Monthly Archives: September 2011
A couple of weeks ago two different people whose work I admire told me they were hearing rumors of the SEC talking to UNC. They didn’t reveal their sources, so I can’t evaluate the merit of these rumors. However, like the Texas to the ACC rumor, I thought it was crazy. Today on Twitter (follow me @SportsBizMiss) someone asked me what school that was the least talked about was the most likely for the SEC. Then I started thinking about it….
Sure, go ahead and lock me up in a padded room in a straight jacket. I’ve officially lost it. I’m considering UNC to the SEC. Do I think it’s likely? No. Do I think it’s interesting to consider? Of course. This is why I love conference realignment.
If it were all about money, UNC should jump at the chance to join the SEC. The Tar Heel’s athletic department turned a paltry $140,000 profit on the backs of students who funded nearly 10% of the budget with $6.9 million in student fees. It also took $14.6 million in contributions to reach that profit.
Over in the SEC, only one school needed 10% of their budget to be funded by student fees: Mississippi State. Yet, Mississippi State managed a nice $1.9 million profit in the athletic department without pulling a single dime from the booster club for the 2009-2010 school year.
That’s the power of being a member of the SEC.
The simple truth is football makes more money than basketball. BCS payouts are bigger than March Madness payouts to the athletic department. Television contracts are driven by football, not basketball and mean bigger money for the SEC than the ACC. Most football programs turn larger profits than basketball programs.
Joining the SEC would easily mean $5-6 million more each year in conference distributions for the Tar Heels. Likely far more with a reworked television contract. Being a member of the SEC would also improve UNC’s football recruiting, and an improved football program means big money for any athletic department.
But, it’s not all about money or football for some schools. UNC is likely one of those. They have power in the ACC. The conference needs them more than they need the conference. The same would not be true in the SEC. UNC has to ask itself: does it want to be a big fish in a small pond or a small fish in a big pond with a healthier bank account? What’s more important: history, tradition and power or the ability to be a self-sufficient athletic department? Fans yearn for the former and then criticize schools for not being the latter. Unfortunately, sometimes you can’t have it both ways.
In the end, I don’t see UNC moving to the SEC. Is it the right choice? It depends on what you believe a school should value most highly.
Aside from a chance to exit the shadow of the Longhorns, Texas A&M also stands to gain some revenue from its move to the SEC.
For the 2009-2010 school year, A&M received $10.17 million from the Big 12. Included in that figure is $841,381 for bowl game expenses, so A&M’s actual Big 12 share was $9.33. Each member of the SEC that year received $17.42 million.
Texas A&M expected to receive $12.71 million for the 2010-2011 school year, $1.48 million of which was for bowl expense reimbursement. Its $11.23 million Big 12 share (exclusive of bowl money) paled in comparison to the SEC’s $18.33 million per member.
According to A&M’s budget for this school year they expect to receive a conference distribution of around $15.83 million from the Big 12. Reports immediately following the announcement of A&M’s acceptance into the SEC today stated ESPN would be increasing rights fees to allow SEC members to receive at least the same compensation they would have received prior to A&M’s addition. That means A&M will see a minimum bump of $2.5 million, and closer to $3.4 million if the SEC repeats last year’s over 5% increase in overall conference monies to be distributed.
Aside from any conference buyout, A&M may also experience some additional travel costs as they join the SEC. However, don’t expect it to decimate the additional revenue they’ll be receiving. An open records request of Nebraska shows an increase of $1 million in travel costs following the school’s move from the Big 12 to the Big Ten.
In speaking with Aggies during my recent visit to College Station, the real value in this move isn’t in conference distributions, its in the ability to build a national brand for the school. As part of the Big 12, A&M was “one of the Texas schools.” In the SEC, they’ll be the Texas school. There’s a lot to gain from this move if the Aggies capitalize on the opportunity.
Note: I should note that I didn’t compare the estimated revenue members of the Big 12 have been projected to make beginning next season under the new FOX deal. That’s because I firmly believe the SEC will have an improved contract after a fourteenth member is added. I’ll wait until the time comes for a comparison.
Both are automatic-qualifying conferences, which means they get an automatic berth in a BCS bowl game (Orange Bowl, Sugar Bowl, Fiesta Bowl or Rose Bowl). But what happens if one of those conferences folds? Or perhaps one is forced to add several schools to remain viable?
Current AQ conferences were determined based on data from the 2004, 2005, 2006 and 2007 football seasons. That data will be reevaluated following the 2011 season based on the 2008, 2009, 2010 and 2011 seasons. Perfect timing for conference realignment.
Three sets of data are considered: rank of the highest-ranked team in the conference, rank of all conference teams and number of teams in the top 25.
Here’s how it all played out last time:
1. Average rank of highest-ranked team in BCS Standings
3. Big Ten……………………………………4.25
4. Big 12……………………………………..4.5
5. Atlantic Coast…………………………..8.25
6. Big East…………………………………..9.0
7. Mountain West……………………….14.25
8. Western Athletic……………………..16.75
9. Conference USA………………………40.975
11. Sun Belt………………………………..68.625
2. Average conference ranking (ranking of all teams in the conference by the six computers)
3. Big 12…………………………………….42.38
4. Atlantic Coast………………………….42.47
5. Big Ten…………………………………..42.65
6. Big East………………………………….46.76
7. Mountain West…………………………67.46
8. Western Athletic……………………….76.36
9. Conference USA………………………..81.41
11. Sun Belt…………………………………93.52
3. Adjusted Top 25 performance ranking (number of teams in top 25 of BCS standings, as a percentage of the top conference)
2. Big Ten……………………………………..78.35%
4. Big 12……………………………………….64.29%
5. Atlantic Coast…………………………….57.14%
6. Big East…………………………………….49.11%
7. Western Athletic…………………………22.32%
8. Mountain West…………………………..20.09%
9. Conference USA……………………………0.00%
11. Sun Belt……………………………………..0.00%
There is a threshold for annual qualification that requires the conference be in the top six in the first two sets of data and in the top 50% in the third set of data. However, a team can obtain a waiver from the Presidential Oversight Committee if they are in the top six in the first two sets of data, or top five in one and top seven in the other, and top 33% of the third set.
In light of this, it’s important conferences take on-the-field performance into account when making realignment decisions. This doesn’t mean that’s enough to get you into an AQ conference (I’m talking to you, Boise State), but it does have to be considered. If the Mountain West still had Utah, TCU and BYU, along with the Boise State addition, the Big 12′s AQ status could be in serious danger depending on who they chose to add.
Fortunately for the Big 12, I don’t think there’s a non-AQ who could surpass them at this point, even with the losses. However, I do think it means if the Big East or Big 12 folds there would be an AQ opening for the taking.
How conferences will realign is anyone’s guess. I’ve spoken with athletic department executives at a number of schools and they’ve asked me as many questions as I’ve asked them. No one has a clear idea of how things will shake out.
What I do know is that my predictions from over a month ago were wrong. So, I’m ready to roll out some new ones. This time I want to talk about the timing, because I think that’s a huge part of how this all unfolds.
The SEC is going to add Texas A&M. The legal maneuvering is a stall tactic and will be resolved.
It’s beginning to sound like Pitt and Syracuse to the ACC will be the surprise move that will blow things wide open. Let’s say that happens next.
Now the Big East needs to add at least a couple of teams…or go back to being a basketball conference. Six weeks ago I said that the Big East would be an innocent bystander who would be fatally wounded in the conference realignment standoff. I still think it’s possible.
If the Big East is looking around, where are they looking? Should they go after Big 12 schools like Kansas, Kansas State, Iowa State, Texas Tech or Baylor? Those schools might have to make a decision before they know if Oklahoma or Texas will finish off the Big 12 by leaving. If you were one of those schools, what would you do? I think I’d be listening to the Big East, especially if I was Iowa State or Baylor and got the call. If you’re those schools, do you want to risk that there are no available chairs when the music stops playing?
I think it’s a tougher call for Kansas, Kansas State and Texas Tech, because they could end up with a better option. If I’m them, I try to stall as long as possible.
The Big East could also invite UCF, East Carolina, Houston or a number of other schools. If I’m any of those schools and get the call, I’m putting ink on paper as quickly as possible.
Meanwhile, Oklahoma could finalize its move to the Pac-12 any day now. Oklahoma State’s President is perhaps the only President getting any sleep these days. His horse is effectively hitched to Oklahoma’s wagon.
Oklahoma and Oklahoma State moving to the Pac-12 do not mean the end of the Big 12. The Big 12 is over when Texas says it is. If they want to stay, and they certainly have reasons to, the Big 12 can look at BYU, Air Force, Houston, SMU or maybe try to lure a Big East school away. Again, the Big East is like a deer frozen in the headlights. It just has to wait and see if anyone takes it out.
In the meantime, the SEC needs a 14th member. If the Big 12 stays intact, I’m not convinced they add 14 right away. However, if the Big 12 is coming apart, the SEC could snag Missouri.
And what exactly is the Big Ten doing? Delaney is like a General up on a hill watching the battle take place in the valley below. He could swoop in and make a move if he needs to, but for right now he appears to be lying in wait.
Obviously the Big Ten would love to add Notre Dame, but I don’t see them joining a conference until their hand is forced by the BCS. They’ll sit this round out. Other candidates? Kansas, Missouri, UCONN, Syracuse and Rutgers. If the SEC grabs Missouri first, I think the Big Ten could add all four of the others. Kansas State doesn’t get to tag along with Kansas because of academics, and the other three make a nice triangle around New York. The Big Ten Network would love that. And remember, this isn’t about ratings. It’s about being able to tell advertisers you’re in a market.
Back to the ACC. I still think Texas to the ACC makes more sense than most think. Who comes with them? If I’m the ACC, I want Kansas. Which means I better get to them before the Big Ten or Pac-12 do. I don’t think Texas politicians will be able to force Texas Tech down the ACC’s throat along with Texas, and I don’t believe the ACC wants them.
Does the Pac-12 want to go to 16? Maybe they want Kansas and are willing to look past Kansas State’s academics to take them too. I’m not sold on this though. They won’t take BYU with their culture that ‘s not a perfect fit and their ban on Sunday athletics. They won’t take Boise State either, sorry Bronco fans.
I’m unconvinced we’re going to four 16-team super conferences. I think it’s a media creation that fans have latched onto because everyone thinks it sets up the system for a four-team playoff. Conferences aren’t going to add unless the final picture involves more money for its members. Not every addition does that.
Think you know how it should all shake out? Try the conference realignment game Chadd Scott and I developed – Choose Your Own Adventure style!
Remember those awesome choose-your-own-adventure novels from childhood? How about a grown-up version related to college football? Conference realignment remains the biggest story in college sports and now YOU can determine its landscape choosing who goes where. But be careful, not all choices are equal; while some realignment decisions make conferences and teams stronger, others doom them to failure.
All the credit for this idea goes to Chadd Scott of SEC/ACC/C-USA site ChuckOliver.net. We spent hours pouring over scenarios and building this game. While not every possibility is covered, I think it’s a fun way to see how conference realignment is very much like a game of chess or Jenga!
Then I got to thinking about it, and suddenly I can see it. Texas to the ACC makes more sense than any other scenario outside of the Big 12.
Let’s get inside the mind of Texas for a minute. It’s used to being the alpha dog in its conference. It has a brand new network it would like to keep that stands to make them financially stable for a very long time. Texas is an elite public university, one of the “public Ivy” schools.
Given all that, where does Texas best fit outside the Big 12? Crazy though it may sound, I think it’s the ACC.
Before we get into why the ACC is the surprise frontrunner, let’s take a look at the other conferences from the one with no chance to the one with the strongest case after the ACC.
The only way Texas will be joining the Big East is if it goes independent for football and needs a home for its other sports. I don’t see any point in wasting word count on why this is the case.
The Big Ten doesn’t seem to be a factor at this point. Even if they were, they would almost certainly require Texas to ditch the Longhorn Network because of the Big Ten Network, which has second tier rights in the conference (by comparison, the regional networks in the Pac-12 have third tier rights).
I’m sure the SEC would welcome Texas with open arms, but the academics in the SEC keep them from being a factor. Florida and Vanderbilt are the only academic heavyweights in the conference, and that’s not enough for Texas. Again, this is a conference unlikely to let Texas keep Longhorn Network. That’s the most important part.
The Pac-12 is out because Texas would have to give up the Longhorn Network and stomach splitting money equally with little brother Texas Tech and a school like Washington State. They’d also presumably be sharing a regional network with Texas Tech. They wouldn’t be getting into Southern California either, as it seems clear any addition of Texas, Texas Tech, Oklahoma and Oklahoma State would mean creation of an eastern division in the Pac-12 to also include Utah, Colorado, Arizona and Arizona State. Although they fit in academically, it’s not enough. It also means playing away games two time zones away.
Which brings us to the ACC. The ACC comes the closest to giving Texas everything it wants and needs. Texas can come in and immediately be competitive in football and basketball. It’s a respectable conference for all the other sports as well. Based on the US News and World Report rankings that came out yesterday, the ACC is the best conference academically. Texas would be in extremely good company in that respect. The ACC television deals already provide a per year average that is higher than the Big 12 will have under its new contract. Although Texas receives more than the average in the Big 12 currently because of the unequal revenue distribution model, that model has already been equalized to a degree with equal sharing of the new FOX money, and there’s talk of making all revenue sharing equal going forward.
The biggest selling point isn’t that Texas can make as much or more in conference distributions in the ACC, it’s that Texas would get to keep the Longhorn Network. I think that’s the deciding factor here. The ACC allows each member to dispose of their third tier rights (any content not picked up by the conference’s tv partner, ESPN) in whatever manner they choose, so there’s no reason to believe Texas wouldn’t be able to keep the Longhorn Network. Texas is guaranteed to make $10.98 million from the Longhorn Network this year, with increases of 3% each year after. In addition, once network revenues exceed $295 million, Texas will begin receiving a whopping 70% of what’s called “Network Adjusted Gross Revenue,” which is essentially net income of the Longhorn Network. Is there any doubt holding onto this network is Texas’ top priority?
Even more importantly, the ACC could position the Longhorn Network to carry more football games. ESPN, Texas’ partner in the Longhorn Network, is the sole rights-holder in the ACC. That means no negotiation with FOX or any other network when it comes to television rights in the conference. From what I’ve been able to gather, the ACC contract with ESPN requires ESPN to carry all football and men’s basketball games, which on the face of it would make it seem that no football games would be available to the Longhorn Network. I have not been able to obtain a copy of the contract between ESPN and the ACC, but I wouldn’t be surprised to find language that might allow Longhorn Network to grab some games. Because ESPN has so many channels across its own brand and ABC, I imagine the language says something about games being carried on ESPN or any of its affiliates or subsidiaries. Longhorn Network would likely qualify if broad enough language was used.
Even if the terms of the contract don’t allow for ESPN to pass games to the Longhorn Network, I think there could be some negotiation to allow it. The ACC would be increasing in value as a conference by adding a huge national brand like Texas, so a renegotiation of the contract with ESPN might be in order. If a new contract is negotiated and current members of the ACC have their revenue share increased, perhaps they won’t mind a game or two ending up on Longhorn Network. Money talks. Not to mention that adding Texas increases the brand power of the ACC as a whole. As long as revenue is still be distributed equally amongst ACC members and the current members are adequately compensated for allowing the Longhorn Network to exist, I don’t think they’ll say no to the chance to add Texas.
You can argue with me all you want about fans not wanting to travel to ACC destinations or current ACC members being against the addition, but the financial incentives for all involved are the most important motivators in this round of conference realignment.
If you’re not sold, check out this piece by Chadd Scott of ACC/SEC/C-USA site ChuckOliver.net detailing why Texas to the ACC is a bad move.
Quite a few of you have told me via email or Twitter that you use BusinessofCollegeSports.com in courses you teach at the undergraduate and graduate level. I want to develop an area of the website just for you!
Please email me and tell me more about what you’re using and what courses you’re using it for. Also, if you could use the subject line “Course Info” when you mail that would be helpful. This will help me as I develop the new area. If you have any suggestions about what I could add that would be helpful, just let me know!
There are a lot of questions regarding conference realignment, and for many schools it means their future is uncertain. Chris Williams (@ChrisMWilliams) over at CycloneFanatic.com asked me to address some questions for Iowa State.
Those of you who follow me on Twitter know that I just completed a 10-day trip with stops at Ole Miss, Texas A&M and University of Tulsa. Being cooped up in the car for almost 3,000 miles gave me and my boyfriend, Chadd Scott of SEC/ACC/C-USA website ChuckOliver.net, plenty of time to discuss conference realignment. We worked through the questions about Iowa State together, and today you can find our answers on CycloneFanatic.com!
Here’s a taste of what we covered over there:
Iowa State has been a player in a major conference for over a century. At this point, the future is unknown and every scenario that a person can think of is hypothetical. But if indeed the future of college athletics is going to four 16-team conferences, do you feel like the Cyclones will be a part of one? If yes, which one and why?
A lot of Iowa State fans want the school to be proactive in these times. With the amount of leverage that a school like Iowa State has, is that even possible? If so, how? Or, do the Iowa State‘s of the world have to wait for the dominoes to fall?
Let’s say that the Pac-12 does indeed jump to 16 but other conferences do not follow immediately. Reports have linked teams like Iowa State, Kansas, Kansas State and Missouri (or some combination three of them) landing in the Big East. Would something like that make sense to you in the present day?
The future of the Big East’s television package is currently unknown. In a scenario that the Big East expands to let’s say, 12 (or more) football teams. Any estimation as to what each school could make in a future television deal?
Is there a chance that Oklahoma and Texas’ talk about going to the Pac-12 is a power play to force Notre Dame’s hand? At the end of the day, I assume that Texas nor Notre Dame want super conferences right?
The term “tortious interference” has become synonymous with conference realignment this week. Many believe Baylor is preparing to file a tortious interference claim against the SEC. What exactly does that mean?
Tortious interference is when a person or entity who is not a party to a contract (or business relationship, but we’ll stick with the term contract to cover both) intentionally convinces one of the parties to the contract to break that contract.
In the conference realignment scenario, Baylor could claim that the SEC is intentionally inducing Texas A&M to break its contract with the Big 12.
In order to be successful in their claim, Baylor (and any other schools who joined in) would have to prove certain “elements” in order for the case to go to trial. Before the case goes to trial, a judge could grant a motion to dismiss or a motion for summary judgment by the SEC if he/she doesn’t believe each of these elements is established.
The elements of a typical tortious interference claim, although it varies by jurisdiction, are as follows (first in legalese and then translated to English):
- The existence of a contractual relationship or beneficial business relationship between two parties.
- Knowledge of that relationship by a third party.
- Intent of the third party to induce a party to the relationship to breach the relationship.
- Lack of any privilege on the part of the third party to induce such a breach.
- The contractual relationship is breached.
- Damage to the party against whom the breach occurs.
The first two are easy hurdles for a plaintiff to clear. There is a relationship between Texas A&M and the Big 12, and the SEC is aware of that relationship.
By now most of you have heard there’s an issue with the third factor. A plaintiff would have to prove the SEC intentionally induced Texas A&M to breach the contract. All the evidence made public so far points to Texas A&M choosing to leave the Big 12 before the invite from the SEC.
However, there may be a wrinkle with regards to last summer’s conference realignment discussions. Did the SEC approach A&M then? If so, did they know A&M leaving the conference could result in current television contracts being renegotiated or canceled? I’m told Baylor could try and satisfy the third factor regarding inducement if they can prove the answers to those questions are yes.
Another issue the SEC could argue is whether any contract is really being breached. In terms of membership, the Big 12 is wholly governed by its Bylaws, which is a document that is not signed but is adopted by vote of the members. There is no other signed contract or agreement either between all of the members or between each member and the conference.
The Bylaws provide for a member to leave the conference upon notice and payment of a specified fee. If A&M gave the proper notice and agrees to pay the fee, what is A&M breaching by leaving? Baylor might argue the breach is with regards to the television contracts, but without a copy of the contracts I can’t comment on that. If what’s been made public is true – that there is a provision that allows for renegotiation in one or both tv contracts if the conference drops below ten members – Baylor could argue the breach exists there. Whether that’s enough to satisfy a judge is anyone’s guess.
The other factor I think the SEC might claim the plaintiff couldn’t prove is the last relating to damages. The plaintiff would have to claim actual damages, such as monetary losses. Now, if ESPN were to drop or renegotiate (for a smaller value) their television contract with the Big 12 because of A&M’s departure, then damages are easy to prove. Otherwise, I don’t think they have a case. There’s no reason to believe that the loss of A&M alone would cause these contracts to be renegotiated or dropped, especially if the Big 12 carries forward with the plan to add a team to replace A&M. Clay Travis wrote a great piece on why there won’t be any lost television money to claim as damages.
A plaintiff like Baylor wouldn’t be able to include what we call “speculative damages.” This would be items like lost ticket sales in the game that replaces A&M at Baylor or loss in value of future television contracts. So, without losses from existing tv contracts being renegotiated or canceled, this essential element will be tough to prove.
If the SEC believes the plaintiff can’t prove all of the elements of the case, they would have two opportunities to ask the judge to dismiss the case before trial. Once after pleadings are filed, meaning the plaintiff has filed a complaint stating their claim and the defendant has answered that complaint. The SEC could file a motion to dismiss where the judge would decide if the plaintiff has alleged sufficient facts with “reasonable plausibility to state a claim.
The next opportunity for the SEC would be after document production, depositions and interrogatories. The SEC would file a motion for summary judgment claiming the plaintiff can’t produce evidence to prove the third or sixth elements.
A motion for summary judgment is granted if it would be impossible for the other party to prevail at trial based on the undisputed facts presented and the law. The court must consider all materials in the light most favorable to the party opposing the motion for summary judgment, in this case the plaintiff. In order to prevail on the motion for summary judgment, the plaintiff would only have to show evidence that a dispute of material facts exists, regardless of the strength of that evidence.
Despite the fact that I think the SEC could prevail in a case like this, it’s not something they want to bring upon themselves. That’s why we’re in a holding pattern.
The SEC can no longer accept A&M and rely on the letter from Beebe to Slive (which said the Big 12 and its member institutions would not bring any legal actions against the SEC), because Bernie Machen of the University of Florida has already acknowledged publicly the SEC knows a school has withdrawn consent.
A lot of you have asked me if A&M could indemnify the SEC in order to get the deal done. Indemnifying the SEC means A&M would agree to take on any losses the SEC incurred. However, it doesn’t keep the SEC from getting sued and having to go through the court process. I don’t anticipate we’ll see this happen or that it would be enough for the SEC to complete the deal.
So what now? We wait to see who blinks first. I think the threat of legal action is only a temporary solution for the Big 12 schools opposed to A&M’s move and that A&M will end up in the SEC when all is said and done.
I’d like to thank my law firm colleagues Foy R. Devine and Eric S. Fisher for their invaluable assistance with this post.
Foy R. Devine: Foy Devine chairs the Taylor English Litigation and Dispute Resolution practice group. Since 1969, Mr. Devine has concentrated his practice in civil trial work. He has handled business litigation of all types, as well as catastrophic personal injury and death cases arising out of product related injuries. He has frequently appeared in state and federal appellate courts. He is AV rated by Martindale-Hubbell, and has been selected as a Georgia Super Lawyer for several years. For more on Foy Devine, click here.
Eric S. Fisher: Eric Fisher is a member of the firm’s Litigation & Dispute Resolution group, handling matters across the spectrum of litigation. He has represented individuals and companies in a wide variety of cases, including involving contractual and partnership disputes, business torts, fiduciary duties, and healthcare. Mr. Fisher is licensed to practice in California as well as in Georgia, and he has experience in federal and state trial and appellate courts and alternative dispute resolution proceedings in both states. For more on Eric Fisher, click here.
This article offers the personal observations of Kristi Dosh, Foy Devine and Eric Fisher and does not represent the views of their law firm or its clients. Any information contained herein does not constitute legal advice. Consult your own attorney for legal advice on these matters.