The inside story of stalled negotiations

I spent years trying to locate Derek Chang, to no avail, and eventually gave up trying. But a tip from a source this summer — ”Last I heard, he’s in Singapore” — re-started the search and led me, eventually, to Chang.

To the executive vice president for content strategy for DirecTV (i.e., it lead negotiator) prior to the launch of the Pac-12 Networks.

Turns out, Chang does not hate the Pac-12. In fact, he’s a Stanford business school grad who took endless heat from classmates for not signing a carriage deal with the conference.

(During one of our conversations, Chang joked that the blowback was so severe, he was forced to leave the country for a new job.)

“I saw those guys a couple years ago at the (Pac-12) basketball game in Shanghai,’’ Chang said of the conference brass, including commissioner Larry Scott. “We still have a good relationship.’’

Locating Chang, who works for Scripps and is now based in London, was a breakthrough in my attempt to piece together the details of the stalled negotiations between the Pac-12 and DirecTV.

Even better: Chang agreed to talk on the record, to the extent that he could recollect, about the impasse that began in the spring of 2011 and remains in place today.

(To this point, the only DirecTV comments that I’m aware of are generic news releases and website splatterings.)

The account below is based on interviews with Chang, Scott and numerous other Hotline sources with direct knowledge of the Pac-12 Networks negotiations with DirecTV (and other distributors) during the pre- and post-launch windows.

You can blame one side or the other — you can curse DTV or rail against Scott and the Pac-12 — but ultimately, both sides made business decisions that served their best interests … and led them down paths that would never intersect.

The story begins long before the stalemate appeared on the public radar. It begins in the early months of 2011, a full year-and-a-half before the expiration of the Pac-12’s media rights deal with ESPN and Fox.

“We didn’t have a specific model for a TV network predetermined,’’ Scott recalled. “We were the conference of champions. We felt we should have a platform for the student athletes. From a brand perspective and a DNA perspective, if we were the best in the country, we ought to show it.

“But the RSNs (Fox’s array of Regional Sports Networks) were a mixed bag. A lot of games were not available regionally. There was a tremendous deficit of coverage of football and basketball. And outside of sports, we felt it would be great if we could create an asset for the conference — having control, not just licensor rights, had appeal.

“So we hired media advisors and tried to find the optimal balance between maximum revenue and maximum national exposure, but also create our own network. We went to the marketplace, and most people tried to dissuade us — they told us not to start our own network. But we were determined.”

Scott went first to ESPN and Fox and discussed a model similar to the Big Ten Network — a joint venture with financial guarantees and carriage leverage. He described the discussions as “meaningful” and even received proposals.

“We decided the best way to go was to unbundle the Tier 1 (content) from the rest of it. We felt that if we separated the content, our opportunities would be better.”

On May 3, the conference unveiled the $3 billion Tier 1 deal with ESPN and Fox — and, behind the scenes, immediately began courting partners for what would become the Pac-12 Networks.

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