Grant of Rights

Part 5

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I’m not a media lawyer, but I’ve talked to a few and what I can tell you about a Grant of Rights (GoR) is they are not unique to Sports Conferences.   They are tried and true contracts that are used for nearly every endeavor where someone provides some value to something you created.  For instance, you could write a song and grant the rights to a recording label to market it for you.   Or, you could be an author and grant the rights to your work to a publishing house to provide it a larger distribution or even grant the rights to make a movie adaptation of your story.   Or, you could have produced a TV show and granted the rights to a network to broadcast it.

All contracts can be adapted if both parties sign off on it, but the strength of the Grant of Rights, as opposed to the buyout, is that the GoR has an end date.  You will always get your rights back at some future date, as opposed to a buyout which runs indefinitely.  Think of it as a contract a baseball player has with a team.   They are paid to perform under the contract and at the end of the contract they can become a free agent.   However, they cannot walk away from the team and play for another team mid contract and expect to get paid.   The only way that works is if the team they are on sells their rights to another baseball team.

This is the basic use of a Grant of Rights.   For sports conferences and leagues from the Power Five to the NFL to the MLS, who I spoke too, bundle all the video broadcast rights to their teams home sporting events and granted them to the conference/league to market and sell to broadcasters.  Having them secured under a GoR reduces the risk for the media company because they know exactly what inventory they will have for years to come.  Less risk means more revenue to those providing the inventory, much like how you’ll receive a lower interest rate on a loan if you are less risk to the bank.

It may feel this way, because the first time most sports fans heard of them was to end realignment, but it is not new.   All conferences have used GoRs within their media deals that rolled yearly so that a school could not sell a game twice or pull it back mid-season if they didn’t like the scheduling.  What has changed within college sports, however, is the duration of the grant of rights and that happened in 2007 with the advent of the Big Ten Network.

In order to secure the resources needed to build a conference network, the Big Ten needed to bind all of the media rights for the schools together for a long time, which provided the network the inventory it needed to secure a partnership and to build a venture around that asset.   This is no different than a label locking up an artist to a multiple album deal.

This grant of rights the Big Ten put in place was apparently for twenty five years, however I have also been told it is a rolling ten year contract.   The Pac 12 put one in place with the advent of the Pac 12 Network as well, though I have not heard the duration.  The Big 12 and ACC put one together, tied to their media contract, to solidify their strength of commitment to each other within the conference.

To date only the SEC has stated it has neither a buyout nor a Grant of Rights.   However, that was prior to the formation of the SEC Network.   It is unknown at this time if ESPN required one to alter their contract with the SEC when they bundled all of the SEC’s inventory on all of its channels, including the SEC Network, for the new value of $6 billion over 25 years.

With all that being said, how they work is actually quite simple.  The teams have video broadcast inventory, e.g. home games in various sports.  They grant the rights to these home games to the conference to bundle and sell to a media channel.  No one can force you to sign away your rights, you have to do it yourself, which is another reason why they are difficult to break.  Once they are signed, you no longer control those rights until the term of the agreement ends.

What happens then is that any revenue generated from the inventory goes to the conference, who pays out their members based on their bylaws.  They do not go directly to the school nor does the school control them during the duration.   This acts like a poison pill.  If a team without a Grant of Rights leaves a conference, their rights and the revenue derived from those rights flow with them.   However, while a team under a grant of rights could move conferences, the revenue generated from their rights would still flow back to the conference that holds the GoR.  As an example, if the SEC expanded with North Carolina, the SEC would have to pay the ACC for any revenue North Carolina’s inventory generated.  This makes it difficult for both North Carolina and the SEC, because North Carolina doesn’t have much to offer the SEC any longer.

Additionally, North Carolina may lose their revenue stream completely.  The Big 12’s bylaws are public and they clearly state in section 3.1 that:

big 12 withdrawal

The Grant of Rights Agreement which will remain in full force and effect as to such Withdrawing Member and the Withdrawing Member shall continue to be fully bound under the Grant of Rights Agreement after Withdraw for the remainder of the term of any Grant of Rights Agreement as if it remained a Member of the Conference, but the Withdrawing Member shall not be entitled to payment of any amounts or any other benefits arising under the Grant of Rights Agreement after Withdraw.

In short, if you are no longer a member you are not paid as a member would be paid, even if your rights are owned by the conference.

When the Big Ten raiding the ACC rumors were spreading the ACC was looking for ways to state publically that no one was interested in moving to the Big Ten.  The Big 12 was apparently instrumental and assisting the ACC with crafting their Grant of Rights and stopping realignment cold.  It wouldn’t be a stretch to imagine the ACC’s language is similar to the Big 12’s due to this.   Additionally, most GoRs in many industries have similar language to protect the owner of the rights, in this case it is the conference, not the university.

So to push our North Carolina example one step forward, if the ACC held UNC’s rights through 2027 and UNC joined the SEC in 2015, the ACC could technically gain 12 years of revenue off of UNC without having to pass any of it back to UNC, since they are no longer a member of the ACC.

This is why University of Oklahoma President Boren called Grant of Rights “handcuffs”, because you don’t sign them unless you plan on staying where you want to be.  I’ve seen several reporters try and claim that Texas wouldn’t have signed something they couldn’t break.   But from what I have been told Texas signed it because they are where they wanted to be.   They wanted to facilitate stability as a means to stop everyone else, namely Missouri and Oklahoma, from looking around as well.  Now signing it is a requirement to joining the conference.

However, Grant of Rights are still contracts, which means they can be amended if both parties mutually agree to do so.  There are limitless ways that these rights could be bought and sold over the years if realignment needed to occur, but what GoR’s do is take the power away from the schools and hand it to the conferences, who now have all the leverage.

Much like our earlier example about baseball players, the ACC could allow UNC to move, however they may sell the rights to the SEC for some sum, which would be on top of whatever buyout UNC had to pay via the bylaws.  The ACC could also be creative and do something like cash over time and guaranteed events against each of the SEC schools a year.   Much like a trade in the MLB, all that matters is that it is mutually agreed upon to make the change.   GoR’s are unbreakable, as they have been upheld in court numerous times in multiple industries, but they are not unmalleable.  They are often bought and sold within the process of doing business.  This is an extremely important distinction.

For this discussion quantifying this should be easy; do you have one or not.   What is difficult to determine is if any sort of business deal could be brokered to allow a team to move.   For now I’ll just give a penalty to a team’s score if they have a grant of rights active for more than the next five years.

 

If you have any questions or would like some numbers discussed, contact The Number Monkey on Twitter @TheNumberMonkey or via email [email protected]

©2015 Number Monkey Media

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