The Whole Money Thing - The Finances Behind Colorado's Move to the Pac-10

I've been reading a few articles recently on the "winners" and "losers" of the recent conference moves.  Somewhat surprisingly, I've noticed that Colorado has been lumped together with the "loser" group.  For what!? It seems to me that we get more money from a more stable conference.  What's the problem with that?

The issue, it seems, stems from both an inflated vision of the future Big 12, and a misguided understanding of the penalty monies that CU would have to pay the Big 12 to leave early.  The fact is it does make financial sense to make this move.

Let's get this perfectly clear, CU entered into this deal taking for granted a few key points.  1) They fully expect (and the Pac-10 has reciprocated) that the new conference will help defer the costs of the Big 12 penalties.  2) CU expects (and with good reason) that donations and ticket sales will increase with the move. 

But, for the sake of argument, let's consider the move without these factors.  Under the conditions of the Big XII charter, CU stands to lose either 50% of revenue over 2 years  or 80% of revenue over 1 year.  Since the only hard-data available on team revenue is from 2007-2008, I'll have to go with that.  In that year, CU received $8.0 million in revenue sharing.  Under that scenario, which I certainly understand has changed, CU would have the choice of either forfeiting $8.0 million over 2 years, or $6.4 Million over 1 year. Yes, that's a lot of money, but those costs don't exist in a vacuum.  The increased revenue that CU will see from the new Pac-10 television contract will help us shore up the financial gap.

It was reported in the Denver Post that the new Pac-10 contract will probably be worth about $14.5 million per year at the outset ($6.5 million a year more than CU would normally have received in the Big 12) .  Under the 2 year plan, CU would end up with a net loss of only $1.5 million after the first Pac-10 year.  Under the 1 year plan (which is looking much more likely now with the understanding that Utah will start in 2011), CU would actually gain $100k after that first Pac-10 year.  Yes, multi-year budgets will have to be juggled, but these are smart people.  Our budget will be fine; it's not that hard.

But what about the $20 million a year in future Big 12 money that CU is going to miss out on?  Well, most agree that that number is pure fantasy.  From the Denver Post article:

"(The Big 12 contract will) be similar to the Pac-10 per school.  It's not realistic that Beebe's going to give Texas and Oklahoma and (Texas) A&M $20 million (each) and all the have-nots $14 million to $17 million. They can distribute that kind of ratio, but the total pie won't be large enough to add up to that." -link

The article quoted the same source as saying that the Big 12 contract could be worth $1 million less per institution per year than the new Pac-10 deal.  Not to mention the horrid deal-with-the-devil revenue sharing plan that the "forgotten 5" have had to swallow.

At the end of the day, the move isn't about the financial realities of the next one or two years.  This move is about the continuing future.  Check back in 3-4 years when the Pac-10 network is up and running.  Not only will CU be in a stronger position, but it will no longer be saddled with the competitive disadvantage of un-balanced revenue sharing.  The future is rosier than either ESPN or Chip Brown would have you believe, and it certainly won't see us losing $15 million. Yes, the deal would've been sweeter with the majority of the Big 12 South heading west with us, but CU is still getting a pretty good deal.

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