Thoughts on the Financial Situation for Clemson

There seems to be great confusion over what each conference gets at the table from the major networks with various posters making good points and bad ones without correct information. While apparently no one is privy to the intimate details of each conference contract besides the networks and consultants hired by the conferences, we can try to paint a more complete picture by doing a little digging that the average reader does not.

The first item of confusion is the separate Tiers of rights that each TV deal makes a claim on. I am no expert on how each is defined within a contract, and I imagine each one is written a little differently with respect to the tier rights, but its not very hard to understand how they are setting it up if you sit and think about it.

The Tiers are basically the picks made by the networks on the games (in any sport) they want to show on TV. I can give a familiar example by using the SEC and ACC deals as I see them. Keep in mind that the ACC deal that we are under right now, and the revision made that was signed last week, is the next deal following the Pac-12's to be put in motion. The Big XII's new big deal was agreed in principle for 10 teams, but has not been signed. The SEC will follow shortly thereafter, due to changes from expansion to 14. The Big East's deal is expiring next year and will be drastically changed. Notre Dame's NBC deal does not expire until 2015.

The company who owns Tier 1 rights for the SEC is CBS, so they pay $55M per year for the day game and a primetime game that matches up the best SEC opponents of the week.

The ESPN family (ABC/ESPN/ESPN2/ESPNU/Classic if nec) own the 2nd Tier rights, so they have a certain number of slots to fill each week and spread them over their networks for the SEC and other conferences. They built those extra networks to hold all these games. ABC tends to get the best, so its also Tier 1, and especially the saturday night game. ESPN picks their slots 2nd, though I think this is shifting now moreso to ESPN from ABC, and so on until ESPNU is filled up.

ESPN3 is basically the 3rd Tier. Anything that no one else picks up will usually end up here. ESPN owns all Tier 3 rights to ACC, so we'll be on ESPN3 unless the game is supposed to suck so bad they don't even want to show it there. They also have an obligation to pick up as many of our Tier 3 games as possible, since they're paying for them anyway.

Raycom and the SEC-syndicated network (the day game that used to be Jefferson-Pilot) have deals where they take one game and put it at the 11am/Noon time slots on regional TVs. Raycom basically buys the game from ESPN2/ESPNU that they want to show, and they have another similar deal with basketball where they get a prime matchup on weekends. You could call those Tier 2 or 3, depending on the contract stipulations that I'm not privy to, but you get the idea. ESPN GamePlan will still let the parent company make money on those nationwide for those out of the area, and its blacked out in the area to protect Raycom.

Anything that doesn't get picked up belongs to the school, but is still called Tier 3. This leaves Olympic Sports, Golf, baseball, and some early-season basketball as free reign for you to make money on. If there is the odd football game not picked up anywhere, Clemson can sell it to whomever. TigerCast would fall under Tier 3, for example. So would CSS, basically.

This from ESPN on our new ACC deal:

Lastly, the term "third-tier rights" means different things in different conference agreements. In the new ACC extension (as was the case in the original 2011-2023 agreement), ESPN retains exclusive rights to all football and men’s basketball games. Additionally, ESPN retains the first selection rights to women’s basketball and all other ACC sports such as baseball, softball, soccer, lacrosse, etc. Whatever is not selected for coverage and distribution by ESPN from these sports is retained by the member institutions.

So if Clemson created a side deal with CBS for TigerCast at $500K per year, that is 3rd Tier money we take in ourselves by showing November/December basketball, women's basketball, baseball, or other minor sports. ESPN3 can't televise everything. The TigerCast-type money is not included in the figures you see posted anywhere about conference contracts.

Not every school does it this way however, some conferences pool all the Tier 3 worth showing together. The Big Ten Network pools all 2nd and 3rd tiers into one Channel. Whether teams like Minnesota have something else on the side like TigerCast is not something I know of, but it is Tier 3 if they do. The Longhorn Network that Texas wants so badly is currently a syndicated network of Tier 2/3 partnering with ESPN. It will likely develop into an in-state channel and they'll start pulling in the cash.

The ACC deal signed last week is for all 3 tiers, valued at ~$16 million per year per school average after the ACC office takes their 1-team share. Its not $17.1M as is quoted. Actually, its not even $16, because the ESPN deal is backweighted. Our current deal that went into effect last year pays us about $6M per year on average more than we got before (which was about $6M). This new one is no different in the early years of the contract. We take home about $10-12 million from the ACC offices and it ramps up to the $16-17 M figure in 2021 and then pushes above that at the end. It allows for 5 year renegotiations if the value of the ACC is deemed worthy to renegotiate upwards.

As Phillips said today, there is no way to actually check the numbers because the ACC offices hold the contract and do not distribute it to member institutions. I can't check them and neither can he, which shocks the hell out of me. Still, because everyone's deal is backweighted, we will use the average number of $16M per year. Unless we make a killing on TigerCast, which we all know isn't happening, or crank up our radio affiliate cost (from zero, USC charges for it), Clemson is basically stuck at $16M per year.

The B1G sold their 1st tier off, and that deal will get them a few day games on the ESPN family, and the BTN can pick from the rest. They also sold the championship game separately to Fox for more money. They sell basketball games to CBS for more money too. BTN charges the cable companies for subscription service, and they charge you, so they make money on advertisers and you buying a package that has the channel. I believe they charge around $1 per person in B1G states, and a third of that for subscribers outside of those states. If you have the channel, you are giving the Big Ten money. I have it. Altogether they get about $22M per year per school from all these deals currently. BTN will only grow in subscription cost however.

The Pac-12 will end up doing the same thing, they sold the first 2 tiers to ESPN/Fox to generate $20.8M per school per year. This money doesn't even count what they will make on a Pac-12 Network that is planned to launch as a Tier 3. It very likely would push them to $29M per school since that whole half of the country would be buying it. Thats a $13 M difference from Clemson for teams like Oregon who currently have similar-sized (~$60M) budgets today.

The SEC's deal is being renegotiated now, and while the CBS deal is unlikely to move since everyone has that channel free already, the ESPN and 3rd tier rights are going up. The SEC wants its own 3rd tier network channel as well, and in the southeast this would make them ridiculous money too. They will likely get over the $30M figure because we're all sports nuts in the south. I would demand a SEC Channel myself.

The Big XII's old deal paid $15 M per school, but the new one will pay $20M per as it stands today. Each school retains it's 3rd Tier rights, which allows Texas to have the Longhorn Network with ESPN as a private deal. They will make ridiculous sums from that in-state. However, this means that Clemson gets the $20M, plus anything we want to do with ESPN on the side either as part of a group of schools or ourselves with an expanded TigerCast system or its successor. TDP alluded to the value of our 3rd tier as being in the $4.5M range. Clemson would get potentially $24.5M from going to the Big XII just as it sits.

However, the XII need not take on the extra travel costs to go East without getting something for it. To make financial sense, they would require enough from ESPN and Fox (or whomever) to offset the travel at a minimum. On top of this, they would be able to sell the rights to the Big XII Championship, like the B1G, which gets $24M per year from its Fox contract just for the 1 game. If the Big XII does the same and gets a bump from ESPN/Fox to cover travel, we may get into the Pac-12 range when all 3 tiers are added together.

Offsetting this travel would also encourage the Big XII to expand further, to 14 or 16. Info from our sources lends us to not believe this is going to happen yet, but I could see ND added as a 13th basketball/olympic-member until 2015, then for football, and then adding a team like Georgia Tech or Miami, then splitting the conference into "Pods" of 4.

This does not count any potential money from the new "Cotton" Bowl the SEC and Big XII agreed to, which cuts out the crooked-bowl-rep-middle-man and generates profit for each conference directly. The bowl is largely symbolic and we do not know exactly what it would generate in revenue.

What could Clemson Athletics do if the budget revenues went from $60M to possibly $90M? Is it worth the $20M exit fee we have to pay once, or that could be paid twice over with what IPTAY sits on? I don't see how you could argue it isn't over the 12-15 year lifespan of these deals. Even if the deal only reaches 80 or 90M, I dont see how we could turn it down to stay here in the ACC. 6% of the CUAD revenue goes back to Academics, so its not like they wont benefit financially, and they can even get more nationwide exposure and more applicants.

Are we being treated properly in the ACC financially?

Given TDP's and Swofford's admission that 80% of the ESPN contract is just football money, then no we are not. Using this analysis, its quite clear that Clemson and FSU should be getting the lion's share of the new deal. I have been told that both schools made it clear that they did not want the 9th conference game added to the ACC slate and both wanted a larger share of bowl money instead of equal distribution, and were denied. If we went to the BCS-level games and got a much larger portion, the benefit to switching would not be quite so big (but would still be large).

Step One: Determine total viewership for each program's football team (2011 regular season) by using Nielson ratings and audience data to determine viewership for different types of games. Note that I performed a detailed breakdown to find the average viewership for national and regional games broadcast on ABC, ESPN, ESPN2, ESPNU, and regional affiliates. I also broke down games by their start time (i.e. Noon, Afternoon, Night, or Weeknight) so that estimated viewership numbers reflect a fairly detailed prediction.

Again, this is an inherent problem with the available data... I have to use season-long averages since I don't have all of the team-specific figures. I think it's the best guess I can develop with the data that is available. . Sum all of the viewership information and compare across teams

Actually the Nielsen data is a big problem, they do not provide much per game or per school data each week to the average Joe. Bowl games are easily looked up, but Clemson vs Boston College in prior years? good luck finding it, I've tried.

Step Two: Determine total viewership for each program's basketball team (2011-12 regular season) by again using Nielson ratings to estimate average ACC viewership for ESPN, ESPN2, ESPNU, and regional games. Look at games played by each team during the season and the various channels/time-slots for each of the games. Estimate likely TV audience for games, summarize, and compare.

Step Three: Assign a multiplier to Football Viewership in order to reflect its higher valuation by corporate sponsors. This can certainly be a point of debate, but I chose to use a 67/33% split based on information I found in a presentation that Nielson provided in 2011:

http://www.slideshare.net/ceobroadband/state-of-the-media-2011-year-in-sports-11339432

By applying some basic math, this assumption yields the following valuation for each viewer of an ACC regular season game for football and basketball

Swofford's comments say its 80/20, not 67/33. At 156M per year of the old deal, that equals 124.8M just for football or about $0.65 per viewer just of football games and $0.29 for basketball. At $240M of the new deal, assuming the same viewer totals and relative values, its $191M at a price of $1 per viewer.

Based on his evaluation, if we had a staggered system that benefitted the teams bringing in the most cash, Clemson would get $23M each year instead of $16M on average. The ACC is having us carry around the weaker teams and hitting us with a $7M "penalty" to do that.

I think we all realize that equal sharing is better for a conference long-term, because continually giving the Haves more money than the Have-Nots only perpetuates the Haves, but this is a big chunk we're carrying for such continued poor treatment from Greensboro.

As for the numbers, if you wish to see his figures, click to embiggen.

Since ABC, ESPN, and ESPN2 are the most valuable networks, it should be pretty evident that the boys in Bristol think that FSU, Clemson, Miami, and VT are the conference's cash cows (at least for Football). For example, UVA only attracted 3 high-profile network games despite its strong season, and those were against the conference's premier teams (@ FSU, @ Miami, @ VT).

Which comes as no surprise really. UNC and Duke dominate all basketball programming as well. However the ACC is actually in the Top 2 or 3 as far as total viewership, and we will end up 5th in revenue. Tell me how you could say Swofford didn't screw this up? Clearly some better leveraging could've been applied, even though not all those eyeballs are watching because so many teams suck.

Clemson's Board of Trustees will meet Today to discuss figures like the ones provided here to put together their plan of action moving forward. While my sources indicate no offer has come, I do expect the BOT to have a general idea of how they will vote on a Big XII offer when it does, and likely vote to empower Barker to negotiate on behalf of Clemson with the Big XII conference. The BOT would retain veto and ratification power on any deal, and I'd expect it all done by the end of June.