This week’s ACC spring meetings just got a little bit more interesting.
After it was widely understood that a bulk of this week’s meetings would surround the revenue deficit that conference members are beginning to see, with unequal revenue distribution being chief amongst the possible solutions, Brett McMurphy of Action Network today reported that Florida State, Clemson, Miami, UNC, NC State, Virginia, and Virginia Tech have had communications and meetings over the last several months regarding ways to break free of the conference’s Grant of Rights.
The agreement “irrevocably and exclusively grants to the conference during the term all rights necessary for the conference to perform the contractual obligations of the conference expressly set forth in the ESPN agreement,” which basically means any money a school makes from a TV broadcast belongs to the ACC until 2036.
Sports Illustrated’s Ross Dellenger first reported that the seven schools have been meeting to discuss possible remedies to the iron-clad Grant of Rights in a piece published today examing the overall outlook of the next steps of conference re-configurations, later confirming McMurphy’s report.
From the article:
A subset of seven schools in the 14-member conference has coalesced over what many of them describe as an untenable situation. Officials from the seven schools, led by Florida State and Clemson, have met a handful of times over the past several months, with their lawyers examining the grant-of-rights to determine just how unbreakable it is.
The ACC’s options are quite limited, both for the group of seven and the league as a whole.
1. Seek additional revenue from ESPN. This is a long shot given the network’s current situation. ESPN, in the midst of a wave of personnel cuts, is also negotiating deals with UFC/WWE, the NBA and Pac-12. While commissioner Jim Phillips and a few ACC presidents met recently with the network over this issue, no significant cash infusion appears imminent.
2. Secede from the league. Some of the schools, possibly the most frustrated lot such as FSU and Clemson, could pay the $120 million exit fee and hope they can break a grant-of-rights agreement that most attorneys—though maybe not their own—say is airtight. That then leaves a very big question: Where do they go? The SEC and Big Ten seem quite comfortable with their current membership, but potential western realignment could trigger them to expand more.
3. Create another league. If the seven agree to dissolve the current grant-of-rights agreement (we don’t know yet if this is a possibility), they may add a couple of more schools and begin their own association in hopes of it being more lucrative. This comes with its own issues, of course. You’d need a broadcast partner or private equity to fund such an endeavor. And, as one official asks, “Will it really be that much more lucrative?”
Basically, there are no easy answers.
No one seems to really be blaming the current commissioner, Phillips. The lengthy ESPN contract was signed by his predecessor and has put the conference at a disadvantage to the Big Ten and SEC, which signed new deals somewhat recently for more heftier payouts.
“It’s not a Jim Phillips thing,” says one high-ranking ACC official. “It’s a revenue thing.”
A fourth option for the league will be further explored this week at meetings: changing the revenue distribution model to a more merit-based system. Instead of equally distributing revenue, this system would award more dollars to those programs excelling on the field.
Administrators have spent the last couple of months discussing this festering issue. It has divided a conference that is less like-minded than most leagues in the country: big football revenue-generators like Florida State, Clemson, Miami and even North Carolina grouped with the likes of Boston College, Syracuse and Wake Forest.
While a vote on a revenue distribution model isn’t expected this week, proposals are likely to be explored as university presidents are now examining the issue.
During a Board of Trustees meeting in February, FSU athletic director Michael Alford seemed to publicly fire a warning shot at the rest of the conference: Change the revenue distribution model or else.
“At the end of the day for Florida State to compete nationally, something has to change going forward,” Alford told his board in a wide-ranging presentation in which he suggested that FSU brings in 15% of ACC media rights value but receives only 7% in distribution.
However, any change in the distribution model falls short of significantly closing the gap between the SEC and Big Ten. In the most successful year under a merit-based model, a school might receive an extra $5 million, one administrator estimates.
An unequal distribution model can also impact the culture of a conference. It can sow divisiveness within a league, says one athletic director from outside the ACC.
“It won’t stop there,” the AD says. “This will be the beginning of the end.”
With the Big 12 welcoming new members in UCF, Houston, BYU, and Cincinnati this year and Texas and Oklahoma officially joining the SEC in 2024 — the same time as USC and UCLA entering the Big Ten — the impetus continues to exponentially grow for those in the ACC to be proactive in solutions.
“Right now, when you throw everything in, we receive about $42 million — $30 million behind our competitors and peers across the country, and that’s $30 million every year,” Florida State athletic director Michael Alford said during an FSU Board of Trustees meeting in February, noting that the gap could continue to grow as conferences exercise their flexibility around media rights.
“Each conference gets to go to the open market before our deal is even up...some of them a couple of times — so that [deficit] number is even going to get larger.”
Alford, after being asked by a board member, said “hypothetically” it was possible that FSU would break even within four years with the increased revenue from leaving the ACC.
That number would appear to only be the exit fee from the ACC. Acquiring FSU’s media rights back from the ACC would be another matter. Based on what Texas & Oklahoma paid to the Big 12 that number could be another $400 million the school would need to come up with to regain its television rights from the conference.
Florida State failing to receive revenue splits equivalent to its name-brand peers in other conferences sticks out even more when considering numbers previously shared by Alford showing that FSU would rank No. 3 in both the SEC and Big Ten for revenue generated before conference distributions showing that FSU would rank third in the SEC in revenue generated — ahead of schools like the Alabama Crimson Tide, LSU Tigers and Florida Gators.
When comparing against Big 10 schools, Florida State ranks third, behind the Ohio State Buckeyes and Michigan Wolverines but ahead of the Penn State Nittany Lions, Iowa Hawkeyes, Wisconsin Badgers, and others.
“We understand, especially at Florida State and a couple of other institutions, really understand the commitment of that gap that’s coming,” Alford said in an exclusive interview with Tomahawk Nation. “It’s a freight train. That’s barreling down the tracks... I’m very involved and looking at solutions. Because I can’t sit here. And for five years, it’d be 30 million behind every year. It’s not a one-year thing. And that makes a big difference, especially when you start compounding that year after year after year.”
“I need to protect Florida State University, and make sure that we’re doing everything we can to make sure that we’re able to compete nationally. And I’m not talking just football, everyone is going to immediately go there. And I agree. But you know, one thing that’s great about our institution and the culture of our institution is we expect national championships across the board. We want to compete in everything we do... With that revenue gap, you’re going to see maybe some decisions that that we have to make that won’t allow that... want to protect that student-athlete experience, what we’re able to offer them and how they’re able to grow during their time here as much as I can. And that’s the driving factor behind it.”