the East Coast has already tucked into bed. The network has only 18 million subscribers, which is less than The Pursuit Channel, Fox Deportes and a host of other lower-tier networks, per The Mercury News. Partly as a result, revenue is reportedly projected to drop 6%, or $8.1 million, this fiscal year, with net advertising revenue plunging 22%.

The financial picture isn't much prettier for the affiliate members. In 2019, the conference is projected to distribute roughly $33.5 million total to each school. That falls well short of the Big Ten ($17.5 million difference), SEC ($8.5 million difference) and Big 12 ($4.5 million difference).

"If it keeps going south, it affects the recruiting, affects the facilities and it affects visibility because people aren't watching it," Galatioto said. "This is not a professional sport where you can just overpay somebody. Here you got to get kids who want to play in your conference and you're competing with the SEC and Big Ten. That's the risk. It's the value of your content. If that starts going down, then you're in a tough spot."

Oh, and about that $5 billion valuation?

"I can't tell you if it's a good valuation or a bad valuation because I haven't seen the numbers, but the one thing I can tell you is the difference between a good deal and a bad deal is what you pay for it," Galatioto said.

In the meantime, Pac-12 schools are struggling for cash, with some athletic departments running up annual deficits in the millions. A private investor could provide them the capital injection needed until its $3 billion deal with ESPN and Fox expires in 2024. Then perhaps, with the help of an adept negotiator like a PE exec, the conference could strike a financially competitive TV deal with its Power 5 counterparts.

With some voting shares, the investor could help reform a company that has bloated executive salaries and is paying too much for rent. The most logical move would be to oust Scott, whose $5.3 million annual salary in 2017 is more than double that of SEC commissioner Greg Sankey, who reportedly made $2 million in the last year that tax information was available. Then it could move out of its pricey San Francisco office, which reportedly costs nearly $7 million annually. For comparison, the SEC pays $318,000 annually for rent at its headquarters in Birmingham, AL.

Cutting costs and changing leadership? It's a job practically made for private equity.

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