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Conference Expansion: Stanford, California and SMU Join the ACC

Wakeforest22890 said:
Maybe I misunderstand, but why would Clemson get any SEC TV money if the SEC isn't getting any of Clemson's media rights (which the ACC holds)? Or are you saying Clemson is going to somehow reach an agreement to buy out their entire grant of rights from the ACC and pay like $555 million this year to do so?
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I’m asking if there is a path for Clemson to buy out of the league. If so, how much does it cost? If we know what it costs we also know whether it makes sense for them to do so assuming the SEC would take them.
 
It will drop every year but I believe I saw FSU folks talking about a number over $500 million before this new academic year started.
 
Wakeforest22890 said:
It will drop every year but I believe I saw FSU folks talking about a number over $500 million before this new academic year started.
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So let’s say its $550M. The delta between expected ACC revenue and SEC revenue is expected to average about 50M a year per school between now and 2030 and then keep expanding through 2034 when the SEC deal ends. So let’s just call it 52-55M a year over the next 10 years. Assuming no other material revenue streams come Clemson’s way you don’t even have to put a time value of money on that $550M (or even $500M). It likely makes no sense financially unless for some reason the SEC helps flip the bill or Clemson is willing to presume come 2034 the deals will be significantly better for the SEC (which some say comes at a significant risk). Easier to just wait to buy out when it is cheaper, but then you’re still running the delta between the payouts by league over fewer years.

Not saying they wouldn’t seek to find another “legal” way out but the math presumably says you wait to do it.
 
DeacMan said:
So let’s say its $550M. The delta between expected ACC revenue and SEC revenue is expected to average about 50M a year per school between now and 2030 and then keep expanding through 2034 when the SEC deal ends. So let’s just call it 52-55M a year over the next 10 years. Assuming no other material revenue streams come Clemson’s way you don’t even have to put a time value of money on that $550M (or even $500M). It likely makes no sense financially unless for some reason the SEC helps flip the bill or Clemson is willing to presume come 2034 the deals will be significantly better for the SEC (which some say comes at a significant risk). Easier to just wait to buy out when it is cheaper, but then you’re still running the delta between the payouts by league over fewer years.

Not saying they wouldn’t seek to find another “legal” way out but the math presumably says you wait to do it.
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That $550 figure is also low. It’s more in the neighborhood of $900+ from what most are saying.
 
deacdixieboy said:
That $550 figure is also low. It’s more in the neighborhood of $900+ from what most are saying.
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That $900M figure seems pretty speculative. I suspect numbers is closer to the truth. As much as we like to think schools would ink up to some figure like that to lock everyone in, the power schools in the conference presumably aren’t stupid and would likely only agree to a number that might actually make sense for them to pay.

But even at $500M and a 5% CAGR you’re talking about math that makes little sense given the estimated deltas in payouts. That $500M they pay today would be worth about $800M in 10 years at that rate of growth. And the delta on payments for being in the SEC on TV revs isn’t close to that number.

Also, the math I’ve seen says the SEC has the most lucrative expected payout per school, making an approach by the B1G even less likely to be persuasive.

I guess one thing I did not account for is the possibility a bunch of big time donors help bankroll a buy out just because they want to see it happen. Seems crazy to me, but when did that stop people from funding buildings and other stuff that strokes their egos.
 
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DeacMan said:
That $900M figure seems pretty speculative. I suspect numbers is closer to the truth. As much as we like to think schools would ink up to some figure like that to lock everyone in, the power schools in the conference presumably aren’t stupid and would likely only agree to a number that might actually make sense for them to pay.

But even at $500M and a 5% CAGR you’re talking about math that makes little sense given the estimated deltas in payouts.

Also, the math I’ve seen says the SEC has the most lucrative expected payout per school, making an approach by the B1G even less likely to be persuasive.

I guess one thing I did not account for is the possibility a bunch of big time donors help bankroll a buy out just because they want to see it happen. Seems crazy to me, but when did that stop people from funding buildings and other stuff that strokes their egos.
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That $500M figure may be correct just to get out of the ACC, but it doesn’t include the loss of all media rights until 2036. I’m not sure how the ACC could possibly let any school out of that.
 
deacdixieboy said:
That $500M figure may be correct just to get out of the ACC, but it doesn’t include the loss of all media rights until 2036. I’m not sure how the ACC could possibly let any school out of that.
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The entire point of providing some super lucrative buyout clause presumably would be to sever your entire association with the conference. Why even have the clause otherwise.

Regardless, seems like even a $500M buyout of all interests doesn’t make sense math wise. $500M today is worth hundreds of millions more in 10 years. I’ve seen nothing to suggest it would be close to worth it financially.
 
deacdixieboy said:
That $500M figure may be correct just to get out of the ACC, but it doesn’t include the loss of all media rights until 2036. I’m not sure how the ACC could possibly let any school out of that.
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The exit fee is 3x annual revenue. So say $120 million.

The GOR buyout is either:
a) pay the ACC to release your media rights. Say that is $500 million. (Or whatever.)
b) leave your media rights with the ACC and don't buy them out. (This will never happen, why would the SEC welcome you but not receive any media revenue from your home games for 12 years?)

So, if it were a $500 million GOR buyout, plus $120 million exit fee, it would be $620 million.

I don't know what the present value is of the media rights through 2036 is. It depends on the knowable information and what discount rate you use. (Seems like the fact of the contract is certain, unless there is a legal path to puncture it, which would factor into either the estimated cash flows or the discount rate. Probably the first.)

The exit fee will probably remain a present value of about $120 million (if I understand it right.)

That's the math from the ACC side. Clemson's side would set against that number, the present value of the differential in estimated revenue from say the SEC. Plus the economic and psychological cost of going 6-6 every year, and the lost estimated revenue of a more likely path to the playoffs. Offset by the possibility of the ACC blowing up and losing that path early.

Seems like the key variable is - 1) can the GOR be escaped legally, and 2) what would happen to the ACC given (1)

I presume Clemson likes being in the ACC, all else equal. FSU, probably not. That's somewhat mutual in my book.
 
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ACC could value departing school GoR at whatever the departed school would be getting from their new conference. That is, take Clemson's claim that they are "$50 million" behind other conferences. So ACC paid almost $40 million. So each year valued that way would be about $90 million. So $990 for the remaining 11 football seasons.
 
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