ACC, FSU, Clemson Agree to Settle Legal Battle

The longstanding legal disputes between the Atlantic Coast Conference (ACC) and its prominent member schools, Clemson University and Florida State University, are nearing a possible settlement. This resolution could foster a period of stability within the league for the coming years. According to an individual closely connected with the situation, a proposed agreement involves altering the revenue distribution model within the league. This person, who spoke under anonymity since no formal announcement has been made by the league or the universities, mentioned that the settlement requires approval from all parties involved.

Meetings of trustees at both Clemson and Florida State are scheduled for Tuesday, with the FSU agenda listing lawsuits against the ACC and Clemson outlining resolutions of “athletic litigations.” The ACC’s Board of Directors, which comprises university presidents and chancellors, is also slated to convene to finalize this agreement during a previously arranged meeting on the same day.

Should the agreement be endorsed, it will introduce a new model that incorporates television viewership ratings into revenue distribution among the member schools. This change stands to benefit institutions that generate high TV interest, with potential increases of more than $15 million in payouts. Conversely, it could result in reduced payments of around $7 million for schools drawing less viewership.

Another critical aspect of the settlement is the clarification of terms for potential exiting teams before the expiration of the ACC’s media rights agreement, running until 2036. These conditions are significant in light of FSU’s lawsuit in late 2023, as well as a subsequent lawsuit from Clemson, both seeking clarity on this matter. The ACC had filed counter lawsuits against the schools in response.

The approval of this agreement would tackle these legal threats, providing relief to the league and its Commissioner, Jim Phillips, who has been proactive in seeking ways to augment the financial strength of member schools. Phillips has been particularly focused on closing the financial disparity with the Big Ten and Southeastern conferences through league expansion and innovative revenue strategies.

Based on the latest tax records, the ACC had an average distribution of $44.8 million to its 14 football-playing members for the 2022-23 season, achieving a record total revenue of $706.6 million. During the same period, TV revenues surged to $481.7 million, up from $288.6 million during the 2018-19 fiscal year.

The ACC currently occupies the third spot in financial rankings compared to the Big Ten and SEC, yet surpassing the Big 12. The proposed settlement comes shortly after ESPN exercised an option to extend its base rights agreement with the ACC, paralleling a previous contract covering the ACC Network until 2036.

The discussion over revenue distribution is taking place during the initial year of a new “success initiative,” championed by Phillips. This initiative provides schools the opportunity to retain additional earnings generated by their own successes in postseason tournaments, potentially adding up to about $25 million yearly, particularly tied to performances in the College Football Playoff.

Under the proposed model, revenue allocation would consist of 60% tied to a rotating formula based on TV ratings, while the remaining 40% would be shared equally among the member schools. This model aligns with the wider goal of rewarding programs that capture audience attention due to their sporting achievements.

Following recent realignment, the ACC has expanded its membership to include 18 schools, with 17 participating in football, after the addition of California, Stanford, and SMU. This expansion resulted in generating an extra $600 million in revenue under the ACC’s agreement with ESPN. Both Cal and Stanford have agreed to accept reduced payouts in the early seasons, gradually increasing their share over time, while SMU has opted out of TV revenue for nine years.