(01-15-2024 06:35 PM)Garrettabc Wrote:  

(01-15-2024 05:49 PM)Native Georgian Wrote:  How does ESPN benefit from *not* exercising its option? Aren’t they getting ACC content for considerably below-market value? Why give that up?

If the star of the show is leaving the show, then it's one less reason to keep the show going.

ESPN has plenty of stars. Losing FSU is not a big deal in terms of brand. What ESPN has that it doesn't want to lose is domination over the markets in every state in the South and Southwest, and access to markets in New England and into the Plains states. And now with Cal and Stanford it has late night slots to which it owns 100% rights.

ESPN wants to hang onto to its virtual monopoly over the region. That is the only reason they would be upset by FSU leaving, but if FSU were to wind up in the SEC ESPN wins and FSU wins and if there is a settlement the ACC wins.

Oh! I don't see ESPN giving up the contract in 2027, they'll exercise their option. Show me where any school in the ACC outside of FSU and possibly Clemson, has the numbers to make SEC/Big 10 money. They don't, not even Miami. North Carolina and Virginia get mentioned because of markets totaling 20 million. But they don't want to leave. Now, Louisville comes the closest to being able to make the jump financially, but they aren't academically compatible with the Big 10 and they double up a small state for the SEC.

Truly the ACC can lose FSU to the SEC and neither the SEC, ESPN, or the ACC will miss a beat.

(01-15-2024 05:49 PM)Native Georgian Wrote:  How does ESPN benefit from *not* exercising its option? Aren’t they getting ACC content for considerably below-market value? Why give that up?

It gives them flexibility for the future.

For the past 20 or so years, having ESPN2 on every basic-cable package for $1 a month was a big win for ESPN, 12*$1*100M households is a billion dollar business. So ESPN would make it a priority to have enough quality programming to keep ESPN2 supplied, along with ESPN-U and now the SEC and ACC Networks.

That $1 a month for ESPN2 is now for 50M households, and dropping. $600M is still a lot of money, but it's less money every year. And if we look at the Disney-Charter deal, part of the deal was Charter dumped a bunch of low-audience Disney networks.

If the future is all about ESPN recruiting and retaining streaming subscribers, maybe it's all about programming that draws mega audiences for ABC and big-event subscribers (Florida State vs Notre DAme), and all about niche programming that keeps diehards subscribed to ESPN+ to follow their team (Old Dominion at Virginia). But maybe there's no financial model for monetizing games that would get 1-2M viewers like Virginia vs North Carolina?

(01-15-2024 06:47 PM)Frank the Tank Wrote:  

(01-15-2024 05:23 PM)johnbragg Wrote:  

(01-15-2024 04:59 PM)bullet Wrote:  

(01-15-2024 02:29 PM)Frank the Tank Wrote:  Anyone that thinks that FSU has the legal leverage as opposed to the ACC in this matter or ESPN has any rational business reason to not extend the option in the context of the greater financial issues art the Walt Disney Company is sorely mistaken. I’m wary of repeating myself constantly (as too many people are fixed into the outcome that they personally want on this matter and don’t want to apply either prevailing legal standards or common sense financial parameters), but I’ll leave it at that.

Not if they don't think the contract is worth $30-$35 million in 2027.

Which would be contrary to everything we think we know abotu sports media economics -- the ACC doesn't just give ESPN programming, they anchor and entire dollar-or-so-a-month cable channel in half the country.

Nonetheless, ESPN hasn't pulled the trigger on the option. Which by everything we think we know is a no-brainer.

I wouldn’t read into ESPN having not exercised the option as any signal one way or the other. There’s no reason to exercise that option until the last possible moment from a legal perspective.

Except, by the original contract they were supposed to. ESPN asked to extend the option period (for at this point obscure reasons) and the ACC agreed (for somewhat obscure reasons, vague aspirations of striking a better deal with ESPN that came to naught)

Quote:Even if a party intends to extend a contract, there’s no real reason to do it early unless there’s some extra incentive involved (e.g. if you extend early, we’ll provide an even better long-term discount).

The more important factor for me has always been that my belief (and I think the belief of virtually everyone looking at this objectively) the ACC is undervalued compared to the overall sports marketplace. That’s why FSU is trying to get out of the ACC contract and GOR in the first place! Paradoxically for FSU, if ESPN actually determines that the ACC is actually getting *overpaid* and they don’t exercise their option on that basis, then FSU pretty much loses on all of the financial and breach of fiduciary duty claims in its lawsuit.

People can’t have it both ways: either (a) the ACC is undervalued where FSU has a case but ESPN would then have every incentive to extend the ACC contract, or (b) the ACC is actually getting overpaid to the point where ESPN would rather not extend but then that pretty much destroys all of FSU’s legal arguments (which are all based on the ACC signing a bad undervalued deal).

As a layman, I read the FSU arguments about financial mismanagement as throat-clearing and wasting the court's time, I don't think there's an actionable complaint there.

Whether the ACC contract is overvalued or undervalued compared to current market realities doesn't really effect FSU's claims that the GOR is an exit penalty and that the GOR + Exit Fee is a legally unenforceable exit penalty.

What they asked for in the lawsuit is to be released from the GOR and the exit fees.

In the funhouse mirror world where ESPN does not extend the ACC contract, I don't think FSU is tied to the ACC past 2027.

It would not surprise me if ESPN declines to exercise the 2027 option.

With the Cal, Stanford and SMU additions, ESPN will be paying about $100 million more a year and the three newcomers clearly won't be adding that much value. Over the course of the extended term, that's an additional $1 billion commitment. Will the ACC football powers, even if they stay, keep generating sufficient revenue to justify the payouts? How much will the ACC's value diminish over time as the B1G and SEC contracts grow payouts to double the amount Clemson and FSU receives and ACC football suffers because of it. That's clearly FSU's stated concern and rationale for suing to get out.

If the option is not exercised, the cost to leave the ACC drops dramatically and teams may leave, BUT ONLY IF THEY HAVE SOMEWHERE ELSE TO GO.

Let's say the SEC and B1G each take 2. That's a wash financially for ESPN. The savings from the B1G teams just fund the higher payout needed for the 2 SEC teams. Let's say the Big 12 takes 2 also. That's a slight savings for ESPN, assuming Fox picks up it's normal share. If those moves happen though, Notre Dame may also leave.

The result would be 11 ACC teams remaining, almost certainly including Cal, Stanford, SMU, Wake, BC and Syracuse. There is no way the remaining teams can justify a $34 million per year payout. ESPN can decline to exercise the option and instead give the remaining ACC teams a lowball offer for a new contract like it did to the PAC. If the new ACC even gets $15 million per team, ESPN would save about $200 million per year.

Public companies are driven by financial results, and that pressure is higher on Disney now because its CEO has not performed and its Board faces a proxy fight for Board seats. Declining the 2027 option in order to eliminate future risk and a billion dollar commitment might make perfect sense to Disney.

Not an attorney but these seem to be pertinent facts. Please correct me if I’m mistaken.

1. The GoR specifies that the intent is to meet ESPN’s requirement of at least 15 members

2. The ACC was not limited in the composition of those 15. (SMU counts)

3. The initial 2012 agreement with ESPN was through 2027. FSU voted in favor of this including the GoR.

4. The 2016 amendment didn’t give the ACC a review of or increase upon the agreed rates from the initial 2012 agreement.

5. In 2016, ESPN convinced the ACC office to convince its members to extend the GoR from ‘27 to ‘36 for a promise of “placeholder consideration payments” in condition that a hoped for ACCN did not materialize. Those payments were promised only through ‘27. FSU voted in favor of this.

6. The 2016 agreement contained an option, exercisable by ESPN in ‘27 to extend the rates at previous escalators.

7. That option date was contingent upon the date of the ACCN launch.

8. When the ACCN launched in 2019, the exercise date moved up to 2021 upon the existing agreement.

9. Upon the ACCN launch, the ACC commissioner agreed to extend the exercise date to 2025 without the required vote of membership (2/3rds) and without consideration.

I am/was (retired-I do not hold any FINRA licenses. Do not treat anything following as financial advice) a finance expert and these are my concerns/thoughts.

1. Options have value. The longer the term for an in the money call option for a company you expect to grow, the more expensive it will be. AAPL $185 Dec ‘25 calls are about 50% more expensive than $185 Dec ‘24 calls as an example.

2. There is an intrinsic and extrinsic value to DIS in holding onto that call option on the ACC. The intrinsic is pretty high- it covers for now- but there is enough market volatility and uncertainty that I’m sure it’s driving their internal finance folks nuts as to the right decision to make.

3. With stocks, the option holder who isn’t a bank or other financial institution rarely exercises an option; it’s a trading mechanism and can be a protection of value. Some of that thought process should be in play for DIS, but it’s different when talking about an illiquid market.


As a fiduciary responsible to a board and shareholders, I would never have made the alleged offer to ESPN to extend the option by four years with *zero* consideration and without the required backing of my stakeholders. I’d have been fired for cause. And I’d be reading and rereading my Company’s D&O policy if I were the Phillips/Swofford equivalent who made the deal and worried about lawsuits from LPs.

From FSU’s perspective they were harmed by the unilateral decision of the ACC in extending the option without consideration or proper authorization. The ACC was in breach of its fiduciary responsibilities to its members, the GoR is between the members of the ACC and the conference and not between those members and ESPN.

And if the GoR specifies that the purpose is to uphold the terms of the contract (15 members, not that it must be the current composition vs FSU/SMU) to satisfy ESPN, then the remaining members shot themselves in the foot by admitting Calfordsmoo.

(01-15-2024 06:47 PM)Frank the Tank Wrote:  

(01-15-2024 05:23 PM)johnbragg Wrote:  

(01-15-2024 04:59 PM)bullet Wrote:  

(01-15-2024 02:29 PM)Frank the Tank Wrote:  Anyone that thinks that FSU has the legal leverage as opposed to the ACC in this matter or ESPN has any rational business reason to not extend the option in the context of the greater financial issues art the Walt Disney Company is sorely mistaken. I’m wary of repeating myself constantly (as too many people are fixed into the outcome that they personally want on this matter and don’t want to apply either prevailing legal standards or common sense financial parameters), but I’ll leave it at that.

Not if they don't think the contract is worth $30-$35 million in 2027.

Which would be contrary to everything we think we know abotu sports media economics -- the ACC doesn't just give ESPN programming, they anchor and entire dollar-or-so-a-month cable channel in half the country.

Nonetheless, ESPN hasn't pulled the trigger on the option. Which by everything we think we know is a no-brainer.

I wouldn’t read into ESPN having not exercised the option as any signal one way or the other. There’s no reason to exercise that option until the last possible moment from a legal perspective. Even if a party intends to extend a contract, there’s no real reason to do it early unless there’s some extra incentive involved (e.g. if you extend early, we’ll provide an even better long-term discount).

The more important factor for me has always been that my belief (and I think the belief of virtually everyone looking at this objectively) the ACC is undervalued compared to the overall sports marketplace. That’s why FSU is trying to get out of the ACC contract and GOR in the first place! Paradoxically for FSU, if ESPN actually determines that the ACC is actually getting *overpaid* and they don’t exercise their option on that basis, then FSU pretty much loses on all of the financial and breach of fiduciary duty claims in its lawsuit.

People can’t have it both ways: either (a) the ACC is undervalued where FSU has a case but ESPN would then have every incentive to extend the ACC contract, or (b) the ACC is actually getting overpaid to the point where ESPN would rather not extend but then that pretty much destroys all of FSU’s legal arguments (which are all based on the ACC signing a bad undervalued deal).

(only the bolded sentence) - absolutely!

This many years out, with the contents of the conference in question, circumstances may change.

There's just no reason to make that choice on the dark.

I disagree with your either-or options though.

There's also a question of liability.

Does espn want to be anywhere near this court case. The obvious answer is no.

This doesn't need to be about FSU directly. If schools are likely to be leaving or be added, does espn want to pay for a conference of an unknown quantity of members?

Plus, if there is no media deal, then the conference doesn't "need" to backfill.

(01-15-2024 02:29 PM)Frank the Tank Wrote:  Anyone that thinks that FSU has the legal leverage as opposed to the ACC in this matter or ESPN has any rational business reason to not extend the option in the context of the greater financial issues art the Walt Disney Company is sorely mistaken. I’m wary of repeating myself constantly (as too many people are fixed into the outcome that they personally want on this matter and don’t want to apply either prevailing legal standards or common sense financial parameters), but I’ll leave it at that.

At the end of the process a big check will be written to AAC. I doubt it ever gets to the courts, both sides have too much to lose.

I expect Clemson will follow fairly quickly. ESPN would want them in SEC, but SEC doesn't really need either of them. Will be interesting to see how it all shakes out.

(01-15-2024 11:39 PM)goodknightfl Wrote:  

(01-15-2024 02:29 PM)Frank the Tank Wrote:  Anyone that thinks that FSU has the legal leverage as opposed to the ACC in this matter or ESPN has any rational business reason to not extend the option in the context of the greater financial issues art the Walt Disney Company is sorely mistaken. I’m wary of repeating myself constantly (as too many people are fixed into the outcome that they personally want on this matter and don’t want to apply either prevailing legal standards or common sense financial parameters), but I’ll leave it at that.

At the end of the process a big check will be written to AAC. I doubt it ever gets to the courts, both sides have too much to lose.

I expect Clemson will follow fairly quickly. ESPN would want them in SEC, but SEC doesn't really need either of them. Will be interesting to see how it all shakes out.

The SEC would take them just to keep the supermajority of viewers in Florida (UF: 42% FSU: 35%) and to hold the only other major brand in the Deep South (Clemson). Miami is not an SEC city so if the Big 10 lands them more power to them. With those two in hand the only battle remaining for the SEC is North Carolina and Virginia.

(01-15-2024 11:43 PM)JRsec Wrote:  

(01-15-2024 11:39 PM)goodknightfl Wrote:  

(01-15-2024 02:29 PM)Frank the Tank Wrote:  Anyone that thinks that FSU has the legal leverage as opposed to the ACC in this matter or ESPN has any rational business reason to not extend the option in the context of the greater financial issues art the Walt Disney Company is sorely mistaken. I’m wary of repeating myself constantly (as too many people are fixed into the outcome that they personally want on this matter and don’t want to apply either prevailing legal standards or common sense financial parameters), but I’ll leave it at that.

At the end of the process a big check will be written to AAC. I doubt it ever gets to the courts, both sides have too much to lose.

I expect Clemson will follow fairly quickly. ESPN would want them in SEC, but SEC doesn't really need either of them. Will be interesting to see how it all shakes out.

The SEC would take them just to keep the supermajority of viewers in Florida (UF: 42% FSU: 35%) and to hold the only other major brand in the Deep South (Clemson). Miami is not an SEC city so if the Big 10 lands them more power to them. With those two in hand the only battle remaining for the SEC is North Carolina and Virginia.

If that's the case, just split the difference and call it good.

FSU and NC to the SEC and Miami and Virginia to the Big10.

(01-15-2024 06:47 PM)Frank the Tank Wrote:  

(01-15-2024 05:23 PM)johnbragg Wrote:  

(01-15-2024 04:59 PM)bullet Wrote:  

(01-15-2024 02:29 PM)Frank the Tank Wrote:  Anyone that thinks that FSU has the legal leverage as opposed to the ACC in this matter or ESPN has any rational business reason to not extend the option in the context of the greater financial issues art the Walt Disney Company is sorely mistaken. I’m wary of repeating myself constantly (as too many people are fixed into the outcome that they personally want on this matter and don’t want to apply either prevailing legal standards or common sense financial parameters), but I’ll leave it at that.

Not if they don't think the contract is worth $30-$35 million in 2027.

Which would be contrary to everything we think we know abotu sports media economics -- the ACC doesn't just give ESPN programming, they anchor and entire dollar-or-so-a-month cable channel in half the country.

Nonetheless, ESPN hasn't pulled the trigger on the option. Which by everything we think we know is a no-brainer.

I wouldn’t read into ESPN having not exercised the option as any signal one way or the other. There’s no reason to exercise that option until the last possible moment from a legal perspective. Even if a party intends to extend a contract, there’s no real reason to do it early unless there’s some extra incentive involved (e.g. if you extend early, we’ll provide an even better long-term discount).

The more important factor for me has always been that my belief (and I think the belief of virtually everyone looking at this objectively) the ACC is undervalued compared to the overall sports marketplace. That’s why FSU is trying to get out of the ACC contract and GOR in the first place! Paradoxically for FSU, if ESPN actually determines that the ACC is actually getting *overpaid* and they don’t exercise their option on that basis, then FSU pretty much loses on all of the financial and breach of fiduciary duty claims in its lawsuit.

People can’t have it both ways: either (a) the ACC is undervalued where FSU has a case but ESPN would then have every incentive to extend the ACC contract, or (b) the ACC is actually getting overpaid to the point where ESPN would rather not extend but then that pretty much destroys all of FSU’s legal arguments (which are all based on the ACC signing a bad undervalued deal).

About the bolded, I have believed that all along, I have frequently said that the ACC, like IMO the SEC, is underpaid.

But recently, I have reevaluated that idea. IIRC, the ACC is currently getting about $32m a year in media money, with escalators via the ACCN that will raise that to around $40m over the next few years.

If the ACC was to have come to market this past spring, before the additions of SMU, Cal and Stanford (since they weren't part of the ACC that has signed the 2010 era deals), would they have gotten much, if anything, more than that? I'm not sure. IMO, the ACC is basically the new Big 12, but with FSU and Clemson as football powers. They are IMO maybe worth that extra $5m to $10m a year more the ACC will likely be making compared to the $32m that I believe the nB12 will be making the next several years. There just isn't much difference in value between them, IMO.

And now, with Cal/Stanford/SMU added, the ACC is arguably even less valuable, such that ESPN might be less likely to renew that option on 2027.

IIRC, FSU's lawsuit, in addition to talking about the ACC mismanaging its media deals leading to underpayment, did also talk about the GOR being unconscionable and the exit fees being excessive. So maybe they should emphasize those points in court, paint them in a "restraint of trade" way that prevents them from leaving and realizing their full value, as they may not be contradictory. I don't know.

Did everyone forget that there was a global pandemic that likely had a huge factor on businesses not wanting to commit to new contract extensions in 2021?

It might be reasonable to ask ESPN to decide in 2024 now that things have settled down.

Everyone acting like it was the craziest thing to push back a decision when so much was uncertain is not acknowledging the realities of the time period.

(01-16-2024 08:57 AM)4x4hokies Wrote:  Did everyone forget that there was a global pandemic that likely had a huge factor on businesses not wanting to commit to new contract extensions in 2021?

It might be reasonable to ask ESPN to decide in 2024 now that things have settled down.

Everyone acting like it was the craziest thing to push back a decision when so much was uncertain is not acknowledging the realities of the time period.

Solid point.

(01-16-2024 08:57 AM)4x4hokies Wrote:  Did everyone forget that there was a global pandemic that likely had a huge factor on businesses not wanting to commit to new contract extensions in 2021?

It might be reasonable to ask ESPN to decide in 2024 now that things have settled down.

Everyone acting like it was the craziest thing to push back a decision when so much was uncertain is not acknowledging the realities of the time period.

I'm not so sure how much impact the pandemic had. For example, as noted in the link, the NFL and NHL both signed their current media deals during the spring of 2021.

This link lists a plethora of sports deals that were signed during 2021. Looks like a long list to me:

https://www.sportspromedia.com/insights/...ott=ouXM7r

(01-15-2024 07:52 PM)johnbragg Wrote:  

(01-15-2024 06:47 PM)Frank the Tank Wrote:  

(01-15-2024 05:23 PM)johnbragg Wrote:  

(01-15-2024 04:59 PM)bullet Wrote:  

(01-15-2024 02:29 PM)Frank the Tank Wrote:  Anyone that thinks that FSU has the legal leverage as opposed to the ACC in this matter or ESPN has any rational business reason to not extend the option in the context of the greater financial issues art the Walt Disney Company is sorely mistaken. I’m wary of repeating myself constantly (as too many people are fixed into the outcome that they personally want on this matter and don’t want to apply either prevailing legal standards or common sense financial parameters), but I’ll leave it at that.

Not if they don't think the contract is worth $30-$35 million in 2027.

Which would be contrary to everything we think we know abotu sports media economics -- the ACC doesn't just give ESPN programming, they anchor and entire dollar-or-so-a-month cable channel in half the country.

Nonetheless, ESPN hasn't pulled the trigger on the option. Which by everything we think we know is a no-brainer.

I wouldn’t read into ESPN having not exercised the option as any signal one way or the other. There’s no reason to exercise that option until the last possible moment from a legal perspective.

Except, by the original contract they were supposed to. ESPN asked to extend the option period (for at this point obscure reasons) and the ACC agreed (for somewhat obscure reasons, vague aspirations of striking a better deal with ESPN that came to naught)

Quote:Even if a party intends to extend a contract, there’s no real reason to do it early unless there’s some extra incentive involved (e.g. if you extend early, we’ll provide an even better long-term discount).

The more important factor for me has always been that my belief (and I think the belief of virtually everyone looking at this objectively) the ACC is undervalued compared to the overall sports marketplace. That’s why FSU is trying to get out of the ACC contract and GOR in the first place! Paradoxically for FSU, if ESPN actually determines that the ACC is actually getting *overpaid* and they don’t exercise their option on that basis, then FSU pretty much loses on all of the financial and breach of fiduciary duty claims in its lawsuit.

People can’t have it both ways: either (a) the ACC is undervalued where FSU has a case but ESPN would then have every incentive to extend the ACC contract, or (b) the ACC is actually getting overpaid to the point where ESPN would rather not extend but then that pretty much destroys all of FSU’s legal arguments (which are all based on the ACC signing a bad undervalued deal).

As a layman, I read the FSU arguments about financial mismanagement as throat-clearing and wasting the court's time, I don't think there's an actionable complaint there.

Whether the ACC contract is overvalued or undervalued compared to current market realities doesn't really effect FSU's claims that the GOR is an exit penalty and that the GOR + Exit Fee is a legally unenforceable exit penalty.

What they asked for in the lawsuit is to be released from the GOR and the exit fees.

In the funhouse mirror world where ESPN does not extend the ACC contract, I don't think FSU is tied to the ACC past 2027.

I don't think that the reasons are obscure at all. ESPN isn't getting a particularly good deal with the ACC, and it just got a lot worse with SMU and Calford joining. If/when FSU leaves, that deal will start to look even worse. An easy way to pay for FSU's departure would be to NOT renew the contract and cut the payout for the rest by ~ $10m per year.

(01-15-2024 10:34 PM)CintiFan Wrote:  It would not surprise me if ESPN declines to exercise the 2027 option.

With the Cal, Stanford and SMU additions, ESPN will be paying about $100 million more a year and the three newcomers clearly won't be adding that much value. Over the course of the extended term, that's an additional $1 billion commitment. Will the ACC football powers, even if they stay, keep generating sufficient revenue to justify the payouts? How much will the ACC's value diminish over time as the B1G and SEC contracts grow payouts to double the amount Clemson and FSU receives and ACC football suffers because of it. That's clearly FSU's stated concern and rationale for suing to get out.

If the option is not exercised, the cost to leave the ACC drops dramatically and teams may leave, BUT ONLY IF THEY HAVE SOMEWHERE ELSE TO GO.

Let's say the SEC and B1G each take 2. That's a wash financially for ESPN. The savings from the B1G teams just fund the higher payout needed for the 2 SEC teams. Let's say the Big 12 takes 2 also. That's a slight savings for ESPN, assuming Fox picks up it's normal share. If those moves happen though, Notre Dame may also leave.

The result would be 11 ACC teams remaining, almost certainly including Cal, Stanford, SMU, Wake, BC and Syracuse. There is no way the remaining teams can justify a $34 million per year payout. ESPN can decline to exercise the option and instead give the remaining ACC teams a lowball offer for a new contract like it did to the PAC. If the new ACC even gets $15 million per team, ESPN would save about $200 million per year.

Public companies are driven by financial results, and that pressure is higher on Disney now because its CEO has not performed and its Board faces a proxy fight for Board seats. Declining the 2027 option in order to eliminate future risk and a billion dollar commitment might make perfect sense to Disney.

That's funny, I just posted something similar, though you went into more detail. One thing I would argue, however, is that $15m for the current ACC minus their top 6 schools and minus ND would not be a lowball offer at all, but probably market value. If it was a "lowball", then Fox or someone else would swoop in and grab it, but everyone can easily see what would happen to the ACC's already low ratings if their top Football Brands departed.

(01-16-2024 10:48 AM)bryanw1995 Wrote:  

(01-15-2024 10:34 PM)CintiFan Wrote:  It would not surprise me if ESPN declines to exercise the 2027 option.

With the Cal, Stanford and SMU additions, ESPN will be paying about $100 million more a year and the three newcomers clearly won't be adding that much value. Over the course of the extended term, that's an additional $1 billion commitment. Will the ACC football powers, even if they stay, keep generating sufficient revenue to justify the payouts? How much will the ACC's value diminish over time as the B1G and SEC contracts grow payouts to double the amount Clemson and FSU receives and ACC football suffers because of it. That's clearly FSU's stated concern and rationale for suing to get out.

If the option is not exercised, the cost to leave the ACC drops dramatically and teams may leave, BUT ONLY IF THEY HAVE SOMEWHERE ELSE TO GO.

Let's say the SEC and B1G each take 2. That's a wash financially for ESPN. The savings from the B1G teams just fund the higher payout needed for the 2 SEC teams. Let's say the Big 12 takes 2 also. That's a slight savings for ESPN, assuming Fox picks up it's normal share. If those moves happen though, Notre Dame may also leave.

The result would be 11 ACC teams remaining, almost certainly including Cal, Stanford, SMU, Wake, BC and Syracuse. There is no way the remaining teams can justify a $34 million per year payout. ESPN can decline to exercise the option and instead give the remaining ACC teams a lowball offer for a new contract like it did to the PAC. If the new ACC even gets $15 million per team, ESPN would save about $200 million per year.

Public companies are driven by financial results, and that pressure is higher on Disney now because its CEO has not performed and its Board faces a proxy fight for Board seats. Declining the 2027 option in order to eliminate future risk and a billion dollar commitment might make perfect sense to Disney.

That's funny, I just posted something similar, though you went into more detail. One thing I would argue, however, is that $15m for the current ACC minus their top 6 schools and minus ND would not be a lowball offer at all, but probably market value. If it was a "lowball", then Fox or someone else would swoop in and grab it, but everyone can easily see what would happen to the ACC's already low ratings if their top Football Brands departed.

I agree. I think ESPN could get the 'new' ACC at such a low rate because I don't see much competition for it. Fox, CBS and NBC seem content to focus on B1G games, and with USC, UCLA, Oregon and Washington joining, that just creates more quality content for them. Fox still has Big 12 games too. None of the 'new' ACC games would go on their OTA channels, so all ACC games would be relegated to secondary channels. I just don't don't see any of them bidding high for ACC content or see significant $ from a new source.

The "market price" is simply what someone is willing to pay and so, like the PAC media fiasco, if ESPN is the only significant bidder, their offer sets the market price.

The first action would be to negotiate an outlet for FSU and keep it out of the courts as much as possible. The ACC knows FSU could have a sympathetic judge; and FSU knows a judge could be assigned that would be hardnosed regarding the terms of the signed GoR. That's why the GoR has to be attacked for being excessive and unreasonable along with exposing ACC management missteps, claims of engaging in financial endeavors that were not prudent, and making critical decisions without comprehensive and timely disclosures to all members. Neither party will want their dirty laundry hanging in the front yard. It'll get personal and ugly.

If Clemson is confident they have a landing spot in the P2, they should strongly consider joining FSU's exit endeavor. Leaving just one financially elite football school in the ACC will not be clean splicing.

The rest of the ACC would be closer to uniform economic compatibility. UNC can hold onto their bedrock political and strategic dominance, and Notre Dame can gleefully partake of that structure in an ongoing fashion. The rest will accept their place until the GoR fades out and/or favorable financial conditions and incentives will come to some of them several years in the future with enticing offers from elsewhere, inclusive of the P2.

(01-15-2024 10:34 PM)CintiFan Wrote:  It would not surprise me if ESPN declines to exercise the 2027 option.

With the Cal, Stanford and SMU additions, ESPN will be paying about $100 million more a year and the three newcomers clearly won't be adding that much value.

You do know ESPN offered the entire Pac 10 a package, right?

So ESPN was ready to pay the entire conference, but instead of paying ten shares they are paying three shares* and still reap the late night window.

It actually worked out really well for ESPN because they get 4C content at a bargain price and replace Wazzou and Oregon State with SMU for less.




* Not to mention ESPN is/was prepared to pay the conference four pro-rata shares anyway. It was literally built into the contract. I'm sure they are happy with the late night window because they probably never expected that to be on the table when they wrote it in the deal.

(01-16-2024 12:01 AM)Skyhawk Wrote:  

(01-15-2024 11:43 PM)JRsec Wrote:  

(01-15-2024 11:39 PM)goodknightfl Wrote:  

(01-15-2024 02:29 PM)Frank the Tank Wrote:  Anyone that thinks that FSU has the legal leverage as opposed to the ACC in this matter or ESPN has any rational business reason to not extend the option in the context of the greater financial issues art the Walt Disney Company is sorely mistaken. I’m wary of repeating myself constantly (as too many people are fixed into the outcome that they personally want on this matter and don’t want to apply either prevailing legal standards or common sense financial parameters), but I’ll leave it at that.

At the end of the process a big check will be written to AAC. I doubt it ever gets to the courts, both sides have too much to lose.

I expect Clemson will follow fairly quickly. ESPN would want them in SEC, but SEC doesn't really need either of them. Will be interesting to see how it all shakes out.

The SEC would take them just to keep the supermajority of viewers in Florida (UF: 42% FSU: 35%) and to hold the only other major brand in the Deep South (Clemson). Miami is not an SEC city so if the Big 10 lands them more power to them. With those two in hand the only battle remaining for the SEC is North Carolina and Virginia.

If that's the case, just split the difference and call it good.

FSU and NC to the SEC and Miami and Virginia to the Big10.

If you think UVa is a solid Big Ten addition at this point in time, I'm sorry, but you don't know anything about UVa or that factors which currently drive expansion.

(01-16-2024 08:50 AM)quo vadis Wrote:  

(01-15-2024 06:47 PM)Frank the Tank Wrote:  

(01-15-2024 05:23 PM)johnbragg Wrote:  

(01-15-2024 04:59 PM)bullet Wrote:  

(01-15-2024 02:29 PM)Frank the Tank Wrote:  Anyone that thinks that FSU has the legal leverage as opposed to the ACC in this matter or ESPN has any rational business reason to not extend the option in the context of the greater financial issues art the Walt Disney Company is sorely mistaken. I’m wary of repeating myself constantly (as too many people are fixed into the outcome that they personally want on this matter and don’t want to apply either prevailing legal standards or common sense financial parameters), but I’ll leave it at that.

Not if they don't think the contract is worth $30-$35 million in 2027.

Which would be contrary to everything we think we know abotu sports media economics -- the ACC doesn't just give ESPN programming, they anchor and entire dollar-or-so-a-month cable channel in half the country.

Nonetheless, ESPN hasn't pulled the trigger on the option. Which by everything we think we know is a no-brainer.

I wouldn’t read into ESPN having not exercised the option as any signal one way or the other. There’s no reason to exercise that option until the last possible moment from a legal perspective. Even if a party intends to extend a contract, there’s no real reason to do it early unless there’s some extra incentive involved (e.g. if you extend early, we’ll provide an even better long-term discount).

The more important factor for me has always been that my belief (and I think the belief of virtually everyone looking at this objectively) the ACC is undervalued compared to the overall sports marketplace. That’s why FSU is trying to get out of the ACC contract and GOR in the first place! Paradoxically for FSU, if ESPN actually determines that the ACC is actually getting *overpaid* and they don’t exercise their option on that basis, then FSU pretty much loses on all of the financial and breach of fiduciary duty claims in its lawsuit.

People can’t have it both ways: either (a) the ACC is undervalued where FSU has a case but ESPN would then have every incentive to extend the ACC contract, or (b) the ACC is actually getting overpaid to the point where ESPN would rather not extend but then that pretty much destroys all of FSU’s legal arguments (which are all based on the ACC signing a bad undervalued deal).

About the bolded, I have believed that all along, I have frequently said that the ACC, like IMO the SEC, is underpaid.

But recently, I have reevaluated that idea. IIRC, the ACC is currently getting about $32m a year in media money, with escalators via the ACCN that will raise that to around $40m over the next few years.

If the ACC was to have come to market this past spring, before the additions of SMU, Cal and Stanford (since they weren't part of the ACC that has signed the 2010 era deals), would they have gotten much, if anything, more than that? I'm not sure. IMO, the ACC is basically the new Big 12, but with FSU and Clemson as football powers. They are IMO maybe worth that extra $5m to $10m a year more the ACC will likely be making compared to the $32m that I believe the nB12 will be making the next several years. There just isn't much difference in value between them, IMO.

And now, with Cal/Stanford/SMU added, the ACC is arguably even less valuable, such that ESPN might be less likely to renew that option on 2027.

IIRC, FSU's lawsuit, in addition to talking about the ACC mismanaging its media deals leading to underpayment, did also talk about the GOR being unconscionable and the exit fees being excessive. So maybe they should emphasize those points in court, paint them in a "restraint of trade" way that prevents them from leaving and realizing their full value, as they may not be contradictory. I don't know.

(01-16-2024 10:44 AM)bryanw1995 Wrote:  

(01-15-2024 07:52 PM)johnbragg Wrote:  

(01-15-2024 06:47 PM)Frank the Tank Wrote:  

(01-15-2024 05:23 PM)johnbragg Wrote:  

(01-15-2024 04:59 PM)bullet Wrote:  Not if they don't think the contract is worth $30-$35 million in 2027.

Which would be contrary to everything we think we know abotu sports media economics -- the ACC doesn't just give ESPN programming, they anchor and entire dollar-or-so-a-month cable channel in half the country.

Nonetheless, ESPN hasn't pulled the trigger on the option. Which by everything we think we know is a no-brainer.

I wouldn’t read into ESPN having not exercised the option as any signal one way or the other. There’s no reason to exercise that option until the last possible moment from a legal perspective.

Except, by the original contract they were supposed to. ESPN asked to extend the option period (for at this point obscure reasons) and the ACC agreed (for somewhat obscure reasons, vague aspirations of striking a better deal with ESPN that came to naught)

Quote:Even if a party intends to extend a contract, there’s no real reason to do it early unless there’s some extra incentive involved (e.g. if you extend early, we’ll provide an even better long-term discount).

The more important factor for me has always been that my belief (and I think the belief of virtually everyone looking at this objectively) the ACC is undervalued compared to the overall sports marketplace. That’s why FSU is trying to get out of the ACC contract and GOR in the first place! Paradoxically for FSU, if ESPN actually determines that the ACC is actually getting *overpaid* and they don’t exercise their option on that basis, then FSU pretty much loses on all of the financial and breach of fiduciary duty claims in its lawsuit.

People can’t have it both ways: either (a) the ACC is undervalued where FSU has a case but ESPN would then have every incentive to extend the ACC contract, or (b) the ACC is actually getting overpaid to the point where ESPN would rather not extend but then that pretty much destroys all of FSU’s legal arguments (which are all based on the ACC signing a bad undervalued deal).

As a layman, I read the FSU arguments about financial mismanagement as throat-clearing and wasting the court's time, I don't think there's an actionable complaint there.

Whether the ACC contract is overvalued or undervalued compared to current market realities doesn't really effect FSU's claims that the GOR is an exit penalty and that the GOR + Exit Fee is a legally unenforceable exit penalty.

What they asked for in the lawsuit is to be released from the GOR and the exit fees.

In the funhouse mirror world where ESPN does not extend the ACC contract, I don't think FSU is tied to the ACC past 2027.

I don't think that the reasons are obscure at all. ESPN isn't getting a particularly good deal with the ACC, and it just got a lot worse with SMU and Calford joining. If/when FSU leaves, that deal will start to look even worse. An easy way to pay for FSU's departure would be to NOT renew the contract and cut the payout for the rest by ~ $10m per year.

(01-16-2024 10:48 AM)bryanw1995 Wrote:  

(01-15-2024 10:34 PM)CintiFan Wrote:  It would not surprise me if ESPN declines to exercise the 2027 option.

With the Cal, Stanford and SMU additions, ESPN will be paying about $100 million more a year and the three newcomers clearly won't be adding that much value. Over the course of the extended term, that's an additional $1 billion commitment. Will the ACC football powers, even if they stay, keep generating sufficient revenue to justify the payouts? How much will the ACC's value diminish over time as the B1G and SEC contracts grow payouts to double the amount Clemson and FSU receives and ACC football suffers because of it. That's clearly FSU's stated concern and rationale for suing to get out.

If the option is not exercised, the cost to leave the ACC drops dramatically and teams may leave, BUT ONLY IF THEY HAVE SOMEWHERE ELSE TO GO.

Let's say the SEC and B1G each take 2. That's a wash financially for ESPN. The savings from the B1G teams just fund the higher payout needed for the 2 SEC teams. Let's say the Big 12 takes 2 also. That's a slight savings for ESPN, assuming Fox picks up it's normal share. If those moves happen though, Notre Dame may also leave.

The result would be 11 ACC teams remaining, almost certainly including Cal, Stanford, SMU, Wake, BC and Syracuse. There is no way the remaining teams can justify a $34 million per year payout. ESPN can decline to exercise the option and instead give the remaining ACC teams a lowball offer for a new contract like it did to the PAC. If the new ACC even gets $15 million per team, ESPN would save about $200 million per year.

Public companies are driven by financial results, and that pressure is higher on Disney now because its CEO has not performed and its Board faces a proxy fight for Board seats. Declining the 2027 option in order to eliminate future risk and a billion dollar commitment might make perfect sense to Disney.

That's funny, I just posted something similar, though you went into more detail. One thing I would argue, however, is that $15m for the current ACC minus their top 6 schools and minus ND would not be a lowball offer at all, but probably market value. If it was a "lowball", then Fox or someone else would swoop in and grab it, but everyone can easily see what would happen to the ACC's already low ratings if their top Football Brands departed.

I'll repeat this, because it's the truth:

ESPN is getting a killer deal considering they offered the entire Pac 10 a package. In other words, they have the money to spend and wanted the content.

Instead, they get the 4C for half off plus they get Stanford, Cal, and SMU (which replaces Wazzou and Oregon St.). Now their ACC content has access to a late night window.




So many people here thought (and some still think) Stanford and Cal were shoe-ins for FOX and the Big Ten, yet now they're ewww icky gross for ESPN lol

Agendas, man. I tell ya wut