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Sunday, April 21, 2024
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Why Expansion May Not Be Worth It For the ACC

  • FOS spoke with industry experts on the potential media value of adding Stanford, Cal, or SMU.
  • From TV revenue to travel fees, expanding may not provide enough of a financial benefit.
Mar 16, 2023; Orlando, FL, USA; The Duke Blue Devils mascot performs during the second half against the Oral Roberts Golden Eagles at Amway Center.
Matt Pendleton-USA TODAY Sports

Since the Pac-12 broke up last week, all eyes have been on the ACC and whether the conference would invite Stanford and Cal. 

The ACC’s university presidents have had multiple meetings, and have also considered adding SMU, according to reports. But as of Thursday morning, the ACC did not have enough support among presidents to add any of the schools. 

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The conference won’t agree to expansion unless it can make significant revenue gains. But from TV revenue to travel fees, expanding may not provide enough of a financial benefit.

The ACC’s current media contract with ESPN, offering about $30 million per school annually, can’t be renegotiated until 2036. But renegotiating this contract after expansion may not be a game-changer.

Industry experts laid out the theoretical argument for why SMU, Cal, and Stanford could be a value add.

More inventory, or games, will yield more money from a network even though Stanford, Cal, and SMU aren’t currently football powerhouses. 

They also reside in a pair of media markets that both rank in the top 15 in the country. That not only draws more eyeballs, but also gives the conference two more time zones, providing inventory networks could space out throughout the day.

Cable companies can charge two sets of fees to offer consumers a conference network, one source said. The fee is higher in a state, or general region, where said conference has a school. 

The ACC Network would theoretically not only entice more subscribers from the Bay Area and Dallas, but also could charge those subscribers a higher fee. The conference, of course, would also get more money from ESPN. 

But in reality, that “added value” may not amount to much.

ESPN’s contract with the ACC reportedly mentions a “pro rata” rate for new schools, meaning that the network would add enough to the contract that the newcomers would get the same share as existing programs. In this case, the ACC would get about $30 million per school per year. ACC schools probably aren’t going to add any of the schools for anything less than pro rata. 

To get a modest bump in revenue, the ACC could withhold some of the pro rata money from incoming schools for a number of years and split it amongst existing members.

If the ACC added three schools and withheld half of their distributions, the current schools could split an additional $45 million from conference media revenue (not including other conference sources, like the CFP). But splitting $30 million 15 ways would yield only $3 million per school per year.

The increased media fees schools would receive may not be worth the increased cost of shuttling athletes in more than a dozen sports to Texas or Northern California.

Currently, ACC athletes don’t travel farther west than Louisville. Schools could spend millions each year on travel — just ask UCLA, which had to significantly increase its budget to join the Big Ten.

As the conference continues to consider its options, the clock is ticking.

Members like Florida State have been vocal about concerns over the ACC’s revenue distributions, and have even threatened to leave the conference if they can’t get the money they’re looking for. 

Schools have until Aug. 15 to decide whether they intend to defect in 2024.

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