A 10-Point Lesson On FSU-ACC Showdown, Grant of Rights, More
By David Glenn
North Carolina Sports Network
Hey, folks. David Glenn here from the David Glenn Show and the new North Carolina Sports Network.
I’m the guy who started covering the ACC in 1987 and created the ACC Sports Journal in 1994 and then ACCSports.com a few years after that, before selling those outlets in 2015. This is my 37th year covering the ACC, and I thank you for joining us today here on our various new platforms. If you get a chance, please subscribe to our new YouTube channel — it’s easy, and it’s FREE — and check out more of our work at our new website, NCSportsNetwork.com.
There have now been perhaps 10 rounds of “The ACC Is Falling Apart” headlines in recent years, and it’s important to remember that all 10 rounds proved to be false, or at best premature.
The folks responsible for those false reports are almost never actual journalists, they’re often motivated more by clickbait than by accurate reporting, and — as I try to emphasize in the journalism parts of the classes I teach at UNC Wilmington — their downfall is rarely “making stuff up” or “lying to you on purpose,” which are really dangerous and destructive habits that are in the process of costing Fox News, for example, literally billions of dollars in legal settlements in a non-sports context.
Instead, the mistake behind the bogus “ACC Is Falling Apart” headlines — which may be accurate one day, but again have a truly woeful 0-for-an awful lot track record to this point — is almost always that the person trying to break news learns one or two important new facts … but then fails miserably at another very important aspect of sports journalism: putting the puzzle pieces you do have into a broader context and accepting that there are almost always puzzle pieces you don’t have, which requires 1-patience, 2-journalism skills and 3-institutional knowledge, multiple sources representing multiple and diverse parties, and other expertise that most of the inexperienced “breaking news” folks simply don’t have. That’s why they keep getting stuff wrong, which is understandably frustrating for the fans out there, especially ACC fans.
In part with such errors in mind, we are here to help.
Here is a fact-based look at what’s happening with the ACC here in the summer of 2023, brought to you by our friends at the North Carolina Pork Council.
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OK, on to the big topic of the day, the latest “ACC Is Falling Apart” headlines.
#1. There is an Aug. 15 deadline, every year, if you want to tell the Atlantic Coast Conference you’re leaving the following year.This means if Florida State or anyone else wanted to leave the ACC in 2024, they would need to notify the ACC, in writing, by this Aug. 15, which of course is almost here.
I personally do not expect any ACC school to meet that withdrawal deadline this year, but it’s important to mention it, just in case.
#2. The biggest error many fans are making in analyzing the FSU-ACC situation is criticizing, or really emphasizing, the Seminoles’ recent performance on the field.
While it is true that FSU is 36-36 overall and 21-27 in the ACC over the last six seasons — the definition of mediocrity — it’s also absolutely, positively true that, when it comes to TV money, and the sheer dollar value any program provides to the ACC in its TV negotiations, how many people watch a particular school’s games matters infinitely more than how many games that school is winning.
Those two things — winning and how many people watch — obviously are related to each other over time. But at the end of the day, a conference’s TV partners care less about who is winning, and they are willing to pay for how many people are watching.
This is where FSU has maybe its strongest argument. While you’re making fun of the Seminoles’ recent on-field record, FSU officials can show — beyond any doubt — that, even when they’re not winning as much, millions of people are still watching their games.
In fact, if you exclude teams that are already in or on their way to the Big Ten or the SEC, the three biggest college football draws in America are 1-Notre Dame, 2-Clemson and 3-Florida State. Oregon and Washington also are in the top five, by the way, which is one big reason they were on the Big Ten’s radar for the last year or so, before finally receiving and accepting official invitations.
Florida State football games get 70 percent more viewers than what the average ACC football game gets in one very important category (rated regular-season games; not all such games have publicly rated games showing TV audience sizes, etc.), and that’s a very big deal. If you don’t understand and accept that aspect of this story, you’ll never understand the rest of it.
#3. One thing that has been reported accurately is that the ACC is in the most vulnerable position of its entire 71-year history.
Why? Because FSU officials are not exaggerating about the size and nature of the growing financial gap between the Big Ten and SEC — by far the two wealthiest leagues in the history of college sports — and the ACC and the Big 12 on a distant second tier.
(Now that the Pac-12 has imploded, the “Power Five” phrase should be replaced by “Power Four” references instead.)
Without bombarding you with all the numbers, the Big Ten and the SEC right now send annual shared-revenue checks to their member schools that are in the $50-60 million dollar range (per school). Those annual checks sent by the ACC and Big 12 right now are in the $40-45 million dollar range.
So let’s oversimplify things a bit and call it a $10-$20 million annual gap right now. That annual financial gap — between the Big Ten and SEC schools on the top tier and the ACC and Big 12 schools on the second tier — is projected to grow gradually to $30 million per year and perhaps even $40 million per year by the end of this decade.
#4. Those future annual gaps of $30-$40 million per year are not based on mere projections and/or speculation; they are based largely on multimedia contracts that already have been signed, sealed and delivered.
Starting this year, the Big Ten has a combination of extremely lucrative TV deals with FOX, CBS, NBC and the Big Ten Network; collectively, they are worth more than $1.1 billion per year, and they extend all the way through 2029-30. Starting next year, the SEC has lucrative TV deals with ABC/ESPN and the SEC Network all the way through 2033-34. The Big 12 has deals with ESPN and FOX all the way through 2030-31.
Meanwhile, the ACC is stuck in a below-market deal with ABC/ESPN and the ACC Network all the way into 2036. Right now the ACC is making more than $400 million a year just in TV/multimedia revenue (and more than $600 million a year in total shared revenue), and while that number will continue to grow each year, it’s a much, much smaller number than what the Big Ten and SEC are going to be making with their new deals.
So, again, this ACC financial crisis is very real, at least in that regard.
#5. It is absolutely accurate to say that the current and recent financial gaps among the top conferences have NOT stopped the ACC from winning on the field.
Remember, the ACC — which was the wealthiest conference in America, on a per school basis, 20 years ago — has fallen behind financially mostly over the last decade or so.
During the 2022-23 academic year, ACC schools won more NCAA team titles — nine — than any other conference. Over the last two years combined, the ACC also ranks first nationally in NCAA team titles.
Even in the highest-profile sports, the ACC has been faring well.
Three of the last 10 national championships in football have been won by ACC schools: FSU in 2013, and Clemson in 2016 and 2018. (Only the SEC has more football “natties” in that period; the Big Ten has only one.) Current members of the ACC also have won four of the last 10 NCAA titles in men’s basketball; the Big Ten and the SEC both have zero NCAA men’s basketball titles in that same period.
Obviously, the relatively small financial deficits of the last decade have not stopped ACC schools from winning big on the field. At the same time, of course, it’s fair to wonder how long that trend can continue once the deficits grow from $10 million per year to $30 or $40 million per year.
#6. FSU sees the massive movement in other major conferences and wants to signal publicly to the Big Ten and SEC — again, by far the wealthiest leagues in college sports — and even to others that the Seminoles are ready and willing to jump.
It may not sound like a big deal for fans, but university presidents in the Big Ten and the SEC have been adamant about wanting to avoid the appearance of being predatory — meaning going out of their way to aggressively destroy another major conference.
If the Seminoles come to them, then those same presidents can metaphorically shrug their shoulders and say, “We were simply responding to the marketplace. When Florida State publicly declared itself a free agent, we felt compelled to at least listen and consider their potential candidacy.”
FSU officials also want to show their own fans that they are treating the matter with the same urgency that’s clearly emanating from the Seminoles’ fan base, and they want put as much public pressure as possible on ACC officials with their antagonistic public declarations (which aren’t at all appreciated by the league office or most other member schools), which brings us to our next Fun Fact.
#7. Thanks in part to pressure from FSU officials (public and private comments), Clemson representatives (mostly private conversations) and even others, the ACC already has announced it is making the most dramatic change to its financial distribution rules in the history of the 70-year-old league.
While there have been some small variations over the years, the ACC has basically been an “equal-shares” league, meaning that everyone gets essentially the same-sized slice of the financial pie every year when it’s time to send those annual “shared revenue” checks from the conference headquarters.
Starting in 2024, for the first time, the ACC will adopt at least some aspects of fundamentally unequal revenue sharing.
Back in May, the ACC announced that its new revenue-sharing policy means that individual schools will be rewarded for what they do in the football and men’s basketball postseasons, meaning that if your ACC school makes the College Football Playoff or a big bowl game, or advances in the NCAA Basketball Tournament, that school will get significantly more than just a 1/14th (football, excluding Notre Dame) or 1/15th (men’s basketball, including Notre Dame) share of that postseason revenue.
With this new policy, the most successful schools believe they can increase their ACC payouts in some years by $6 to $15 million. That obviously still doesn’t close the financial gap with the Big Ten and the SEC, but it’s a performance-based step in the right direction in the eyes of the schools that demanded such a change.
Remember, too, that Florida State has the ACC’s second-largest athletics budget — behind only Notre Dame — and that FSU’s annual ACC check of $40 million-plus makes up only about 28-30 percent its annual $150 million athletics budget, which ranks among the 20 largest in all of college sports.
#8. What FSU, Clemson, Miami and others also want, but were denied in recent negotiations with their fellow ACC members, was another radical change to the league’s long-standing revenue-sharing model.
Those schools also want those members who draw the most TV eyeballs to get larger shares than those who draw fewer TV eyeballs.
In football, for example, Duke, Wake Forest and Boston College draw average audiences (in “rated” games) below 1.5 million viewers. In the same category, FSU and Clemson have average audiences of more than 3 million viewers, so more than double the size of those smaller audiences.
For now, at least, the majority of ACC members have been unwilling to make that change to the revenue-sharing model, and that has left FSU, Clemson and Miami unhappy.
#9. If an ACC school announced right now that it was planning to leave next summer, meaning 2024, that school (a) automatically would lose one very large but manageable amount of money and (b) would put at severe risk a much larger amount of money, meaning hundreds of millions of dollars.
(a) First, the simple part.
ACC bylaws have an exit fee that amounts to three times the league’s operating budget. The ACC’s current operating budget is somewhere around $40 million per year, so that means the exit fee alone would be something around $120 million.
Virtually everyone agrees that this clause is ironclad (although you should be prepared to read about “sovereign immunity” and various other long-shot legal arguments to the contrary), but a $120 million exit fee obviously wouldn’t scare any school that knows it can increase its annual check by $30-$40 million year in its new league.
This is exactly the logic that led Maryland to leave behind six decades’ worth of ACC membership for the much wealthier Big Ten about a decade ago.
(b) Secondly, of course, everyone has heard by now about the Grant of Rights, which is not something Maryland had to worry about.
(In fact, the ACC’s Grant of Rights was created largely as a reaction to the Terrapins’ departure, as a way to add stability to a league that desperately needed it at the time, and also as a way to convince ESPN to move forward with the creation of the ACC Network.)
Under the league’s current bylaws, any ACC school leaving in 2024 would be leaving behind 12 years’ worth of its multimedia rights, because these ACC schools — including FSU — signed away their Grant of Rights all the way through 2036, meaning the length of the league’s TV deal with ESPN.
Moving forward, ACC media rights are worth in the neighborhood of $30-40 million per year per school, so I believe we’re talking about a number — over 12 years, remember — with a value of more than $400 million.
When you consider the $120 million exit fee, plus the loss of $400 million or so in media rights fees over 12 years, plus the reality that your new league can’t benefit financially from your home games until 2036 unless you somehow get out of your Grant of Rights, that’s a conundrum that basically equates to a $500 million or half-a-billion-dollar question!!
Why would the Big Ten or the SEC agree to pay you a full portion of its shared revenues (which is your biggest motivation to leave the ACC in the first place) if that new league isn’t sure it can financially benefit from your home games until 2036?
#10. Various forms of a Grant of Rights have been a part of college sports for a full decade now, including in the Big 12 and the ACC, and no school has ever even challenged a Grant of Rights in court, much less somehow escaped or even minimized the impact of a Grant of Rights.
In my opinion, as an attorney since 1994, someone who has practiced contract law specifically and someone who has seen the actual Grant of Rights documents, it is a sound legal contract, there are no obvious loopholes, and that’s the biggest reason why nobody has challenged it to this point.
However, that doesn’t mean Florida State or someone else won’t decide to become the first to challenge a Grant of Rights in court, even if the school’s attorneys know (while never stating publicly) that wiggling off the financial hook entirely would require the legal equivalent of a 99-yard Hail Mary completion.
As many FSU officials have now said publicly, they’re going to be falling behind by an average of about $30 million per year or more if they don’t challenge the status quo in the ACC, so it’s a different kind of penalty in their eyes if they just sit quietly in the coming years.
So what’s the bottom line? Well, that requires going beyond today’s 10 “Fun Facts” and engaging in what I will label “Educated Speculation.” I candidly admit that I do not have a crystal ball here….
Whereas it is crystal-clear that FSU would leave the ACC as soon as possible if the right offer came from the Big Ten or SEC, it’s not at all clear that the Seminoles — while definitely one of the most appealing schools that isn’t already in or on its way to one of those other leagues — will receive that offer any time soon.
Remember, the Big Ten just spent the last year thoroughly vetting Oregon and Washington as expansion candidates, long before those official invitations were extended and accepted, so the idea of an official offer to the Seminoles coming in the next week or so is almost unthinkable.
Similarly, the SEC is focused on the incoming Oklahoma and Texas programs, and — under the current (Grant of Rights) circumstances — it’s not entirely clear whether FSU and/or Clemson would automatically add more value to the SEC than they would take away as additional mouths to feed.
Why, for example, would ESPN agree to pay the SEC a new premium for the potential additions of FSU and Clemson when ESPN already holds the rights to the Seminoles’ and Tigers’ games at a deeply discounted rate with the ACC all the way through 2036? Also, what incentive does ESPN have to destroy or damage the ACC and its ACC Network (a collaboration between the network and the league), which only recently achieved full distribution nationally, when the ACC is ESPN’s second-most-important collegiate partner, behind only the SEC and the SEC Network?
The most likely scenario, by far, is that FSU, Clemson, the Big Ten (soon growing to 18 members) and the SEC (soon growing to 16 members) will spend the next year more thoroughly vetting their options, both with each other and with the ACC’s extremely pesky Grant of Rights.
Meanwhile, the Seminoles and Tigers can continue to pressure the ACC for additional changes to its revenue-sharing model and/or attempt to negotiate exit terms at less than the enormous, contractually specified amount, although neither approach seems likely to succeed anytime soon.
At the same time, ACC commissioner Jim Phillips and the rest of the folks at the ACC headquarters — which is in the process of moving from Greensboro, where it’s been for the league’s entire 70-year existence, to Charlotte, a big-business and Fortune 500 mecca where the league hopes to expand its advertising and sponsorship relationships — also will be busy seeking those new and improved revenue streams.
By the time the ACC’s annual exit deadline arrives on Aug. 15, 2024, meaning next summer, all parties involved likely will have at least a bit more clarity.
In the meantime, while it’s hard to imagine the current version of the ACC remaining intact all the way through 2036, it’s also hard to see a quick-and-easy path to any ACC school’s departure anytime soon.
With each passing year, of course, the financial cost of the Grant of Rights goes down, meaning the cost of a negotiated ACC exit also likely would go down. At some point, long before 2036, unless the ACC somehow finds those new revenue streams, the legal, financial and realignment planets probably will align such that Florida State, Clemson and perhaps other ACC schools end up elsewhere.
In the meantime, among the few certainties of the modern media landscape is that you’ll see a lot more false and misleading headlines before you see one that gets this very fluid situation exactly right.
I’m David Glenn of the David Glenn Show. Thanks for spending some time with us today on the North Carolina Sports Network.
