News leaked out late Monday that ACC Commissioner John Swofford will announce details of the long-awaited conference network at Thursday’s ACC Media Kickoff. While the pending announcement was expected, there are aspects of the upcoming network that are surprising. Some of the leaked details raise some important questions about the future of the conference and Florida State.
1. ACC had no choice but to announce a “network”
Absolutely nobody was surprised by the news that an ACC network will be officially announced this Thursday. Both the ACC and ESPN really had no choice but to roll out some type of network in time for this week’s ACC Media Kickoff.
If you believe some reports, ESPN was on the hook to the ACC for $45 million ($3 million per school) if a conference network was not established July 1, 2016. Obviously that date has come and gone, but there is enough evidence to believe that ESPN was contractually obligated to launch some sort of network when the ACC gave the four-letter network an exclusive and all-encompassing deal in 2012.
Since neither the ACC nor ESPN have released the agreement in question, there’s no way to know whether the all-digital platform, which is expected to be launched next month, will meet the requirements of a “network” as defined in that contract. What’s being called a “linear” network, which means an actual television channel on cable and satellite, will reportedly be available in 2019. Since an actual TV network is being launched three years after the agreed upon date, does the ACC or its member schools have a cause of action against ESPN/Disney, or will ESPN dole out the $45 million to the conference? Or was the original arrangement modified to eliminate this penalty in the new deal with ESPN?
Regardless of what was required of ESPN contractually, Swofford simply couldn’t afford another round of badgering from media about a conference network. At last year’s ACC Kickoff, he was besieged with questions about the state of the network and the ever-widening financial gap between the ACC and other Power Five conferences.
If Swofford failed to announce anything by the start of this week's Kickoff, every media outlet would have focused on the failure of the conference and its commissioner toward creating a network. While it’s uncertain whether the digital-only network will result in a substantial financial boost to the member schools before the actual TV network is launched in 2019, Thursday’s announcement buys the ACC and its commissioner time and might even cool the critics.
2. Revenue generated by the “network” will be speculative
Unlike traditional sports networks, nobody can provide an accurate financial projection when it comes to the digital-only offering that will reportedly be available next month, nor the linear network that is set to launch in 2019.
Initially, many felt that the new network would be an on-demand digital platform with the customer paying for a subscription or a la carte for programming. However, it doesn’t sound like that will be the case. Instead, early indications are that the digital-only network will simply be a streaming network similar to ESPN3. In fact, it’s a good bet that much of the ACC Network’s inventory will be the same as is currently housed on ESPN’s streaming platform. That raises the million-dollar question, how can an on-line streaming platform effectively be monetized over the next three years? It’s hard to fathom how a digital-only “network” can generate real revenue, at least when compared to other conference TV networks.
The SEC, Big Ten and Pac-12 networks are all tied into traditional satellite and cable networks with revenue generated through subscriptions to those services. As a result, those conferences have a pretty good idea of how much revenue their respective networks will generate. While the Pac-12 network has come up short of expectations, the SEC and Big Ten have reaped huge financial gains from traditional conference television networks.
With the ACC relying completely on a digital component for its network for the next three years, it’s impossible to imagine that the revenue generated will be on par with other P5 networks. This would put FSU and other ACC member schools further behind the eight ball when it comes to keeping up with the Joneses.
The more positive news, and in a bit of a surprise, ESPN is expected to launch an actual ACC television network in 2019. As evidenced by the success of the SEC and Big Ten networks, a satellite/cable network has the potential to generate significant revenue to member schools. But even that raises serious questions given the current landscape of television viewing habits.
Over the past couple years, satellite and cable have been seen a dramatic loss in subscriptions with the advent of cord-cutting. As such, you have to wonder what a television network will be worth in three years. The potential to generate real revenue from such a network could be dramatically different in 2019.
Reportedly, the delay in launching an actual ACC television network is result of ESPN being locked into its current cable/satellite deals. Makes you wonder why ESPN didn’t start the ball rolling on an actual TV network with cable and satellite companies when it agreed to create one three years ago.
There are also potential hurdles involved with Raycom Sports holding rights to certain ACC games through 2027. Again, you have to wonder why this wasn’t a consideration three years ago when everyone expected ESPN to create a network for the conference.
3. How will expenses and revenue be divided up?
ACC Commissioner John Swofford has always insisted on equal revenue sharing among the member schools. He has been firm in that stance despite the fact that the conference is extremely top heavy when it comes to the schools that generate most of the television and post-season revenue. Will that still continue to be the case under the new platform?
If the new network follows the pattern of ESPN3, the schools themselves will be producing the bulk of the content. If that’s the case, it raises more questions about how it will be set up financially. Will the schools themselves pay for new studios, equipment and personnel to produce the shows and broadcast live games for the “network”? If that’s the case, it makes even more sense for schools generating the most revenue to share in the benefits. That would incentivize each school to produce a top-notch product to maximize revenue.
Or will ESPN/ACC provide each school a flat amount to take care of the expenses? And what if this amount isn’t deemed sufficient to produce a quality product? Is Wake Forest really going to receive the same amount of funds to create its sports offerings as Florida State? A better option might be for the schools the submit proposals for what is required to produce quality programming for its sports teams. If FSU can show its needs twice the resources to produce a quality product compared to Wake Forest or Syracuse, it should receive that amount.
4. Which games will be broadcast through traditional televisions and which ones will be on the network?
It will be interesting to see how ESPN decides to divvy up its inventory of games. The best guess is that the digital offering will follow the SEC Network’s model. Last year, the SECN broadcast 15 football games but only two involved intra-conference matchups (both had Kentucky as one of the teams). The other 13 games pitted an SEC team against a non-conference weakling.
A good bet is that many of the ACC games currently broadcast through ESPN’s online streaming service, ESPN 3, will be moved to the new digital network. And like the SECN’s slate of games, most of the offerings will be leftovers that aren’t deemed big enough to show on one of ESPN’s traditional channels. For instance, FSU’s Sept. 10 game against Charleston Southern is currently scheduled to be shown on ESPN3. Now, there's a good chance that game will appear on the digital ACC Network.
Men’s basketball is a totally different animal. With well over 400 regular-season games among the ACC’s 15 schools, there will be a huge inventory to push to the digital platform. And with several high-profile men’s basketball programs in the ACC, there should be several intriguing matchups to choose from each week. While just one or two football games a week might be pushed to the network, 72 men’s basketball games were broadcast through ESPN’s online streaming network last season.
And obviously the new platform will be a boon for baseball and Olympic sports. How much those sports will move the financial needle remains to be seen. However, the ACC has a strong base of quality sports teams which will provide much-needed inventory.
5. Agreeing to extend the Grant of Rights for nine more years
Probably the most surprising news to come out regarding the upcoming network is that the ACC’s member schools agreed to extend the Grant of Rights (GOR) by nine years. With the GOR now in place through the 2035-36 academic year, it would be financial suicide for a member school to leave the conference before then since each school’s media rights would be forfeited to the ACC. If a school were to leave the conference, the ACC would still retain its valuable media rights all the way through 2036.
Considering the ever-widening financial gap between the ACC and other Power Five conferences, which is primarily a function of television revenue, you have to wonder why schools like Florida State and Clemson would agree to give up these ultra-valuable rights. There simply has to be incentives in place that haven’t been made public yet. It’s unimaginable to think that FSU would just sign-off on a long term extension worth potentially hundreds of millions of dollars without receiving some serious concessions from the ACC and ESPN.
These concessions could take several forms, but the most logical is that member schools will be incentivized in some fashion. As mentioned the last Five Takes column, one possibility is to give a portion of post-season revenue generated from football and basketball to the participating schools. Another is that schools could receive bonuses for hosting major television events like ESPN Gameday.
Of course, the elephant in the room is Notre Dame. The extension of the GOR reportedly ties in the Irish as a partial member through 2036, and obligates them to join the ACC in football should they decide to forgo their independence in this sport before then. But will they?
Of course, the dynamic of the ACC would completely change should Notre Dame, arguably college sports’ most valuable program, join on a full-time basis. That would result in a huge uptick in value to the whole conference and potentially put it on par financially with the SEC and Big Ten. But as has been noted several times, what is Notre Dame’s motivation to give up its independence? Currently, there isn’t anything pushing the Irish to make the move but the college football landscape could change dramatically over the next 20 years, so it’s certainly possible.
FINAL NOTE: Please don't attempt to categorize my opinion on the upcoming networks as either positive or negative. Most will agree that revenue to member schools is the main reason for having conference-only networks. In this instance, neither the pro or anti-ACC crowd can quantify what the upcoming announcement will mean for ACC member schools financially. Could be a boon or bust, we just don't know.
The other point of this column is to point all the numerous unanswered questions that will be raised with the advent of the new networks. Hopefully, John Swofford will provide us with more details on Thursday but traditionally the ACC hasn't been very transparent in its business dealings so I wouldn't expect much.
