Canzano: Settlement gives Oregon State and Washington State $255 million war chest

The backstory on the Pac-12 settlement.

Fans at the WSU-OSU game this season embraced the Pac-2. (Photo: Kai Eselein)

Jayathi Murthy called me at 6:30 a.m. PT on a Saturday in Week 2 of the college football season. The Oregon State president was ticked off about what happened to the Pac-12 and the attempts by the departing members to blow up the 108-year-old conference on their way out the door.

“We’re ready for the fight,” she told me.

Oregon State and Washington State announced on Friday that they have reached a settlement with the 10 departing schools. The financial piece of the agreement gives the two schools protection against liabilities involving ongoing lawsuits, $190 million in future conference revenue and $65 million from the departing schools that will be spread out over the next two years.

The total war chest: $255 million.

Said one source: “We have a term sheet. We still don’t have a definitive final agreement. It will be a month or two before this thing gets papered, but we’re close enough that everyone feels comfortable.”

The departing schools get closure and an assurance that OSU and WSU won’t try to withhold all the revenue this year. But it also amounts to a victory in the fight Murthy spoke about in September. At the time, she expressed disappointment that TV market size was driving college football realignment.

“The presumption of it gets me,” Murthy told me. “We are a land-grant university. It was this amazing, visionary thing that happened 150 years ago. It was amazing and deliberate. It put universities in small towns. Now, everything is tied entirely to eyeballs and TV ratings? To do that is to disenfranchise students.

“It’s not the way it should be.”

Murthy and WSU President Kirk Schulz present a formidable 1-2 punch. Schulz is well-versed in college athletics and has a seat on the College Football Playoff governing board. As university presidents go, he’s as involved as they come in sports. But Murthy at her core is essentially a bare-knuckle fighter armed with a mechanical engineering degree.

Said a source: “Kirk is no fool when it comes to athletics and Jayathi was never going to roll over.”

At 16, Murthy enrolled in a prestigious engineering school in India. She was one of the first women to attend the school and it had only one women’s restroom. During the application process she was warned: “You’re welcome to get a degree, but don’t expect anyone to hire you.”

I present that context because the Schulz-Murthy combination is what the presidents of the 10 departing schools found themselves up against over the last several months. WSU-OSU’s leaders not only understood the challenges, but were willing to go to the mattresses. In fact, the Pac-12 survival ultimately relied on it.

What I know about the settlement:

• The term sheet is several pages long. There are elements of it that still need to be mediated. Nobody I spoke with on either side expects any backsliding. The deal is done. All of the financial details will eventually be revealed. Public records laws in Oregon, for example, don’t allow public institutions to keep settlement details private.

• There were negotiations happening for “weeks and weeks” I’m told by a source. The sides were very close to an agreement on the financial part of the settlement even as Judge Gary Libey ruled on the preliminary injunction in mid-November. The settlement talks continued after Libey’s ruling and progressed while the Washington Supreme Court weighed whether it would review the case.

• Once the Washington Supreme Court declined the review, governance was established. Oregon State and Washington State had the only two board seats and were in control.

• “The departing schools were worried that Oregon State and Washington State might try to withhold all the revenue,” said one source. “The departing schools were threatening to dissolve the conference. The settlement addresses all that.”

• For months I’ve tried to figure out how much future Pac-12 revenue OSU and WSU might collect. Initial estimates ranged from $150 million to $170 million. I now have an update on that figure: $190 million, per sources.

That includes all future postseason revenue due to the Pac-12 (i.e. NCAA Tournament units) and $50 million-a-year in Rose Bowl equivalency payments from the CFP.

• Eight of the 10 departing schools agreed from the start of the mediation that OSU and WSU were entitled to all the future revenue due to the Pac-12. There were two holdout schools, however. They were pleading poverty and claimed they were entitled to NCAA Tournament revenues because they’d earned them. The two holdouts relented last week, I’m told, and signed off on WSU and OSU keeping the future revenue.

• The 10 departing schools don’t have “exit fees” but they’ve agreed to pay WSU and OSU a combined $65 million on the way out the door. Some of those payments will be withheld from revenue earned by the conference this fiscal year. A second round of payments will be made to WSU/OSU in 2024-25, I’m told.

Why the deferred payments?

Some of the departing schools insist they don’t have the cash and need to defer payments until after they begin receiving media-rights payments from their new conferences.

• Quick math tells us that OSU and WSU will have a war chest with $255 million available to live off in the next few years and rebuild the Pac-12. The NCAA allows a grace period that will allow the Pac-12 to exist as a two-team conference for at least the next two years. The conference will need to rebuild to at least eight teams by the end of the 2025-26 academic year.

• The Pac-12 faces several ongoing lawsuits, including a wrongful termination suit brought by the former CFO Brent Willman and Mark Shuken, president of the Pac-12 Networks. Said one person with direct knowledge of the negotiations: “We were hung up over what could be done about the liabilities. It was a big fucking issue.”

I’m told this was the last piece that came into place with the settlement agreement.

• The sides agreed to share the responsibility for any ongoing liabilities. The parties also agreed to keep the details of that piece of the settlement confidential. Said a source at one of the departing schools: “The conference doesn’t want to put a target on its back and have someone come after the pot.”

• Washington State and Oregon State’s football teams formed a scheduling partnership with the Mountain West Conference in 2024. Men’s and women’s basketball, men’s and women’s soccer, men’s and women’s golf, cross country, volleyball, women’s rowing and softball will be affiliate members in the West Coast Conference. Oregon State announced that gymnastics, wrestling, indoor/outdoor track and field and men’s rowing will continue competing as members of the Pac-12.

The departing schools will be off to their new conferences in August. Oregon State and Washington State now have control of the Pac-12 and $250 million in assets. They have a plan for 2024. Beyond that, things remain uncertain.

I keep thinking about that early-morning call in September from Jayathi Murthy. She sounded determined. There was no way around it — there was a fight ahead for OSU and WSU. One that has opened a door to the future.

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