The ACC is exploring a new revenue structure aimed at ending litigation with its two restive members.
Conference presidents recently considered a proposal that would distribute revenue differently among league members, in order to provide stability and preserve the membership of Florida State and Clemson. Nothing is imminent and details of the deal remain mostly private, but the ultimate goal of the structure is to resolve a dispute with the Tigers and Seminoles, who sued the conference in an attempt to exit the league.
Those with knowledge of the discussions spoke to Yahoo Sports on condition of anonymity.
Discussions between league presidents are ongoing and are expected to continue.
Details on the new revenue structure remain hazy, but leaders have revised a plan to create a separate revenue pool that would be divided based on media value metrics. This separate distribution would be tied specifically to a school’s television ratings for football and, potentially, basketball.
Any new distribution would be available to all schools.
Along with the new revenue structure, leaders are examining the possibility of modifying the length of the league’s rights lease, the binding agreement at the center of the Seminoles’ and Tigers’ lawsuits. The ACC’s rights lease, which binds schools through 2036, would presumably be shortened.
It is unclear whether there is enough support to pass such drastic measures. It is believed that a two-thirds majority is required at the very least.
Last week, ACC presidents met in person at their annual meeting in Charlotte, where the potential deal was discussed. On Tuesday, they met on a call (also regularly scheduled) to discuss the issue further.
For several months, the league has been embroiled in legal trouble with two of its most prominent members. FSU and Clemson, unhappy with the conference’s financial results, are seeking an exit from the rights concession as well as the league’s ESPN television contract.
The schools’ potential willingness to remain in the conference is, to some, a shocking revelation and a sharp departure from their past actions. The unequal revenue structure is not an entirely new idea. Last year, FSU officials and board members suggested that the conference’s television revenue distribution formula (which is now evenly distributed) instead be tied to viewership data and other media value data.
The proposal is seen as a temporary solution to keep them in the conference before any judicial decision on the validity of the grant of rights.
A potential court loss that immediately opens up franchise licensing could have a catastrophic impact not only on the ACC but on other conferences, setting a precedent for all schools to break what were initially thought to be binding agreements.
The proposal comes after the conference earlier this year approved what it describes as a “success initiative,” a system that distributes more revenue to teams that excel in football and basketball. The initiative would reward high-performing football programs with up to $25 million if they meet all the success criteria, such as qualifying for a bowl game, finishing in the top 25 and advancing through the College Football Playoff.
The initiative, as well as this new revenue structure, is an attempt by Commissioner Jim Phillips and league administrators to reward winning in a way that helps close the financial gap between the ACC and the two richest conferences: the SEC and Big Ten. The gaps in television distribution, a major reason for the exit attempts by FSU and Clemson, could grow to more than $30 million per school over the next two years.
Television contracts are schools’ main source of revenue, accounting for a third of an athletic department’s budget in some places. They are the driving force behind the latest wave of conference reorganization, as schools eschew historic rivalries and geographic footprints for leagues with TV deals that pay more money.
While more money doesn’t always lead to greater success, there is a correlation between success and resources, administrators say. It’s one reason officials at FSU and Clemson are pursuing exit plans, something Phillips described over the summer as “damaging and detrimental” to the conference.
The league has been “working to” keep the two schools in the league, he told Yahoo Sports in July, and has been locked in court-ordered mediation for weeks. Clemson and FSU have felt that if they are legally cut off from ACC rights, there will be takers.
It’s unlikely that any SEC or Big Ten school would agree to a reduction in its TV distribution to add a school. In the case of the SEC, this is especially true given its presence: The league already has a presence in South Carolina and Florida.
For the Big Ten and SEC to expand, they will likely need more money from their television partners — a lot more money (more than $100 million a year). That means primarily Fox for the Big Ten and ESPN for the SEC.
ESPN is right in the middle of the situation.
While the general belief is that the contract runs through 2036, that is not true. The agreement ends in 2027. ESPN must opt to renew it for another nine years by next February. The ACC and ESPN have been actively negotiating the extension, talks Phillips has described as “positive and productive.”
