What went wrong: ACC TV contract?

Great article from ACC Football RX.   Just nails it.

My only side note is I don't believe the ACC got value for Pitt and Syracuse....they got value because it was undervalued contract and the time frame was extended.  It was the RENEGOTIATION that brought value under the guise of these 2 schools.

Sadly, the ACC has the same people negotiating for the ACC now and they have done nothing but screwed it up, MULTIPLE ways, and gotten David Teel to call them 'ninjas' for it.



http://accfootballrx.blogspot.com/2016/06/what-went-wrong-acc-tv-contract.html


What went wrong: ACC TV contract?

In 2012 I wrote a series of posts called "What went wrong?" in which I examined why teams like Virginia Tech, Florida State, Miami and Clemson were never able to win on the big stage in the decade from 2003 to 2012.

Now, it's time to turn our attention to the ACC itself. In this post we'll discuss what went wrong with the TV contract...

1. Timing. The first big TV contract was negotiated and signed in 2010 [2010 ACC TV contract]. It was a historically bad time for ACC football [how ACC got a bad rep]. OK, not the absolute worst it's ever been, but certainly not a good time either. That did not help the value of the deal, which payed an average of about $12 million/year per team (although, to be fair, that was almost TWICE as much as the previous ACC contract).

2. Duration. If you're going to sign an unfavorable contract, at least make it a short one, right? Apparently no one negotiating for the ACC at the time of the first TV contract studied economics, because despite coming at a bad time it was for 12 years (from 2011 through 2023)! Oh, that it had only been 6 years...

3. No Competition. The ACC's 2010 contract also spelled out that it would give "the network [ESPN] exclusive rights to conference football and men's basketball games". Yep, ALL of them: Tier 1, Tier 2 and Tier 3. As the league learned later, there is a separate market for each tier, and if sold to the proper markets, the grand total could have been much higher. Any cable company will tell you - bundles are cheaper!

4. Raycom. There are various theories as to why Raycom was included in the ACC/ESPN contract. Some think it was an act of nepotism by John Swofford (why the 12 school presidents would also approve it I have no idea). Others think it was a case of the "good ole' boy" network. At any rate, tier 2 games are being sub-licensed to Raycom for $50 million/year (money which goes to ESPN, not to the ACC). That price is apparently far enough below market value that they can afford to sublicense some of them again to Fox regional sports networks. Obviously, if 2 middle men can make a profit, the ACC did not get the best price!

What has the ACC done to try and fix it?

• The first thing they did was expand by adding Syracuse and Pittsburgh. This allowed them to renegotiate their contract. However, ESPN didn't actually pay them more for the games already under contract, they simply paid market value for the new games.
• Since 12 to 14 more home games per year just wasn't enough to increase the ACC revenue stream all that much, they also extended the length of the contract (from 12 to 15 years), which now runs through 2027. That added another 252 to 294 games at market prices - which were then averaged into the previously underpriced games.
• Note: about this time Maryland left the conference and was replaced by Louisville. This move was revenue neutral in terms of the ESPN TV contract, though it may have an affect on other revenue streams.
• Next, they added Notre Dame for basketball, baseball, etc. and signed a deal with them for an average of 5 ACC-controlled football games per year (half of which would be on the ESPN TV contract). Since the games against the Irish are almost always valued at tier 1 prices, this boosted the payments again.
• Finally, the ACC schools all signed a Grant of Rights, which ESPN agreed to pay more in order to secure (about $2 million more per school, though it was tied closely to adding Notre Dame so it's hard to tell how much was for one and how much for the other).

That gets us to where we are today. On the ACC's most recent tax return (2014-15), it shows TV revenue of $217.9 million ($14.5 million per team). If we take the growth from the previous tax return and extrapolate that over the length of the contract, we get an average of $22.1 million per team - with a final payment in 2026-27 of $31.1 million per team [LINK].

Compare that to the new Big Ten TV contract, which will pay an average of $29.3 million per team from Fox + ESPN, plus an estimated $8 to $10 million more from BTN for a total of $37.3 to $39.3 million per team. Or compare the SEC, which reported $315 million from their TV contracts on their 2014-15 tax return [LINK].

BOTTOM  LINE: The ACC TV contract today is way better than it was in 2010, which was way better than the previous one... but the league made some serious errors with that 2010 contract, and it continues to hold the conference back, revenue-wise. I'm not sure there is much they can do about it except wait it out...