Last September, ESPN took the somewhat unusual step of hosting its College GameDay preview show not on the campus of the day's biggest game but in New York's Times Square, hours from any major Div. I game that day and not exactly the heart of what would normally be considered college football country.
It was not a coincidence that Disney. which owns ESPN, was engaged in a pivotal programming negotiation with Altice, the cable provider that serves 2.4 million customers in the New York metropolitan area. Among Disney's demands, which included price hikes for several channels: Carry ESPN's new ACC Network, which will launch next summer.
That the ACC Network was among Disney's top priorities underlined how important that new network is to ESPN. To see how important the network continues to be to the ACC, look no further than the league's fiscal year 2017 tax return, which was released last month.
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The ACC continues to be fifth among the Power 5 conferences in per-school revenue, which makes the potential success of the network somewhat of an all-or-nothing proposition for the conference.
The money each school gets from television contracts is the primary source of funding for coaches' contracts, practice facilities, lazy rivers, barbershops, arena renovations, stadium upgrades and every other weapon in the college-athletics arms race. There are other factors involved in what makes a school or a team competitive in any given sport, but conference payouts are the foundation – what makes the Power 5 the Power 5.
It's going to be almost impossible for the ACC to close the gap on the SEC and Big Ten, both of which had a considerable head start on their own (profitable) networks, but the ACC is counting on network revenue – which even in its least optimistic projections should be at least $10 million per school per year, once the network is up and running – to move it past the Pac-12 and even with the Big 12.
The ACC believes that despite the widespread demographic and cultural changes that have seen viewers drop multichannel cable and satellite packages. ESPN alone has lost an estimated 16 million subscribers since 2011, when it had more than 100 million – a massive financial impact since ESPN charges providers $8 per month for the channel.
“That landscape continues to change and, as I've said before, I think we're with the best partner you could possibly have,” ACC commissioner John Swofford said last month. “With whatever all of that looks like, five years from now, 10 years from now, the numbers continue to be encouraging from our standpoint.”
Wake Forest president Nathan Hatch, the current chair of the ACC's Council of Presidents, declined an interview request.
The ACC distributed an average of $26.6 million per school in 2017, with total revenue up 12 percent and Notre Dame receiving a fraction of that. The Pac-12 was at $31.5 million in its most recent financial statements, the Big 12 at an estimated $40 million (its official figure of $36.5 million doesn't include some tertiary media rights, including Texas' Longhorn Network) and the SEC at $40.9 million, while the Big Ten is expected to exceed $50 million.
Even beyond the Big 12, not all of those figures can be compared apples-to-apples – the ACC doesn't include the expenses it reimburses for conference championships, about $1 million per school, while other conferences do – but the broad strokes are accurate.
So it's easy to see why the network is so important to the ACC, but what about ESPN, which has issues of its own?
The money ESPN makes on the network, a profit-sharing venture with the league, can be used to pay the rights fees ESPN already owes the ACC – $236 million in 2017. The better the network does, the more ESPN's deal with the ACC essentially pays for itself.
Disney is in the midst of a two-year cycle in which it will renegotiate almost all of its carriage contracts with cable and satellite providers as well as the new wave of online content providers. In all of those negotiations, the ACC Network has been a priority, both inside and outside the conference's geographical footprint.
In any particularly tricky negotiations, ESPN still holds a few trump cards. Back when it was trying to get carriage for ESPN2 in the mid-'90s, ESPN moved one of the Duke-North Carolina basketball games to ESPN2. That took care of that. It could do the same now – although the Clemson-Florida State football game probably carries more weight in today's football-driven sports universe, a shift the GameDay gambit illustrates.
Last October, two weeks after GameDay was in Times Square, Altice and Disney announced a deal that included, among other considerations, full carriage of the ACC Network: A win for ESPN, and a bigger win for the ACC as it bets all its chips on the network to close the financial gap laid bare in its latest tax return.
Sports columnist Luke DeCock: 919-829-8947, email@example.com, @LukeDeCock