The ACC Defrauded FSU of its media rights
I've been covering college football and expansion/realignment since the Big East's dynamic duo - Pitt and West Virginia - were hell-bent on saving the Big East conference despite itself.
The twists and turns of conference expansion are unpredictable. The rules are such that it's almost impossible to accurately detail events as they develop. For starters, knowledgeable sources are reluctant to spill the beans.
People in the know understand the value of discretion. They know the media doesn't. Bloggers? Discretion isn't in their vocabulary. If a source shares information, it's a safe bet they have a self-serving reason for talking - like using the media to further their agenda or promote their version of reality.
The other problematic factor in writing about expansion is the unpredictability of the outcome. Every element that plays a role in determining the end result is in flux. Facts confirmed by reliable sources can be invalidated by the whim of a college president having a bad hair day.
And the worst part of covering expansion is that the most exciting developments are the events that never occur. And when deals fall apart, the rules stipulate that everybody denies everything.
Suddenly, everyone in the know who was feeding you information goes silent. Or worse, they deny everything they've previously told you.
All the above is for context. I know the dangers of reporting on expansion as events unfold. I've been burned by sources in the past. And I've learned my lesson.
FSU Considers Exiting the ACC
Yet, the most exciting development in college football expansion doesn't involve the Big 12 or Pac 12 - the real story is Florida State. The Seminoles, if they are bold enough, may have the legal standing to invalidate the ACC's grant of rights and exit the conference sooner rather than later.
I have a well-placed source in the sports media rights industry who believes Florida State was defrauded by the ACC.
Usually, I automatically judge any claim detailing an easy way out of a GoR as meritless. I am not an attorney, but I have researched the infallibility of the Big 12's grant of rights since 2012. I've spoken with over a dozen legal experts on media rights. They were unanimous in their opinion - an assignment of rights is only circumventable by breach of contract or fraud.
Swofford Mislead Florida State's Board of Trustees
My contact alleges the revenue projections presented to Florida State's Board of Trustees on March 7, 2013, by ACC Commissioner John Swofford and TV consultant Dean Jordan, were grossly inaccurate and misleading.
FSU's Board acted on the bad-faith representations of the ACC. Swofford and Jordan knew the revenue projections were unrealistic yet assured the Board profits from a conference network would put the Seminoles on par with their SEC peers.
That's what lawyers call "intentional fraud." Swofford, in his capacity as the commissioner of the ACC, intentionally misrepresented revenue projections with the intent to deceive the Board of Trustees into signing the grant of rights.
My contact claims Swofford and Jordan also committed "constructive fraud" during their presentation to the Board.
Constructive fraud, also known as "innocent misrepresentation," is a legal concept that describes Swofford's assurances to the Board of Trustees he knew were false or concealed material information, even though he may not have intended to deceive the Board.
The portrayal of ESPN as "eager" to launch an ACC network but for FSU's reluctance to sign the grant of rights is another example of constructive fraud used by Swofford and Jordan to manipulate the Board of Trustees.
Certainly, FSU's refusal to sign the grant of rights was the primary reason for ESPN's reluctance to invest in the ACC network, but it was not the only factor ESPN had to consider.
ACC Contract Concessions Harm FSU's Bottom Line
It would take three years and significant concessions by the ACC before ESPN was on-board with a conference network. ACC concessions included:
- The base television contract was extended for 9 years.
- No increases or adjustments for inflation for the annual compensation resulting from contract extension from 2027 to 2036.
- ACC members agreed to absorb the costs of producing and broadcasting non-revenue sports on the conference network
It would be another three years - six years after FSU signed the grant of rights - before the ACC network was launched.
The delay in launching ACCN was one of many factors that failed to live up to the promises made by Swofford in 2013. Revenues for the conference network were less than expected, while costs to produce programming exceeded estimates.
So far, Florida State has invested over $7.5 million in equipment and facilities dedicated to producing broadcasts for ACCN.
ACC's Contract Extension Fails to Adjust Compensation for Inflation
Yet, the most costly aspect of the concessions required of the ACC to secure ESPN's investment in the ACCN is the length of the contract extension. The base compensation the ACC receives for each of the 9 years added is the same annual payout agreed to in 2013 - no adjustment for inflation has been added.
The impact of inflation on FSU's revenue is not insignificant. Assuming the Seminoles receive $28.5 million in TV money each year from 2023 to 2036 with a consistent inflation rate of 2.5%:
- $399 million in TV money before inflation adjustment
- $356.25 million in TV money after inflation adjustment
FSU's TV revenue is reduced by $42.75 million because the ACC contract extension did not adjust annual compensation for inflation.
The 2.5% inflation rate used in the previous example is too low. The purchasing power of a dollar decreased by approximately 7% from 2022 to 2023.
FSU Could Lose $121 million to inflation over the next 13 years
If we use an inflation rate of 7% to calculate the impact of the ACC's decision not to insist on an increase in their base compensation, then we see a dramatic impact on revenues. FSU's base TV money remains $399 million, but a 7% inflation rate reduces the value of their compensation to $277.94 million - a loss of $121 million.
Swofford didn't share that projection with FSU's Board of Trustees.
I've been debunking rumors about voiding the Big 12's grant of rights for 11 years. None of them had legs. None of them had even the pretense of a legal basis.
The notion that FSU could successfully challenge the ACC's grant of rights isn't a rumor - fraud is one of only two ways an assignment of rights can be set aside.
The ACC's Fraud Opens the Door for FSU to Exit
The ACC made promises to Florida State in exchange for its grant of rights. None of those promises were realized. John Swofford and Dean Jordan misrepresented facts and intentionally inflated revenue projections to coerce Florida State's Board into approving the grant of rights. The ACC acted with full knowledge they were being deceptive, thereby committing intentional fraud.
As a result of the ACC's fraud, Florida State's ability to compete with regional rivals in the SEC and Big 12 is jeopardized. The Seminoles, as a member of the ACC, can't hope to be in the ballpark of the revenue enjoyed by its SEC neighbors.
Now FSU has to worry about UCF. The Knights, thanks to Big 12 money, now have the resources to challenge the Seminoles as a regional rival.
The writing is on he wall for Florida State. They cannot remain in the ACC and compete with better funded programs from the SEC and Big 12. And they must realize their options for increased revenue from the ACC are limited. FSU's campaign for a greater share of revenues, if successful, would barely move the needle. Florida State and Clemson would see, at best, a $5 million increase in their conference revenue.
There's no doubt FSU cannot afford to stay in the ACC. The only question is how soon can the Seminoles arrange their exit?
And that's a question best answered with hindsight. Does FSU's Board approve the ACC grant of rights if Swofford's presenation contains accurate revenue projections and assurances of ESPN's interest in a conference network?
Or does the Board decide to keep FSU's options open by refusing to sign away its media rights to the ACC?
There's no doubt fraud was involved in Swofford winning the support of the Board for the grant of rights. There's no doubt the intentional fraud breached the implied contract between the ACC and FSU.
Is FSU brave enough to declare a breach and break away from the ACC?
Every year the Seminoles remain in the ACC puts their football program at greater disadvantage than the year before. At what point do they say enough is enough?
That's up to FSU's leadership and the Board of Trustees to decide. Hopefully, unlike 2013, they have enough information to make an informed decision.