The problems with the conference and the network would probably be a lot less if they weren't based in downtown SF. Larry Scott, the commissioner, has a vision of the conference being a brand just like Google, Apple and Facebook, he's trying to find some hedgefund to buy into the conference. He's done a good job getting the conference more games on ESPN and Fox, the problem is they tend to start after 8 p.m. EST and often compete against other Pac-12 games being shown. It makes no sense to have three Pac-12 games overlapping a time slot on Fox, ESPN and ESPN 2.
And the conference fan base just isn't as passionate about football and basketball as they are elsewhere. Game attendance as decreased like it has elsewhere, but probably moreso due to every game being available on TV and game times not being set until a week out. Throw in the competition eight of the schools have from pro teams in their areas fighting for attention, and the distances the other four fanbases may have to travel for a road game at night.
It's impacted recruiting - the top two qbs this past year nationally were in LA and they chose Clemson and Alabama. Some may argue the commissioner is to blame, but outside of Oregon - none of the schools seem interested in competing at the top level, the fans don't seem interested and are fine with the status quo.