Mailbag: Arizona’s financial crisis, impact of the House case, ‘Pac-2’ legal affairs, UW’s perfect run, Taylor’s good work and more
The Wildcats could be forced to cut sports due, in part, to a massive accounting error
The Hotline mailbag publishes each Friday. Send questions to pac12hotline@bayareanewsgroup.com and include ‘mailbag’ in the subject line. Or hit me on Twitter: @WilnerHotline.
Please note: Some questions have been edited for clarity and brevity.
On the House vs. NCAA case: While I have little doubt the richest schools can afford to pay $46 million, what about smaller Power Five programs like Wake Forest or Washington State? Could this cause them to shut down sports, even football, and have athletic departments go bankrupt? — @DavidJBrown19
This is a great question because there is so much to cover on this subject.
Let us begin our response in Tucson, where Arizona president Robert Robbins recently informed the faculty that ‘draconian’ budget cuts were on the way due to financial difficulties stemming from a $240 million accounting error.
Instead of 156 days, the school now has 97 days of cash on hand. (This is the type of whopper you’d expect from the Pac-12.)
According to Robbins, Arizona’s athletic department contributed to the crisis by failing to reimburse the university “fast enough” for a $55 million COVID-era loan.
The elimination of sports programs is a distinct possibility.
“Everything is on the table in terms of dealing with athletics,” he said.
It’s a terrible situation for the campus and the local economy, which is so reliant on the university. But our focus here is on the athletic aspect, and the Wildcats resemble the canary in the coal mine in that regard.
This brings us to the House vs. NCAA case, which you mentioned and which the Hotline discussed earlier this week.
For those who are unfamiliar, the antitrust lawsuit, named after former Arizona State swimmer Grant House, is a game-changer for the NCAA.
The plaintiffs are seeking compensation for more than 10,000 athletes’ names, images, and likenesses over a five-year period preceding the NCAA’s legalization of NIL in the summer of 2021.
According to the lawsuit, media rights revenue should be included in the NIL compensation.
In addition, the Power Five conferences are named as defendants.
The judge also granted it class-action status.
When all is said and done, the NCAA could be on the hook for $4.2 billion in damages.
Even if a settlement is reached before the trial (in January 2025), the financial impact will be enormous.
There is a real possibility that every Power Five school will be hit with a NIL bill in the tens of millions of dollars and will have to compensate athletes for future media rights deals. (The $46 million figure is based on our very rough calculations.)
According to expert witnesses for the plaintiffs, athlete NIL accounts for 10% of the value of major conference media deals. If the NCAA loses or is forced to settle, the House case will almost certainly result in a revenue-sharing agreement between the schools and the athletes.
What does this have to do with Arizona?
Because few athletic departments can afford to pay tens of millions in NIL back-pay and distribute 10% of real-time media rights revenue to athletes.
If Arizona cuts sports due to the current financial crisis, the Wildcats may have some competition in the near future due to the House case.
According to a Hotline source who is well-versed in the consequences, the potential impact of House — some believe it is likely, others believe it is unavoidable — is almost indescribable.
It will force athletic departments to drastically alter their financial models and reduce the scope of their operations.
Football, of course, will survive. Men’s and women’s basketball, as well as a few other sports, will be affected.
However, based on our conversations with industry sources, numerous money-losing Olympic sports programs across Division I would be jeopardized.
And, if House causes the crisis we expect, top football schools will be forced to seek additional funding and more efficient financial models.
Consolidation, in other words.
The media rights cash isn’t guaranteed to last the rest of the decade and into the early 2030s, but it won’t be enough to offset any revenue-sharing agreement with athletes.
If the NCAA is bludgeoned in the House case, the mini-NFL model that the Hotline and others have envisioned for the sport in the mid- or late-2030s could arrive much sooner.
Where the University of Arizona’s athletic department is headed, the rest of college sports will follow a little later.
It’s getting awfully close to Nov. 14th. What are the odds that there’s a mediated settlement reached before the preliminary injunction hearing in the lawsuit filed by Washington State and Oregon State? — @AmbitiousCoug
A mediated settlement before the preliminary injunction hearing on November 14 is unlikely but not impossible, so something like 3-to-1 (or 25% implied probability).
WSU and OSU, the plaintiffs, require clarity in order to plan their future before the transfer portal opens in early December. (They most emphatically do not want a lengthy trial.)
Meanwhile, the ten departing schools oppose WSU and OSU gaining complete board control over current revenue. (They, too, do not want a trial, in part because of what might be revealed during the discovery process.)
However, neither side wants to give up leverage before it is absolutely necessary.
Our hunch — and it’s just that — is that both sides will be watching Whitman County Superior Court Judge Gary Libey’s demeanor during the hearing on Tuesday afternoon.
Perhaps they will request a pause before he rules, then return to mediation to reach an agreement.
With no clear plan for WSU and OSU and the transfer portal looming, how are their rosters not going to be raided by teams in Power Five conferences? — @dji0578
If the schools are unable to communicate a path forward to their players (in terms of conference affiliation and competitive resources), the rosters may be dismantled.
It’s a legitimate concern.
However, given the modest NIL on both campuses (WSU less so than OSU), their rosters could have been picked apart anyway.
Don’t most schools lose out on conference revenue when they announce their departures for another conference? What is the norm across college football? — @PeterErlendson
It is determined by the contract situation.
Yes, schools are frequently required to pay exit fees, but the Pac-12 never bothered to include one in its bylaws (because the presidents, ever arrogant, didn’t think anyone would leave).
Yes, outbound schools can have their revenue distributions reduced, but only if they leave before the grant-of-rights agreement expires.
There is no revenue reduction because none of the Pac-12 schools are leaving early… Unless and until WSU and OSU gain control of the board and decide to withhold payments to the outbound 10.
For the past 11 years, you’ve reminded fans that no team has ever made it through conference play undefeated in the Pac-12 era. Do you think that holds true this year, or does Washington make it? — @keithdennis
The Huskies are three games away from becoming the first team to go undefeated in league play since Oregon in 2010 — before the expansion era.
They host Utah, travel to Oregon State, and host Washington State.
We don’t expect to lose in the Apple Cup, so it’ll be a two-game season.
Their chances are excellent.
What do you think of Troy Taylor’s work at Stanford so far? Seems like the Cardinal has exceeded expectations. — @helixcardinal
Taylor has performed admirably this season. Stanford should not have won two conference games and should not have pushed Arizona and Washington to the brink of defeat based on personnel.
The Hotline is optimistic about the program’s future under Taylor if the university makes some adjustments to the transfer portal.
Stanford’s roster-building process must rely heavily on high school recruiting, but the portal must be flexible.
And we’re not sure that will happen.
If ESPN’s ‘College GameDay’ comes to Corvallis for the Oregon State-Washington matchup and the ratings are high and the Beavers win, will that change the narrative for the ‘Pac-2’ — and perhaps be a catalyst for ACC or Big 12 membership? — @GaryLutwen
If Washington and Oregon State win this weekend, ‘GameDay’ will almost certainly set up shop in Corvallis on November 18.
But, regardless of the pomp and circumstance, outcome, or television ratings for that game, Oregon State and Washington State aren’t going anywhere.
The chances of them joining the ACC are nil, and anyone who says or reports otherwise on social media should be avoided at all costs.
The Big 12 is more likely — only because anything is more likely than nothing — but only by a small margin: Let’s say the probability is 0.1 percent.
Why would the Cougars and Beavers join the Big 12? They do not fit geographically; they do not add financial value; and they do not bring premier football or basketball brands.
If they improve the Big 12’s football competitiveness, it won’t be enough to make membership worthwhile for current schools or, more importantly, the conference’s media partners.
If the Pac-12 Network hadn’t botched the deal with DirecTV all those years ago, would the conference still be intact for 2024 and beyond? — @605inMN
We included the Pac-12 Networks’ distribution nightmare in our examination of the strategic blunders that led to the conference’s demise — not as a single issue, but as part of the larger gaffe that was the networks’ business model (as conceived and implemented by former commissioner Larry Scott).
The roughly $50 million per year added to the conference coffers as a result of a deal with DirecTV would not have significantly altered the financial trajectory of any individual athletic department. It could, however, have improved the intra-conference culture and stability.
A deal with DTV would have resulted in increased media exposure, revenue, harmony, and trust in conference leadership.
That faith could have prevented the fractures that formed, particularly in Los Angeles, and precipitated the eventual collapse.
You have given the ‘Traitor-10’ a pass in the lawsuit, saying they don’t have any desire to punish Washington State and Oregon State further. As a Cougar, I’m not believing it. If they were even slightly sympathetic to the ‘Pac-2’ schools, how come nobody has come out to say it publicly? — Perry Cooper
I’m not sure if I gave the ten schools “a pass.” Certainly, our coverage of the lawsuit has documented the residents’ concerns in Pullman and Corvallis, as well as evidence to back up their claims.
But, after speaking with athletic directors and officials from a variety of universities, I don’t believe the departing schools have any ill will toward WSU or OSU. They want the Cougars and Beavers to succeed in the future.
Nonetheless, many of those same officials believe their schools are entitled to full conference revenue shares in 2023-24.
Furthermore, due to the litigation, no one is speaking publicly. The general counsels have ordered them to remain silent.
What are the odds that Oregon quarterback Bo Nix and Washington quarterback Michael Penix Jr. split the West Coast vote, and neither wins the Heisman Trophy? — @CougRob
It’s not out of the question, but we’re a long way from there.
There are far too many games left for Nix and Penix, as well as their competitors across the country. The Heisman Trophy is decided in the conference championships, which take place in the second half of November and the first weekend of December.
If the situation calls for it, we’ll go into more detail.
Several weeks ago, you mentioned that there was a scare when your son got hit by a baseball. How is he doing, and is he back to playing sports? — @Olibbey1
Thank you for inquiring. You are incredibly thoughtful.
Yes, he was drilled in the ribs and suffered a ruptured spleen, landing him in the ER, followed by an ambulance transport to a pediatric trauma center, and several days in the intensive care unit.
It was an unusual injury because most spleen lacerations occur as a result of collisions or bike crashes (falling over the handlebars).
The four-centimeter laceration, thankfully, healed on its own without the need for surgery or removal. He missed six weeks of Little League and travel baseball, but he is fully recovered and ready to bat again.
I’m not sure I’ve recovered emotionally, but that’s a different story.
Thank you again for your inquiry.
