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January 16, 2013
After one of the worst regular seasons in ACC football history, the conference did extremely well in the post-season going 4-2 in bowl games (6-3 if you count future members Louisville, Pittsburgh and Syracuse).
The surprising bowl performance can't change the fact that there are some inherent financial deficiencies within the conference that make it difficult for some athletic programs like Florida State to remain viable in the long term.
Last summer there were rumors coming from fan blogs and Twitter that had Florida State bolting for another conference. At the time, those rumors had very little, if any, substance.
Rumors again surfaced after Florida State voted against an increased conference exit fee and ACC charter member Maryland accepted an invitation to join the Big 10. Within the past couple months nearly every school in the ACC has been rumored to have one foot out the conference door. These rumors were strong enough to motivate the conference presidents to issue a joint press release expressing their commitment to the ACC.
Many Seminole fans are ready to write the ACC off and would gladly pack FSU's bags if one of the major conferences extends an invitation. While a change in conferences may ultimately happen, FSU sticking to the ACC isn't totally out of the question just yet. But for that to happen some fundamental changes will need to take place inside the conference to entice the Seminoles, and others, to stay put.
While there are a variety of shortcomings associated with FSU's continued membership in the ACC, ultimately it will come down to money.
It's been well documented that the annual television revenue share for each school within the ACC is significantly less than it is for schools in the other four major conferences. The financial difference is often a point of debate since apples are often being compared to oranges but there's no debate that ACC schools make several million dollars less annually than schools in the Big 10, SEC, Pac-12 and Big 12.
With 14 years still left on the ACC's deal with ESPN, which includes every school's third tier television rights, it's unlikely that Florida State will see a significant bump in television revenue any time soon. That could change should Notre Dame decide to become a full-time member. However, pinning FSU's financial future on that uncertainty would be a major gamble.
Absent a significant addition to conference membership, there is another change that could entice the Seminoles to remain in the ACC and one that could ultimately save the conference.
Do away with equal revenue sharing
Just last year ACC Commissioner John Swofford said that equal revenue-sharing among member schools is "sacred" and is a "fundamental" part of the league. He also said he doesn't "see that changing."
Less than a year later the ACC made several concessions to let Notre Dame enter the conference as a partial member and effectively have its cake and eat it too. While the partial addition of the Irish was undoubtedly a good move for the conference, it clearly showed that equality in the league isn't as sacred as it once was. With that in mind, it's time for Swofford and the ACC to make further concessions to the schools that drive the bus and generate the most revenue.
Last year when the ACC signed a 15-year $3.6 billion deal with ESPN, Swofford conceded that football was responsible for 70 to 80 percent of the revenue generated by this contract. Others in the know say the percentage is probably even higher.
There's little debate that there are only a handful of ACC schools that have a strong football following. And from that small group, Florida State is clearly the conference's football cash cow (see this story on bowl ratings). Despite FSU and a couple other schools carrying the bulk of the financial load for the league's athletic departments, these schools are not compensated accordingly thanks to Swofford's "equal revenue sharing" philosophy. It also doesn't help that the conference sold all of the schools' television rights, including third tier, for football and men's basketball.
The situation in the ACC is like having a couple outstanding salesmen generate 80 percent of the sales for a business but they receive no raises or commissions. Meanwhile the bulk of the sales team does little if anything to help the company's bottom line but they still receive the same compensation as the heavy hitters.
The "equal revenue sharing" plan in this hypothetical, and with FSU in the ACC, results two inherent problems.
First, there is little incentive for the underachieving salesmen to pick up the pace. They are going to receive the same compensation regardless of their efforts. Also, since a couple salesmen are keeping the business afloat there's no reason for them to expend additional time and effort to help the business.
In the case of the ACC, Florida State spends more on its athletic programs than any other team in the league largely because it needs to hire and retain the best coaches, recruit the top players and build and maintain state of the art facilities (mainly for football) to continue to compete at a high level. These expenses and the league's equal distribution policy may explain why FSU barely broke even on the most recent projected athletic department budget while most of the other athletic departments in the ACC show a profit.
There is simply no financial incentive for schools like Wake Forest, Boston College or Duke to pump additional of money into the football programs under the ACC's current financial structure. In theory, most of the schools in the ACC could forgo upgrades to facilities, hire coaches on the cheap and have a skeleton budget for recruiting with the end result being an improved bottom line.
The second problem in our hypothetical is that the top salesmen will quickly grow tired of bringing in most of the revenue and will start look to work elsewhere. Since they have proved their value other businesses will be interested in hiring them away for more money. The same is happening with other conferences that are beginning to show interest in the ACC's football power schools.
Instead of simply figuring out a way to reward the schools that bring in the bulk of the TV revenue, the ACC's response was to unilaterally impose a more than doubled exit fee. This would be like the employer in our hypothetical changing the employment contract in midstream to include a huge penalty if the employee takes another job. Worse, this change was done without the employee's consent (at least in FSU's case) and he or she is still legally bound to the contract.
Argument for equal revenue sharing debunked
The most common argument you hear from people like John Swofford in favor of equal revenue sharing is that it's "fair" and helps foster a more competitive balance among the teams in the conference. This equal revenue sharing model works extremely well in the NFL, which is easily the most popular and successful professional sport in this country.
The problem is that one college football conference can't be compared to an entire professional sports league.
Can you imagine if every team in the NFL's AFC West division shared revenue equally while other teams and divisions were able to bring in more revenue because of separate television deals? Do you believe that the Denver Broncos would be fine if most of the other teams in the NFL were able to sign more free agents and have better stadiums because the NFC West was locked into a lousy TV deal? I doubt season ticket holders would be satisfied if the Broncos won the AFC West but had a hard time competing with the rest of the league because of this overall financial disparity.
Like the NFL, Florida State doesn't just compete against teams within its conference but all of the FBS teams in college football. Every Sunday fans look forward to seeing where FSU ranks in the AP, Coaches Poll and BCS rankings. On the other hand, a weekly ACC power poll wouldn't even register as a blip on a fan's radar. And the Seminoles recruit more against teams like Florida, Georgia and Alabama than they do against teams in the ACC with the exception of Miami.
If you needed further evidence that the ACC isn't on an island look no further than this year's conference championship game. It's obvious from the horrid attendance that fans, many of which make a large financial investment in their favorite school, are much more concerned with FSU's standing among other FBS teams rather than within the ACC.
The danger of taking non-equal revenue sharing too far
Look no further than the Texas Longhorns for an example of how giving one school too much financial independence can adversely impact a conference.
The Big 12 nearly fell apart in large part because Texas secured its own television network worth an additional $15 million annually to the school's athletic budget. That blockbuster deal in combination with the perception that Texas already wielded too much power within the conference nearly destroyed the Big 12.
In the end the Big 12 survived but still lost Texas A&M and Missouri largely because these schools were frustrated with Texas' stronghold on the conference.
The perception that Texas was pulling too much weight got so bad that Oklahoma led the charge to get Big 12 commissioner Dan Beebe removed from office. The Sooners and the rest of the conference were ultimately successful and Beebe was eventually dismissed and replaced.
It's still not entirety certain how stable the 10-school Big 12 is with Texas' lopsided deal but it looks like the conference will survive. Even with Texas ruling the Big 12 roost, schools within the conference are still in a better financial situation than the ACC is under its current TV deal.
How to bring about a change in the revenue sharing plan
The ACC's current setup is an example of equal revenue sharing taken to an unfavorable and unworkable extreme, while Texas in the Big 12 shows the other extreme.
Striking a happy medium between the two extremes makes the most sense and could ultimately save the ACC.
One way to accomplish this objective is to reward success.
Instead of actually losing money for earning a spot in the ACC championship and a bowl game, schools should be compensated accordingly. Instead of the ACC keeping most of the money for the championship game being held in Charlotte, while the participating schools often lose money unless they sell enough tickets, why not let the higher ranked team host the game and keep the revenue like it would for a normal home game? The visiting school should also share in the revenue through championship game ticket sales to its fans.
The teams that earn bowl berths should also be rewarded for their success instead of often being punished financially. If for example schools were given a 25 percent share of the bowl payout it would at the very least negate potential losses from coming up short on ticket sales and in most cases further compensate the school for its success on the field.
For Florida State, a 25 percent share of the Orange Bowl payout would have resulted in an additional $4.25 million in revenue to the athletic department. The Clemson Tigers would have taken home an additional $1.7 million for playing in the Chick-fil-A Bowl. The two ACC teams that had the most success on the field, have made the biggest investment in their football programs, and arguably have the most avid fan bases would be properly compensated instead of being penalized for success.
There are certainly other ways for the conference to reward schools based on a team's TV ratings, national television appearances and so on.
And in the ultimate no-brainer category, schools that are ineligible for the post-season (North Carolina) or opt out of post-season play (Miami) should not share in any bowl revenue that comes into the conference. Not only will this reward the schools that stay out of trouble, something the ACC should want, it will penalize schools that run afoul of NCAA rules.
Bringing on Notre Dame as a partial member and adding academic lightweight Louisville is a clear sign that John Swofford is willing to adjust his long held beliefs about how to run the conference. For the long term viability of the ACC he will need to take those changes a step further and find ways to reward the programs that bring the most to the league, just like a business rewards its top employees based on performance.
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