Big 12 Grant of Rights - SEC Rumblings - Apologies to BYU

Expansion never dies – it just sleeps like Cthulhu waiting to rise from the deeps and wreck havoc upon college football.

Last week I had a very lively Twitter discussion with @Expansion_Crush and @NebGradDubDub about the Big 12’s grant of rights, hereafter referred to as GoR, and how secure the GoR actually made the conference.

There is some who believe the Big 12’s GoR is nullified by the conference’s exit fee. That’s not true.

The GoR doesn’t stop any member from leaving the Big 12. Any member institution can give notice, pay the exit fee, and withdraw from the conference. The GoR has absolutely no impact.

That’s right – the Big 12’s GoR isn’t a barrier to leaving the conference if a member is dead set on leaving.

What the GoR does is retain the departing members tier 1 and tier 2 television rights for the Big 12 conference.

And it keeps the money allocated to the departing member too.

What it does, very effectively, is remove any benefit for any conference to add a current Big 12 member.

What about the argument that the Big 12’s GoR is punitive? Not even close…

The Big 12’s GoR isn’t punitive because its not intended to stop any member from leaving. It’s also technically not punitive because it’s a completed business transaction via contract.

Contracts are valid when two parties have a meeting of minds, have legal terms and due consideration is given. The Big 12’s GoR meets that standard.

Big 12 members agreed that a GoR was necessary to obtain the best possible TV contract with Fox Sports and ESPN. They agreed to terms and they received compensation for signing the contract by way of increased TV revenues and a $60 million signing bonus.

How is the fact that a departing member doesn't receive their share of TV money not punitive? They signed it. More importantly within the document its clearly stated that the provision within the GoR that forfeits TV money to the conference is not punitive because it was necessary to obtain the TV contract. 

Remember that in order for a contract to be valid all the terms of the contract must be legal. The provision that cedes TV rights money to the Big 12 upon leaving the conference is legal and enforceable. 

The exit fee is completely different. It’s included in the by laws to compensate the Big 12 for the loss of the departing member. The amount of the exit fee isn't important. What is important is the method used to determine the exit fee. It must be equal to the damages suffered by the conference. 

But the exit fee is moot anyway. Exit fees are recoverable. They are a non-factor in most cases. 

What's important to note that despite the fact that they appear linked that paying the exit fee does not void the GoR.

The Big 12 knows that exit fees are recoverable and a non-issue for schools like Texas and Oklahoma. If WVU could pay $20 million to exit the Big East how much could the Longhorns pay?

The GoR is the real glue binding the Big 12 together, but not why you think. 

The GoR means that neither the Big Ten or SEC could make money by adding a Big 12 school and that effectively removes the motivation poach from the Big 12. 

There are many who doubt the legality of a grant of rights. They claim it can be circumvented.  Some even go so far as to say its punitive because it prohibits school X from leaving the Big 12 for the greater profits of conference Y.

That’s not how contract law works. Again the details are that all ten members of the Big 12 signed the GoR and received compensation. They received due consideration – somewhat above fair market value – for the GoR’s implementation.  They all agreed, prior to its implementation, that the GoR was necessary to secure a new television contract and they each acted in their own best interests by signing the GoR.

The cost of challenging the Big 12's GoR in court would far exceed, and likely wouldn't be adjudicated before the GoR expired, the profit to be made by adding a current Big 12 school. 

Many people I talk to believe the ACC’s GoR could be circumvented or the same reasons that make the Big 12’s GoR solid: due consideration i.e. payment.

ACC members did not receive compensation for signing the GoR. They may have received intangible benefits like a sense of security and the like but as far as I can tell no money changed hands.

That opens up several valid questions about the ACC’s GoR. Do intangibles count as due consideration? Can a state institution sign away rights without receiving due consideration?

The Big Ten believes that’s the case and so may the SEC.

What if the Big Ten and SEC would collude to carve up the ACC by attacking the ACC’s GoR and using the upcoming autonomy of the big 5 to make it unlikely that the private schools in the ACC can compete with the rest?

At least four ACC schools will  find difficult to meet the financial needs of the highest echelon of college football.  Their athletic departments run at or near a deficit each and every year and with the price tag of competing going up I wonder how they will fund the changes.

Notes:

I’m staring to hear rumblings from SEC sources again. Right now its nothing more than background chatter but they openly wonder if the SEC and Big Ten could carve up the ACC with just a little pressure.  Both would benefit and neither would be seen as the villain.

I want to apologize to BYU fans. Certain WV based twitter personalities started rumors about BYU joining the Big 12 directly after comments by the Big Ten and SEC about BYU. There was absolutely nothing to those rumors. The individual who started them is known for trolling distressed fan bases in order to drive traffic to internet message board ran by equally nefarious cohorts.  I have nothing but respect for the BYU program and its fans.

The Truth about BYU and the Big 12

I’m not happy about writing this particular expansion update. I have great respect and admiration for BYU as an institution and for their football program and it’s because of my esteem for the Cougars that I decided to once again write about what’s not happening because I believe the good people who follow BYU understand the value of truth no matter how difficult it is to read. 

BYU isn’t close to membership in the Big 12 conference.

The Big 12 hasn’t retained the services of Chuck Neinas to brainstorm revenue-generating ways of adding BYU.

BYU didn’t send representatives to the recent Big 12 spring meetings.

BYU doesn’t have eight votes among Big 12 members.

I understand the panic among the BYU fan base. The ACC and SEC declarations about BYU’s exclusion from the ranks of the new football elite fuel the rumors.

The panic also makes BYU fans vulnerable.

The fear of being left out of the elite and being forced, through no fault of you own, to fall back to the level of a Conference USA program makes it easier for you to suspend disbelief and seize upon any rumor, no matter how crazy, that offers an alternative.

The problem is none of the rumors are true.

I wish I could write that BYU was close to becoming the 11^th member of the Big 12 but if I were to do so I would be lying and BYU fans deserve the truth.

The Big 12 isn’t thinking about expansion. Conference commissioner Bob Bowlsby is on record as saying that he couldn’t get a single member institution to support expansion.

Why?

The answer is always money.  It just isn’t profitable for the Big 12 to expand under the current television contract.

The Big 12’s TV contract is split between Fox and ESPN and both networks have refused to reopen the contract to add money for expansion.

What that means is if the Big 12 were to add BYU  that each of the ten current members would see their annual revenue from the TV contract reduced by $2-3 million each  year.  Over the lifetime of the current contract that loss of revenue hits a staggering $20-30 million dollars.

 Some people may try and tell you that the conference realizes it must spend money to make money. Those people don’t understand the Big 12.

Equal revenue sharing is new to the Big 12. Prior to the TV contract signed two years ago it was Texas that received the most benefit from the Big 12’s media deal.

It’s not hard to understand why the seven schools, who now enjoy revenues from the new contract, would be reluctant to reduce their shares. 

The only factor that could have motivated the Big 12 to expand and willingly accept revenue cuts was the slim chance that the playoff selection committee would favor those conferences who play a conference championship game.

Current NCAA rules require a conference have a minimum of 12 members to hold a championship game and since the NCAA denied the Big 12’s request for a waiver last summer it seemed the playoff committee would determine the fate of Big 12 expansion.

If the committee decided that a conference champion determined by way of a championship game was more worthy than a champion determined by round-robin play then the Big 12 would have expanded by inviting BYU and UCF.

Big 12 expansion, for the foreseeable future, wad dead when Bowlsby was assured by those on the committee, which includes WVU’s Oliver Luck, that the Big 12’s champion would be on equal footing with those determined by a championship game.

And then came the “coup de grace”…

This August the 350 member institutions that comprise division 1 will vote to allow the ACC, Big Ten, Big 12, Pac 12 and SEC to establish their own rules. One of the rules that will be changed is the rule that stipulates 12 members in separate divisions are required for the staging of a championship game.

That autonomy eliminates any incentive the Big 12 had to expand.

No matter what rumor you hear I want you to keep that in mind. I want to ask why would the Big 12 expand? What benefit would expansion bring?

But don’t despair.

I still believe that BYU and UCF will eventually be Big 12 members. It’s just happening tomorrow or next month, or next year, or the year after.

The Big 12 understands they have the smallest media footprint of the major conferences and they understand the need to expand. It will happen as soon the TV contract makes it profitable.

Until then my message to the BYU faithful is don’t panic. BYU is in a better position than most to survive the wilderness for the next 5 or 6 years.  BYU will be more than okay.

Until then don’t panic and don’t fall for those who would lie to you because they see BYU nation in panic mode.

Expansion is Dead: Part II

Why is it that talk about college football expansion refuses to die? There is far more evidence to support the theory that, at least for the foreseeable future, expansion is dead.

But is it?

Dead? Not exactly but it certainly is in deep hibernation.

Certainly the Big Ten covets the opportunity to extend their product south and the conference hasn’t exactly been secretive about their desire to further pillage the ACC.  The problem is that the only schools that meet their profile just are not interested.

Maybe that changes now that ACC commissioner John Swofford publically admitted that an ACC network is years away and may not happen at all but I’m not so sure it would matter to Big Ten targets UVA and UNC.

The consensus is  that the Big Ten’s payout will dwarf that offered by the ACC --perhaps by as much as $20 million per year. Is that enough of an incentive to lure away the new TV markets in Virginia and North Carolina that the Big Ten craves?

I don’t think so.

In order for change to take place there must be either great need or great opportunity and very little risk.  Look at all the moves in the conference realignment drama that played out over the past two years: Pitt, Syracuse, Rutgers, WVU and Louisville left the Big East out of great need. Maryland had perhaps the greatest need of all when they dumped the ACC for the Big Ten.  

Texas A&M, Missouri and Colorado left because of the great opportunity offered by membership in other conferences.

In every case the reward of switching conferences greatly exceeded the risk involved in the move.

And that’s why I believe the ACC is secure despite having the lowest payout of the major conferences.

I’m not convinced the risk-reward equation  supports a move by any ACC school.

First there is the grant of rights – the ACC’s grant of rights is modeled after the Big 12’s in that every member has agreed to cede both their television rights and the television revenue to the conference in the event of a theoretical move.

People like to argue about how secure a grant of rights makes a conference. There are many scenarios people contrive to get around the GoR but not a single attorney I’ve spoken to believes a GoR could be successfully challenged.  It’s just not worth the risk or the money and time it would take to even adjudicate the issue.

Add to that a powerful provision I’m told exists in both the Big 12 and ACC’s GoR – one that stipulates that each member  agrees that the loss of TV revenues for departing members isn't punitive.  

What that means is that if any school leaves the Big 12 or ACC for another conference they will not play on television remainder of the ACC/Big 12 TV contract and that they will receive absolutely no television money.

To me that ends the discussion right there. The risk is far to great to even consider a move.

Yet sources within the Big Ten continue to tell me that they believe the ACC GoR could be easily circumvented because the ACC schools did not receive due consideration for ceding their rights.

They believe that it maybe be illegal for state-funded institutions to grant rights without receiving proper payment.

I don’t argue the point with them.

But valid or not their argument is moot when the Big Ten can’t find an ACC school interested in even discussing the possibility.

As if the pesky grant of rights wasn’t enough there’s also the culture problem to overcome.

Most ACC schools identify with the southern culture whereas it’s safe to say to the Big Ten is a mid-west league despite the additions of Maryland and Rutgers.

It was easy for WVU to leave the Big East. The Big East didn’t fit WVU’s culture. The Big 12 is by far a better fit, at least culturally if not geographically,  for WVU.

UVA and UNC in the Big Ten? That’s a clash of cultures that usually spell doom for outlier – just ask Boston College how they’ve done as a member of the ACC.

The third factor against any ACC school leaving is the exit fee. Until the law suit with Maryland is decided the value equation of a move is a losing proposition.

How much of a revenue gap would be needed to overcome the GoR, the outlier factor and the specter of the exit fee?

How many ACC schools can risk a decade of no TV money or TV appearances?

There are scenarios where the Big Ten could entice certain ACC schools to leave.  Those schools each have unique revenue problems that somewhat offset the risk of adjudication – provided the exit fee is ruled punitive – but each of those schools falls short of the metrics the Big Ten requires.

Florida State, Georgia Tech and Pitt have revenue problems. FSU does not meet the Big Ten’s academic model and both GT and Pitt lack the large alumni base that the Big Ten depends on to inflate revenues. 

An official at NC State tells me they would jump at the chance to leave the ACC and UNC’s shadow, but like FSU the Wolfpack doesn’t meet the academic standards required by the Big Ten.

It’s my opinion that the Big Ten’s ACC expansion plans are over unless they reconsider schools that are not AAU members.

The Big Ten is trying.  The plan to move the basketball tournament to Washington D.C. was meant to be  a clear message to UVA but so far the Cavaliers are not listening.

Does Swofford’s sound bite about a potential ACC network change anything? Not unless the ACC’s exit fee is ruled punitive – if that happens then the risk-reward equation suddenly changes in the Big Ten’s favor.

There’s a few more scenarios concerning the SEC, the Big 12 and the Big Ten targeting the Big 12 that I’ll address next week. Some are more likely than others.

Some Notes:

• BYU has to be reconsidering the ban on Sunday play that has kept them out of the Big 12 – right?
• I’ve been one of the few voices openly saying that an ACC Network would never happen and I’ve been writing about it for over a year. Last week I came to believe one must be in the works because of the new found sense of allegiance UVA has for the ACC.

Big 5 Autonomy Ends Expansion

Sometime today the NCAA’s Executive Committee will vote to endorse a plan to give the 65 member institutions of the ACC, Big 12, Big Ten, Pac 12 and the SEC the autonomy to make their own rules. 

In August, at the NCAA convention, the 350 schools that comprise the NCAA’s Division 1 will vote to ratify the changes.

There is some thought that the schools not in a power conference will veto the change and make the Big 5 play by the same rules as everyone else – that will not happen.

A veto almost certainly means that the Big 5 will break away from the NCAA and no one wants that.

So the 252 Division 1 schools that play in the 18 conferences not in the Big 5 will vote to ratify the changes along with the rest.

And once they plan then realignment, at least in the next 5 to 10 years,  is over.

Once the Big 5 have the power to make their own rules the desire to add mouths to the table will  shrink as their wallets grow.

The first change the Big 5 will make will be to pay their student-athletes scholarships to cover the full cost of attendance.  At WVU that means about $2,000 extra for every scholarship athlete.  That’s not a problem for WVU. The Mountaineers, flush with cash from the move to the Big 12 and their shinny new deal with IMG, have included that line item in the budget for the past few years.

Expect more changes too -- changes like insurance for athletes and covering other incidentals.

You can also expect the ACC and Big 12 to use their new found autonomy to change the rules for conference championship games.

The Big 12 won’t need the NCAA’s minimum of 12 members to play a championship game and the ACC will no longer be forced to sacrifice a lamb from the Coastal Division to FSU or Clemson.  Each will be free to determine their own rules for who plays in the championship game.

For the ACC that means no more Blue Devils or Deacons offering weak opposition to FSU – it means that two best teams will play to represent the ACC in the playoffs and it means the fans will enjoy a FSU-Clemson rematch nearly every year.

For the Big 12 it means no expansion. The conference is dead-set against expanding if the additions do not add to the television pot. 

I think that’s a huge mistake on the Big 12’s part but you can’t argue with their logic. Right now there isn’t an expansion candidate available that can satisfy the plethora of metrics necessary to justify expansion.

A few are close. A few are tantalizing close and only need a track-record of success and few more points in the college football “Q score” to be worthy of inclusion.

Recently a Big 12 official told me that the conference was prepared to offer BYU and the UCF Knights membership in the conference  if they were forced to meet the NCAA’s minimum number of members (12) for a championship game.

He told me that Bowlsby believed the details with BYU could be worked out and that UCF was by far the next best candidate available.

That won’t happen now – at least for a while. The trick for BYU and UCF will be in finding the money to compete with schools from the Big 5 for recruits and visibility.

It’s not hard to see BYU keeping pace. The Cougars have a contract with ESPN and their independent status will make them an attractive option for scheduling.

UCF will likely need it's alumni and fans to make up the difference to keep the Knight's program moving forward.

 I'm told the Knights will be vetted again in 2020 and if the Knights can continue their success and push themselves over the top in terms of measurable they may just get their ticket punched into the Big 12 when the new television deal is due. 

The change also means stability for the ACC despite the plans for further expansion by the Big Ten. A reliable Big Ten source tells me that UVA has communicated to the Big Ten it is no longer interested in leaving the ACC.

The money UVA receives will be in the same ballpark as the money the Big Ten receives. At least its enough to keep UVA in the ACC rather than being an outlier in the Big Ten.

An athletic department official at North Carolina State spoke candidly with me a few weeks ago about expansion and he had a few surprising observations.

He told me that only NC State and FSU would be willing to leave the ACC and then only if the offer came from the SEC and he doesn’t expect that offer to come anytime soon.

The source at NC State said that FSU agreed to sign the ACC’s Grant of Rights shortly after being  rejected by the Big Ten (academics).  Once FSU signed then all the others were eager to sign.

I asked the NC State official about the Big Ten’s belief that the ACC grant of rights could be circumvented and his answer was surprising.

He confirmed that the only consideration ACC member institutions received for signing the grant of rights were intangibles like security and that NC State thought the grant of rights could broken.

“There is some question that a state institution like NC State could legally assign broadcast rights without compensation at true market value.” He said.

But it’s his opinion it doesn’t matter.  The only schools in the ACC that meet Big Ten academic standards are not interested in leaving.  No amount of money is going to convince UVA or UNC to leave the ACC especially with the new autonomy of the power conferences on the horizon.

The reason is money.  Very soon the Big 5  will distance themselves from the rest. The ability to make their own rules allows them to eventually claim all the money and once that happens its just a matter of time before the Big 5 have their own commissioner and a unified television contract.  When (and if) that happens the difference between what the Big Ten earns and what the ACC earns will be negligible.