Group Created with Sketch.
Volume 22 No. 3
  • Created with Sketch.
  • Created with Sketch.
  • Created with Sketch.

Expanding ACC will reopen ESPN deal

Just three weeks into a new TV deal that already is considered well below market value, the Atlantic Coast Conference is getting a mulligan.

The conference is adding Big East Conference schools Syracuse and Pittsburgh, which will give it another crack at negotiating its media rights deal with ESPN. This time, the ACC expects to do much better than its current deal, which went into effect this football season.

John Swofford saw the marketplace change after doing the ACC’s latest TV deal.
The opportunity to reopen its 12-year, $1.86 billion deal with ESPN was a significant factor in the ACC’s decision to expand with Syracuse and Pittsburgh, Commissioner John Swofford told SportsBusiness Journal. The ACC signed that media agreement in May 2010, but subsequent rights-fee deals signed by the Big 12 and Pac-12 were considerably richer than the ACC’s.

“The marketplace certainly has changed since we did our deal,” Swofford said.

The ACC’s contract with ESPN, which is valued at $155 million a year, contains a standard line called a “composition clause” that allows either the conference or ESPN to reopen the deal if membership increases or decreases by at least two schools. The conference or the network can act on that clause any time the conference’s membership changes by at least two schools.

What They're Saying

“We’ve had this constant feeling for the past year and a half that change was coming. There’s been a lot of instability out there. … Our group felt the prudent thing to do was to take a step forward with two schools that fit our profile. The beauty of where we are now is that we don’t need to do anything, but if something good comes along that brings tangible value, we’ll consider it.”

— ACC Commissioner John Swofford

“The traditional conference as we knew it has given way to more of a scheduling group for the purposes of marketing, TV and revenue production. Each conference used to have its own culture and was in large part formed by where you were geographically. Commerce flowed between those states and each conference had its own culture. With expansion, that’s no longer true.”

— Chuck Neinas, Big 12 interim commissioner and college consultant

“The networks certainly are paying for the number of games, but they also want games that mean something to the fans. That’s a big part of it. If a league is sufficiently diluted, there could be some economic impact. … We don’t think moving out of the Big 12 affects us that much. The Big Ten is tradition-rich and there are rivalries that mean a lot in that league. We’re excited about what will evolve there. At the same time, losing the Oklahoma game over the years certainly impacted our fans. You wouldn’t want to go down a path of losing too many of those rivalries. … I’m still not sure that it’s inevitable we’ll all move to this 16-team model. I think you’ll see that some conferences are more comfortable where they are.”

— Tom Osborne, Nebraska’s athletic director and legendary former football coach

“I’m as mystified as anyone. It really upsets me. There are times I want to call these people and say, ‘What in the world are you doing?’ I just don’t understand it.”

— Gene Corrigan, former ACC commissioner and athletic director at Notre Dame

The agreement does not permit the ACC to take its rights to the open market. But the addition of two schools does create the opportunity for a new negotiation and, undoubtedly, more money. If the two sides cannot come to an agreement, the deal would go to an arbitrator.

Swofford said he looks forward to meeting with ESPN soon, although he didn’t put a timetable on it. It’s still unclear when Syracuse and Pittsburgh will join the conference, which is when a new deal likely would kick in. Big East bylaws mandate that they have to wait 27 months before departing, but reports have indicated that the schools will negotiate with the conference to leave sooner.
It’s also unclear whether the ACC will add two more schools, taking its membership to 16, which also would affect any new deal.

Swofford was careful to refer to ESPN as the conference’s “partner” on several occasions throughout an interview with SportsBusiness Journal last week and said he expects the new round of talks to go smoothly. He clearly has expectations, though.

When asked if he anticipates the ACC’s per-school revenue of $12.9 million a year to increase from the current deal, Swofford said, “The simple answer is yes. We expect to do better than our schools staying even.”

In a statement sent to SportsBusiness Journal, ESPN said: “Conversations continue with our conference partners regarding conference composition clauses in our existing contracts. We are looking forward to discussions with the ACC.”

Officials representing ACC schools wouldn’t say exactly how much more money they expect, but industry executives suggest that the ACC’s new contract could increase in value by as much as $2 million per school per year, which would make the overall conference deal worth nearly $210 million a year.

The conference, of course, expects to do better, and it will use other conference deals as a gauge. The Pac-12 and Big Ten are at the top of the list, with media deals that average close to $21 million for each school annually. The SEC’s deal averages out to $17.1 million per school per year.

Even the beleaguered Big 12, which is trying to weather its latest round of defections, receives more per school than the ACC on average. The Big 12’s $150 million a year from separate deals with Fox and ESPN averages out to $15 million a school when divided by the 10 schools.

The Big East was scheduled to take its media rights to the open market next year, but its current instability could change that. In May, the Big East turned down an extension offer from ESPN that would have paid it $130 million a year. It’s not certain what the per-school allocation would have been in that deal because not all of the Big East’s members play football.

A new deal, for example, that would put the ACC’s 14 schools on par annually with the SEC schools would have to pay the conference $240 million a year, although industry experts question whether the ACC’s football can command that kind of money. Even when the deal was signed last year, the ACC’s contract with ESPN at $155 million annually fell far short of the SEC’s $205 million a year from CBS and ESPN, signed in 2008.

It was dwarfed even further this past May when the Pac-12 hammered out a deal for 12 years at $250 million a year, or $3 billion overall, establishing a new market for conference rights (see chart).

But Syracuse and Pittsburgh bring respectable football and elite basketball programs into the ACC, while also introducing new markets. Pittsburgh represents the nation’s 24th-largest TV market, while Syracuse ranks 84th.

“We really like the way these schools close the geographical gap,” Swofford said of the distance between the ACC’s base of schools in the south and Boston College. “That’s a real plus for us.”

One way for the ACC to convince ESPN to increase its rights fee would be to offer more rights in exchange. It’s likely that ESPN would want to extend the ACC’s deal by several more years, sources said.

“We’re going to sit down with ESPN and renegotiate as partners,” Swofford said. “We’ll see where that leads us, but we’re confident it will lead us to a good place. If we couldn’t agree — and that would be a big ‘if’ — it could go to arbitration. … Things need to settle down a bit [across the college landscape], but we’ll sit down soon.”

Swofford in the past has used IMG’s Barry Frank as a media consultant to the conference. He said no decisions have been made on a consultant for the next round of talks.

Wasserman Media Group’s Dean Jordan also has worked on media research for the conference.

The clause in the ACC-ESPN contract that permits the deal to be reopened is standard among college conferences. The SEC is expected to exercise its right to a new deal if it adds Texas A&M and another school, as reported. ESPN and Fox, meanwhile, could void the Big 12’s contract or ask the conference to give it a reduction in fees if it loses teams. Network sources say that is an unlikely option, especially if Texas remains in the conference.

The ACC-ESPN deal that went into effect this season pays about $4 million in new media revenue for each existing ACC school. Three percent escalators are built in annually.

HISTORY LESSON: Super-conference concept rooted in 1990 proposal.

College Television Deals Through The Years

Conference Terms Contract years Network(s) Deal signed
Big Ten $1 billion/10 years 2007-08 through 2016-17 ESPN/ABC June 2006
  NA*/6 years 2011-12 through 2016-17 CBS June 2011
  $2.8 billion/25 years 2007-08 through 2031-32 Big Ten Network August 2006
Notes: With the addition this fall of former Big 12 member Nebraska, there are 12 schools in the Big Ten. The Big Ten Network debuted in 2007. The conference and News Corp. jointly own the network and share expenses.
Big East $200 million/6 years 2007-08 through 2012-13 ESPN/ABC August 2006
Note: Pitt and Syracuse announced this month that they will be moving to the ACC by 2013. Mountain West member TCU is expected to join the league in 2012, giving the conference seven football-playing members, and the conference is considering expansion.
SEC $2.25 billion/15 years 2009-10 through 2023-24 ESPN/ABC August 2008
  $825 million/15 years 2009-10 through 2023-24 CBS College Sports August 2008
Note: An agreement to make Texas A&M the conference’s 13th member is pending, and more expansion is under consideration.
ACC $1.86 billion/12 years 2011-12 through 2022-23 ESPN/ABC May 2010
Note: Pitt and Syracuse will leave the Big East by 2013, making the ACC a 14-member conference, and more expansion is under consideration.
Big 12 $1.17 billion/13 years 2012-13 through 2025-26 Fox March 2011
  $480 million/8 years 2008-09 through 2015-16 ESPN/ABC April 2007
  $78 million/4 years 2008-09 through 2011-12 FSN April 2007
Note: The loss of Nebraska to the Big Ten and Colorado to the Pac-12 reduced the conference to 10 members this year. The conference is considering expansion on the heels of Texas A&M’s pending move to the SEC.
Pac-12 $3 billion/12 years 2011-12 through 2022-23 ESPN and Fox May 2011
Note: Former Big 12 member Colorado and former Mountain West member Utah became the 11th and 12th members of the conference this year.

NA: Not available
* Before an extension in June as a result of the addition of Nebraska, the original deal signed in June 2006 was $200 million over 10 years, from 2006-07 through 2015-16.
Sources: Conference Form 990s filed with the IRS; conference officials