What's next for Florida State and the ACC?

Florida State may not be the only ACC school concerned about the league's revenue gap with the Big Ten and SEC, but it is the one making the most noise. Mark Konezny/USA TODAY Sports

It has been a year of bold talk for Florida State University. We'll find out soon if that talk dovetails into a historic legal challenge.

In February, FSU officials put the ACC on alert, with athletic director Michael Alford declaring "something has to change" for Florida State to remain a consistent national contender despite the ACC's money gap when compared to the SEC and Big Ten. In August, school president Richard McCullough said the school will "very seriously" consider leaving the league unless there were radical changes to the league's revenue distribution model.

Since the regular season ended, FSU has been issuing scathing statements by officials at every level directed at the College Football Playoff. That includes Alford calling the decision to exclude the undefeated Seminoles "unforgivable."

The lack of a playoff appearance appears to have FSU officials refocused on the school's next big-picture move. ESPN's Andrea Adelson reported on Tuesday that sources have indicated renewed in-depth discussions about the Seminoles' long-term ACC future.

While no board meeting has been called yet to formally discuss the bubbling issues, it would be counter to FSU's own yearlong rhetoric if one isn't called soon.

And that would set the stage for a legal standoff between FSU and the ACC, which could be one of the highest-stakes legal battles in college athletics history. There has been no known legal challenge to a grant of rights. (A grant of rights agreement gives the conference full control over a school's media rights. The ACC currently owns all FSU home game content through 2036.)

The first step would be Florida State officially deciding on a declaratory action to legally challenge the ACC grant of rights. This would trigger the exploration of formally unwinding from the ACC without actually leaving the conference.

It would do so to get a sense of what leaving could look like financially and legally. It is not as drastic as announcing an exit but would signify the university is attempting to find a path.

According to sources, Florida State officials and lawyers have gone to the ACC's office at least a half-dozen times to dissect and analyze the legal language in the league's grant of rights. They are one of many ACC programs that have done so, as copies are not permitted outside league offices.

And while the move won't come with any other schools immediately joining, others are plotting a similar sequence -- explore the legal opportunities of unwinding from the grant of rights, which would likely take months, and then eventually leave the league if that's both financially tenable and there's a safe landing spot.

The words of Florida State's leadership in 2023 and the sport's upheaval since Oklahoma and Texas began bolting the Big 12 for the SEC in summer 2021 have led to the critical upcoming crossroads. And while there won't be an immediate avalanche of programs that follow FSU, it could be the start of bad news coming for the ACC in drip-drip-drip fashion.

Whether it's in days or weeks, FSU's board of trustees is expected to begin a formal vetting and discussion of what they've found in the exploration of the grant of rights.

Here's what they will be considering, with the landscape of college sports again hanging in the balance if and when FSU's actions meet their words.

What happens next?

An actual declaration of Florida State -- or any other ACC team -- leaving the league wouldn't have to come until Aug. 15. That's the deadline for any school to withdraw to leave the league for the 2025-26 season. So the ACC as we know it will be intact for 2024-25.

In many ways, any immediate action by FSU or others to explore legally unwinding from the ACC grant of rights gives them a six-month legal runway before they'd actually have to make the decision to exit.

"Florida State isn't leaving tomorrow," said a Florida State source. "Who says they want to leave immediately? Who says they are ever going to leave?"

FSU, obviously, isn't the only program that has explored leaving. But they are expected to be first to declare they're legally challenging the grant of rights, per sources.

As FSU board chair Peter Collins told Warchant.com over the summer: The grant of rights "will not be the document that keeps us from taking action."

How long would they be alone? Clemson has been the other school most vocal about the ACC's financial shortcomings, as athletic director Graham Neff has publicly acknowledged the "magnitude" of the ACC's finances compared to other leagues.

(The ACC has the third-highest revenue distribution among major conferences, but league members are staring at eventually making $30 million less annually than the Big Ten and SEC at full contractual throttle in upcoming years.)

From there, Clemson and North Carolina are viewed as schools that could potentially follow. Neff said as recently as November that Clemson is "very active" in monitoring the realignment landscape.

"We talk with everybody, internally and externally, unapologetically, to continue to be well-positioned and well-read," Neff said in a news conference before the South Carolina game in late November.

FSU would eventually have company, as general counsels, board members, athletic officials and presidents have been chatting about this with some urgency for well over a year. But FSU appears poised to jump first.

Where would FSU go?

As of now, there are really only two potential destinations. And an invitation to the SEC or Big Ten is not certain or imminent. The only certainty -- now or down the road -- is that neither league would want a hint of legal exposure. Also, the schools in those leagues aren't going to take less money for new members to join. That means there'd have to be some type of clear discount rate for any school before the leagues get formally involved.

One issue FSU will have to overcome is the self-inflicted wounds from its own public behavior toward the ACC in recent months, especially McCullough's remarks this summer. They have made commissioners and presidents cringe, as they envision that's what FSU would be like as a league member. That's a headwind FSU will have to overcome as it eventually courts other leagues.

That said, it's naïve to think in this era of conference contraction that neither of the Power 2 leagues would want to absorb a brand like FSU in the next decade. But it remains tricky financially, as the Big Ten just jumped to 18 schools with the additions of Oregon and Washington at cut rates. (That move is instructive in that they did not receive a pro rata share from the Big Ten, which is something any potentially departing ACC schools would face.)

Any move to the SEC would receive pushback from in-state rival Florida, and it's unlikely neighboring schools like Georgia and Auburn would want to give away the financial income edge they have in the SEC to a recruiting competitor.

SEC commissioner Greg Sankey has expressed with sincerity his happiness at 16 teams, and perhaps the only way that changes in the near future for FSU is in a defensive move. Would the SEC really want a Big Ten flag planted so squarely in its backyard? But there's no sign yet that the Big Ten covets FSU in a significant way.

This could all unfold amid a distinct bear market in media for sports rights that industry sources say could make additional conference expansion unappealing to media partners. Without new TV money coming in, any new members will likely need to join at a discount rate, as Oregon and Washington did in the Big Ten.

The part that few are saying out loud about FSU is that it -- along with Clemson -- are likely not the most coveted ACC schools in the eyes of the Big Ten and SEC. Both North Carolina and Virginia represent new markets and states for both leagues. They are also contiguous states, which the SEC has always valued. It's a competitive battleground that allows one league to expand north to new markets and another to potentially go south.

While Virginia and UNC aren't in the same hemisphere as Clemson and FSU in football, they do add robust new markets and fertile recruiting grounds for two competitive leagues and commissioners who want to capture those areas.

How much would leaving cost? How would it be paid?

Eventually leaving the ACC will be a costly proposition. And FSU has already logged plenty of billable hours exploring the move.

Ultimately, there have been some breadcrumbs left that private equity money would be used to fill in any financial gaps for FSU.

The exit fee would cost FSU in the neighborhood of $120 million, but the important aspect is that amount doesn't factor in the cost of unwinding from the grant of rights. (Hence the expected exploration here soon.)

By signing the grant of rights, the ACC owns all of FSU's home game content through 2036, the length of the league's television contract with ESPN. (As it does for all schools in the league.)

Legal predictions on a ruling are difficult. Part of FSU's legal challenge will be the fact it willingly agreed to the terms of this deal eight years ago.

Even with an FSU legal victory, there'd be some type of cost to get all that content back. Or, more likely, some type of settlement to avoid a protracted legal battle. (If there's one thing we've learned over the last generation, college presidents and athletic administrators aggressively avoid depositions and court appearances.)

So where would potentially hundreds of millions in cash come from?

Florida State is well down the road in securing private equity, if needed, for any financial implications from a move. Sources told ESPN that Sixth Street Partners would be a likely partner for the Seminoles in private equity.

Former FSU quarterback Drew Weatherford, an FSU trustee, has been actively engaging other schools about private equity and its role in the future of college athletics, per sources. (He's a partner in a private equity firm.)

FSU has ruled out independence as an option. The chatter about a handful of ACC schools breaking away to start their own league has faded.

So that leaves FSU to wriggle out of a financial relationship with the ACC that it has cast as untenable. The ACC has made strides toward creating extra revenue for its programs. The additions of Stanford, Cal and SMU at discount rates provided each incumbent program in the neighborhood of an extra $2 million annually per school.

Starting in 2024-25, the ACC will begin an incentive-based structure that will reward success in football and basketball. While those moves have made an impact, they still don't appear to be an impetus for long-term harmony.

An estimate of what FSU would have earned this year from success incentives is around $6 million. Next year, with the expanded CFP, if an ACC team reached the title game, that number could be between $12 million and $20 million, depending on what CFP financials look like.

Could private equity offer FSU a way to ease the financial burden of an exit? That appears the most likely option.

Who would follow Florida State?

It's instructive to recall the three schools that voted against ACC expansion this summer were FSU, Clemson and North Carolina.

With FSU expected to formally explore options first, others in the league have spent plenty of billable hours and athletic department bandwidth doing the due diligence. But none appear as eager as FSU to go so quickly.

Reports earlier this year had pinned Clemson and Florida State in lockstep, but that doesn't appear to be how this would unfold. Clemson and North Carolina have been in close touch on this, per sources, and they'd likely observe and then follow FSU at some point. The timing of that might depend on both the legal read of what FSU's doing and a snapshot of how difficult the path looks to follow them.

UNC athletic director Bubba Cunningham was critical of FSU this summer, calling the public chatter about leaving the ACC "barking." But there's also a bottom-line reality at UNC that it needs to look out for its best long-term interests, as it knows it is the most coveted brand not named Notre Dame that's not in a Power 2 league. The Tar Heels aren't going to stick around the ACC for sentimental reasons if a clean path to an upgrade is available.

Complicating matters for UNC -- and potentially impacting timing -- is the departure of chancellor Kevin Guskiewicz for Michigan State in recent weeks.

While Neff has been Clemson-centric in his comments and generally positive about the ACC, he's been consistent in indicating that Clemson's options are open. The school has hired outside consultants and taken the obligatory trips to ACC headquarters for grant of rights exploration.

Miami certainly falls in line with the financially aggrieved in the ACC, but it doesn't appear poised for any immediate action. Virginia has done modest exploration but is not as far down the road as some of the other ACC schools. Schools like NC State and Virginia Tech have had all the discussions, but the available spots on the Power 2 dance card are clearly limited.

Any notion of an immediate demise of the ACC would be exaggerated. But it's clear the league's biggest football brands -- and biggest overall brands -- lack faith in the league having the financial fundamentals to be an incubator for championship football for the long term. And that makes the upcoming months critical for how the league will look in the future.