Pac-12 announces pay cuts, layoffs as strategy shifts in the age of coronavirus

©The Mercury News

The Pac-12 is implementing a series of cost-cutting measures, including pay cuts for executives and layoffs at the Pac-12 Networks, as a result of the coronavirus-forced shutdown and the broader headwinds in the media space, the Hotline has learned.

The moves include a 20% salary reduction for commissioner Larry Scott and 10% cuts for members of his senior staff in both conference and networks divisions. The cuts will remain in place for the remainder of the school year, then be revisited this summer.

Scott was credited with $5.3 million in compensation in the conference’s FY18 tax returns (the most recent available), making him one of the top-paid commissioners in college athletics during that timeframe.

Several executives (conference and networks) earn in excess of $500,000 per year.

In addition, the Pac-12 Networks will reduce its workforce by eight% as part of “a new strategic and financial restructuring plan,” according to an internal memo obtained by the Hotline.

The move is expected to impact approximately a dozen full-time employees. (They were notified Monday morning.)

“The new strategic plan is designed to adapt our organization to the fiscal realities of the very rapidly changing media landscape and the current financial pressures brought on by the COVID-19 crisis, and set us up for future success,” Scott wrote in the memo.

“The plan is the culmination of a comprehensive process conducted by Mark (Shuken, the president of the networks), myself and our leadership team, in close consultation with our members, and is essential to achieving the goals set forth for our members.

“It shares a number of elements of strategies that other media companies have rolled out over the past many months given the similar challenges and opportunities that we are all facing in the industry.

“At its core, the new plan will deliver on four essential areas – our Mission, our Financial Targets, Emerging Media Opportunities and Future Value.

“It is an unfortunate reality that in order to make these necessary changes, while we have made every effort to limit the impact on employees, we have had to make some difficult decisions and will be reducing the Pac-12 Networks workforce by 8%.”

In addition to the pay cuts and layoffs, the Pac-12 is also imposing a hiring freeze across both the conference and network divisions, with exceptions for “critical functions.”

Other cost-savings measures include “(i) pause on all travel, discretionary spending and capital projects, (ii) cancellation of in-person meetings, (iii) savings from cancelled sports events, live and studio shows, and (iv) cancellation or deferring of special projects.”

The Pac-12 pay cuts mirror the reductions taken by NCAA president Mark Emmert (20 percent) and his vice presidents (10 percent).

Within the conference, Oregon announced last week that president Michael Schill would take a voluntary 12% reduction, with his senior staff, including athletic director Rob Mullens, taking 10% cuts for at least the next six months.

The Pac-12 expects total revenue for the 2020 fiscal year to drop by as much as $15.5 million — or about $1.3 million per school — as the result of the cancellation of March Madness and the conference basketball tournament.

Those losses could be mitigated by business interruption insurance or drawing on the conference’s $22.5 million emergency reserve fund.

Scott told the Hotline on Monday that no decision has been reached with regard to the use of the reserves; nor has the insurance issue been resolved.

The $15.5 million hit would constitute a loss of three% of annual revenue — painful but not debilitating. However, the schools are beginning to prepare for the financial crisis that would accompany a significant disruption to the football season.

The tightening of budgets played a central role in the strategic decisions involving the Pac-12 Networks.

The conference’s wholly-owned media company is contractual obligated to broadcast 850 live events per year and makes annual payments to the campuses in the $2.5 million range (per school).

The networks are expected to make their number in FY20. The cost reductions could result in an uptick in payouts in future years.

“We recognize that the cable and satellite subscription base keeps decreasing, so there would be financial pressures on the networks under any circumstances,” Scott told the Hotline.

“Given the financial pressures on the campuses, increasing the surplus for the network became a higher priority.”

Scott called the downturn in cable and satellite space a “secular decline” and noted the promise of new forms of distribution, particularly streaming services.

The Pac-12’s Tier 1 contracts with ESPN and Fox and the Pac-12’s Networks’ distribution all deals expire in the spring of 2024.

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©2020 The Mercury News (San Jose, Calif.)