Sporting News: Realignment far from over, FSU source: If MD reduces exit fee, like "free agency"

[TuxedoYoda]

IMO, you are 1/2 right. I have long believed the B12 is vulnerable. My view is they are one call from Larry Scott away from losing OU (and OSU).

I'm sure OU & OSU can't wait to go the next 13 years without a penny in TV revenue. You certainly have this all figured out.

 

[IthacaMatt]

Matt: you think that if you own 10 shares of ATT, they can pass a by law saying if you sell the stock you owe them $1 gadzillion. And yes, I know it's not that simple, but neither is the theory you are pushing. As a matter of general contract law, liquidated damages clauses are not enforced if courts find them to be punitive. And this may be viewed as a liquidated damages clause and, if it is, the question is not how much is a school helped by being in the conference but how much is the conference harmed by the school leaving.

You really think the ACC will have an easy time showing that it suffered $50M of damages when it replaced maryland with Louisville within a week? I'm not sure they can show any damages beyond the costs of a few board meetings by conference call.

IF I own shares of AT&T, I have no say over compensation to executives, stock options diluting my shares, or the failure to pay a dividend.

If you don't think the ACC was badly harmed by Maryland's defection, and the constant media harping on Florida State, Clemson or whomever else, leaving, then just look at the Big East. They turned down an $11M/year/team contract offer, and now would be lucky to get half of that, if the entire conference doesn't break up in the next couple months.

 

[IthacaMatt]

First, the court will decide if $50 million is punitive or not. The ACC will argue it isn't. Considering Marylands athletic budget is set at $57 million, Maryland has an argument it is.

Secondly, Maryland left about 2 months after the vote. The ACC will surely argue as you have. Maryland will likely counter that they were not given enough time to exit while doing their due diligence as a public university which is beholden to the state of Maryland and said state's taxpayers. They moved as quickly as possible, with their no vote standing for their disagreement with the increase.

Fair points. This will be interesting, to say the least. I think that, unlike the Big East v. WVU case, the ACC will try to see this through on the full $50M. Otherwise, they face a Big East like situation.

 

[IthacaMatt]

I don't think I'm saying that. The Court's inquiry should be what were the ACC's damages assuming that the ACC used its best efforts to limit them.

The problem here is that the ACC easily found a replacement school with better athletics. We can all make up vague and inchoate damage claims, but that's different than convincing the court they exist.

And it would be different, for example, than the Big East claiming it was damaged by LV's departure when the best replacement is ECU.

Well, how different is it? First, the Big East got TCU as a replacement for WVU, which many people crowed about as an upgrade. Then the addition of Boise State, another "upgrade" - if you measure only in terms of recent on-the-field success. But that is ephemeral. The Big East lost brand value when charter members left. That hurt the television product, even if the "replacement teams" had good records. Would you make the same argument that the Big East is in just as good of shape and would have a hard time proving damages?

 

[Oxford Bob]

Fair points. This will be interesting, to say the least. I think that, unlike the Big East v. WVU case, the ACC will try to see this through on the full $50M. Otherwise, they face a Big East like situation.

Absolutely correct. If the ACC gets the $50M or close to it , then it helps them defend their turf and keeps some schools from leaving. If they get close to what BE got with WVU, it could lead to a jailbreak.

 

[caw]

Fair points. This will be interesting, to say the least. I think that, unlike the Big East v. WVU case, the ACC will try to see this through on the full $50M. Otherwise, they face a Big East like situation.

It most definitely will be interesting. I have to think it goes down a bit, but JMO.

What is the most a team has paid to get out of a conference? WVU at 15? I wonder how much looking at what other conferences exit fees will weigh on determining if the ACC one is punitive in nature. I think the ACC's is 30 million more than the next closest?

 

[HuskyHawk]

Doesn't the ACC have a right to ask of its members to commit to the common cause? And isn't putting in place a strong disincentive to leaving a rational thing to do? Look at the Big East - after the first raid, they said "let's put in place an exit fee and a waiting period, to prevent others from leaving, too." You want to know that others are committed to membership. Look at the Big 10. Do you think their grant of TV rights is oppressive and unenforceable?

I belive that the $50M came up for a vote at the meeting, and had not been previously proposed. Let's say you are part of a homeowners association, and they have a normal meeting where there is a suprise vote, with no warning, to say that each homeowner must put up $200k to build a community center and pool. The requirement is effective immediately, there is no delay in implementation to allow you to manuever. Your options: move out of your house immediately or pay. Enforce it? Might that be unconscionable? Might it also be a punitive amount with no basis in fact? Liquidated damages are reduced all the time.

I think Maryland has tons of arguaments here. They will definitely pay something. I also think that they will definitely pay less than $50M. I think one of the best arguments that this is unconsionable is that it took effect immediately, so that none of the schools had any option but to accept it. Maryland could not realistically withdraw from the ACC at that moment, which was the only choice given them.

 

[whaler11]

I'm sure OU & OSU can't wait to go the next 13 years without a penny in TV revenue. You certainly have this all figured out.

How about we just assume you say 'Grant of Rights' in every thread and you can find a more productive way to spend your time.

 

[gioff23]

I'm sure OU & OSU can't wait to go the next 13 years without a penny in TV revenue. You certainly have this all figured out.

So, you can't enforce a 3 year exit or an exit fee, but you can enforce a GoR. Good luck with that ....

BTW, am I the only one laughing that there is still a SN. Does anyone really read that?

 

[TuxedoYoda]

So, you can't enforce a 3 year exit or an exit fee, but you can enforce a GoR. Good luck with that ....

BTW, am I the only one laughing that there is still a SN. Does anyone really read that?

A GOR is not an exit fee. It isn't "enforced." The conference legally owns the TV rights for a school.

 

[whaler11]

A GOR is not an exit fee. It isn't "enforced." The conference legally owns the TV rights for a school.

Yes in theory. No one knows if it works.

 

[kyleslamb]

A GOR is not an exit fee. It isn't "enforced." The conference legally owns the TV rights for a school.

Like any clause of a contract, though, it has limitations on the scope and duration. If the clause were deemed unreasonable, it could be struck down in court, meaning the entire Grant of Rights agreement is inapplicable.

 

[TuxedoYoda]

Like any clause of a contract, though, it has limitations on the scope and duration. If the clause were deemed unreasonable, it could be struck down in court, meaning the entire Grant of Rights agreement is inapplicable.

The lawyers from the Big 10, Big 12, & Pac 12 all think they are ironclad. On Google, you can easily find university presidents (who are lawyers) from these conferences talking publicly about how they believe GORs are ironclad. The lawyers from the networks with contingent deals think they are ironclad. The football schools in the ACC are afraid to sign a GOR with the ACC because they are afraid it is ironclad.

At the very least, you guys have to admit that a GOR seems to be a superior tool for conference stability than an exit fee.

 

[gioff23]

It is superior, no doubt. But it is new and has not been challenged. A decade ago the exit provisions were ironclad. We won't know until challenged, but i would be interested to hear the reaction when a conference says a school can not take its own media rights with it in a judicial proceeding.

 

[specialisthusky]

The lawyers from the Big 10, Big 12, & Pac 12 all think they are ironclad. On Google, you can easily find university presidents (who are lawyers) from these conferences talking publicly about how they believe GORs are ironclad. The lawyers from the networks with contingent deals think they are ironclad. The football schools in the ACC are afraid to sign a GOR with the ACC because they are afraid it is ironclad.

At the very least, you guys have to admit that a GOR seems to be a superior tool for conference stability than an exit fee.

Cool story. Do you ever get sick of talking about it? We get it yoda; you think the gor is flawless. You constantly reminding everyone at every chance u get is getting old.

 

[TuxedoYoda]

A decade ago the exit provisions were ironclad.

That is not accurate.

Regarding GORs, everyone should read this:

http://www.usatoday.com/story/sport...-acc-presidents-commitment-statement/1752757/

 

[kyleslamb]

The lawyers from the Big 10, Big 12, & Pac 12 all think they are ironclad. On Google, you can easily find university presidents (who are lawyers) from these conferences talking publicly about how they believe GORs are ironclad. The lawyers from the networks with contingent deals think they are ironclad. The football schools in the ACC are afraid to sign a GOR with the ACC because they are afraid it is ironclad.

At the very least, you guys have to admit that a GOR seems to be a superior tool for conference stability than an exit fee.

Very little in law is "ironclad." There are exceptions to everything and all it takes is one judge to have a different opinion of an agreement to be tossed out in court.

Also, if the Big Ten thought it was 'ironclad' there'd be no rumors emanating from Big Ten country about Kansas. There'd be no reason to look at them if it were truly 'ironclad.'

Regardless of what you think about a Grant of Rights, the Big Ten seems to think if it decides it wants Kansas, the GOR won't be a total stumbling block to doing so.

For the record, Grant of Rights agreements are challenged often in the music industry as they are standard in recording contracts. And many artists have won lawsuits challenging them depending on the situation. They're not ironclad. Sometimes they hold up, sometimes they don't.

 

[Jericho]

Very little in law is "ironclad." There are exceptions to everything and all it takes is one judge to have a different opinion of an agreement to be tossed out in court.

Also, if the Big Ten thought it was 'ironclad' there'd be no rumors emanating from Big Ten country about Kansas. There'd be no reason to look at them if it were truly 'ironclad.'

Regardless of what you think about a Grant of Rights, the Big Ten seems to think if it decides it wants Kansas, the GOR won't be a total stumbling block to doing so.

For the record, Grant of Rights agreements are challenged often in the music industry as they are standard in recording contracts. And many artists have won lawsuits challenging them depending on the situation. They're not ironclad. Sometimes they hold up, sometimes they don't.

The Big 10 can add Kansas and potentially work around the "Grant of Rights" issue. A grant of rights does not prevent a school from moving. It only prevents a school from bringing its TV rights with them. So if Kansas left, all the Kansas games would remain property of the Big 12 for next dozen or so years. Or at least the rights Kansas granted to the Big 12. Remember that in the Big 12, that's only Tier 1 and Tier 2 television rights. Kansas retains its rights to Tier 3 sports.

If Kansas went Big 10, it could provide no Tier 1 or Tier 2 inventory to the Big 10 until its grant of rights expire or the grant of rights was bought out. However, it could grant Tier 3 rights (or buy out whomever owns them) to the conference. The Big 10 could then take the Tier 3 stuff and stick it on their network. While the main content providers might not likely pay the Big 10 any more money (since they'd get no more content than they already have), the Big 10 Network can increase its profits. The BTN would have Tier 3 Kansas content, not to mention all Kansas road games playing other Big 10 teams. The thought is that people in Kansas would still want to see these games and the Big 10 could still charge higher carriage rates to people in Kansas to keep the channel. So in reality, you'd only be missing around 6 football games and around 12-15 basketball games per year. Those games are still worth good money, but aren't the end all, be all of television content. The bottom line is that the grant of rights could be worked around if you really wanted it to happen.

I just don't think the Big 10 cares that much about Kansas to bother doing that.

 

[kyleslamb]

The Big 10 can add Kansas and potentially work around the "Grant of Rights" issue. A grant of rights does not prevent a school from moving. It only prevents a school from bringing its TV rights with them. So if Kansas left, all the Kansas games would remain property of the Big 12 for next dozen or so years. Or at least the rights Kansas granted to the Big 12. Remember that in the Big 12, that's only Tier 1 and Tier 2 television rights. Kansas retains its rights to Tier 3 sports.

If Kansas went Big 10, it could provide no Tier 1 or Tier 2 inventory to the Big 10 until its grant of rights expire or the grant of rights was bought out. However, it could grant Tier 3 rights (or buy out whomever owns them) to the conference. The Big 10 could then take the Tier 3 stuff and stick it on their network. While the main content providers might not likely pay the Big 10 any more money (since they'd get no more content than they already have), the Big 10 Network can increase its profits. The BTN would have Tier 3 Kansas content, not to mention all Kansas road games playing other Big 10 teams. The thought is that people in Kansas would still want to see these games and the Big 10 could still charge higher carriage rates to people in Kansas to keep the channel. So in reality, you'd only be missing around 6 football games and around 12-15 basketball games per year. Those games are still worth good money, but aren't the end all, be all of television content. The bottom line is that the grant of rights could be worked around if you really wanted it to happen.

I just don't think the Big 10 cares that much about Kansas to bother doing that.

I'm well aware that it doesn't prevent a team from moving. That's my point... the Big Ten wouldn't have interest in Kansas if it didn't think it could get around not having the television rights of the Jayhawks. Otherwise, no team would be worth the value of acquiring them in the short term.

 

[Jericho]

I'm well aware that it doesn't prevent a team from moving. That's my point... the Big Ten wouldn't have interest in Kansas if it didn't think it could get around not having the television rights of the Jayhawks. Otherwise, no team would be worth the value of acquiring them in the short term.

My point is that you don't even need to get into the legal issues. The Grant of rights can be completely enforceable (and there's no reason it really shouldn't be) and The Big 10 could still make money off Kansas to make it wortwhile.

 

[Jericho]

I'm sure OU & OSU can't wait to go the next 13 years without a penny in TV revenue. You certainly have this all figured out.

That's not true at all. Oklahoma and OSU could go Pac 12 and get still get their share of the Pac-12 television revenue. They would still make money. The Pac-12 decides what slice of the total pie they would get (a full share or a reduced share). They just can't bring their Tier 1 or Tier 2 rights. They can bring their Tier 3 rights (not granted to the Big 12) and they can leverage these rights into the Pac-12 network to bring much more money than the rights are actually worth (basically the same reasoning the Big 10 added Rutgers. To force households to carry the Big 10 network). Its far from ideal, but its not like Oklahoma would get nothing.

 

[kyleslamb]

My point is that you don't even need to get into the legal issues. The Grant of rights can be completely enforceable (and there's no reason it really shouldn't be) and The Big 10 could still make money off Kansas to make it wortwhile.

A Grant of Rights agreement is completely enforceable... until it's not.

There are probably hundreds of cases over the years where GOR agreements were thrown out in the recording industry over various disputes. Sometimes they're enforceable... sometimes they ain't. Depends on the circumstances, the jurisdiction, etc.

In general, yes, they're enforceable. But it wouldn't be the first time they've been tossed out and if it ever happens in conference alignment, it won't be the last.

You might be right about making money off Kansas regardless of the TV rights (after all, they wouldn't likely need to join until 2017, which would knock off about 5 years of those 13 years of the GOR). It's probably worth it long term if it means Texas, Missouri and others also joined. That said, I don't believe the Big Ten is eyeing Kansas with the acquiescing of not having any TV money for nearly a decade.

 

[businesslawyer]

The lawyers from the Big 10, Big 12, & Pac 12 all think they are ironclad. On Google, you can easily find university presidents (who are lawyers) from these conferences talking publicly about how they believe GORs are ironclad. The lawyers from the networks with contingent deals think they are ironclad. The football schools in the ACC are afraid to sign a GOR with the ACC because they are afraid it is ironclad.

At the very least, you guys have to admit that a GOR seems to be a superior tool for conference stability than an exit fee.

Because Presidents never lie? Because President's think they can say "We have no duck*ing clue whether they work or not" and that won't be used against them in court when someone leaves? Seriously, your arguments are about as dumb as they come (and on this board I don't use that term lightly).

I am not saying they won't be enforced. They may, or they may not. But I am saying you should save our bandwidth because you have added zilch to this discussion.

 

[FfldCntyFan]

One thing that cannot be questioned is that basically anything can have a monetary value placed on it. In agreeing to the 27 month exit notification WVU made it impossible for the commitment they later made to the B-12 to be met. Somehow they pulled it off. Any judgement of damages in wrongful death (see OJ) or sexual abuse (see Michael Jackson) is evidence that something that should not possibly have a price placed on it can in retrospect be valued.

There is no reason to believe that a cash settlement cannot be reached in lieu of handing over broadcasts of games once a school has left the B-12. The delay could very well be that the cost of that settlement is still too much of a variable (until the first case occurs) and the benefit of leaving the B-12 has yet to reach the point where a school is willing to be the first.

 

[Taco]

I belive that the $50M came up for a vote at the meeting, and had not been previously proposed. Let's say you are part of a homeowners association, and they have a normal meeting where there is a suprise vote, with no warning, to say that each homeowner must put up $200k to build a community center and pool. The requirement is effective immediately, there is no delay in implementation to allow you to manuever. Your options: move out of your house immediately or pay. Enforce it? Might that be unconscionable? Might it also be a punitive amount with no basis in fact? Liquidated damages are reduced all the time.

I think Maryland has tons of arguaments here. They will definitely pay something. I also think that they will definitely pay less than $50M. I think one of the best arguments that this is unconsionable is that it took effect immediately, so that none of the schools had any option but to accept it. Maryland could not realistically withdraw from the ACC at that moment, which was the only choice given them.

 

[Taco]

HH's post is the issue IMO. The ACC changed things, not MD. MD acted in response to this (Exorbidamt exit fee), it can be argued. There are a ton of real world comparisons (and I'm sure) and precedents. I would guess (no expert here) that if this isn't settled, they won't get anywhere near 50 mil - just damages.

 

[nelsonmuntz]

A Grant of Rights agreement is completely enforceable... until it's not.

There are probably hundreds of cases over the years where GOR agreements were thrown out in the recording industry over various disputes. Sometimes they're enforceable... sometimes they ain't. Depends on the circumstances, the jurisdiction, etc.

In general, yes, they're enforceable. But it wouldn't be the first time they've been tossed out and if it ever happens in conference alignment, it won't be the last.

You might be right about making money off Kansas regardless of the TV rights (after all, they wouldn't likely need to join until 2017, which would knock off about 5 years of those 13 years of the GOR). It's probably worth it long term if it means Texas, Missouri and others also joined. That said, I don't believe the Big Ten is eyeing Kansas with the acquiescing of not having any TV money for nearly a decade.

When a sophisticated entity with good legal representation, such as a University, sells media rights, and the other side pays for them, there aren't a lot of good arguments to get out of that sale agreement. Where you see contracts busted is when it is a 19 year old kid that signs a recording contract that gives the producer everything and the kid nothing. And even those agreements are only typically broken by hanging the producer upside down off a hotel balcony or putting a gun to his head. Unless Kansas is going to tell Bowlsby "either your brains, or your signature, will be on this contract", I don't see a way out unless the contract itself has a backdoor, which none of us would know (although some have speculated).

 

[Taco]

This title of this post is about FSU and MD who are and were in the ACC (where they don't any GOR agreement) so this GOR talk is off topic IMO. The question in my mind (and what's more meaningful to UConn getting into a different conference) is what the ramifications might be for MD for having jumped. From reading other posts that would have had to have been unanimous and FSU and MD both would not have gone along.