NCAA reorg imminent

[Essexfenwick]

Here Ya go

https://www.tiktok.com/@ricoknows/video ... mPgnG&_r=1

[wgdsr]

for the 1st time in awhile, i agree with you. i don't believe it either.

The GOR is online. No gov law or venue provisions that I could see.

But Doc's scenario is still like a seven cushion bank shot.

posted before, here is what bowlsby said:

https://www.cbssports.com/college-footb ... urbulence/

is he and all of his and the acc's high priced attorneys wrong?

If the GOR does not have a choice-of-forum and choice-of-law provision … then yeah, they might be wrong.

There is precedent in Texas. Former Head Coach Mike Leach tried to sue Texas Tech, a Texas state public educational institution, after he got fired. His suit was ultimately thrown out by the Texas Supreme Court which ruled that Texas Tech enjoyed the sovereign immunity of the state itself and that he could only sue Texas Tech with the permission of the state of Texas, which of course was denied.

https://www.burntorangenation.com/platf ... n-immunity

That may be what FSU is relying on … a similar grant of sovereign immunity by the state of Florida.

DocBarrister

it's very possible you didn't read the article. leach's case wouldn't apply in the same way toward sovereign immunity given what the gor is predicated on.

I don’t understand what you are saying. Why wouldn’t FSU and the state of Florida be able to apply sovereign immunity to the GOR? Like Leach’s suit, they are basically breach of contract and tort cases.

DocBarrister

A decade or so ago the Big 12 and ACC were having discussions about playing future nonconference games against one another. Nothing as radical as realignment but enough that the Big 12 gave the ACC access to the league's most significant legal tool -- its grant of rights.

"It was professional courtesy more than anything," recalled Big 12 commissioner Bob Bowlsby.

The grant of rights contracts signed by schools, which literally "grant" the "rights" to broadcast their games to their respective conferences for the term of a league-negotiated media rights deal, have become the foundations of two Power Five conferences' stability.

While every conference holds grant of rights agreements with its member institutions, the ACC modeled its version entirely off the Big 12 document, giving the two conferences an "identical" legal backstop, according to a source who has reviewed both documents.

That has led observer after observer to refer to the contracts with a singular adjective: "Ironclad," Bowlsby said.

So ironclad, in fact, that Big 12 legal minds developed the strategy relying on a landmark 115-year old Supreme Court case that traced its roots back to British Common Law in the 1600s. So ironclad that the Big 12 incorporated itself in Delaware, a state so business-friendly that 65% of Fortune 500 companies file their incorporation papers there.

So ironclad that the verbiage in these contracts might have saved both conferences from near-extinction.

Those ACC schools seemingly had nowhere to go and lacked the financial will to challenge the grant of rights in court given its ironclad nature. Start with that Delaware incorporation.

"It was unusual to build a grant of rights around federal copyright law," Bowlsby explained of the Big 12's contract. "The thing that was important about that: any disputes would be heard in federal court in Delaware, not in a state court."


That a huge advantage for a league that might otherwise have to contend with Texas (Big 12) or Florida State (ACC) battling its conference with homefield advantage in a state court.

The Big 12 legal team had the answer when their 2012 TV deal was finalized. They needed a strategy that found a jet sweep around the 11th Amendment, which includes the concept of state sovereign immunity.

That 115-year old landmark Supreme Court case, Ex parte Young, circumvents state sovereign immunity to allow lawsuits in federal courts for injunctions against state officials if they act against federal law or the U.S. Constitution. It essentially lays the groundwork for a conference to sue a school leaving early for another conference.

The Stanford Law Review called the decision "the cornerstone of modern constitutional litigation."

Explained an attorney who has viewed the Big 12's grant of rights: "Every state has different sovereign immunity laws. Especially in Texas, it's very hard to sue a state institution like a state university. Ex parte Young is a way to try to get around those issues. It would allow you to sue the president of a university if he tried to take Team X to another conference [violating the grant of rights]."


in part, this is what bowlsby believes has been accomplished. why wouldn't it work?

You are forgetting that under the scenario described by Tom Mars, FSU would be asserting Florida state sovereign immunity rights. In essence, suing FSU over a federal copyright claim would be like suing the state of Florida itself under federal copyright law.

A 2019 U.S. Supreme Court ruling overturned a 1990 federal law that tried to eliminate state sovereign immunity in the copyright context:

Last week, the Copyright Office released a report on Copyright and State Sovereign Immunity, concluding its year-long study on the topic. Sovereign immunity is a doctrine that makes states and state entities immune from lawsuits under federal law in some cases. Congress sought to eliminate sovereign immunity in the copyright context in a 1990 federal law, which was overturned by a 2019 Supreme Court decision.

https://www.authorsalliance.org/2021/09 ... 20decision.

https://www.supremecourt.gov/opinions/1 ... 7_dc8f.pdf

It’s important to note that the ACC GOR was written before the 2019 U.S. Supreme Court ruling. That means the ACC (and Big 12) may have relied on a 1990 federal law that was later struck down by the U.S. Supreme Court.

It’s complicated stuff, but FSU’s position looks stronger and stronger. I doubt the president and trustees of FSU would have mouthed off like they did if they did not feel confident about breaking the GOR.

In any case, I think all of this still points to an eventual settlement where FSU is allowed to leave the ACC for a price that is much lower than what the current GOR and exit fee require.

Should note that this scenario would not work for, say, the University of Miami, a private school. FSU is a state institution, and that makes a huge difference. Importantly, this approach may also work for Clemson, which in its usual cowardly manner is allowing FSU to lead the way and take the brunt of fire from the ACC member schools.

I’m glad you raised this important point, wgdsr. Thanks.

DocBarrister

thanks.

a) i am not forgetting your initial point. i, in fact, bolded a part of the article that says exactly that several times and describes their strategy about being able to sue the prez etc. of any university. which ggait knows as well but you attempt to convey that he doesn't also. sidebar: this is a common tactic of yours. it's bad faith and makes you come off looking poorly and then the debate is sidetracked typically having to defend something that isn't stated. makes the convo dumb. how about just asserting your side would work better?
b) here is more of the article (i am increasingly dubious that you actually read it, which was cited to you numerous x, including before & after you lashed out with a "lazy" accusation for not linking articles. i am not 100 you actually like linked articles):
In that shocking July 2021 development, Texas and Oklahoma announced they were leaving the Big 12 for the SEC after the existing grant of rights expired in 2025. The Big 12 quickly rallied to assemble an unequal revenue sharing plan for the two schools. Unlike what the ACC accomplished Wednesday, that strategy did not work for the Big 12.

Then it just came down to that negotiation. Earlier this year, the Big 12 announced a deal for the Longhorns and Sooners to leave one year early in 2024, netting the league $100 million.

Neither school dared challenge the grant of rights itself.

After Texas and Oklahoma declared their intentions two years ago, Bowlsby doubled back and vetted the vulnerability of his grant of rights with a New York litigation firm.

"I asked them to tear it apart," Bowlsby said. "They came back and said, 'This is ironclad. You can take it any federal court in the country and win.'"

Because of the rigid nature of the language contained within the grant of rights, Bowlsby added that any issue arising from it is "going to end up having to be a negotiation, not a court trial."

A costly negotiation at that.

An ACC league source last year told CBS Sports, at that time, it might have cost as much as $500 million total to exit the league, including its grant of rights, as there were then 14 years left on the deal. Other estimates have been lower but still significant.

The ACC is neither naïve nor innocent in this endeavor. It just finds itself with internal turmoil. Former commissioner John Swofford's daring raid to expand the league helped collapsed the old Big East. He negotiated a 2016 media rights amendment with ESPN that established the ACC Network and pushed the agreement out 20 years.

Now, as other conferences have passed the ACC, its grant of rights might as well be a one-ton blocking sled on every ACC practice field.

"Well, all I can say is that same grant of rights has been in other conferences, and no one has really challenged it," Miami athletic director Dan Radakovich told the Miami Herald this week. "So, not being a lawyer, I don't know the tenets of it. But just being a lay person, it must be pretty good if no one has tried to challenge it."

bold added by me, wgdsr.
c) it doesn't seem that complicated. and in fact, most people viewing the gor itself have said it's surprisingly simple also.

so i'll take some liberties here and assume that these high-priced attys were very aware of the new ruling, however it may affect things. i'll also take you at your word that this omission is in plain sight. so... as i've said from the get go, this may likely come down to hoo has the better attorneys and fortitude. the guys in the field in nyc on 2 conferences' retainer and the sports atty from rogers, arkansas weighing in on this part. i'd say it's more than a bit odd that it's taken until now? for someone out of hundreds of folks that have looked at this to point out an easily identifiable gaping hole, but i digress.

lastly, why did fla st mouth off? probably several or more hoped for objectives and motivations. as far as legal hubris, i'd personally think that's murky at best. i.e. had that been in play, to me we wouldn't be hearing them mouth off at a board meeting and on espn, we'd be hearing a release that they've decided to join x conference or alerted the acc that they intend to leave. next up negotiations and lawsuits.

them going to the street signals to me they know it's likely a big number.

[Essexfenwick]

1.2 billion if they go to the B1G or SEC.

[ggait]

1.2 billion if they go to the B1G or SEC.

Maybe a little high.

The B10 does not admit all schools with full rev shares.

USC and UCLA got full shares, which is the exception. UW and UO were admitted as "junior partners." Which has been the norm with the B10.

Maybe the four west coast schools will convince the B10 to take pity on Stanford and Cal and admit them as junior junior partners. As long as you don't have to pay them too much, the B10 academic types would drool over adding the #1 academic private school and the #1 academic public school that play full P5 D1 sports.

Unlike USC and UCLA, Oregon and Washington will not enter the Big Ten with full revenue shares. Sources told ESPN that both schools will receive approximately $30 million annually when they join the league, a share that will increase by $1 million during the current media contract with Fox, NBC and CBS, which runs through the 2029-30 athletic season. They then would be able to receive full shares. The other Big Ten members are expected to receive more than $60 million annually from the new agreement this year, an amount that will increase over the life of the deal. Previous Big Ten expansion additions Nebraska, Rutgers and Maryland also did not receive full revenue shares immediately.

[ggait]

Here Ya go

https://www.tiktok.com/@ricoknows/video ... mPgnG&_r=1

I'd love to know who was the architect of the original B12 GOR. Much respect to whatever lawyer that was. This law nerd recognizes law nerd game. That person really earned whatever fee was charged.

Contracting with any state or state instrumentality (like a state university) is a nightmare because of the sovereign immunity issue. Like how TTU blatantly screwed Mike Leach out a few million that was clearly owed under a contract. The fact that states are allowed, under the Constitution, to renege on contracts (unless the state legislature specifically consents otherwise) is little known but pretty nutso. Think about being Nick Saban's lawyer and worrying about whether you can even bring (much less win) a claim for all the $$$ he's owed under his fat contract.

Brilliant work around in the GOR. While you can't sue FSU, you can individually sue and enjoin the university president, athletic director, general counsel, CFO and every member of the board of trustees under a 100+ year old SCOTUS precedent.

And the actual results speak (actually shout) for themselves. Legal genius if you ask me.

P.S. The only quibble I have on this is the focus on the DE incorporation. While the B12 is incorporated in DE, I believe the ACC is formed under NC state law. DE for the B12 is just a nice to have -- DE Chancery court is a nice option. But the real juice is basing the GOR on federal law and being able to run into federal court whenever you need to.

[wgdsr]

Here Ya go

https://www.tiktok.com/@ricoknows/video ... mPgnG&_r=1

I'd love to know who was the architect of the original B12 GOR. Much respect to whatever lawyer that was. This law nerd recognizes law nerd game. That person really earned whatever fee was charged.

Contracting with any state or state instrumentality (like a state university) is a nightmare because of the sovereign immunity issue. Like how TTU blatantly screwed Mike Leach out a few million that was clearly owed under a contract. The fact that states are allowed, under the Constitution, to renege on contracts (unless the state legislature specifically consents otherwise) is little known but pretty nutso. Think about being Nick Saban's lawyer and worrying about whether you can even bring (much less win) a claim for all the $$$ he's owed under his fat contract.

Brilliant work around in the GOR. While you can't sue FSU, you can individually sue and enjoin the university president, athletic director, general counsel, CFO and every member of the board of trustees under a 100+ year old SCOTUS precedent.

And the actual results speak (actually shout) for themselves. Legal genius if you ask me.

P.S. The only quibble I have on this is the focus on the DE incorporation. While the B12 is incorporated in DE, I believe the ACC is formed under NC state law. DE for the B12 is just a nice to have -- DE Chancery court is a nice option. But the real juice is basing the GOR on federal law and being able to run into federal court whenever you need to.

my issue with it, and i don't even know if it's well founded, is tieing it into home football games. why not have it be however school is compensated outside of pro-rata playoff payouts for the conference, etc? seems like a conference and networks could do a workaround. obviously, it might not pass a smell test, but not sure there's a mandate on how schools are supposed to get paid.

[pcowlax]

I imagine legally you could do something off the wall like, while still under GOR to the ACC, play all of your conference games on the road but for every game that "should" have been a home game for you, you get all ticket sales, concessions, etc above cost instead of the actual hosting school. I guess that would depend on what language was used to define home games. Obviously in actual practice that would be extremely difficult to get everyone to agree to (who gets to buy the tickets?) and probably impossible to do.

[wgdsr]

I imagine legally you could do something off the wall like, while still under GOR to the ACC, play all of your conference games on the road but for every game that "should" have been a home game for you, you get all ticket sales, concessions, etc above cost instead of the actual hosting school. I guess that would depend on what language was used to define home games. Obviously in actual practice that would be extremely difficult to get everyone to agree to (who gets to buy the tickets?) and probably impossible to do.

i'm talking about the media payout that could somehow get worked around as a conference payout. not tix sales or concessions. but just say a fox says we're paying 1 billion this year... for all home games except fsu we'll pay $1, then what "we're paying" is for home games everywhere else. and then the conference pays out equally, regardless of the fact that the media rights for fsu home games were only $1 each.

[ggait]

The $$$ is completely about bundling all of the conference games and selling that package of inventory to a broadcaster. The GOR only covers/grants those rights necessary for the conference to fulfill its obligations to, in the ACC's case, ESPN.

The GOR only exists for the sole purpose of providing the agreed broadcast inventory to ESPN. So it does not apply to road vs. home game, ticket revenue, concession revenue, etc. Which are the small dollars.

[pcowlax]

The $$$ is completely about bundling all of the conference games and selling that package of inventory to a broadcaster. The GOR only covers/grants those rights necessary for the conference to fulfill its obligations to, in the ACC's case, ESPN.

The GOR only exists for the sole purpose of providing the agreed broadcast inventory to ESPN. So it does not apply to road vs. home game, ticket revenue, concession revenue, etc. Which are the small dollars.

What I was referring to is that the GOR grants the ACC the broadcast rights to all FSU homes games (all sports but just home games) (at least that is how every description I have read of it interprets it). Meaning that if they went to another conference, the TV network that had a deal with that conference would not be able to broadcast FSU home games (or they could but would get no income for it which means the same thing) so those can't be included in TV package for the league FSU is joining, significantly reducing the appeal to those leagues of adding FSU while a GOR is still in place. In my admittedly crazy scenario, I am saying that the other league (call it the SEC) would in fact be able to broadcast all of FSU's games (at least in conference) because they wouldn't HAVE any home games. The tickets, sales, etc. for the games that otherwise would have been at home would be throwing a bone to FSU for forcing them to play all conference games on the road. Below is from Charlotte Observer article on the issue.

"A Grant of Rights agreement is a contract that ensures that the ACC will own the broadcast rights to all of its member schools’ home games through 20361234. This essentially locks schools into ACC membership for that span1. The ACC’s grant of rights contract states member schools “irrevocably and exclusively grants to the conference during the term all rights necessary for the conference to perform the contractual obligations of the conference expressly set forth in the ESPN agreement”3. If a school breaks the deal, the ACC will continue to own the TV rights of any of that school's home games, according to the contract4. A grant of rights dictates who owns a thing, such as intellectual property rights, or an image5."

[wgdsr]

The $$$ is completely about bundling all of the conference games and selling that package of inventory to a broadcaster. The GOR only covers/grants those rights necessary for the conference to fulfill its obligations to, in the ACC's case, ESPN.

The GOR only exists for the sole purpose of providing the agreed broadcast inventory to ESPN. So it does not apply to road vs. home game, ticket revenue, concession revenue, etc. Which are the small dollars.

What I was referring to is that the GOR grants the ACC the broadcast rights to all FSU homes games (all sports but just home games) (at least that is how every description I have read of it interprets it). Meaning that if they went to another conference, the TV network that had a deal with that conference would not be able to broadcast FSU home games (or they could but would get no income for it which means the same thing) so those can't be included in TV package for the league FSU is joining, significantly reducing the appeal to those leagues of adding FSU while a GOR is still in place. In my admittedly crazy scenario, I am saying that the other league (call it the SEC) would in fact be able to broadcast all of FSU's games (at least in conference) because they wouldn't HAVE any home games. The tickets, sales, etc. for the games that otherwise would have been at home would be throwing a bone to FSU for forcing them to play all conference games on the road. Below is from Charlotte Observer article on the issue.

"A Grant of Rights agreement is a contract that ensures that the ACC will own the broadcast rights to all of its member schools’ home games through 20361234. This essentially locks schools into ACC membership for that span1. The ACC’s grant of rights contract states member schools “irrevocably and exclusively grants to the conference during the term all rights necessary for the conference to perform the contractual obligations of the conference expressly set forth in the ESPN agreement”3. If a school breaks the deal, the ACC will continue to own the TV rights of any of that school's home games, according to the contract4. A grant of rights dictates who owns a thing, such as intellectual property rights, or an image5."

pcow this would be a non-starter for a lot of reasons but primarily:
-- competitively and communally. and as we all know now, fsu wants to win national chamionships.
-- the boost to their community makes their year and it would otherwise be a ghost town. hotels, restaurants. if you've booked a room on a big school's football weekend, you may know their rates go 3x to 6x on those weekends. or more.

[pcowlax]

The $$$ is completely about bundling all of the conference games and selling that package of inventory to a broadcaster. The GOR only covers/grants those rights necessary for the conference to fulfill its obligations to, in the ACC's case, ESPN.

The GOR only exists for the sole purpose of providing the agreed broadcast inventory to ESPN. So it does not apply to road vs. home game, ticket revenue, concession revenue, etc. Which are the small dollars.

What I was referring to is that the GOR grants the ACC the broadcast rights to all FSU homes games (all sports but just home games) (at least that is how every description I have read of it interprets it). Meaning that if they went to another conference, the TV network that had a deal with that conference would not be able to broadcast FSU home games (or they could but would get no income for it which means the same thing) so those can't be included in TV package for the league FSU is joining, significantly reducing the appeal to those leagues of adding FSU while a GOR is still in place. In my admittedly crazy scenario, I am saying that the other league (call it the SEC) would in fact be able to broadcast all of FSU's games (at least in conference) because they wouldn't HAVE any home games. The tickets, sales, etc. for the games that otherwise would have been at home would be throwing a bone to FSU for forcing them to play all conference games on the road. Below is from Charlotte Observer article on the issue.

"A Grant of Rights agreement is a contract that ensures that the ACC will own the broadcast rights to all of its member schools’ home games through 20361234. This essentially locks schools into ACC membership for that span1. The ACC’s grant of rights contract states member schools “irrevocably and exclusively grants to the conference during the term all rights necessary for the conference to perform the contractual obligations of the conference expressly set forth in the ESPN agreement”3. If a school breaks the deal, the ACC will continue to own the TV rights of any of that school's home games, according to the contract4. A grant of rights dictates who owns a thing, such as intellectual property rights, or an image5."

pcow this would be a non-starter for a lot of reasons but primarily:
-- competitively and communally. and as we all know now, fsu wants to win national chamionships.
-- the boost to their community makes their year and it would otherwise be a ghost town. hotels, restaurants. if you've booked a room on a big school's football weekend, you may know their rates go 3x to 6x on those weekends. or more.

Oh sure, I called it a crazy scenario and said it would never happen. I was just wondering if it technically would be a legal work around.

[Wheels]

The private equity story that FSU threw out there was interesting. I give them credit for trying to look for creative solutions. The private equity one, though, sounds like some trustee heard "from a friend, who's a lawyer, that said we can look for outside investors like a company does!" I'm not a tax expert, but I have to think that state and federal tax authorities would have an issue with a non-profit entity being owned by a PE group...and returning any portion of profits to a PE group. I'm sure the Florida legislature would be happy to change state laws to advance the interests of college FOOTBAWL, but I'm not sure the IRS would be keen on that. But creative thinking by FSU people for sure.

After the B1G west coast additions and combined with the ACC GOR, I suspect we're done with any conference extinction events happen soon.

RIP to the Pac8-10-12-9-5. Peace be unto it.

[ggait]

Pcow -- I would guess that would not work.

Below is the ACC GOR. But to 100% understand it, you would also have to read the ESPN contract side by side. The GOR basically assigns the rights to all "Works" which are the subject of the ESPN contract.

I'm not sure exactly what the source is of the convention that the home team controls all of the IP for the game played at home. My guess is that the ownership of home games is in the standard game contract -- at least the contract for OOC home games. I'd guess that rights for in conference games are laid out in some omnibus agreement signed by all the conference members. Good chance said agreement requires each member to participate in a certain number of conference games.

Regardless, you'd guess that a member team would not be able to cancel its obligations to play conference games (home or away). So playing a full season of OOC away games would violate multiple contracts. Including the ESPN contract.



https://storageaccountstart88df.blob.co ... ghts-1.pdf

[ggait]

The private equity one, though, sounds like some trustee heard "from a friend, who's a lawyer, that said we can look for outside investors like a company does!" I'm not a tax expert, but I have to think that state and federal tax authorities would have an issue with a non-profit entity being owned by a PE group...and returning any portion of profits to a PE group.

This would be difficult. But I think possible.

It would require a pre-deal reorg along these lines:

The investment structure would be similar to deals involving pro sports teams in the past. Florida State would create a holding company for its media rights; a private equity firm would invest into that entity and receive money in return from future sponsorship and television rights payouts.

In such a scenario, it's unclear what specific FSU entity would help coordinate the first-ever foray into private equity by a college athletics program. Beyond the public university, the athletic department is set up as a separate nonprofit. A booster organization also has intimate involvement with the school. It could be a complicated setup to both protect nonprofit status and many university assets as possible.

It’s unclear exactly which FSU entity is most involved in the process. Florida law allows its public universities to organize their athletic departments as separate nonprofits, and there is a complex web of entities that includes the school itself, its booster organization and these nonprofit athletic setups. Many public schools also have strict rules around transparent, competitive bidding for university contracts, and certain deal structures would need to be avoided so as not to jeopardize a university’s tax-exempt status.

As a deal lawyer, I find this stuff really Interesting and creative. Although boy does it plainly show how far we've traveled from quaint old concepts like "amateurism" and "student athletes."

Also shows me that FSU knows it is stuck. The money from such a deal would be used to supplement revenue while FSU continues to be stuck in the lame ACC. Or this would be the way to fund raise the huge buy out check.

[Farfromgeneva]

The private equity one, though, sounds like some trustee heard "from a friend, who's a lawyer, that said we can look for outside investors like a company does!" I'm not a tax expert, but I have to think that state and federal tax authorities would have an issue with a non-profit entity being owned by a PE group...and returning any portion of profits to a PE group.

This would be difficult. But I think possible.

It would require a pre-deal reorg along these lines:

The investment structure would be similar to deals involving pro sports teams in the past. Florida State would create a holding company for its media rights; a private equity firm would invest into that entity and receive money in return from future sponsorship and television rights payouts.

In such a scenario, it's unclear what specific FSU entity would help coordinate the first-ever foray into private equity by a college athletics program. Beyond the public university, the athletic department is set up as a separate nonprofit. A booster organization also has intimate involvement with the school. It could be a complicated setup to both protect nonprofit status and many university assets as possible.

It’s unclear exactly which FSU entity is most involved in the process. Florida law allows its public universities to organize their athletic departments as separate nonprofits, and there is a complex web of entities that includes the school itself, its booster organization and these nonprofit athletic setups. Many public schools also have strict rules around transparent, competitive bidding for university contracts, and certain deal structures would need to be avoided so as not to jeopardize a university’s tax-exempt status.

As a deal lawyer, I find this stuff really Interesting and creative. Although boy does it plainly show how far we've traveled from quaint old concepts like "amateurism" and "student athletes."

Also shows me that FSU knows it is stuck. The money from such a deal would be used to supplement revenue while FSU continues to be stuck in the lame ACC. Or this would be the way to fund raise the huge buy out check.

Not that unique just throw the IP into a separate entity. Royalty deal but PE navigates the for/non profit universe around the healthcare (hospital) and healthcare housing worlds quite easily. Wash revenues through a master trust structure that money can be fed out via for profit channels etc. credit risk transfer/securitization type structure on buyout dollars. Liquidation preference hybrid debt. Insurers have more recently backed other financial companies where they get a floor yield and split of rev above a certain level. And on and on. It’s just whatever’s cleanest and legally best protective of the investor. The tax issue shouldn’t be affected.

There’s also a functionally for profit 501c3 I’ve met that develops student housing in formal partnership with universities. There’s a million ways to skin the cat but the cat will be on life 9 with a probable winter coming and no fur at some point in such a deal. Begging for a state of FL vs major Alt Mgr faceoff down the road.

https://studenthousingbusiness.com/comp ... jects/amp/

There’s another called National campus communities or similar.

Thing is, say they want to buy 60% economic interest. No way they could buy operational control I figure. And say you can PV back a total of $2Bn in Rev over 25yrs to be worth a total of $500mm. Assume you’re talking a low-mid (or higher) IRR required so discounting further out probability weighted rev is of limited value. So you pay $300mm today. They pay out and spend half that or more day one to buy out the GOR exit fee plus transactional costs and now for the next 25yrs you’re getting 40% of the take. Avg of $80mm means you now are getting $32mm/yr and have $150mm left over to run opex and pay off all related debts (transfer pricing on Capital investment, FF&E or PP&E, would be an accounting nightmare) for two generations basically.

Or sell less and keep more recurring rev but then you have this fixed overhead to cover. Maybe the deal includes some R&M type payments as well but unlikely it covers the majority of needs. It’s a bad trade. Best case is you can do something tax exempt and get it for a 10% type IRR and capture more while selling less but I don’t see that being the path. That’s probably only worth doing for, at best, 5-6 programs (UT, 1-2 out of UGA/UF/UA, ND, Mich, USC & OSU) if any ultimately.

[Wheels]

The private equity one, though, sounds like some trustee heard "from a friend, who's a lawyer, that said we can look for outside investors like a company does!" I'm not a tax expert, but I have to think that state and federal tax authorities would have an issue with a non-profit entity being owned by a PE group...and returning any portion of profits to a PE group.

This would be difficult. But I think possible.

It would require a pre-deal reorg along these lines:

The investment structure would be similar to deals involving pro sports teams in the past. Florida State would create a holding company for its media rights; a private equity firm would invest into that entity and receive money in return from future sponsorship and television rights payouts.

In such a scenario, it's unclear what specific FSU entity would help coordinate the first-ever foray into private equity by a college athletics program. Beyond the public university, the athletic department is set up as a separate nonprofit. A booster organization also has intimate involvement with the school. It could be a complicated setup to both protect nonprofit status and many university assets as possible.

It’s unclear exactly which FSU entity is most involved in the process. Florida law allows its public universities to organize their athletic departments as separate nonprofits, and there is a complex web of entities that includes the school itself, its booster organization and these nonprofit athletic setups. Many public schools also have strict rules around transparent, competitive bidding for university contracts, and certain deal structures would need to be avoided so as not to jeopardize a university’s tax-exempt status.

As a deal lawyer, I find this stuff really Interesting and creative. Although boy does it plainly show how far we've traveled from quaint old concepts like "amateurism" and "student athletes."

Also shows me that FSU knows it is stuck. The money from such a deal would be used to supplement revenue while FSU continues to be stuck in the lame ACC. Or this would be the way to fund raise the huge buy out check.

Interesting.

Do you think this would pass federal tax regulations?

How do you think other college presidents (i.e., the NCAA) would feel about this?

[Farfromgeneva]

The private equity one, though, sounds like some trustee heard "from a friend, who's a lawyer, that said we can look for outside investors like a company does!" I'm not a tax expert, but I have to think that state and federal tax authorities would have an issue with a non-profit entity being owned by a PE group...and returning any portion of profits to a PE group.

This would be difficult. But I think possible.

It would require a pre-deal reorg along these lines:

The investment structure would be similar to deals involving pro sports teams in the past. Florida State would create a holding company for its media rights; a private equity firm would invest into that entity and receive money in return from future sponsorship and television rights payouts.

In such a scenario, it's unclear what specific FSU entity would help coordinate the first-ever foray into private equity by a college athletics program. Beyond the public university, the athletic department is set up as a separate nonprofit. A booster organization also has intimate involvement with the school. It could be a complicated setup to both protect nonprofit status and many university assets as possible.

It’s unclear exactly which FSU entity is most involved in the process. Florida law allows its public universities to organize their athletic departments as separate nonprofits, and there is a complex web of entities that includes the school itself, its booster organization and these nonprofit athletic setups. Many public schools also have strict rules around transparent, competitive bidding for university contracts, and certain deal structures would need to be avoided so as not to jeopardize a university’s tax-exempt status.

As a deal lawyer, I find this stuff really Interesting and creative. Although boy does it plainly show how far we've traveled from quaint old concepts like "amateurism" and "student athletes."

Also shows me that FSU knows it is stuck. The money from such a deal would be used to supplement revenue while FSU continues to be stuck in the lame ACC. Or this would be the way to fund raise the huge buy out check.

Interesting.

Do you think this would pass federal tax regulations?

How do you think other college presidents (i.e., the NCAA) would feel about this?

Non profits own taxable entities all the time. Quite common. The tax aspect isn’t the issue. It’s the value and economic tradeoff. They’d be selling their institution out for a quick buck. And FSU isn’t worth more than the 30th MLB franchise so thats what you get.

[DocBarrister]

Interesting and seemingly informed take.

Basically:

(1) ESPN ultimately controls the broadcasting rights granted through the ACC GOR.

(2) That means FSU may not lose their broadcast money as long as FSU heads to an ESPN conference (like the SEC).

(3) There are “compositional” terms that allow ESPN to break the deal with the ACC (and, essentially, break up the ACC) if teams leave the ACC.

(4) FSU would be better off giving notice to the ACC by August 15, 2023 versus August 15, 2024.

(5) There are indications FSU is trying to dissolve the ACC by putting together a coalition of 8 teams. Dissolving the ACC would (a) allow FSU and other ACC schools to leave without paying the exit fee and (b) leave without paying the GOR if they go to an ESPN conference (or at least give the leaving ACC school a chance to renegotiate the broadcast rights with ESPN).

Complicated, but more and more, neither the exit fee nor the GOR looks “bulletproof.” If the ACC wants to survive, it needs to come up with positive reasons for teams to stay, and not rely on the exit fee or GOR.



DocBarrister

[ggait]

Doc, Doc, Doc, Doc -- Stop with the fantasy conspiracy theories. Sheesh.

Please show us the language/theory as to how the rights grants disappear if the ACC conference dissolves. I see nothing to that effect. Also, the GOR says this:

Each of the Member Institutions covenants and agrees that (x) it will not enter into any agreement that is inconsistent with the provisions of this Agreement, and (y) it will not take any action, or permit any action to be taken by others subject to its control, including licensees, or fail to take any action, that would affect the validity and enforcement of the Rights granted to the Conference under this Agreement.

So I think ESPN has a clear breach if a majority of the ACC schools collude to dissolve the conference. Which collusion would be done SOLELY for the purpose of breaching the GOR and the ESPN agreement. TLDR -- the ACC schools have zero ability on their own to do what you suggest. ZERO.

Sure, if ESPN wants to rip up its sweetheart agreement 13 years early (and if they are actually allowed to do that -- unproven, questionable), then all bets are off. But going that route would require an unworkable multi-party negotiation among ESPN, B10, SEC, the leaver schools and the left behind schools. Good luck with that one, buddy.

The idea that FSU would be able to keep and use its rights so long as it lands in another ESPN conference? Boy that's contractual crazy talk.

As we've been through 20 times before, the ACC leavers would never do any of this stuff unless they had first secured their landing spots in their new conferences. The B10 and SEC will not go anywhere near FSU or any of the other leavers so long as they are toxic with lingering legal issues. You don't burn down your current house until after you've bought a new house to live in. Duh.

Also, exactly why would ESPN want to tear up its current agreement with the SEC and start a big legal shirt show? Just so they can get access to FSU and Clemson games (which rights they already own on the cheap fyi)? Just so they can pay more for stuff they already own when those teams go to the SEC???? If you haven't noticed, Disney and ESPN are sucking wind these days -- plummeting revenues, plummeting stock price, layoffs, etc. Same goes for all the other media companies, including Comcast. So now would be the absolutely worst time ever for someone to try to get ESPN (whether still owned by Disney or others) to engage in this convoluted scheme that would result in them increase their costs related to something they already own.

Also, you only have 7 "potential" leavers. That is not enough to dissolve the conference. Who is number 8? And I'd bet that many of the current Mag 7 would back down from launching the nuke on this. Maybe the FSU folks want to go scorched earth -- vaya con dios amigo. But few/none of the very smart lawyers who are presidents, GCs or trustees of the other ACC schools are going to authorize starting a land war in Asia. Exploring potential exit scenarios is not even close to being an actual leaver.

NFW that Jim Ryan (former law professor) at UVA is going to torch his reputation and the reputation of his school (new tag line -- "a great and good university") by signing onto a scheme that would brand them as sleazy contract violators. The concept is absolutely preposterous. Besides, most of the ACC schools (UVA, UNC, Duke, BC, Syracuse etc.) generally suck at football. Always have and always will. They'd all be even worse off competitively in the B10. So long as they can continue to fund their hoops programs (cheap as compared to what football costs)f, there's really no incentive for them to go nuclear just so that they can get steamrolled by Michigan, OSU, PSU, etc.

Let's see if FSU actually gives its exit notice on 8/15/2023. I guess there's a tiny possibility of that. But who else would walk that plank with them?

One good thing though. You appear to have been convinced that all of your prior conspiracy theories (no choice of law!; sovereign immunity defense!; CRCA being over-ruled by SCOTUS!, etc.) were bull shirt.

But I do agree that the ACC GOR is not completely ironclad. If Putin launches the nukes and the world goes up in flames, then yeah -- the GOR won't be enforced.