Dennis Dodd: Big Ten expansion not done...stay tuned

[businesslawyer]

I only went to a Top 25ish law school and a Top 20ish (though admittedly it was ranked much worse back then -- not even #1 in NEngland) state public univ for undergrad, so now I finally understand why I couldn't crack $400 per hour prior to leaving private practice.

Mystery solved!! Thanks Nelson!

Seriously? How do you feed your children?

 

[UConn9604]

The amateur Johnny Cochrane's on this board continue to make up "outs" and then attack me or others that point out the unlikelihood of said outs existing with "you don't know". You are right, i dont KNOW. I also don't KNOW that I won't be having a threesome with two supermodels this weekend, but I am not booking a suite at the Plaza just in case.

You find holes in contracts for 2 reasons:

1) they are breaking new legal ground. Investment contracts and especially joint ventures are custom contracts, so you often find holes in those contracts because stuff comes up that no one anticipated. A GOR is a boilerplate media rights agreement with a few minor tweaks. These contracts have existed for decades and been very well litigated. A mid level associate could bank this out in a few days (although the partner will bill for a couple of weeks).

2) Someone wants the out in the contract. In a lot of deals, one party doesn't want to be locked up. But in this case, every school was more worried about others leaving than they were about keeping their options open. Every side of the deal was trying to close loopholes.

It is possible that there is a hole in the agreement, but based on what we know, I wouldn't be booking a suite at the Plaza.

If these things are truly "boilerplate," there must be another copy of one laying around somewhere, right? I mean, if Grant of Rights contracts have "existed for decades," can you find one? If they've been "very well litigated," can you give me a cite to just one case regarding a Grant of Rights contract for an athletic conference in which an institution gives up its rights to televise performances within venues under their control even when they're not a part of the conference?

I'm guessing you'll go 0-for-3 on those requests.

Here's the one thing we know about conference realignment: every institution is always looking out for itself, as it should, and that's why I'm pretty confident that these GORs are not the iron-clad shackles that you think they are.

 

[Mr. Wonderful]

There's still confusion over what the "Rights" are in a Grant of Rights?

It's Broadcast Rights.

The right to broadcast the games is a powerful asset. If a school decides to go to another conference, the conference it leaves can choose not to sell the broadcast rights to the new conference, effectively locking the school out of all TV exposure until the Grant of Rights expires. The old conference is still required to pay full share for those rights, but they can choose not to use them. If they were to not pay that team's share of the TV contract, they would also forfeit the broadcast rights.

And it doesn't take a lawyer, or even direct knowledge of the contract verbiage, to understand.

An analogy is automobile insurance. You get a card with an expiration date well into the future, but if you don't pay the monthly fee, it doesn't mean you're still covered until that date. A Grant of Broadcast Rights works the same way, a conference owns them as long as they pay the school the annual broadcast fee.

No team in the ACC aside from Notre Dame would challenge a Grant of Rights. Notre Dame still owns the broadcast rights to its football content, so the lack of exposure threat only exists for basketball.

As for the "Notre Dame must join only the ACC until 2026" clause, I doubt that would stand up in court.

 

[HuskyHawk]

Yes, but if FSU joined the Big 12 for example, the media rights of all FSU conference road games would be held by the Big 12 since they are also home conference games. Networks pay for match ups and FSU as an opponent would be more valuable than say Iowa State. (Also, it is not clear what happens with bowl game TV revenues or playoff revenues as we haven't read the contracts.) Thus, it is possible that even if a school with a GORs joined a new conference (especially if that school is in the ACC with an ~$20 million conference revenue model), they might actually see an increase in conference revenues from TV revenues, bowl games, playoffs,... We'll see what the Big 10 gets when their media rights come up as it is possible that they will be making > 2x the ACC.

I think the key issue is that all contracts have outs and the key to breaching contracts are damages. For example, I don't think Maryland will pay anywhere close to $50 million for leaving the ACC as the ACC has replaced Maryland with Louisville and negotiated a better TV contract for more money. Where are the damages?

The real question on the GOR is not whether it would be enforced in the general sense, it is whether any court would order specific performance. So in your hypo, does the ACC literally get to broadcast FSU home games on ESPN (and does it reallt want to?) or does it instead get a measure of damages that approximates the value of those broadcasts. My guess is that the courts would not require specific performance and so the new conference would indeed have the broadcast rights, but would pay damages to the prior conference, each year during the GOR.

This is important for two reasons, it means that the new conference would in fact get the games it wants on its network, even if it wouldn't get a real financial boost from those games. Second, it means that each school could argue the damages attributable to the value of its rights. So if Iowa State broke the Big 12 GOR, they could claim that the damages would not be equal to a pro-rata share of the Big 12 contract, but instead, would be much less. Texas' would be much more, though they wouldn't argue that obviously. Additionally, all commercial contracts have an implied duty to mitigate damages. So a replacement school (like Louisville for Maryland) would potentially reduce the damages.

So will any school challenge it? It isn't really in the interest of the conferences for that to happen. My guess is that if we see movement from a GOR conference, it will be negotiate in advance. Like Doc Rivers to the Clippers. So if the Big Ten wants Kansas, they would negotiate with the Big XII in adance to purchase the media rights for KU.

 

[pj]

I think the key facts about the GoR are this:

1) A team can change conferences under a GoR agreement, the GoR does not prohibit that, and the GoR obligations can still be performed by both parties after the realignment, so there is no default of a GoR upon conference change. Continuation of the GoR does not leave the departing school worse off, and if the destination conference is perceived to be sufficiently better that the two parties are willing to lose a little financially as they wait for the GoR to expire, they can operate for years under the former conference's GoR. All it means is that if an ACC school earning $20 mn/yr left the ACC for the B1G paying $35 mn/year to full members, they might get $20 mn/yr from the ACC (still) and $3 mn/yr from the B1G (or some nominal payment) until the GoR expires. The school is better off. The conference doesn't care, the $20 mn/yr is paid by ESPN. ESPN doesn't care much, it now has the departing schools B1G games which may be worth as much or more to it as their ACC games. The new conference gets the new team's in-conference road games and has full rights after the GoR expires.

2) The value of the media rights is diminished after a conference change, and ALL PARTIES (the conference and its TV network assignee that own the rights, and the school that departed, and the destination conference and its TV network assignee) can make more money if the GoR is terminated, with appropriate monetary transfers to compensate the losers. Collectively they have an incentive to renegotiate the contract. There is a high chance the GoR would be renegotiated.

3) The purpose of the GoR is a pass-through of rights to the school's media to a TV network. The GoR assigns media rights to the conference and the conference in a separate but aligned agreement sells them to a network (ACC to ESPN, for instance). The GoR is timed to terminate at the same time as the conference-network agreement because the purpose of the GoR is to give the network confidence it is not going to acquire rights to an "ACC" but lose rights to UNC/FSU/Clemson/Duke games when they move to a Fox-sponsored league. It assures that the network has rights to the same collection of schools throughout the duration of the contract.

4) Because this is its purpose, there is no reason for schools to have agreed to punitive clauses that cause them to forfeit revenue from their media rights when they change conferences. That would create a windfall for the former conference's TV network. The purpose of the agreement was not to create a windfall for someone in the event of realignment, but to prevent a catastrophic loss for the network in the event of realignment. I am not going to believe that schools agreed to such a thing until some informed official states that that is the case. None have.

5) I see no reason why the validity of a GoR agreement would be challenged in court. Maryland has an exit fee case against the ACC because the $50 mn exit fee was imposed without Maryland's consent, effective immediately, at the very time Maryland was negotiating its departure. That's totally different than in a GoR where it is clearly entered into voluntarily and with full knowledge of the consequences. The outcome would be negotiated.

6) Given that a departure from a GoR conference would not prevent a GoR from fulfilling its function, I don't understand the claim of Internet prognosticators that a GoR conference would never raid another GoR conference because they fear that would impair their own GoR. No, the GoR would not be impaired and the purpose of the GoR, extracting more money from their TV network partner, would still be fulfilled.

 

[nelsonmuntz]

I give up. Everyone on this board is right. The GoR's have massive holes you could drive a truck through. They aren't really contracts at all. All these high pticed lawyers that drafted the actual agreements, and a lot of the posters on this board, don't know half as much as PJ and rmoore and Mr. Wonderful.

In fact, it turns out a content provider can sell their media rights as many times as they want under this new theory.

 

[justinslot]

I did find this post from arkstfan on the CSNBBS realignment board compelling:

They [GORs] are strong in theory.

Here is the reality.

Kansas and Virginia have pledged their rights to their respective conferences until a date in the future. Those conferences no longer own those rights having sold them to ESPN in the case of UVA and ESPN and Fox in the case of Kansas.

All the conference holds now is right to receive X dollars per year as set by their TV contract. If Virginia or Kansas were to leave and the TV network were to reduce the stream of payments, the departing school would be liable for the difference between the amount contracted already and the amount received. If the rights fee is not reduced, there are no damages and the departing school pays nothing under the GOR. But if there is a reduction then there are damages to pay.

If ESPN is just an observer, the GOR has significant value. If ESPN uses the GOR to leverage an extension of the Big 10 TV deal then ESPN has an incentive to not reduce the rights fee making the GOR essentially without value for retaining members.

 

[UConnJim]

I give up. Everyone on this board is right. The GoR's have massive holes you could drive a truck through. They aren't really contracts at all. All these high pticed lawyers that drafted the actual agreements, and a lot of the posters on this board, don't know half as much as PJ and rmoore and Mr. Wonderful.

In fact, it turns out a content provider can sell their media rights as many times as they want under this new theory.

Don't take it so seriously. It's only a message board that most want to slant in UConn's favor!

Hopefully, we can put this to bed as it seems nobody posting on this board has read the contracts and nobody knows what the outs are in the GOR contracts. I guess that is a perfect situation for a Boneyard debate as nobody can be proven right and nobody can be proven wrong!

 

[UPitt]

I give up. Everyone on this board is right. The GoR's have massive holes you could drive a truck through. They aren't really contracts at all. All these high pticed lawyers that drafted the actual agreements, and a lot of the posters on this board, don't know half as much as PJ and rmoore and Mr. Wonderful.

In fact, it turns out a content provider can sell their media rights as many times as they want under this new theory.

It was high priced lawyers that approved these agreements as well. They are no dummies either. Nobody said breaking the contract would be clear cut and easy, but all contracts have provisions for termination. ESPN or FOX, the conference, and each school likely has termination clauses. When invoked, the departing party would be subject to adhearing to additional clauses for media rights (ie home games remain with network) or monetary damages or a combination of both. Because no network wants to televise a competing conference's games, a network will sue for monetary damages. Just like every other contract that exists, it is always about the money.

 

[Drimple]

Guys, a "grant of rights" is nothing more than an exclusive license of one party's intellectual property to another. This is extremely common in entertainment agreements and such licenses are totally enforceable.

A school and a conference or a network might negotiate their way out of such a license for a variety of business reasons, but the notion that a "grant of rights" is on some kind of tenuous legal ground and will be struck down in court is fairly ridiculous.

 

[CTMike]

I don't think anyone is saying that GoR's aren't valid- just that it might not necessarily be some iron-clad lock on a conference's membership. If a member leaves- money will (likely) have to change hands.

PS- Nelson, for whatever reason, your last post above was one of my absolute favorites. It was so Nelson.

 

[Mr. Wonderful]

I give up. Everyone on this board is right. The GoR's have massive holes you could drive a truck through. They aren't really contracts at all. All these high pticed lawyers that drafted the actual agreements, and a lot of the posters on this board, don't know half as much as PJ and rmoore and Mr. Wonderful.

In fact, it turns out a content provider can sell their media rights as many times as they want under this new theory.

Please don't bring my name up in posts unless you want to say something to me. It's rude. It's like talking about someone standing next to you to someone else as if they're not there.

Beside, I have no idea why I've joined some opposition club of yours. Nothing I posted contradicts your position. Grant of Rights is not going to be challenged by any school anywhere not named Notre Dame, and that's only because Notre Dame football is not part of any GoR agreement. The special clause about joining the ACC if they join anyone could just come down to monetary damages as made precedent by the Maryland case.

 

[pj]

I give up. Everyone on this board is right. The GoR's have massive holes you could drive a truck through. They aren't really contracts at all. All these high pticed lawyers that drafted the actual agreements, and a lot of the posters on this board, don't know half as much as PJ and rmoore and Mr. Wonderful.

In fact, it turns out a content provider can sell their media rights as many times as they want under this new theory.

I have said:

• The GoRs have no holes.
• They are binding contracts.
• Content providers can only sell their media rights once.
• The GoRs are not a major barrier to conference realignment. They are a major barrier to TV network realignment. They prevent (say) UNC from moving its rights from ESPN to Fox. They do not prevent UNC from moving from the ACC to the B1G while remaining on ESPN.

You seem to be unable to read. You keep accusing me of denying the first three bullets, when in every post I affirm them.

 

[Drimple]

I don't think anyone is saying that GoR's aren't valid- just that it might not necessarily be some iron-clad lock on a conference's membership. If a member leaves- money will (likely) have to change hands.

PS- Nelson, for whatever reason, your last post above was one of my absolute favorites. It was so Nelson.

Sure, but a conference probably isn't going to want a school unless they get the GOR issue straightened out ahead of time. There's a difference between the Big Ten saying "Welcome Maryland, I know you'll work out that exit fee business and we'll even loan you a few bucks if you need it because we can make money off you right away" and "Welcome UNC, we can't make a dime off you for 20 years so please try to get that worked out for us, thanks."

That, in effect, makes it fairly iron-clad from a business perspective.

That said, I think you could very well see some schools negotiate their way out more or less painlessly. I don't think anyone is really in love with the idea of being embroiled in school vs. conference lawsuits ala Maryland and Rutgers.

 

[UConn9604]

I give up. Everyone on this board is right. The GoR's have massive holes you could drive a truck through. They aren't really contracts at all. All these high pticed lawyers that drafted the actual agreements, and a lot of the posters on this board, don't know half as much as PJ and rmoore and Mr. Wonderful.

In fact, it turns out a content provider can sell their media rights as many times as they want under this new theory.

Would you take bets on whether the ACC in 2028 looks like the ACC in 2013?

 

[pj]

Sure, but a conference probably isn't going to want a school unless they get the GOR issue straightened out ahead of time. There's a difference between the Big Ten saying "Welcome Maryland, I know you'll work out that exit fee business and we'll even loan you a few bucks if you need it because we can make money off you right away" and "Welcome UNC, we can't make a dime off you for 20 years so please try to get that worked out for us, thanks."

That, in effect, makes it fairly iron-clad from a business perspective.

That said, I think you could very well see some schools negotiate their way out more or less painlessly. I don't think anyone is really in love with the idea of being embroiled in school vs. conference lawsuits ala Maryland and Rutgers.

Why? You're right, the new conference doesn't make a dime off the new team. But it doesn't lose a dime either. And the migrating team doesn't lose either, if the old conference has to continue paying on the old GoR. So the move to a new conference is dollar-neutral for both parties. They are going to evaluate it on its long-term merits, not short-term financial impact. If, say, Kansas feels it is better off in the B1G than the B12, the GoR won't prevent the move.

 

[GopherHawk]

I agree with PJ. Here is a poor example. If a team moved to a conference with more compelling home games the vale of their media rights would increase. There would be no loss to the previous conference. In fact the moving school could potentially negotiate that portion from the new conference.

 

[CL82]

I give up. Everyone on this board is right.

Wow, that was a long time coming. I'm glad I didn't hit the ignore button....kind of.

 

[NEforceUConn]

Would you take bets on whether the ACC in 2028 looks like the ACC in 2013?

Just as their was absolutely NO chance that PJ Hairston was getting charged with posession of a handgun (even though it was found about 5 feet from the car) in North Carolina, there is NO chance that the ACC in 2028 will look like the ACC in 2014.

 

[SouthronCross]

Just as their was absolutely NO chance that PJ Hairston was getting charged with posession of a handgun (even though it was found about 5 feet from the car) in North Carolina, there is NO chance that the ACC in 2028 will look like the ACC in 2014.

What do you think will be different? Who will still be there, and, who will be gone, in your opinion? I am honestly curious.

 

[Limbo Land]

What do you think will be different? Who will still be there, and, who will be gone, in your opinion? I am honestly curious.

I agree with SouthronCross that the teams in the ACC will stay pretty much the same.. BUT... only if the ACC network actually gets the schools more money. Fla St. and Clemson were all but promised that if they hang in with the ACC then they will get the new revenue stream. Fl. St Pres pretty vocal about the lack of new funding and Tier 3 rights. Problem is that the deal with Comcast is extremely disadvantageous. No new revenue stream.... Fl St. and Clemson will look to leave.

 

[itgoeslike]

I agree with SouthronCross that the teams in the ACC will stay pretty much the same.. BUT... only if the ACC network actually gets the schools more money. Fla St. and Clemson were all but promised that if they hang in with the ACC then they will get the new revenue stream. Fl. St Pres pretty vocal about the lack of new funding and Tier 3 rights. Problem is that the deal with Comcast is extremely disadvantageous. No new revenue stream.... Fl St. and Clemson will look to leave.

The following article suggests that the ACC network will be delayed and may never get off the ground.

http://www.sportsbusinessdaily.com/...:"35762_1369068703_166310064","pt":"twitter"}

 

[woomba]

Even most people on message boards were skeptical when talk of the ACC Network surfaced when ESPN already owns the most of media rights already.

The question becomes were ACC Presidents fooled by Swofford's promises or were they aware that the network was a long shot going in when they signed the GoR...meaning that the formation of the ACCN will NOT be the catalyst for future realignment going forward.

I personally bet on the latter and think the ACC's safe for now.

 

[itgoeslike]

ESPN owns the ACC's rights top to bottom. The problem is that they sold a portion of 2nd and 3rd tier rights to Raycom and Fox Sports Net. The cost to re-aquire them is going to be cumbersome and expensive, and without a "pot of gold" (like the SEC) waiting for them, they are clearly dragging their feet. Per the article above, it may be cheaper to dish out $2M per school than try to get the ACCN off the ground.

 

[Huskyforlife]

If we ever do find our way into the B1G I'm going to go troll the Syracuse board harder than I've ever trolled anyone before.

It will be glorious.

no you won't. they banned me on that board after we beat them last year and i hadn't even posted yet about it. they're board does not tolerate other fans. at least not me