Pac-12 Networks president Mark Shuken: On equity options, the secure “fortress,” AT&T negotiations and looming Tier One deals

Early in a recent conversation, it became clear that Mark Shuken, the new president of the Pac-12 Networks, is a believer. It became clear because he said as much.

“I believe Larry was prophetic in taking the risk,’’ Shuken said.

He was referring, of course, to Pac-12 commissioner Larry Scott’s decision to create a television network wholly owned by the schools, with no partner to share the costs and provide leverage for carriage negotiations.

Before you enter full eye-roll mode, know this: Shuken is no novice.

A Santa Clara University graduate, he has spent decades in the media industry — much of it on the content-creation side with entities deeply familiar to Pac-12 fans.

He led the creation of the Lakers and Dodgers networks for Time Warner Cable, oversaw the Rivals Network (the recruiting websites) and was the CEO of DirecTV’s regional sports networks when the Pac-12 Networks were created.

Industry sources with no connections to the conference describe Shuken as bright and creative, with a deep knowledge of the media landscape; inside the conference, he has been praised for an approachable, honest management style.

“I’m just not sure how much he can do for them at this point,’’ one source said.

That’s the issue, after all: How much of a course correction can Shuken execute?

The Pac-12 Networks, launched in Aug. 2012, are a maturing entity with limited near-term growth prospects.

Their distribution (approximately 20 million homes) and revenue (approximately $2.5 million per campus last year) are approximately one-third of their peer networks in the Big Ten and SEC, with no signs of significant upturn in either area.

Those are hardly the only obstacles.

The networks have been roundly criticized for their costs (producing 850 live events across one national and six regional networks) … for the lack of carriage on DirecTV … for the scheduling demands placed on student athletes … for the limited availability of HD broadcasts … for the immense resources devoted to Olympic sports that draw limited audiences …

All the shortcomings were glaring at Shuken when he took command of the networks in early September.

Then again, it was a prime opportunity: The networks had nowhere to go but up, and Shuken wouldn’t be blamed for any failings.

“The downside risk is limited,” he said, “and the upside is enormous.”

Our 45-minute conversation at T-Mobile Arena during the Pac-12 tournament covered so much ground that it will be presented on the Hotline in two installments.

The first — this column — addresses the big-picture challenges facing Shuken. The second, scheduled for publication later this week, will cover a slew of other topics, including questions submitted by Hotline readers.

In both installments, you might notice the underlying theme of Shuken’s fledgling tenure: Every move is made with 2023-24 in mind.

That’s when the Pac-12’s contracts with ESPN and Fox expire, and the next Tier One media deal takes center stage.

Scott has bet his legacy and campus budgets on signing a blockbuster deal, and the prospects for success will depend, in part, on the valuation of the Pac-12 Networks at the time by potential bidders, whether it’s ESPN and Fox or Amazon and Facebook.

“We have an obligation to be prepared for the next rights agreement,’’ Shuken said.

With that in mind, he recently named Larry Meyers as executive vice president/content. Meyers’ role, in short: Drive content strategy across the linear, digital and social platforms, on big screen TVs and smart phones, with current students and older fans alike.

The value of the Pac-12’s media rights will depend partly on the level of audience engagement, Shuken explained, and the engagement level depends, to a certain extent, on the quality of the content.

That issue — the valuation — brought Shuken and I to a topic of keen interest to me: What could alter the current course of the Pac-12 Networks before 2023-24?

Shuken gave no indication of plans to sell an equity stake. Quite the opposite, in fact. It seems he and Scott are relishing the opportunity to put every ounce of Pac-12 content on the table in 2023-24.

He recounted a recent exchange with executives from a new-media company (he didn’t say which one).

“We went to one entity, and when we explained our timeframe, (they) cut us off. They said, ‘We don’t want you to sell your rights again until we have a chance to talk to you.’

“They’re going to evaluate our value differently than the current distributors.”

That dovetailed into a second topic of interest: The status of the Pac-12 Networks’ distribution agreements with Comcast, Time Warner, Cox, DISH and other partners.

Typically, carriage deals run for five or six years. Content providers don’t want to get locked into longer timeframes because they assume a valuation increase and want their rights on the open market as soon as is reasonably possible.

But the Pac-12 Networks’ brand is not exactly pristine at this point; demand for the context appears less than feverish.

So I wondered: Will Comcast, Cox, Time Warner, etc., agree to the standard three or four percent increase? Might they dig in at the current rate? Would any of them dump the networks altogether?

Any of those positions by the distributors could undermine future Pac-12 Networks revenue.

But as it turns out, those matters are moot.

The Pac-12 Networks’ deals are longer than industry standard, Shuken said. He declined to specify the year of expiration but hinted that the deals are in the 10-year range, meaning they won’t come up for negotiations until 2022 or so.

That’s after the NFL and Major League Baseball renegotiate their network contracts and seemingly is good news for the Pac-12.

“The fortress is secure,’’ Shuken said. “That will give us a view of the landscape. We don’t have anything to do in the core linear business until after that, so have time to feel that out.”

Yet the lengthy carriage arrangements make me wonder: Why would Comcast and Co. agree to 10-year deals unless the terms were favorable to them?

(The conference has not disclosed those terms, by the way.)

The final big-picture topic on my agenda was the conference’s relationship with AT&T. At stake is carriage on DirecTV and so much more. Related Articles Pac-12 hits rock bottom: Assessing the carnage after epic fails in football and basketball postseasons, plus the off-court scandals

Pac-12 basketball collapse: Don’t blame commissioner Larry Scott

Tier One media rights: Negotiations for a new Pac-12 mega-deal aren’t that far away

USC AD Lynn Swann on the Pac-12 Networks: Accept the shortcomings and move on

In 2013, the Pac-12 agreed to a sweeping partnership with AT&T that included equipment, signage in arenas and stadiums, wireless sponsorships and U-verse distribution. The contract expires this summer.

Might the comprehensive nature of the partnership force the sides to finally agree on DirecTV distribution?

Or might the DirecTV impasse prompt AT&T to walk away from the conference altogether, taking U-verse with it?

Shuken seemed to draw a line in the airwaves.

“The AT&T sponsorship works very well for both entities,’’ he said. “The fact that DirecTV does not carry the networks does not work for us, and we’re not inclined to treat those as separate initiatives.

“We’re hopeful that DirecTV will choose to launch the networks the way everyone else carries the networks.

“But I would rather work with another wireless partner than an entity whose television partner doesn’t choose to carry the networks.”

Oh, my.

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