Maryland’s split with the ACC is turning out to be an ugly divorce. It has everything you want in a classic bitter separation; money grabbing, name calling, vindictive withholding, creative lawyering, secret conspiring, petty social exclusion, and lawsuits aplenty. The most recent lawsuit from Maryland claims and embodies all of these characteristics in an attempt to get out of the $52 million exit fee required by the ACC, and to recover the roughly $16 million in conference revenue the ACC is keeping from them to pay off this debt. Tarhheelblog does an amazing job of detailing the ins and outs of this lawsuit that has only one certain ending. Maryland is going to pay. Even if they win everything in this lawsuit, which they won’t, they will still have to pay. Please read the Tarheelblog for the long version, but here is the short version.
Maryland
is claiming the raising of the exit fee to be invalid due to breach of contract
and unreasonable restriction of trade.
Maryland states that the ACC is in breach of contract by not taking the
proper steps outlined in the ACC bylaws to notify Maryland of the exit fee
amendment to the ACC constitution. They also state that by raising the fee the
ACC is unreasonably restricting the trade and commerce of conference
membership, which makes the fee unlawful and entitles Maryland to damages three
times the exit fee under Maryland Law (§§11-209 and §§11-204). The breach of contract may fly but I’m
sure the ACC has a good counter argument, and the second one is just
ridiculous. How can you say trade
is being restricted when four schools (Pitt, Syracuse, Louisville, and Notre
Dame) knowingly accepted the exit fee when they joined the ACC? Plus, it is not like we are getting Len
Elmore to preside over this case.
The case is being heard in North Carolina. I’ll let a My Cousin
Vinny quote illustrate Maryland’s situation:
“Stan, you’re in Ala-fuckin-Bama. You come from New York. There is no way that this case is not going to trial.”
There is no way a judge in ACC country is going to award
Maryland $156 million under a Maryland statute on a specious anti-trust argument,
but lets just say the judge is a softy and buys the breach of contract
line. Maryland would probably
still be held to the original exit fee, which amounts to about $17-$20
million. This is where the
withholdings make a huge difference if Maryland is able to lower the exit
fee. Maryland’s rosy financialassessment conducted this past summer stated that Maryland’s Athletic
Department budget would not start turning a surplus until 2018, and once it
does 50% of that surplus will be used to pay back the money the Athletic
Department borrowed from the University.
That assessment was based on the Athletic Department borrowing upwards
of $36 million because they would not get the conference revenue from last year
or this year. Maryland knows that
they are not getting this year’s conference revenue (around $20 million)
because they have legally filed their official notice of withdrawal this past
June, which makes them ineligible to receive their share of conference
revenue. The dispute now is over
the $16 million from last year’s revenue that is being withheld and the
definition of the word “file”. The
ACC bylaws state that in order to voluntarily leave the conference, a school
must “file” an official notice of withdrawal with all other school and the
commissioner. Maryland claims that
the announcement to leave the ACC in November 2012 did not constitute an
official notice of withdrawal, and because of this they are entitled to that
$16 million owed to them from 2012-2013.
Obviously the ACC does not see it that way, so Maryland has once again
placed the balance of their argument in the hands of a judge who may or may not
have a miniature replica of the Old Well on his bench. All of this means that unless Maryland
hits a one outer and is awarded damages from their anti-trust argument, they
are looking to be out anywhere from $20-50 million dollars depending on the
final exit fee and the ruling on the withheld conference revenue.
Doesn’t Maryland sound like a wife
who recklessly spent money during a marriage and now is trying to bilk her
husband out of more money to pay off her own debt? And while the marriage was on its downswing Maryland cheated
on the ACC with a better looking and wealthier guy in the Big 10, and now the
scorned husband is trying to stick it to his cheating wife? And isn’t Maryland a little too
cocksure that she will forever make her ex husband jealous by driving around in
her new Ferrari that is the Big 10 TV money? I was one of those people who thought “Big 10. Big Money. Maryland wins.
ACC screwed. End of
story.” Not that I liked that
narrative (I will forever hate the Big 10 no matter how much money we get) but
it is the one that seemed the most plausible. A closer look, though, at some revenue numbers coupled with
cryptic dealings should make people wonder what the ACC is up to, and could
they make Maryland regret leaving the conference they founded?
The Department of Education lists the revenues of different sports for almost all schools that have college
sports. I think it is best to look
at revenue more that profit because profit is based on revenue plus expenses,
and different schools can count different things as expenses (just ask
Maryland’s swim team) but they cannot fudge the money coming in. A comparison between football and
basketball revenue between the ACC and Big 10 leads to some interesting
numbers. I factored in Maryland as
a Big 10 school and Louisville as an ACC school. The Big 10 outstrips the ACC in football which is not a
surprise. All Big 10 schools
generated $586 million in total revenue while the ACC could only muster $411
million. Basketball, however, is a
different story. The ACC’s
basketball revenue is $211.5 million while the Big 10 is only $189.7
million. You must also remember that
the Big 10 revenue is largely based on the success of the revenue generated
from the Big 10 network. The ACC
does not have that luxury to factor into their revenue stream, so all things
considered the gap is not as big as one might think. But overall the Big 10 is the big winner, which could
culminate in each school possibly getting $40 million per year when the Big 10
renegotiates their TV contract in 2017.
So Maryland is the winner, right?
Not so fast. John Swofford
and the ACC have made some weird dealings over the last 2 years that make one
wonder what they are up to.
In May of 2012, seven months before
Maryland’s announcement, The ACC locked themselves into a more binding contract
with ESPN through 2027 that gave ESPN more rights to the games for a smaller
per school payout than any other conference in the country. When Maryland announced their departure
in November 2012 there were rumblings that the only other school to vote
against the exit fee increase, Florida State, would be on its way out to pursue
more money, signaling the beginning of the end for the ACC. But that was not the case. This past April all ACC schools,
including Florida State, signed a grant of media rights, meaning that if any
school leaves in the next 14 years the ACC would retain the rights to broadcast
their games and they would keep the revenue from it. This equates to way more than a $50 million exit fee, which
essentially means no one is leaving the ACC anytime soon. Florida State decided to sign this
based on a meeting they had with commissioner John Swofford and a
representative of the Wasserman Media Group. Based on that meeting, Florida State was so impressed that
they decided to stay in the ACC.
What could have been said at that meeting to convince Florida State to
stay for less money? And what
caused all schools to sign this grant of media rights that locks them into a TV
deal that could be worth $20 million less per year than some of the higher paid
conferences? What am I missing
here? The answers may lie in the
fact that Maryland may have left a sleeping giant who, if it plays its cards
right, may outdo the Big 10’s TV deal.
With
the addition of Louisville, the ACC now has the top three highest revenue
generating basketball teams in the country (Louisville, Syracuse, and Duke) and
four of the top seven with UNC.
They have the reigning national champion in football. They have Notre Dame contractually
obligated to play five ACC games per year. Four of the last 10 national basketball championships reside
in the conference. They have a
rabid lacrosse following with three of the top five men’s lacrosse teams, and six
of the last 10 national champions.
Couple all of this with a relatively nascent conference network that
contains within its footprint more top 30 TV markets, more households with
TV’s, and a greater population base than any other conference and you have a
recipe for an advertising juggernaut.
Think about it: ACC
football may not be as attractive as Big 10 or SEC, but it will still hold its
own on the East Coast. But what
happens when football season is over?
Is a cable company going to pay top dollar to carry an SEC network where
they need to sell advertising for Auburn vs. South Carolina basketball? What happens to the Big 10 network in
the spring when it needs to sell advertising for niche sports to its
subscribers? The ACC has
positioned its network to produce high quality product to the largest audience
in the country with the teams they have incorporated into their
conference. With a high revenue for sports outside of football, the ACC may produce a network more attractive to cable companies and advertisers by having must watch live games throughout the year. Think of
the advertising they can get with the basketball teams they have. Lacrosse may not be the biggest sport,
but in the northeast it is huge and it is not far fetched to think that they
get subscribers who want it solely to watch some of the best lacrosse in the
country throughout the spring. Think
of that branding tactic. “The ACC
Network: No Offseason”. Genius
right, and it would be true to form.
Maryland may get more money from this divorce in the short term. The Big 10 stands to gain a windfall in
their renegotiations. But will
Maryland find that their new partner does not draw the same fervor from their
fan base, and become jealous when their ex husband gets his crap together and
starts making the money they thought they would have when they were
together. Only time will tell.
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