FSU is seeking a deal with the devil. There are several potential egregious violations.
The first being the ACC and GOR. The ACC must agree to a school leaving and FSU is not likely to garner enough support. The GOR was voluntarily entered into by FSU. FSU can leave but there TV rights belong to the ACC.
The second being the obvious elephant in the room: FSU is a State school, must keep all decision public, and must not violate the non-profit status of the school. A private equity deal will require that the investors receive a return on investment (ROI). In a venture, this is usually credit card or more expectations. Since the investors cannot get blood form a stone (non-profits cannot release "profits", they must be re-invested), the investors would seek a long term loan with an exorbitant interest rate.
The third being that rich donors can meet the demand via donations, which is much safer, cleaner, and open to scrutiny (this is a state institution!). Could it be that the donors don't think FSU needs the extra cash? Or worse, that the extra cash is not a good investment? Either position by the doors undercuts the equity financing argument, if donors don't see the benefit, how will equity partners? Remember, donors are seeking to benefit the school, equity partners are there to make money.
The fourth being that ESPN must agree to any move (lateral to SEC or separation to the B1G or Big12). There is no business model where ESPN kills off a larger profit center to minimally enhance another profit center. From ESPN's perspective, it would be better to merge the conferences, pay them roughly equally, or work with everyone to ensure a soft landing and keep the key components. We have not had any inkling to this kind of activity; this leads me to believe that the ACCN remains too valuable to the ESPN to make the sacrifices moving FSU out would cause.
- ESPN CANNOT legally work a deal behind the ACC's collective back. ESPN would need to work any deals in the open, ESPN cannot facilitate the move of FSU to the SEC unless all parties agree to the facilitation AND approve the interference. Disney/ESPN know not to get into an antitrust matter.
The fifth being that FSU has no arranged landing spot. The B1G and the SEC are the two that can pay anything. The Big12 cannot pay FSU's demands, in short, a move to the Big12 would undercut every FSU argument and cost more to leave than FSU would recoup in new revenues.
Unless FSU comes clean on how the deal works, and everything is above board, the FSU leadership seems to lack knowledge and ethics.
FSU's shortfall of $30MM annually is not a substantive argument, worthy of voiding a contract. A court is not likely to agree that the potential to earn money when a breach cannot be reasonably made or when the fundamental liquidated damages are established for anything less than that established.
Since FSU is going nowhere this school year, there remains 12 years in play. Assuming FSU's claim of $30/MM is acceptable to a court, assume also an exit fee of $126MM (3X annual revenue, likely to be higher as time goes forward), and the absolute minimum TV rights buy back is 12 years of minimum revenue, or $42MM annually, FSU's rights buy back is $504MM. The total minimum for FSU to leave after the 2023-2024 school year would be $630MM. This is the low end of the estimate. The exit fee is the cost for any school to leave prior to the completion of the contract period, which runs until 2036. The rights buy back is the cost for FSU to control their own rights, no conference will accept FSU while the ACC and ESPN hold the rights.
The calculations are not in line with the costs to OU and UT (2.1X the annual TV deal), thus, it is likely the cost to leave is much higher. At the factor of 2.1 (from OU/UT), the rights buy back value is $1.058BB, with a total cost to leave of $1.184BB. Just a reminder that FSU's endowment is less than $1BB, of which most or all of it CANNOT be used for the AD.
When one considers the low side argument, FSU is not close to losing $30MM, it is in the $18MM/year range at best. If the high side is used, FSU loses money, as much as $24MM annually, to leave early, this is certainly part of their consideration. Further, the $300MM floated balloon is nothing to be considered by the ACC.
Anyway, FSU can believe what they want but they have a lot of hurdles to cross before their fantasy comes true. The numbers show that FSU is more likely blustering for attention and squeezing other schools knowing they cannot sustain a legal challenge, which can be dragged out as long as the GOR, or close enough to permanently harm FSU. They must also show a good faith offer to support their claim that they can make that much money, without a B1G or SEC offer in hand, they have no claim to take the ACC and ESPN into court. Then FSU would have a chance to make their arguments to the court which have never worked. See all entertainment attempts to break a rights ownership deal.
