The ACC is making more money than ever. So why is the league's future so uncertain?

 

The ACC is making more money than ever. So why is the league's future so uncertain?

The Atlantic Coast Conference set records in 2020 in revenue generation and distribution to its member institutions, indicators that are nearly as important as wins and losses in college athletics these days.

But it wasn’t enough to keep the Greensboro-based league from falling further behind two other major college athletic conferences in those key financial metrics—a revenue gap that is likely to grow significantly in coming years and threaten the future of the ACC, a conference as much a part of the fabric of North Carolina as Cheerwine and pulled pork.

The athletic conferences are nonprofit entities and file tax forms with the Internal Revenue Service that spell out their revenues and expenses, including distributions to member institutions. WRAL News analyzed two decades of tax records filed by the top five NCAA conferences, a period of enormous financial growth, movement of schools and increasing budgets, financed in large part due to skyrocketing television rights fees.

The financial and power chasm between the top two conferences and everyone else poses big questions and foretells big changes for college athletes, fans and academic institutions.

The ACC brought in about $84 million in the fiscal year ending June 30, 2001, distributing almost $8 million to each of its then-nine league members. Twenty years later, the league reported making $578.3 million in revenue during the 2020-21 fiscal year and distributed an average of $36.1 million to its 15 members, which included Notre Dame as a full member during the pandemic football season of 2020.

Two of its competitors, however, have grown even quicker.

The Southeastern Conference, with football powerhouses such as Alabama, Georgia and Florida, generated $833.3 million and distributed an average of $54.6 million to its 14 members in the 2020-21 fiscal year, the last year for which financial data is available.

The Big Ten, with football stalwarts Ohio State and Michigan and huge numbers of alumni from large Midwestern state schools, generated $679.8 million and distributed an average of $48.7 million to its 14 members in the 2020-21 fiscal year, even as the conference played an abbreviated football schedule.

The differences in those annual payouts, starting small and growing larger each year, is the revenue gap. About 37% of athletic department revenue across the FBS comes from conference distributions. The ACC is at 36%, but the Big Ten is at 50% and the SEC is at 61%, according to 2021 data from the Knight Commission on Intercollegiate Athletics. Donor contributions make up 28% of ACC athletic department revenue.

The money is seen as critical for long-term financial health of the conferences, a key to stabilizing membership and keeping the most successful schools in the league. As the gap widens, at a minimum, it could mean better facilities, more recruiting muscle and more national exposure for the universities across their athletics programs. At a maximum, it could create a class of schools with huge influence over the future of college athletics.

And the chasm is only going to get bigger due to changes in membership: the SEC is adding powers Oklahoma and Texas from the Big 12 by 2025, and the Big Ten is expanding to California with the additions of USC and UCLA by 2024. Each league will have 16 members and, in the Big Ten’s case, television rights deals that could exceed $1 billion annually.

The moves, particularly the Los Angeles schools’ departure for the Big Ten announced this summer, set off a flurry of speculation about further consolidation involving marquee ACC teams and pushed the league’s revenue gap to the forefront.

“It’s economically impossible to address it,” said Karl Benson, who served as commissioner of the Mid-American, Western Athletic and Sun Belt conferences between 1990 and 2019. “When conferences don’t meet membership expectations, you get movement. What causes USC or UCLA or what causes Texas and Oklahoma to leave? When they recognize it ain’t going to get any better.”

The ACC is locked into its current rights agreement with ESPN until 2036 and, barring an unlikely move from Notre Dame to join the league in football, it lacks a clear addition to significantly alter its position.

It’s left the ACC member schools to ponder: Will it get any better?

“At the end of the day, it comes down to ratings and viewership,” said Tag Garson, senior vice president of properties at Wasserman and former programming director at ABC Sports and ESPN.

But each year moves the ACC closer to the end of its grant of rights agreement and each year may bring a larger revenue gap, changing the calculus for schools.

Several ACC schools could be coveted by the SEC or Big Ten, including Notre Dame, North Carolina, Florida State and Clemson. Other schools may be of interest to one or the other for different reasons. Some schools, perhaps more than half of the league, could end up remaining in a diminished ACC. The schools that help drive the revenue could push for unequal revenue distribution within the league.

The ramifications are not just financial. The ACC’s power could be diminished. The concentration of football powers in two leagues will allow the SEC and Big Ten to set the agenda at the highest level of college athletics at a time of massive disruptions. Everything from the structure of the college football playoff to the number of scholarships, from the shape of the NCAA Tournament to revenue sharing with athletes is on the table, and the Super 2 will be able to shape those discussions.

“We understand where those two leagues are,” Phillips said. “No one is ignoring that. We're all trying to find ways to close that gap.”