The Confidential

The ACC Sports Blog

Grant of Rights: A Panacea?

The official definition of a panacea is either a “remedy for all disease or ills” and/or “an answer or solution for all problems or difficulties.”  Some think that the Big XII is extremely more stable than the ACC because it has a grant of rights for the next 12 years between its institutions, whereas the ACC relies on exit fees to impose solidarity.  Given that Maryland is leaving, and everybody is lining up to pay exit fees to flee the Big East, exit fees are obviously mere speed bumps on the realignment highway.  Indeed, the conventional wisdom is that a grant of rights is THE way to establish unbreakable solidarity.  Or is it?

It is common knowledge that the SEC does not rely on exit fees or a grant of rights.  And yet nobody is leaving the SEC any time soon.  The Big 10 has a grant of rights, and only some silly talk regarding Penn State in a post-sanctions world has caused anyone to even consider it possible for a defection.  And that likely has little to do with the grant of rights and more to do with the great institutional fits/financial situation.  This issue only really matters with the Big XII.  The question is whether the grant of rights prevents realignment from touching the Big XII?  The answer must be “no.”

First and foremost, a grant of rights is a contract.  A contract can always be broken.  As long as the breaching party pays the non-breaching party the appropriate damages, there is nothing to prevent a breach of contract.  If you contract to paint someone’s house for $1,000, expecting to generate $300 in profit… the homeowner could breach the contract and pay you the $300 anyway.  If the homeowner found someone to do the work for $600, that would make sense for the homeowner.  Conversely, if you were offered $5,000 to paint someone else’s house, you could elect to break your obligation and pay the homeowner the difference in what it would cost to replace you.  If there was a replacement for $1,100, you would owe $100.  If the replacement was $900, you would owe nothing.  Again, you are allowed to breach a contract.

As it relates to a grant of rights, any school could breach the contract.  In doing so, they would owe their conference damages.  How those damages would be calculated cannot be that much more different than ascertaining the damages caused by any other defection.  If anything, it could be narrower because the obligation is limited to certain revenue streams.  While an exit fee addresses the uncertainty of calculating damages with a termination of a conference membership, the damages for breaching a contract provision regarding grant of rights would be narrower–how much, if any, revenue was lost due to losing the broadcast rights.  But, even if the measures were identical, the damages would not necessarily be greater.  And, without an exit fee, litigation would be required to reach that determination.  But the main point to take away at this juncture is that any party can breach a contract, including a party to a grant of rights agreement.

Second, it is plausible that the grant of rights could be “avoided” rather than breached.  If the Big 10 wanted Texas, the grant of rights Texas signed only relates to its home games.  The only rights the Big XII has relate to those games.  A game featuring Texas @ Iowa State is irrelevant to Texas’s grant of rights.  The Big 10 would be able to televise Texas @ Indiana or Texas @ Ohio State.  The Big 10 would not be able to televise Michigan @ Texas.  Instead, the Big XII could (and would) televise that game.

To be sure, there is little incentive for ESPN or Fox to want to switch conference members around within their broadcast rights.  But the Big 10 has an additional wrinkle–its own network.  If Texas left the Big XII for the Big 10, the BTN could receive better games, meaning better ratings and more revenue.  Texas @ Michigan State on the BTN is better than Purdue @ Michigan State.  And even if the Texas game was on ESPN, that would still slide a better game down to the BTN.  Along the same lines, with the Pac-12 owning its own network, landing Texas would juice up the ratings.

The real question is how Texas benefits.  Well, first and foremost, the Big 10 would have to agree to not let the absence of a full TV schedule lead to a different payout.  If Texas is currently receiving $20M from the Big XII, the Big 10 would have to give Texas at least that amount–even if Texas did not pull its own weight for several years.  With the Big 10 projecting $40M in revenue per team soon, each school could give up ~$5M and create a pool of to pay for Texas and Texas Tech to not lose money by switching.  It would be temporary–once the grant of rights expired, the Big 10 would have that much more of a valuable property.  It would be an investment.

It would certainly not be any more of an investment than what the Big 10 is doing with Rutgers and Maryland.  There is no certainty that those mediocre athletic schools will pay for themselves.  In contrast, Texas would certainly pay for itself.  The familiar mantra around Frank the Tank is that these are 100 year decisions.  If so, 12 years of a grant of rights is only another speed bump.  If the Big 10 believes in its ability to generate TV revenue with its model, then snagging Texas could be worth the initial investment.

Third, getting back to damages, things could get interesting.  In the context of an Iowa State, would the Big XII really care?  It might be able to lure a replacement that added value.

With a Texas, the Big XII would most definitely care.  If the Big XII is mortally wounded, damages might be easier to ascertain.  If the powers-that-be lowered the Big XII TV revenue, that would make for easy calculations.  That could get ugly.  But that would be subject to litigation–not all that different from exit fees.  If Texas & Tech were willing to pay $15M/year between them for 12 years–is it worth fighting the fight?  Either way, Texas would be gone and there would be nervousness within the Big XII ranks.

Would the Big 10 actually take Texas?  Probably not.  But if the Big 10 became convinced that the Big XII was going to encroach on its present or future properties, i.e. Virginia Tech and Florida State, all bets are off.  The Big 10 could always try to get Texas and Florida State first, allowing the ACC and Big XII to sort out who gets to be the 4th conference.  Two huge recruiting and population areas opening up, with $$$ to follow.  Imagine adding Texas, Texas Tech, Florida State, and Miami as part of an 18-team package. If you are the Big 10, imagine being able to offer the western teams a trip to Texas, while offering the eastern teams a trip to Florida.  An academic hit, to be sure, with FSU and Texas Tech.  But is this any more unrealistic than any other 18 or 20 team expansion scenario?

Will it happen?  Probably not.  Or maybe.  Who knows?  As less time remains on the grant of rights with each successive year, the cost for trying to lure Texas out will decrease.  The looming damages would decrease.  In 5 years, you are looking at damages for only 7 years.  In a 100-year decision, that is a mere moment.

But the only point is that a grant of rights does not guarantee that realignment will not happen.  It might not be feasible for schools like Oklahoma State and West Virginia to change affiliation.  But, in the right situation, the grant of rights will not prevent it.  Everything comes down to money.  With big enough money at stake, anything can happen–even with a grant of rights.  The Confidential’s verdict on a grant of rights: helpful, but not a panacea.

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3 thoughts on “Grant of Rights: A Panacea?

  1. BruceMcF on said:

    Note that the Big Ten will be the last of the major conferences to negotiate a new cable deal. Having Texas and Texas Tech set to enter in, say, 2016, with 9 years of impeded home game rights, would certainly complicate those negotiations.

    I think what will seems most likely to leave this in the realms of hypothetical exercises is not Texas, but Texas Tech. I expect that the more out of people’s comfort zone a move is geographically, the more likely they are going to press on other available objections. And so Texas Tech not being a member of the American Association of Universities, as all current Big Ten schools except Nebraska are (and as Nebraska was at the time it entered the Big Ten, even if its membership was already on shaky ground) seems likely to have greater weight precisely because West Texas is so far from the Big Ten comfort zone.

    And yet it would seem to be very hard to woo UTexas without Texas Tech. Of the four Texas schools left in the Big “12”, in Central Texas, Baylor is Baylor, and TCU was rescued from the Big East. In East Texas, Texas A&M has already negotiated their escape. But Texas Tech is THE school of a very large swathe of West Texas, and leaving them in the lurch would be politically very hard to do.

    To cite another “U of X and X Tech”, even UVA and VTech would spark pushback from Big Ten academics on grounds of academic snobbery. And that would be just on the edge of the 2014 boundaries of the Big Ten, and the non-AAU school in the pair is, in the Academic Ranking of World Universities, among the top 85 in the country, in the 68-85 tier. Texas Tech, by contrast, is in the 138-150 tier.

    • Is Tech even necessary anymore? In the new playoff format, the Big XII and ACC have seats at the table, essentially. Perhaps the best way of ensuring that everyone is taken care of is to have a top tier with B1G and SEC… and then a second tier with Pac-12, ACC, and Big Xii… and then a third tier of the remaining conferences. The big dogs flock to the top tier… the medium dogs say in the middle… but even the bottom dogs have access to theplayoffs.

      • BruceMcF on said:

        Perception matters as much in reality in politics. A perception that U Texas is threatening to leave Texas Tech in the lurch could create problems for UTexas, independent of whether as things eventually played out, the Big12 ended up holding onto its status as a major conference afterward (though possibly at a reduced level of income).

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