Cutting Costs: Relocate PAC 12 Headquarters to a More Affordable Location

Taylor Tubbs

April Commentary

In the ever changing world that is college athletics, a new force has emerged in the past few years that, at least for the time being, will determine the survival of the biggest programs: The Power 5 Conferences. These conferences include the Southeastern Conference, Big 10, Big 12, Atlantic Coast Conference, and Pacific 12. In order for the PAC 12 to remain relevant in the Power 5, it should consider relocating its headquarters to a cheaper location in order to cut costs. Each of the five conferences in the Power 5 has differentiated themselves from the rest of college athletics through autonomy in NCAA governance. While competition exists across all college conferences, the competition within the Power 5 conferences to win the most championships, earn the greatest revenues, and secure the best TV deals is even more intense. The PAC 12 is the outlier in the Power 5 in many aspects, one of which is the location of their headquarters. PAC 12 headquarters is located in San Francisco, California, which is the fourth most expensive city in the country (Vara). In order to maintain its competitive advantage and increase payouts, the PAC 12 should relocate their headquarters to a cheaper, more centrally located city such as Salt Lake City.

Before delving into the current problem of excess in the PAC 12, it is useful to examine the history of the PAC 12, the Power 5 Conferences, and the impact this has had in the world of college sports. Apart from the Ivy League Conference, the PAC 12 claims to have the longest history that began with the Pacific Coast Conference in 1915. Through subsequent conference realignments and renaming efforts, the PAC 12 has evolved from the PCC to the PAC 8, the PAC 10, and now to its current name of the PAC 12 in 2012 (“Pac-12 Centenial…”). The evolution of college conferences and the NCAA has bred a history of pride and competition in an arms race of facilities and sponsorships. Fans are loyal not only to a university team, but also to a conference. This is why it is so important for the PAC 12 to retain its historical structure and competitiveness.

In the NCAA, 2012 and 2013 were dramatic years for college athletics as a major conference, The Big East, dissolved due to financial issues related to TV deals and basketball-centered programs. The Big East renamed itself to the American Athletic Conference, and lost much of its prominence and fan base. This was the beginning of a chasm between the “haves” and the “have-nots” in college athletics (Bennett). Five conferences (SEC, ACC, Big 10, Big 12, PAC 12) emerged dominant because of higher revenues, better facilities, and more lucrative TV deals. These five conferences wanted more governance power within the NCAA, and were granted autonomy in making decisions for themselves in August of 2014 (Bennett). The PAC 12 has asserted itself in the Power 5 as a strong player, yet they face challenges from conferences that generate more revenue and incur fewer costs.

Why is it even necessary for the PAC 12 to cut expenses? The conference brought the highest revenue of any conference in the NCAA at $374 million last year, up from $334 in 2013 (Wilner). The reason that the PAC 12 records the highest revenue is that it produces its TV Network channel in-house, while most of the other conferences do not. For example, the SEC Network generated $528 million last fiscal year, dolling out a record $31.2 to each of its 14 member schools (Wilner). The PAC 12 does not distribute revenue in this manor, as it has TV expenses from headquarter distribution to cover. Therefore, there is a dark cloud behind the PAC 12’s high revenues; PAC 12 member schools only received a 67% cut of this revenue, while the Big 10 distributed 93.4% of their revenue, the SEC 90.2%, and the Big 12 87%. That is roughly a $7 million difference per university between what the Big 10 and the PAC 12 distributed (Wilner). With the highest revenue stream and the lowest distribution percentage in the Power 5, it is apparent that the PAC 12 has excessive and unnecessary expenses. While rival conferences in the Big 10 and SEC keep their expenses fixed and enjoy soaring revenues, the PAC 12’s in-house expense of producing the Pac12Net and the cost of their headquarter location increases the probability that the PAC 12 will continue to fall further and further behind in revenue distribution (Dodd).

The solution for the PAC 12 is to rebrand itself and cut costs by relocating their headquarters from San Francisco to Salt Lake City. Salt Lake City is an ideal place for relocation for both financial and political reasons. Financially, the cost of living in Salt Lake City is less than half what the cost is in San Francisco. The current PAC 12 commissioner Larry Scott’s salary of roughly $3.5 could be reduced to $1.6 million to have the same buying power (“Cost of…”). Rent price, which are a huge part of maintaining office space, are 73.73% lower in Salt Lake. It cost the PAC 12 an estimated $125 million to operate in 2014, which is inflated from actual operating expenses that are closer to $85 million due to the in-house production of the Pac12Net broadcasting (Wilner). Regardless, the $85 million in operating expenses could be greatly reduced by headquarter relocation. The cost of operating in Salt Lake is less, Utah is more centrally located to many PAC 12 schools, and Salt Lake has a large international airport for easy travel.

The question is how deep will conference loyalty run? Will universities trade in decades of history with the PAC 12 conference for a more lucrative distribution deal? The PAC 12 has already begun to rebrand itself with the addition of Colorado and Utah in 2011. These two additions not only changed the conference name, but also the geographic reaches of the conference from the well branded and recognized west coast schools to a broader spectrum in the Rockies. The next step in rebranding is to switch PAC 12 headquarters from the glamorous New York of the west coast to a more practical and accessible location.

In summary, the PAC 12 is in a good place at the moment as a stronghold member in the Power 5 conferences. However, unnecessary expenses are cutting into university distributions and threatening the future of the conference. Relocating the headquarters to Salt Lake City is a step in the right direction for the PAC 12 to retain its spot at the top.

 

Works Cited

Bennett, Brian. “NCAA Board Votes to Allow Autonomy.” ESPN. ESPN Internet            Ventures, 8 Aug. 2014. Web. 30 Jan. 2016.

“Cost Of Living Comparison.” Numbeo. Numbeo, 2016. Web.

Dodd, Dennis. “Pac-12 Returned Only 68 Percent of Its Record Revenues to Schools.”     CBSSports.com. CBS Sports, 17 June 2014. Web. 04 Feb. 2016.

“Pac-12 Centennial History.” Pac-12. PAC 12, 2015. Web. 30 Jan. 2016.

Vara, Vauhini. “San Francisco Near Top in Cost of Living Ranking.” WSJ. Wall Street        Journal, 8 Dec. 2011. Web. 30 Jan. 2016.

Wilner, John. “Pac-12 Conference: FY14 Revenues, Expenses and Per-school         Distributions – College Hotline.” College Hotline. College Hotline, 21 May 2015.      Web. 04 Feb. 2016.

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