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Pac-12 Networks: AT&T takeover of DirecTV to be approved (reportedly). What’s next?

An otherwise forgettable Tuesday in the dead of summer took a newsworthy turn for the Pac-12 this afternoon:

According to multiple news outlets, including the Wall Street Journal, the chairman of the FCC has signed off on AT&T’s takeover of DirecTV.

That could be good news … very good news … over the long haul for the struggling Pac-12 Networks.

Several insta-reaction points:

*** FCC commissioners still must formally approve the deal, and that could take days … or weeks …

*** Despite the oft-used description of the deal as a merger, it is not. It is a takeover. AT&T is in charge of DTV.

That’s good for the Pac-12, which has a business relationship with AT&T — it’s a sweeping partnership that includes sponsorship and equipment, not merely distribution — and no relationship with DTV.

 

*** Does this mean the Pac-12 Networks will be available on DTV in time for football?

After tracking this story for countless hours and interviewing innumerable sources on the topic, I can say for absolute certainty that I have no clue.

The Pac12Nets on the DTV airwaves by Sept. 5 can no longer be ruled out, but nor can it be counted on.

This is a $49 billion deal. It’s incredibly intricate. And the Pac-12 component is but a sliver of the gargantuan pie.

Frustrated Pac-12 fans with DTV should take a cautiously optimistic approach as the ’15 season approaches.

*** Multiple sources have suggested to me that AT&T could ask the conference for a lower in-market subscription price (approx $0.80) than the Pac12Nets are currently charging U-verse, Comcast, Time Warner, etc.

That’s when this could get interesting … when the league’s business model could require a tweak or two.

If the Pac-12 agreed to a price drop in exchange for distribution on DirecTV, then Comcast and DISH and all the other partners would ask for a similar deal (i.e., favored-nation clause).

Commissioner Larry Scott would have to determine whether the lower price for all partners would be offset by the projected increase in distribution.

This barely qualifies as back-of-the-envelope math, but just to illustrate:

The Pac12Nets currently have approx 12 million subscribers, with the vast majority being in-market homes at $0.80 per month.

That’s $115 million per year.

Let’s say AT&T asks for $0.60 per sub, the league agrees, and then offers that price to its other distributors.

It would take an additional four million subs at $0.60 for the Pac12Nets to retain the $115 million in annual income.

It so happens that there are approximately four million DirecTV customers in the league’s footprint, according to SNL Kagan.

More exposure, same revenue.

It would undoubtedly be more complicated, and it might never reach that point — maybe AT&T doesn’t ask for a lower price.

The intent here is simply to provide an overview. Tuesday brought good news for the conference, but there are several steps left.

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Jon Wilner