The Big 12 Loses its Biggest Names

On July 26, 2021, The University of Texas and The University of Oklahoma formally notified the Big 12 conference of their intention to leave. Their destination- the South Eastern Conference (SEC) by the year 2025. The move confirmed rumors and reports that had been circulating in the days prior.

The move sent shock waves through the college football world with the Big 12’s biggest and most recognizable brands moving to the country’s biggest and most powerful conference. While the announcement was creating buzz throughout the sports world, many questions about the move began to arise. Just how could these two household college sports brands up and leave the Big 12? What would this do to the college football landscape as we know it? And of course, were Texas and Oklahoma even legally allowed to make this groundbreaking exit? The purpose of this article is to dive into the legal mechanics of the conference shake up and explore the ramifications moving forward.

The Big 12 Bylaws- How Can Oklahoma and Texas Make this Move?

In order to understand the mechanics of this massive conference realignment, i.e. determining whether Texas and Oklahoma can actually do this, one must look to the by-laws of the Big 12 conference. The conference by-laws are the Big 12’s governing documents. The by-laws state the mission, names the members, defines who can become members and how, and of particular importance here, the by-laws define how a member institution can withdraw from the conference. All 10 signing members of the by-laws committed to remain a member of the conference for 99 years, starting in 2012.

Section 3 of the by-laws covers the withdrawal process for member institutions generally. Section 3.2 specifically defines how a member may withdraw; this section casts a wide net for what constitutes a withdrawal by a member, much of which applies directly to the Oklahoma/Texas situation at hand. In relevant part, Section 3.2 states that a member is deemed to be  a withdrawing member if it gives notice to the conference of its intent to withdraw, or if 75% of the disinterested members (all members except Texas/Oklahoma) determine by vote that the member(s) took actions that evidenced an intent to leave or if another conference offered the member the opportunity to leave the Big 12 and that member institution did not affirmatively deny the request and subsequently notify the other members, among other stipulations.

Clearly, these situations described in 3.2 have been satisfied, as it has been revealed that Oklahoma and Texas were engaged in discussions with the SEC for quite some time prior to their official notification on July 26, 2021. Section 3.3 defines the ‘effective date’ of withdrawal. This section essentially mandates that the effective date will be the June 30th that follows an 18 month period from the withdrawal date. In this case, the effective date is June 30, 2023, which is the earliest Texas and Oklahoma could leave the conference.

Moving along in Section 3 of the by-laws we get to Section 3.4 which defines the all-important buyout amount. This section establishes that the buyout amount will be the amount equal to the distributions that the member school would have been entitled to during the last two years of their membership.  The withdrawing member would not be entitled to the proceeds from the remaining term of the TV deal either.  Thus, the big kicker here is the TV deal between the Big 12 and ESPN/Fox that runs through 2025.

As of now, the buyout is estimated to be around $140 million for Texas and Oklahoma combined. A major revenue generator, and here a massive source of cost as it relates to the buyout, for all conference members is the ESPN/FOX television deal. Because remember, any withdrawing institution must pay the conference two year’s worth of what would have been the member’s revenue.

However, and this is where it gets interesting, ESPN still owes Texas approximately $160 million for the Longhorn Network TV deal.  It has been reported that the money owed could be used by both Texas and Oklahoma to cover the buyout fee. Perhaps all of this and more led Big 12 commissioner Bob Bowlsby to accuse ESPN of a sort of coup to destabilize the conference. He even went so far as to send the mega sports network a cease-and-desist letter.

The cease-and-desist letter accuses ESPN of meddling in the conference realignment discussions between Texas, Oklahoma, and the SEC (and apparently one other unnamed conference).  Specifically, Bowlsby and the Big 12 accuse ESPN of inducing its members to join other conferences for ESPN’s own financial benefit.  The letter also cites specific provisions of the Telecast agreement between the Big 12 and ESPN and claims that ESPN is in breach.  The breach, according to the Big 12, relates to ESPN taking actions that are likely to impair the conference’s rights under the Telecast agreement.

In sum, the letter demands that ESPN cease and desist all actions that could harm the conference and its members, and specifically, that ESPN cease all communications with other conferences regarding any potential realignment or potential financial incentives to conference realignment. Of course, multiple ESPN executives have denied that any communications occurred with Big 12 member schools related to the financial incentives of moving to a different conference.

Section 3 also provides the framework for the conference to sanction certain members. Section 3.6 allows for a 75% vote of disinterested members to hand down sanctions on members that engaged in any action or a course of conduct materially adverse to the best interests of the Conference, or any members that omitted to take certain actions with respect to the methods of withdrawal. This provides the conference with a wide latitude in handing down sanctions on Texas and Oklahoma, if they so desire. The by-laws allow the 75% majority discretion in determining what sanctions may be appropriate. They also provide examples like scholarship reduction and withholding of financial distributions. This could provide for even more drama if the Texas-Oklahoma-Big 12 divorce gets messy over the next few years.

The only thing that we can conclude for certain at this point, is that there is a lot of legal uncertainty surrounding this seismic shift in conference alignment. A lot will need to be sorted out from a legal and financial perspective before Texas and Oklahoma officially become members of the SEC. So, with this entirely messy situation on their hands, why did Texas and Oklahoma make this move?

What does this mean for the Big 12, SEC, and Texas and Oklahoma?

The answer is simple- from both an on-field quality of competition and financial perspective, the SEC is the future (and present) of college football. Although the recruiting clout that comes with being an SEC team is undeniable, I will focus here on the financial motives behind the move.

Big 12 revenue per team under the current TV contract is a little less than $40 million annually, while the SEC member schools received just over $45 million each in fiscal year 2020. So, as of now, the annual revenue discrepancy between the conferences isn’t too drastic. But this is more about the future than the present.

In May of 2021, Big 12 athletic directors and chancellors were informed that FOX and ESPN were not interested in preemptively renewing their television deal.  At the time, the consensus seemed to center around the changing media landscape and the fact that there were still four years remaining on the deal, in terms of reasons not to be concerned internally.

However, there were only three Big 12 university presidents on the committee that was formed to consider acting preemptively with regard to the TV contract- and the University of Texas president was one of them.  So perhaps the writing was on the wall back in May, that the big networks and the big contracts that followed just weren’t that excited about the Big 12. Perhaps that was one factor that set the realignment talks for Texas and Oklahoma into motion.  These two college football brands are just too powerful to not be included in one of the most lucrative TV deals across the country.

Further, The SEC has a $3 billion broadcast deal with ESPN beginning in 2024, which will likely significantly increase the annual revenue per team in the SEC.  ESPN will pay the SEC around $300 million annually for the rights, close to a sixfold increase from the $55 million annually CBS currently pays. Now it starts to make more sense for Texas and Oklahoma. These are two of the biggest, most powerful, and most lucrative college football brands in the country (despite Texas struggling for on-field success in recent years). It seems as if Texas and Oklahoma were willing to dive head first into what will surely be a legal and financial jungle gym over the next few years just for the opportunity to call themselves SEC programs (and of course, that new TV deal with ESPN starting in 2024). It will be very interesting to see how this realignment unfolds, especially once the new SEC television deal takes effect.

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Former college lacrosse player, professional business development experience, current third-year law student, looking to create content that intersects both the legal and business aspects of the sports world.

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