Sources: ACC exploring new revenue structure to resolve Florida State, Clemson lawsuits

The ACC is exploring a new revenue structure intended to bring an end to the litigation with its two restless members.

The conference’s presidents recently examined a proposal that would distribute revenue differently to league members in a move to provide stability and preserve the membership of Florida State and Clemson. Nothing is imminent and particulars of the deal remain mostly private, but the structure’s ultimate goal is to resolve a dispute with the Tigers and Seminoles, both suing the conference in an attempt to exit the league.

Those with knowledge of the discussions spoke to Yahoo Sports under condition of anonymity.

Discussions among league presidents are ongoing and expected to continue.

Details around the new revenue structure remain murky, but leaders have reviewed a plan to create a separate pot of revenue to be divided based on media value metrics. This separate distribution would be specifically tied to a school’s television viewership ratings for football and potentially basketball.

Any new distribution would be available to all schools.

Along with the new revenue structure, leaders are examining amending the length of the league’s grant of rights, the binding agreement at the center of lawsuits from the Seminoles and Tigers. The ACC grant of rights, binding the schools together through 2036, would presumably be shortened.

It is unclear if enough support exists to approve these drastic moves. The belief is that, at the very least, a two-thirds majority is necessary.

ACC presidents met at their annual in-person gathering last week in Charlotte where the possible settlement was discussed. They gathered on a call Tuesday — also regularly scheduled — to further discuss the issue.

For several months now, the league has been mired in legal challenges with two of its most prominent members. FSU and Clemson, unhappy with the conference’s financials, are seeking an exit from the grant of rights as well as the league’s ESPN television contract.

The schools’ potential willingness to remain in the conference is, for some, a shocking revelation and an about-face from their previous actions. The unequal revenue structure is not a wholly new idea. Last year, FSU officials and board members suggested that the conference distribution formula for its television money — now evenly distributed — be instead tied to viewership and other media value data.

The proposal is seen as a temporary solution to keep them in the conference ahead of any court decision over the validity of the grant of rights.

A potential loss in court that immediately opens the grant of rights could have a catastrophic impact not only on the ACC but other conferences, setting a precedent for all schools to break what were at first thought to be binding agreements.

The proposal comes after the conference approved earlier this year what it describes as a “success initiative,” a system that distributes more revenue to teams that excel in football and basketball. The initiative would reward high-performing football programs as much as $25 million if all success benchmarks are met, such as qualifying for a bowl game, finishing inside the top 25 and advancing through the College Football Playoff.

The initiative — as well as this new revenue structure — is an attempt for commissioner Jim Phillips and league administrators to reward winning in a way that helps close the financial gap between the ACC and the two richest conferences: the SEC and Big Ten. The gaps in television distribution — a primary reason for FSU and Clemson’s attempted exits — could soar to more than $30 million per school within the next two years.

Television contracts provide schools their main source of revenue, at some places responsible for one-third of an athletic department’s budget. It is the driving force for the most recent wave of conference realignment, as schools eschew historic rivalries and geographic footprints to shift to leagues with TV deals that pay out more money.

While more money doesn’t always lead to more success, there is a correlation between success and resources, administrators say. It’s a reason FSU and Clemson officials are pursuing exit plans — something that Phillips described over the summer as “disruptive and harmful” to the conference.

The league has been “working towards” keeping the two schools in the league, he told Yahoo Sports in July, and they have been engrossed in court-ordered mediation now for weeks. Those at Clemson and FSU have felt that, if they are legally unhinged from the ACC’s grant of rights, there will be takers.

It is unlikely that any SEC or Big Ten school will agree to accept a reduction in their TV distribution to add any school. For the SEC, that is especially so given its footprint: the league already owns a foothold in South Carolina and in Florida.

In order for the Big Ten and SEC to expand, they’d likely need more money from their television partners — a lot more money (more than $100 million a year). That’s primarily Fox for the Big Ten and ESPN for the SEC.

ESPN is squarely in the middle of the situation.

Though the standard belief is that the contract extends through 2036, that’s not actually true. The deal ends in 2027. ESPN must elect by next February to opt in for another nine years. The ACC and ESPN have been in active negotiations over the extension, conversations that Phillips has described as “positive and productive.”