Bringing some clarity to Pac-12’s financial issues with Comcast
In the spring of 2017, the Pac-12 Networks asked an outside auditing firm — a firm described by the Pac-12 as an industry leader — to examine the payments Comcast was making to the Pac-12 Networks.
This is not an unusual step in the media distribution business. Companies regularly seek audits to make sure monthly or annual payments are accurate.
And Pac-12 Networks executives did not think Comcast’s payments were accurate, according to sources. They thought Comcast was underpaying. They were surprised by the audit’s conclusion that Comcast was, in fact, paying too much.
“Nobody thought it was credible,” one source said. “There was disbelief,’” the other source said.
How much was too much? About $5 million annually, according to sources.
At that point, the logical step would have been to cross-check the audit results with the Pac-12’s internal data and examine invoices sent to Comcast for the year in question (2016). Except the Pac-12 had none of that, because Comcast didn’t share its subscriber data. The situation wasn’t unusual in the media distribution business.
“You have to take the distributor at their word,” one source said. “You don’t know what their (subscriber) data is. And if the payments seem light, you ask for an audit.”
“The situation wasn’t built on something the Pac-12 could check,” the second source said, “because the payments were being made based on Comcast’s internal data. They couldn’t correct it, because it was all on Comcast.”
The only way to gain visibility into the accuracy of payments is to request an audit. It’s standard practice in the media distribution game.
Sources believe Comcast was double-paying the Pac-12 for a portion of its subscriber base — likely for the customers who received both the Pac-12 Networks’ national feed and one of the regional feeds.
Meanwhile, executives remained miffed at the results of the audit and convinced that Comcast was, in fact, underpaying the Pac-12, according to sources.
Because the Pac-12 commissioned the audit and Comcast was solely responsible for the payment amount based on its proprietary subscriber data, a source said, the Pac-12 was not obligated to act on the results.
“They thought, ‘That can’t be right,’” a source said. “The results were so different from what they expected that they didn’t close the audit. So Comcast was never informed.”
And the overpayments continued — by about $5 million annually, according to one of the sources. That amount makes sense in this respect: There have been 10 fiscal years since the launch of the Pac-12 Networks.
If Comcast, a founding partner, overpaid the Pac-12 by about $5 million annually for 10 years, that’s $50 million — the amount cited in the claim filed by Comcast in October. (That claim prompted the Pac-12 to investigate the matter with the use of an outside firm, Cooley LLP.)
Sources believe the company will simply withhold payments totaling $50 million (approximately) over the remaining two years of the carriage contract — about $2 million per school per year.
Link
https://www.seattletimes.com/sports/uw-h...h-comcast/