SMU can add immediate $ to ACC media deal

[ROCKNEPONY]

First Post Longtime Reader

I think the ACC needs to expand to survive.  I understand the contract with ESPN has a Pro Rata clause for adding teams and it seems obvious they should move quickly and make additions now if they will survive later.  I also understand that for any additional G5 or P5 schools ESPN must pay a full share for each new team.

I think those making decisions at SMU should approach the ACC with a bird in hand offer.  Take a half share of approximately 19 million for the life of the media deal with one stipulation: If we win a conference football championship we increase to 3/4 and a second championship we increase to 100%.  No championship no increase until the new media deal. 

If they added SMU, Tulane, Memphis, Rice and UCONN this would give them 5 additional schools at 1/2 shares leaving approximately 95 million annually to split between the current 14 members (approximately 7 million more for each current ACC team).  This would bring thier current media deal to around 45 million each.  That's no chump change for them and the approx. 19 million is a great start for us. 

If they don't bite at the 1/2 shares go for 1/3.  This is the last boat off the island so it would be worth the shot. 

The second plus for adding these schools for ESPN is the addition of the ACC network to cable homes in DFW, Memphis, New Orleans, Connecticut and Houston.  in Houston and DFW these fees would definitely pay ESPN more than the cost of adding SMU and RICE.  Travel is easy as well.

I would have suggested Stanford and Cal but half shares may not be enough and the travel cost for ACC members would skyrocket, thus reducing the $ advantages. 

[ROCKNEPONY]

Here's a source article:

Brett McMurphy
McMurphy: ACC at Crossroads as ‘Magnificent 7’ Seeks More Revenue
May 19, 2023

https://www.actionnetwork.com/ncaaf/acc ... ttMcMurphy

"The only way the ACC can receive significantly more money from ESPN is by expanding. Sources told Action Network that if the ACC adds additional teams — whether from the Power 5 or Group of Five — ESPN contractually must pay the ACC a pro-rata amount for each new member."

[Ikus]

I think those making decisions at SMU should approach the ACC with a bird in hand offer.  Take a half share of approximately 19 million for the life of the media deal with one stipulation: If we win a conference football championship we increase to 3/4 and a second championship we increase to 100%.  No championship no increase until the new media deal.

Interesting idea, but I wonder if SMU would want to do that. I think AAC schools make about $7M per year, so taking half of the $19M wouldn't be that big a jump ... and if the ACC stays at it currently is constructed (meaning with Clemson, Florida State and Miami included), the easier path to the college playoff would be through the AAC, not the ACC. At that point, do you prioritize money or the better chance to win a conference title and perhaps reach the football playoff?

[rodrod5]

You are not using proper numbers in this calculation.

1. The full conference distribution for the ACC was just under $40 million per member. That is not 100% from the media deal. Probably about $25 million of that was from the media deal. The other $15 million comes from the $73 million each P5 conference gets for the football playoffs existing, $25 million two out of every three years for The Orange Bowl, and NCAA credits.

So SMU would only be dealing with a half share of $25 million plus the annual escalator each year that is probably about $1 million per year. So that goes from $19 million for SMU and $19 million for the rest of the ACC to split down to $12.5 million for each half.

2. Next is the ACCn. The ACCn has about 42 million subs now with about 75.5 million total pay TV subs in the USA and declining rapidly. The SEC network is said to have 51.2 million subs. The ACCn gets an average of $.73 per month per sub with the SECn $.95.

More importantly there are only about 4.5 million cable subscribers in Texas and I am not sure if that includes SAT because it is from the Texas Cable TV Association, but with 24 million residents, 2.5 residents per household so 9.6 million households and about a 45% pay TV penetration in Texas well that gets you to that number or close enough for government work.

So what that means is even if 0% of The State of Texas paid for the ACCn, in market or out of market, you are looking at $40 million or so in new annual revenue for the ACCn if they were to get 100% of the Texas market as new subs at the average rate.

ESPN of course will take their half of that so now you have $20 million in new ACCn revenue for the ACC plus the half share of TV money, $12.5 million, for a total of $32.5 million for a 14.5 team league to split up for adding SMU. That would be $2.24 million for each existing member and $12.5 million for SMU.

But of course we are using totally and completely inflated numbers because there is a very good chance that a large number of the cable subs in Texas are already getting the ACCn at some "rate" even if out of market so that $40 million in new revenue is not close to realistic. In addition with those 42 million subs and the average of $.73 you have a total annual revenue of $367,920,000 with $100 million of that off the top for ESPN production expenses before ESPN and the ACC spit profits.

So if you do reverse math with $267,920,000 after expenses so if you divide that by 12 months and $.73 per month you get 30.5 million subs needed to produce that profit. Or doing the math the other way $100 million / 12 / $.73 you get 11.45 million ACCn subs that ESPN needs to break even on production cost.

In 2022 there was a loss of 5.88 million cable subs and in 2021 a loss of 4.7 million. So a loss of over 10 million in two years. So with numbers like that it does not take long to eat into that 30.5 million subs that produces a profit for the ACCn after expenses. It is estimated that by 2028 70% of cable subs will have cut the cord. And so far the estimated of cord cutting have always trailed the actual numbers when the numbers come out . Even the expected year over year acceleration of cutting is usually underestimated.

What that means is there is a very short window for the ACC under even very optimistic, really unrealistic, projections to use new members in new states and new subscriber gains to bring a very marginal amount of new revenue before the cable sub, and channel cramming game finally catches up and crashes cable TV for good and especially crashes the ability of ESPN and others to cram channels on cable subs they really do not want to pay for.

It is simply not worth the $1.5 million or so per year, per member for five or six years, $9 million total, to add a new member that eventually will turn from a very small revenue positive addition to a revenue negative addition or even just break even at best. All the more so when no one has a clue what media markets and deals will be like when the ACC media deal finally ends 9 years from now yet any new members will still be there as members for life".

I know some will come and say "streaming and skinny bundles" and the like, but even streaming is taking hits especially those streaming companies that have been stupid enough to believe they can operate like cable TV companies just delivering the same bloated package of channels most people do not want over the internet instead of "cable".

When one looks at the real world numbers and does realistic math at best what SMU and any other member added to the ACC would offer them is half of a TV money share which is about $25 million now, so half being $12.5 million, and growing about $1 million per year to the end of the contract maybe a slight bit more. That would add just under $1 million per year, per existing member, for each new member added. But again those members are now "members for life" and I do not think that adding $2 million or even $4 million to the payout of ACC members while adding 2 to 4 new members that would be making $12.5 million growing to $17 million over 9 years is a really stabilizing move for the ACC.

[ShantyBoy]

Yes, we absolutely must hope to jump in the ACC lifeboat, now that the PAC lifeline is dead. It was our best hope all along. Eastern based with likeminded schools. The AAC is now the equivalent of the CUSA, MAC, Sunbelt, etc. in that third tier of conferences. And if you think the big boys will continue to allow third tier conference access to the playoff, you are deluding yourself.

[fan]

Ross Delinger on Twitter said ACC presidents met yesterday to discuss expansion plans.

How about SMU, Stanford, Cal? To minimize travel for Olympic sports we'd offer to 'host' games between east and west (ie tennis matches between Miami and Cal played on our campus).

[Topper]

I read in a Tampa newspaper article that FSU is saying that it will lose $390 M over the life of the media contract compared to its membership in the BIG or SEC. The penalty for breaking the current deal is $120 M. Canzano says that Fla St is talking to JPMorganChase re its finances. The Seminoles are either trying to get a restructure of their current arrangement or are seriously considering bolting. Clemson wouldn't be far behind. Their other option is to wait until they can find 7 other teams with lucrative offers to leave. Then they could simply dissolve the ACC although I don't think anyone in the general public knows what rights their current media partners would have in such a situation.

[ROCKNEPONY]

I may be reading this source wrong but I believe it states the ACC has a 35 million $ TV deal.

https://streamingstadium.com/league/nca ... -football/

the ACC distributed 41.3 million per school in 2022 as a total from all sources. based on a quick Google search.

[mtrout]

Everything Canzano says is wrong unless it already happened.

[ROCKNEPONY]

Even getting just 10 million a year is enough to help cover some coaching salary increases.  SMU already has a moderately strong football budget to compete in the ACC.

The primary goal is to position SMU for the next dominoes.  In the best case we're in the power four remaining conferences.  Even in the worst case, if a power 2 exists in the future and we are not part of this group, ACC membership would put us in relationship with like minded schools with whom to build something new.

The AAC does have short-term positives as long as the 12 team playoff holds and the AAC is within the top 6 but it may not put SMU in the best place for recruiting

[redpony]

Does anybody know if we are aggressively working to get into the ACC? or are we just waiting for the phone to ring? What type and how much contact have we had with them?

[rodrod5]

I read in a Tampa newspaper article that FSU is saying that it will lose $390 M over the life of the media contract compared to its membership in the BIG or SEC. The penalty for breaking the current deal is $120 M. Canzano says that Fla St is talking to JPMorganChase re its finances. The Seminoles are either trying to get a restructure of their current arrangement or are seriously considering bolting. Clemson wouldn't be far behind. Their other option is to wait until they can find 7 other teams with lucrative offers to leave. Then they could simply dissolve the ACC although I don't think anyone in the general public knows what rights their current media partners would have in such a situation.

This is nonsense on the part of FSU and Clemson again lets use real world numbers that are known. It has been reported now that Oregon and UW are coming into the Big 10 and getting $30 million the first year and OnE MiLlIoN more per year for the life of the current deal until a new deal is signed at which point they will get full shares. So as stated above the ACC just handed out $39 million or so on average to their current members. That means that even at the end of the current Big 10 deal Oregon and UW will be making less money than average ACC members just made never mind the ACC deal will go up at least $1 million per year unless ACCn subscriber rates fall through the floor rapidly.

So it is a stupid claim right off that FSU and Clemson could be $390 million behind the Big 10. It is also impossible to know what will happen with the new Big 10 deal as well and even if it is massive it will only be a few years after that when the ACC deal finally ends.

Next there is the exit fees. Maryland paid $36+ million of $50 million to leave many moons ago and that was with an argument that they had voted against the brand new jump from $25 million to $50 million in exit fees for the ACC. So I think is is pretty safe to say that FSU and Clemson will be paying about $40 million to possibly the full $50 million to leave.

So we are suppose to assume that somehow the Big 10 is thinking of adding FSU and Clemson at full shares, but just on a last minute whim they also added Oregon and UW at less than half shares after they just added USC and UCLA at full shares and knowing that USC was very happy to separate from Oregon in particular for recruiting purposes. That seems like a lot of knee jerk reactions for a conference that has a long history of playing things extremely close to the vest and taking a very long time to make expansion decisions. You still have Rutgers and Maryland that are not getting full shares and in the case of Rutgers getting even less because of up front loans. That all sounds like a poorly thought out disaster.

Now we have not even talked about the GOR. It is pretty widely reported that Texas and OU had to pay Fox $10 million each to cover the content that Fox will not have from them leaving the Big 12 one year prior to the end of the GOR. Fox only owns half the Big 12 content and while it is said to be the "tier 2" content really it is about equal ownership with ESPN. ESPN owns 100% of the ACC content and there is 9 years left on the ACC contract and GOR. So there is a pretty clear business precedent set that no matter what the conference says about breaking the GOR with the conference, because the GOR is with the conference not with the media partners, you are going to pay the media partner(s) something for the content they miss out on.

And I do not think that the ACC members are just going to negotiate away 9 years left on their GOR. But even if FSU and Clemson can get out of the GOR with the conference there is still the model set that Fox collected $10 million per team from two members of a conference they owned half of the content of. So if you say that ESPN only gets $15 million per year for the content they own 100% of you are looking at $135 million. You add the $40 million exit fee on to that and you are at $175 million out of pocket to leave the ACC and that is with a lowered exit fee, a reduced rate to ESPN for content, and ZERO to the ACC members for breaking the GOR 9 years early and no court cost.

I think that $175 is on the really low side of the actual cost when it is all said and done IF they can actually eventually break the GOR. And all of that to join a Big 10 that just offered Oregon and UW $30 million to start and a S1 million per year bump until the new, unknown, contract. So we are somehow looking at a claim that a school is going to be $390 behind while ignoring what two new members were just offered, ignoring exit fees, ignoring that no one ha a clue what media contracts will be in the future, and ignoring any legal fight and cost over the GOR.

Those claims seem like the claims of a university official that is a complete idiot and has no clue what they are talking about and that is about to get their university into a very poor position and probably cost them a hell of a lot of money,

As for any claim about "well what about the SEC" that has already been discussed. That is a horrible legal position for ESPN to put themselves in that could result in ESPN owing tens and tens if not hundreds and hundreds of millions to the ACC in damages while still paying the remaining members of the ACC to the end of their contract and also having to pay a ton more to FSU and Clemson for content they already 100% own.

There is seemingly zero reason that ESPN would be so stupid as to want to pay more money for something they already own while exposing themselves to massive litigation from several angles and probably to state and congressional investigations as well. FSU and Clemson are simply not worth all of that or close to all of that financial and legal danger especially when ESPN already owns 100% of their content for another 9 years and when the very simple math based on reality above shoes that potentially losing FSU and Clemson to the Big 10 seem far fetched and a completely idiotic move on the part of FSU and Clemson and not really a great move on the part of the Big 10 for that matter.

[35straight II]

Does anybody know if we are aggressively working to get into the ACC? or are we just waiting for the phone to ring? What type and how much contact have we had with them?

If you’re referencing our current administration. No, no one is making calls.

[ROCKNEPONY]

ACCReport: West Virginia, SMU Linked to ACC Expansion Rumors
July 28, 2023

"If the ACC does decide to jump into the expansion realm, 247Sports’ Brandon Marcello reported that there are two teams that are the ACC’s most viable options.

“SMU and West Virginia appear to be the most viable options should the conference become serious about expansion, industry sources told 247Sports,” Marcello wrote. “SMU expressed interest in joining the ACC and explored a realignment partnership with Rice as recently as 2021, another source said.”

https://pittsburghsportsnow.com/2023/07 ... on-rumors/


a bit old but within the last month

[Dukie]

rodrod you like to write novels and that's cool but I'm also not going to bother to cut out a quote to tell you that the ACC has more than 9 years left on the GOR and TV deal; there are actually a full 13 years left (which makes your point stronger).