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SM the conferenceshuffle

The Atlantic Coast n the fall of 2001 it was George Nemhauser’s turn to serve as pres- I ident of the Atlantic Coast Conference set off a Conference. Ordinarily this would be no big deal. The position of ACC pres- ident unceremoniously rotates each wave of league swaps. year among league faculty representa- tives. They tend to brand their terms with lackluster pet projects like sports- Despite the outcry, manship or raising academic standards. But Nemhauser, a professor at Georgia ’s industrial and systems it shouldn’t have engineering department, had a gut feeling that the nine-school ACC was at a crossroads. So when ACC Com- surprised anyone missioner John Swofford asked the question — “What’s on your agenda?” — Nemhauser didn’t hesitate: “We BY DOUG CAMPBELL need to think about expansion.” And thus was set in motion the events that led to a seismic shift in memberships across the National Collegiate Athletic Association (NCAA). By the fall of 2003, the ACC’s historic and some- times tumultuous march to expansion was complete. Ultimately accepting invitations to join the ACC were three schools: University of , , and . The three From Top to Bottom: jumped from the Big East, setting off 1) 2004 Atlantic Coast Conference Logo a nationwide chain reaction of con- 2) John Swofford, ACC Commissioner ference swaps. In all, 19 schools 3) Miami vs. VA Tech, 12/4/04 switched leagues during the second 4)Duke vs. UNC, 2/5/04 half of 2003, and some analysts believe 5) Jessica Trainor (Virginia) and more shuffling is to come. Anne Morrell (North Carolina) at the In the aftermath, ACC leaders were 2004 ACC Women’s Soccer Game giddy. “We have landed at a superb PHOTOGRAPHY: TOP TWO IMAGES COURTESY OF ACC/BOTTOM THREE IMAGES BY JEFF CAMARATI/GETTYIMAGES BY THREE IMAGES OF ACC/BOTTOM COURTESY TWO IMAGES TOP PHOTOGRAPHY:

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place,” Swofford said during a June 2003 actions are in keeping with microeco- The ACC hired sports-business con- press conference to announce the first nomic models of how competitive sultant Dean Bonham to conduct an phase of expansion. In short order, the industries work. analysis of expansion’s pros and cons. ACC had enhanced its revenue-gener- “You can’t hold back these market Bonham’s answer, contained in a report ating prowess in football while at the forces,” says Raymond Sauer, an econo- that was a year in the making, was a same time preserving its reputation as mist at ACC member Clemson robust recommendation for adding the premier men’s basketball confer- University and keeper of the Web-log three schools. In Bonham’s analysis, ence. Television contracts were quickly www.sportseconomist.com. short-term monetary gains were sec- renegotiated to reflect the addition of ondary to the pressing task of durability. the Boston and Miami markets, Nos. 6 Why It Happened “The bottom line came down not and 17, respectively in the nation, adding Pop quiz: The ACC is expanding from to money but survival,” Bonham says. millions of dollars to the ACC’s take. nine member schools to 12 because: “The ground underneath the collegiate This fall the ACC will hold its first- a) Miami couldn’t fathom hosting a world was moving at a pretty rapid ever football championship, worth an home football game against lightweight rate. We foresaw there was going to estimated $7 million. And it stands a Big East foe Rutgers. be a lot of alignment and . far stronger chance of placing two b) Newly struck television contracts If the ACC didn’t expand, some of schools in the coveted Bowl Champi- will bring the ACC an estimated extra their competitors or other conferences onship Series (BCS), whose title game $16 million each year. would.” is worth as much as $14 million and c) ACC leaders feared that Florida The collegiate map that Bonham lesser matchups not far behind. State would leave if Miami was gobbled and ACC managers analyzed in 2002 Meanwhile, the Big East was in up by the Southeast Conference (SEC). laid bare the need for action. Out of crisis, reeling from what Commissioner Answer: All of the above. 11 1-A conferences, the ACC Mike Tranghese had called “the most At one time, all the ACC’s schools ranked fifth in total revenue-per-school, disastrous blow to intercollegiate ath- called the Fifth District home. Estab- according to an NCAA study (see table letics in my lifetime.” In the space of lished in 1953 with eight schools, the on page 22). On an average, per-school a few months the Big East became Greensboro-based ACC lost charter- basis, the league was losing money, the Medium East, having lost three of member University of South Carolina albeit just a bit. Additionally, the ACC its highest-profile schools. Suddenly, in 1971 to the SEC but added Georgia relied heavily on men’s basketball for it was scrambling to survive with only Tech in 1978 and Florida State in 1991. revenues, which would have been fine six teams playing football. In Georgia Tech, the ACC laid claim except that football generally pays a lot The media portrayed the story in to the valuable TV market; in more. The bigger conferences, espe- multiple ways. Some said it was a case Florida State, it finally claimed a top- cially the SEC and the Big 12, gained of brilliant strategy by the ACC con- tier football team. much more from their football pro- trasted by the flat-footedness of the The 1990s and beyond have been grams. While the ACC took in an Big East. Others saw it as an example good years to the ACC. Basketball average $8.1 million per school for of greed overtaking amateur sports. powerhouses Duke University, Univer- men’s basketball and $11.8 million for Neither turned out to be a fair sity of North Carolina, and University football, the SEC generated $5.7 million characterization. Interviews with econ- of Maryland won championships, from men’s basketball and a whopping omists and NCAA observers suggest earning the league a deserved distinc- $26.9 million from football. that conference realignment was going tion as the best in hoops. And Florida Where does all that cash come to happen, whether or not the ACC State took home the No. 1 football from? TV and radio revenues from con- led the charge. Powerful market forces ranking for the 1999 season. tracts negotiated by the schools were at work, creating incentives for Nemhauser’s hunch — shared by themselves account for 7 percent of athletic leagues to grow membership. observers across the country — was that Division 1-A athletic program support. What’s more, the Big East was time was running short for conferences Another 9 percent is from NCAA and hardly asleep at the wheel. Big East to shore up membership and protect conference distributions. Most of that leaders in the late 1990s and in May their goodies. But if it were to go money — an estimated 90 percent — 2003 approached the ACC about through with enlargement, the ACC comes from broadcast agreements merging their football leagues. On both would be making a huge bet. The league negotiated by the NCAA and the ath- occasions it was the ACC that said ‘no,’ annually pays out about $9 million to letic conferences, such as the $6 billion, in the end deciding to cherry-pick some $10 million each to its member schools, 11-year pact allowing CBS to broadcast of the Big East’s marquee schools according to tax filings. Adding three the NCAA basketball tournament. But without having to take on the risks of more would mean having to come up the bulk of collegiate athletic funds operating the proposed 18-team league. with an additional $30 million in annual derive from ticket sales — 26 percent. In hindsight, it all makes perfect revenue to make sure incumbents Schools with 80,000- to 100,000-seat sense. The ACC’s and the Big East’s weren’t giving up anything. football stadiums, packed seven times

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a year, reap even larger shares moting stability, only seldom from ticket sales. Larger still Conference Shuffle reaching out to swipe each are alumni and booster contri- Since the summer of 2003, 19 schools have announced changes other’s schools. butions at 18 percent and direct in conference affiliations. The ACC’s plucking of three Big East University of econ- institutional support at 10 schools got the ball rolling. omist Allen Sanderson likens percent. collegiate athletic conferences Tipping the scales in favor To the ACC To the Big East to a cartel. When everybody of conference enlargement was (all from Big East) (all from C-USA) obeys the unwritten rules, a relatively new post-season Miami everybody profits. “But there’s feature of the NCAA — the Virginia Tech Louisville always the incentive to cheat, . Boston College Marquette whether it’s OPEC or the The BCS was set up in 1998 DePaul NCAA,” Sanderson says. for the purpose of declaring a To the Atlantic 10 South Florida The ACC wasn’t cheating, bona fide national champi- (both from C-USA) but it was moved to take action onship in football. At the same UNC-Charlotte To Conference USA after observing several eyebrow- time, it preserved the tradi- Saint Louis Rice (from WAC) raising developments. One risk tional, and itself highly Southern Methodist (from WAC) that several ACC managers profitable, bowl game system. To the WAC Tulsa (from WAC) cited was that Miami — Six Division 1-A conferences (all from Sun Belt) Marshall (from MAC) crowned football National are guaranteed bids to the four New Mexico State Central Florida (from MAC) Champion in 2001 — would BCS games — the Orange, Utah State Texas-El Paso (from WAC) join the SEC if not courted by Rose, Sugar, and Fiesta bowls Idaho the ACC. In their worst night- — with the top two ranked SOURCE: NCAA; Conferences mares, ACC officers saw Florida teams in the country squaring State deciding to follow, thus off for the so-called national depleting the conference of its title. (A fifth BCS bowl game may be BCS — were mostly making money. foremost football draw. At the same added soon.) The ACC is one of those Thus, the key to making money in time, the opportunity to widen its TV with guaranteed bids. The payoff for a college athletics is strongly tied to con- audience from New England down to national title entry is up to $14 million. ference membership. With the the southern tip of Florida was too Even the lesser bowls are worth as much introduction of the BCS, schools had good to pass up. They wouldn’t even as $11 million. a new incentive to consider changing have to change the conference’s The conferences that get automatic allegiances. “A tlantic” name. berths are known as BCS members, Dan Fulks, an accounting profes- “It was our belief that a number of and membership has its privileges. sor at Transylvania University in changes would be coming anyway,” Non-BCS conferences get a cut of the Kentucky and an NCAA consultant, ACC Commissioner Swofford says. “If bowl game spoils, but it amounts to recalls a conversation with a BCS com- we were proactive, then we were in a between $300,000 and $800,000, or missioner about the widening gap much better position to effect change as little as $74,000 per school. By com- between “have” and “have-not” con- that would impact us positively rather parison, BCS conference schools take ferences. The commissioner replied, than having to react.” in about $2 million each in bowl game “Look, don’t blame me. My job as com- Acquiring schools from the Big East payouts. That means in any given year, missioner is to make as much money wasn’t the ACC’s only option, however. Wa ke Forest University can expect a as I can for the schools in my confer- After the BCS system was announced, big BCS payout even though it his- ence, and that’s what I’m going to do.” Big East leaders laid out their strate- torically hasn’t sent a single team to a gic options. They realized that being BCS game. Conference Rivalries Heat Up No. 6 in revenue in an 11-conference For the ACC, it was financially To be sure, conference realignments system was a precarious position. imperative to keep a seat at the table are nothing new (see sidebar). The In 1997 and 1999, the Big East at the lucrative BCS. On average in reason they happen relatively infre- approached the ACC about joining the 2002, conference schools were losing quently has to do with the “industry” two leagues’ football programs into a money on their athletic programs. structure. Think of athletic confer- single “federated football conference,” That’s in part because athletic revenues ences as rivals in an industry where the according to parties familiar with the must be spread around to fund a typical schools are the suppliers and fans and talks. The thinking was that such a school’s less visible sports, ranging from the TV broadcasters are the buyers. coalition would upgrade the confer- soccer to . But those at The conferences are mainly differen- ences’ negotiating position with TV the top of the food chain — schools tiated by their school membership. networks. Together, the Big East and in the biggest conferences, all in the They maximize their profits by pro- the ACC would command an 18-team

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football league that could deliver the ACC’s] opportunity to choose ACC schools did Swofford. entire East Coast broadcast market. between alternatives and they clearly “The way it was structured, it But the ACC was cool to the idea chose one that made them better off.” didn’t allow the commissioner to go in the 1990s. And when Big East man- out and get things done,” Sauer says. agers pitched the idea anew in the The ACC’s Competitive Advantage “It’s not that John Swofford was any summer of 2003 in an effort to fend How come the ACC was in position more capable than Tranghese up in the off the ACC’s expansion, the answer to make such a choice? A crucial Big East. It’s just that his organization again was ‘no.’ Neither Swofford nor advantage the ACC held over the Big enabled Swofford to effectively move Big East officials would comment East was organization. The ACC has in the direction that the economic about the ACC-Big East merger talks. nine member schools that participate forces dictated the football conference Analysts interviewed for this story said in all sports and distribute conference would move.” the ACC was probably turned off by revenues equally. If there’s a downside to expansion, a merger for several reasons, including By contrast, the Big East, based in it’s the deterioration of some longtime an unwillingness to adopt separate Providence, R.I., created its basketball rivalries. Every fan wants Duke to football and basketball memberships and football programs separately. come to his school at least once a year and the logistical concerns of operat- It kept nine schools for football pur- for hoops, but that’s no guarantee ing an unwieldy 18-school league. poses only and 14 for basketball. under an expanded league. Swofford, “The Big East is a cobbled together Georgetown University, for example, who played football at North Carolina conference in the first place, and their participates in Big East basketball but before rising to the league’s commis- next move is trying to cobble the ACC doesn’t field a Division 1-A football sioner office, says he understands the into their mix,” says Sauer, the team. University, how- importance of fan sentiments in the Clemson economist. “It makes good ever, plays both. Conference revenues ACC’s culture and revenue stream. At strategic sense for them to do that but were not handed out equally, and Big the same time, “The feeling was that they’re not really taking the ACC up East members didn’t give Commis- the collective gain far outweighs the a peg with that proposal. It was [the sioner Tranghese the same leeway that things we would give up.”

Conference Came Undone

Conferences do collapse. Rewind to Big 12. The Western Athletic Conference will lose Rice, Southern Methodist, the 1996 for the final incarnation of the (WAC) swallowed three of the remaining University of Texas at El Paso, and the once-proud schools, Southern Methodist University, . (SWC). An 82-year-old league, marquee , and Texas Christian After all that, has the conference members included the University of University, while the University of shuffling reached its limit? “I believe that Texas, Texas A&M, and Baylor hopped to the newly founded conference realignment will occur when University. Adorning member trophy Conference USA. it is economically feasible to do so,” says cases were seven national football cham- The mid- and late-1990s, then, saw Patrick Rishe, an economist at Webster pionships, five Heisman Trophies, and nearly as much conference shuffling as University in St. Louis. But even Rishe two women’s basketball titles. in 2003, bolstering the NCAA’s assertion believes it will be a while before more But talk about regional: After the that conferences have long been “adding conferences fold, expand, or otherwise University of Arkansas left in 1992 for the new members, casting off those that no realign in significant fashion. , all eight mem- longer fit and changing their geographic “I think that we’ve just about bers were from Texas. That was fine when landscapes.” Witness the near-unraveling stretched our limits. Perhaps the Big 10 cross-state rivalries provided all the rev- of the WAC in 1999, when eight schools, [which, despite its name, actually has 11 enue a conference needed to thrive, but it including four charter members, withdrew members since Penn State joined in 1993] was a huge liability at the dawn of the to found the . will add another team soon to reach the 1990s when national TV contracts The WAC soon picked up Boise State magical number of ‘12’ that’s necessary became the norm. University and Louisiana Tech University, for a football championship. And per- Texas is big, but it could deliver only giving it 11 members — until former SWC haps the Pac 10 will do the same soon,” 7 percent of the nation’s TV markets. member Texas Christian switched confer- Rishe says. “When the Pac 10 does this, it Nearing its deathbed, the SWC talked ences again, leaving for Conference USA will cause a mini-domino effect as the with the then-Big Eight about a merger. at the end of the 2000-2001 season. lesser West Coast conferences scramble Instead, four SWC schools — Texas, Idaho, New Mexico State, and Utah State to try to replace teams that shift to other Texas A&M, Texas Tech, and Baylor — have agreed to join the WAC in 2005. conferences, but nothing like what we simply up and left for the soon-to-be But, at the same time, the conference recently saw.” —DOUG CAMPBELL

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Athletic Conference Cash In 2002 the ACC was the fifth-largest “It’s not a perfect world. But did Syracuse and Connecticut, he argues NCAA conference by revenues. they improve themselves? Yes. They did that the Big East is now even more 50 in terms of financially improving them- so “the strongest basketball confer- selves and in terms of having a seat at ence in the country.” As for the Big

) 40 2002 Revenue the table in the future of any big foot- East’s participation in the BCS, Mar- 2002 Profit OFIT

R 30

P ball talks, whether that’s playoffs or an inatto believes the league’s spot is

20 expanded BCS,” Rayburn says. secure for “the foreseeable future.” The Big East wasted little time

ILLIONS OF10 DOLLARS EVENUE AND M once all the ACC pieces fell into place. What’s Next? R IN ( 0 By November 2003, it had picked up The view from the ACC today is espe- five new schools to replace the three cially bright. The league placed six -10 Big 10 SEC Big 1 Pac 10 ACC Big Moun C-USA WAC MAC Sun East Belt 2 tain West departed. But in the process, the con- teams in bowl games, but only mus- ference pegged its future on basketball tered one — new addition Virginia CONFERENCE and, according to some observers, may Tech — in the BCS. ACC men’s bas- NOTE: Figures are per-school averages. SOURCE: NCAA lose its automatic bid to the eco- ketball retains its pre-expansion cache, nomically rewarding BCS. The five with national broadcasts of pairings a new schools are Cincinnati, Louisville, commonplace. Between the new tele- The Payoff DePaul, Marquette, and the Univer- vision contracts, the possibility of an After some stumbles and lawsuits, sity of South Florida. Only the first extra BCS game and a football cham- in which at first only Miami and two of those schools have Division 1- pionship, the ACC already has topped Virginia Tech were asked to join, the A football teams, and neither is a the necessary $120 million annually to ACC completed its growth spurt in perennial standout. When all the provide all its schools more money October 2003 when Boston College league switching is done, the Big East than before expansion. signed up. With B.C. on board, the will have eight “full” members that “I think the ACC is done (expand- ACC had achieved the magic number play both football and basketball and ing) for the time being, but it’s not 12, qualifying under NCAA rules to another eight that play just basketball. clear to me what the national scene hold a conference football champion- Strategically, it may have been the will look like,” says Prof. Nemhauser, ship game. Big East’s best, and only, option. “The who started it all. The collective gain was almost Big East, realizing its status in foot- Conference realignment is a game instant. TV contracts were quickly ball took a hit; they had to ask with no clock. The BCS came under renegotiated, and even incumbent themselves a question,” says Patrick fire — again — this year for failing to ACC schools are to take in an esti- Rishe, an economist at Webster Uni- produce an undisputed national cham- mated $800,000 more annually under versity in St. Louis. “Based on the pion, as undefeated Auburn was left out newly inked deals with ABC and landscape in the short-term all we can of the title game. Additionally, there was ESPN. Also, new contracts were struck do is stay floating. So why not go evidence that the Big East’s recent depar- with Charlotte-based Jefferson Pilot ahead and become the strongest bas- tures have already weakened the Sports (JP Sports), which has top ketball conference?” conference to the point where it should distribution and broadcast rights to John Marinatto, a Big East associ- no longer get an automatic BCS bid: Big ACC basketball and regional rights to ate commissioner who was closely East champion ACC football. (JP Sports also has involved in the expansion process, says went to the despite its mid- rights to SEC regional football games.) the new members accomplished the dling 8-3 record. Whether the BCS Jimmy Rayburn, vice president of conference’s goal of growing TV rev- expands or shrinks membership, whether operations with JP Sports, thinks the enues. He describes Cincinnati and broadcasters recalibrate how much loss of round-robin-style matchups Louisville as significant broadcast they’re willing to pay for airing rights — in basketball will hurt but agrees markets for football. Noting that the these will be the main factors in deter- with Swofford’s overarching view that past two basketball championships mining if the conference earthquake of the conference improved itself. have been won by member schools 2003 has run out of aftershocks. RF

R EADINGS Fulks, Daniel. Revenues and Expenses, Profits and Losses of Division Roush, Chris. “More members mean more money for ACC.” 1-A Intercollegiate Athletic Programs Aggregated by Conference — Business North Carolina, Sept. 2004, pp. 30-31. 2003 Fiscal Year. Indianapolis: NCAA Publications. Visit www.rich.frb.org/pubs/regionfocus for links to relevant sites. Rosenberg, Beth. “Domino Effect: Division 1-A conference realignment has had emotional, structural impact.” NCAA News, Dec. 8, 2003.

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