ESPN contract with ACC only guaranteed until 2027

[UConnJim]

A couple of points on ESPN. ESPN has managed to keep revenues flat recently with the uptake of ESPN+ and the ACC Network to offset cord cutting. But, ESPN+ subscribers and the average revenue per subscriber have flatlined and the ACCN revenues flatlined as well, but will get a boost for a year when the 3 new members join and then they will decline due to cord cutting. So how did ESPN managed to grow earnings last year? Cost reduction. Guess what their biggest cost reduction was from their Q4 earnings report:

"A decrease in programming and production costs reflecting lower college football costs attributable to the non-renewal of certain contracts."

In other words, ESPN lost Big 10 football, but revenues remained flat because they primarily come from the bundle and costs went down leading to an increase in earnings.

Why is the above important? We now know that ESPN has the option to extend the ACC past 2027, but they haven't yet which means the long term viability of the current ACC is in the hands of ESPN. Given cord cutting and ESPN trying to increase earnings, I don't think it's a given ESPN will extend the ACC. And, ESPN has to find money to bid for the NBA contract and the CFP contract which are more important than the ACC to ESPN. That is why ESPN may favor moving some of the brand name schools out of the ACC to the SEC even at higher cost, move some schools from the ACC to Big 12 at the same cost, have a couple depart for the Big 10 to eliminate their cost, and let the rest of the ACC become homeless like Washington St. and Oregon St. generating an overall cost savings for ESPN with no revenue impact. In fact, having FSU and Clemson play an SEC schedule would most likely increase advertising revenues when shown on TV vs playing an ACC schedule. And, which network do you think can more successfully transition to a DTC model, the SECN or the ACCN? I think the SECN.

 

[CL82]

A couple of points on ESPN. ESPN has managed to keep revenues flat recently with the uptake of ESPN+ and the ACC Network to offset cord cutting. But, ESPN+ subscribers and the average revenue per subscriber have flatlined and the ACCN revenues flatlined as well, but will get a boost for a year when the 3 new members join and then they will decline due to cord cutting. So how did ESPN managed to grow earnings last year? Cost reduction. Guess what their biggest cost reduction was from their Q4 earnings report:

"A decrease in programming and production costs reflecting lower college football costs attributable to the non-renewal of certain contracts."

In other words, ESPN lost Big 10 football, but revenues remained flat because they primarily come from the bundle and costs went down leading to an increase in earnings.

Why is the above important? We now know that ESPN has the option to extend the ACC past 2027, but they haven't yet which means the long term viability of the current ACC is in the hands of ESPN. Given cord cutting and ESPN trying to increase earnings, I don't think it's a given ESPN will extend the ACC. And, ESPN has to find money to bid for the NBA contract and the CFP contract which are more important than the ACC to ESPN. That is why ESPN may favor moving some of the brand name schools out of the ACC to the SEC even at higher cost, move some schools from the ACC to Big 12 at the same cost, have a couple depart for the Big 10 to eliminate their cost, and let the rest of the ACC become homeless like Washington St. and Oregon St. generating an overall cost savings for ESPN with no revenue impact. In fact, having FSU and Clemson play an SEC schedule would most likely increase advertising revenues when shown on TV vs playing an ACC schedule. And, which network do you think can more successfully transition to a DTC model, the SECN or the ACCN? I think the SECN.

On the other hand ACC is inexpensive content to ESPN. There's not a doubt in my mind that they will weigh the scenarios you're talking about, namely cherry picking a few ACC teams and moving them to the SEC, but in the end it may be more financially worthwhile for them to leave the existing inexpensive contract in place until 2037.

 

[UConnJim]

On the other hand ACC is inexpensive content to ESPN. There's not a doubt in my mind that they will weigh the scenarios you're talking about, namely cherry picking a few ACC teams and moving them to the SEC, but in the end it may be more financially worthwhile for them to leave the existing inexpensive contract in place until 2037.

Even thought the ACC may be perceived as cheap content, ESPN has plenty of content to fill their slots. With a 20 team SEC, they could have anywhere from 10 to 20 football games per week to show on ABC/ESPN/ESPN2/SECN. Throw in Big 12 content as well as American/CUSA/MAC/Sun Belt and ESPN would not really miss the ACC content. And, most of the top ACC brands would either go to the SEC or Big 12.

 

[CL82]

Even thought the ACC may be perceived as cheap content, ESPN has plenty of content to fill their slots. With a 20 team SEC, they could have anywhere from 10 to 20 football games per week to show on ABC/ESPN/ESPN2/SECN. Throw in Big 12 content as well as American/CUSA/MAC/Sun Belt and ESPN would not really miss the ACC content. And, most of the top ACC brands would either go to the SEC or Big 12.

OK, but they also have ESPNU and ESPN+ to fill. Keep in mind too that ESPN broadcasts year-round, not just during the football season. Particularly during the basketball season, the ACC provides good content at a cost-effective price.

 

[nelsonmuntz]

Even thought the ACC may be perceived as cheap content, ESPN has plenty of content to fill their slots. With a 20 team SEC, they could have anywhere from 10 to 20 football games per week to show on ABC/ESPN/ESPN2/SECN. Throw in Big 12 content as well as American/CUSA/MAC/Sun Belt and ESPN would not really miss the ACC content. And, most of the top ACC brands would either go to the SEC or Big 12.

Time slots only matter in cable.

ESPN would need a critical mass of content for customers to justify subscriptions, and they would need enough variety so that SEC couldn't just go DTC. That said, I see ESPN changing the nature of their broadcast agreements soon. The days of big guarantees are coming to an end.

 

[UConnJim]

OK, but they also have ESPNU and ESPN+ to fill. Keep in mind too that ESPN broadcasts year-round, not just during the football season. Particularly during the basketball season, the ACC provides good content at a cost-effective price.

Think AAC/Sun Belt/CUSA/MAC for ESPNU and ESPN+. And, Big 12 games are shown as well. Plus, the new SEC contract had a clause that some SEC football games will be shown on ESPN+.

 

[Patman]

I imagine that the work around here is that the auditors were able to review the contract(s) in the ACC offices (but not allowed to retain copies) and a confidentiality agreement was signed (standard in most audits, normally only breakable by potentially illegal activities) to keep the information private.

I'm not sure however what would happen if a public institution received an FOI request pertaining to audited information. The state could demand copies of notes and work papers. There may be a good amount of gray area on what the confidentiality agreement can and cannot cover.

Regardless, at some point the GOR agreement will become public information.

As I said. These people knew what they were doing when they set up the GOR rules. That was the whole purpose.

 

[NE Football]

Even thought the ACC may be perceived as cheap content, ESPN has plenty of content to fill their slots. With a 20 team SEC, they could have anywhere from 10 to 20 football games per week to show on ABC/ESPN/ESPN2/SECN. Throw in Big 12 content as well as American/CUSA/MAC/Sun Belt and ESPN would not really miss the ACC content. And, most of the top ACC brands would either go to the SEC or Big 12.

You are completely misinformed regarding content. G5 conferences are fine for Tuesday and Wednesday nights, but they don’t come close to the viewers that the ACC gets. ESPN is not trading ACC content for G5 content.

 

[Hoophound]

You are completely misinformed regarding content. G5 conferences are fine for Tuesday and Wednesday nights, but they don’t come close to the viewers that the ACC gets. ESPN is not trading ACC content for G5 content.

The ACC, without its top 4+ brands isn’t going to be getting ratings. Memphis will pull in more viewers than Wake or BC.

 

[UConnJim]

You are completely misinformed regarding content. G5 conferences are fine for Tuesday and Wednesday nights, but they don’t come close to the viewers that the ACC gets. ESPN is not trading ACC content for G5 content.

If the top brands from the ACC leave for other ESPN properties, they will still show their games and increase content for the other conferences. In fact, FSU playing an SEC schedule would get better ratings than playing an ACC schedule. Most of the ACC ratings are driven by FSU/Clemson/Notre Dame and by getting prime TV spots on ESPN/ABC. Give BC an AAC schedule with games on ESPN2/ESPNU/ESPN+ and their TV ratings would collapse. Plus, the Big 12 has comparable ratings as the ACC even after extracting Texas and Oklahoma. Look at week 15 and compare ratings for some games:

Iowa St./Kansas St. 3.29 million FOX
BYU/Oklahoma St. 2.89 million ABC
UTSA/Tulane 1.72 million ABC (right after the BC/Miami game)
Miami/BC 1.43 million ABC

 

[NE Football]

If the top brands from the ACC leave for other ESPN properties, they will still show their games and increase content for the other conferences. In fact, FSU playing an SEC schedule would get better ratings than playing an ACC schedule. Most of the ACC ratings are driven by FSU/Clemson/Notre Dame and by getting prime TV spots on ESPN/ABC. Give BC an AAC schedule with games on ESPN2/ESPNU/ESPN+ and their TV ratings would collapse. Plus, the Big 12 has comparable ratings as the ACC even after extracting Texas and Oklahoma. Look at week 15 and compare ratings for some games:

Iowa St./Kansas St. 3.29 million FOX
BYU/Oklahoma St. 2.89 million ABC
UTSA/Tulane 1.72 million ABC (right after the BC/Miami game)
Miami/BC 1.43 million ABC

If ESPN actually shared your view they would not have paid equal shares for SMU, Stanford & Cal. They could have easily killed the expansion by telling the ACC that they would not exercise their option to extend the contract. Instead they chose to pay the ACC another 70 plus million per year.

 

[UConnJim]

If ESPN actually shared your view they would not have paid equal shares for SMU, Stanford & Cal. They could have easily killed the expansion by telling the ACC that they would not exercise their option to extend the contract. Instead they chose to pay the ACC another 70 plus million per year.

It was in the ACC's contract with ESPN to pay for expansion. And, the ACC needs 15 schools to keep their ESPN contract in good standing which was one of the motivators to expand now instead of waiting for a possible conference move by one or more of their current schools.

ESPN can extend the ACC contract at any time, yet they haven't. If the ACC media deal is a great bargain for ESPN, why haven't they extended the contract?

 

[Rufus]

It was in the ACC's contract with ESPN to pay for expansion. And, the ACC needs 15 schools to keep their ESPN contract in good standing which was one of the motivators to expand now instead of waiting for a possible conference move by one or more of their current schools.

ESPN can extend the ACC contract at any time, yet they haven't. If the ACC media deal is a great bargain for ESPN, why haven't they extended the contract?

Exactly. ESPN let the first deadline pass without extending the contract. The ACC Commissioner - on his own and without the required approval of league members - extended the deadline for ESPN to decide if they want to extend the contract. And even after that, still no ESPN extension.

 

[FfldCntyFan]

Exactly. ESPN let the first deadline pass without extending the contract. The ACC Commissioner - on his own and without the required approval of league members - extended the deadline for ESPN to decide if they want to extend the contract. And even after that, still no ESPN extension.

I will ask again, please provide evidence that the bolded is true.

 

[Chin Diesel]

The ACC, without its top 4+ brands isn’t going to be getting ratings. Memphis will pull in more viewers than Wake or BC.

Or at least a close enough difference that paying a premium for WFU doesn't make sense.

 

[TheCatsLair]

It was in the ACC's contract with ESPN to pay for expansion. And, the ACC needs 15 schools to keep their ESPN contract in good standing which was one of the motivators to expand now instead of waiting for a possible conference move by one or more of their current schools.

ESPN can extend the ACC contract at any time, yet they haven't. If the ACC media deal is a great bargain for ESPN, why haven't they extended the contract?

Because it would make sense to exercise the option 3 to 5 years out and have it on the books. It is the same reason why a team doesn't exercise a player's options 4 or 5 years ahead.

 

[NE Football]

It was in the ACC's contract with ESPN to pay for expansion. And, the ACC needs 15 schools to keep their ESPN contract in good standing which was one of the motivators to expand now instead of waiting for a possible conference move by one or more of their current schools.

ESPN can extend the ACC contract at any time, yet they haven't. If the ACC media deal is a great bargain for ESPN, why haven't they extended the contract?

The answer is simple, ESPN has another year to exercise their termination rights. With FSU making noise for a year and now filing a lawsuit challenging the GOR’s, it creates uncertainty as to what teams will be in the conference a year from now. ESPN will be a key witness in the lawsuit. They don’t want to lose FSU to Fox & the B1G.

 

[UConnJim]

The answer is simple, ESPN has another year to exercise their termination rights. With FSU making noise for a year and now filing a lawsuit challenging the GOR’s, it creates uncertainty as to what teams will be in the conference a year from now. ESPN will be a key witness in the lawsuit. They don’t want to lose FSU to Fox & the B1G.

If ESPN is worried about losing FSU to the Big 10/FOX, they can push them to the SEC as ESPN owns the SEC media rights.

 

[Rufus]

If ESPN is worried about losing FSU to the Big 10/FOX, they can push them to the SEC as ESPN owns the SEC media rights.

FSU gave a big F* U* to both the ACC and ESPN. I don't see this happening.

The ACC and FSU will likely settle out of court. FSU can claim victory because they got out and made it to the B1G (most likely destination). The ACC can claim victory because it will say FSU paid a huge exit fee, but was unable to break the grant of rights, but rather paid a penalty to get out of the GOR. The only way the ACC saves face is by making it seem like the GOR is iron clad and by making the final exit fee high enough that most other schools can't bolt like FSU is about to do. Still, it's inevitable that the other top brands leave too. Once they know the exact amount FSU paid to leave, they will be raising funds ASAP to do the same.

 

[CL82]

FSU gave a big F* U* to both the ACC and ESPN. I don't see this happening.

The ACC and FSU will likely settle out of court. FSU can claim victory because they got out and made it to the B1G (most likely destination). The ACC can claim victory because it will say FSU paid a huge exit fee, but was unable to break the grant of rights, but rather paid a penalty to get out of the GOR. The only way the ACC saves face is by making it seem like the GOR is iron clad and by making the final exit fee high enough that most other schools can't bolt like FSU is about to do. Still, it's inevitable that the other top brands leave too. Once they know the exact amount FSU paid to leave, they will be raising funds ASAP to do the same.

That's a great point. A known exit fee, even if significant is probably less daunting than an unquantified exit fee. Part of the strength of a GOR is that they are hard to value and thus nobody is quite sure what it would cost to break one.

 

[UConnJim]

A twitter rumor I saw theorized that FSU is threatening to leave now so that ESPN does not extend the ACC media contract with the uncertainty that FSU might leave. That could reduce the potential exit fee.

 

[TheCatsLair]

A twitter rumor I saw theorized that FSU is threatening to leave now so that ESPN does not extend the ACC media contract with the uncertainty that FSU might leave. That could reduce the potential exit fee.

The issue is that the grant of rights itself extends to 2036, unless somehow it is tied to the TV deal. That would explain why the ACC is trying to hide it.

 

[TheCatsLair]

FSU gave a big F* U* to both the ACC and ESPN. I don't see this happening.

The ACC and FSU will likely settle out of court. FSU can claim victory because they got out and made it to the B1G (most likely destination). The ACC can claim victory because it will say FSU paid a huge exit fee, but was unable to break the grant of rights, but rather paid a penalty to get out of the GOR. The only way the ACC saves face is by making it seem like the GOR is iron clad and by making the final exit fee high enough that most other schools can't bolt like FSU is about to do. Still, it's inevitable that the other top brands leave too. Once they know the exact amount FSU paid to leave, they will be raising funds ASAP to do the same.

Exactly, and even before that ESPN and the SEC did the same thing by screwing FSU out of a CFP berth bid. I'm guessing that FSU wants nothing to do with either entity.

 

[nelsonmuntz]

A twitter rumor I saw theorized that FSU is threatening to leave now so that ESPN does not extend the ACC media contract with the uncertainty that FSU might leave. That could reduce the potential exit fee.

The issue is that the grant of rights itself extends to 2036, unless somehow it is tied to the TV deal. That would explain why the ACC is trying to hide it.

Interesting theory Jim. If there is no media contract, then there are no damages for breaking the nonexistent contract. The would significantly reduce any potential exit fee. CatsLair may be right that the GOR is tied to the extension somehow, and that is why the contract is kept under lock and key (which is still the most ridiculous part of this situation).

 

[billybud]

The GOR reads that the programs assign the media rights to the conference as necessary for the conference to meet the ESPN contract requirements... The GOR and the ESPN Agreement are intrinsically intertwined.

L Grant of Rights. Each of the Member Institutions hereby (a) irrevocably and exclusively grants to the Conference during the Term (as defined below) all rights (the "Rights") necessary for the Conference to perform the contractual obligations of the Conference expressly set forth in the ESPN Agreement, regardless of whether such Member Institution remains a member of the Conference during the entirety of the Term and (b) agrees to satisfy and perform all contractual obligations of a Member Institution during the Term that-are expressly set forth in the ESPN Agreement.

 

[Patman]

The issue is that the grant of rights itself extends to 2036, unless somehow it is tied to the TV deal. That would explain why the ACC is trying to hide it.

They can go see it. The point is to hide it from the public

 

[billybud]

The GOR is accessible...the ESPN contract has been a guarded nuclear secret....The conference members did not get to review nor vote on the ESPN contract...that was between the ACC office and ESPN.

 

[NE Football]

If ESPN is worried about losing FSU to the Big 10/FOX, they can push them to the SEC as ESPN owns the SEC media rights.

They can’t force the SEC to take them and they own FSU’s media rights for a lot less in the ACC. It takes a 75% vote to get into the SEC.

 

[billybud]

They can’t force the SEC to take them and they own FSU’s media rights for a lot less in the ACC. It takes a 75% vote to get into the SEC.

FSU's value to ESPN may be a lot more if not playing Wake, Duke, BC, Cuse, etc al...And that is the reason behind the B1G/SEC consolidations into a P2. The media likes more "brand" match ups.

 

[Rufus]

FSU's value to ESPN may be a lot more if not playing Wake, Duke, BC, Cuse, etc al...And that is the reason behind the B1G/SEC consolidations into a P2. The media likes more "brand" match ups.

I think FSU is putting the screw to ESPN. They have a wink, wink agreement with the B1G through third party channels or they wouldn't be doing this.