The Atlantic Coast Conference reached a settlement with Clemson and Florida State, resolving a year-long contentious legal dispute over revenue distribution and exit penalties.

Clemson and Florida State sued the conference over issues related to revenue distribution and exit penalties. The schools sought to challenge the conference’s grant of rights agreement, which required them to pay substantial fees and surrender media rights if they chose to leave the conference before the agreement’s expiration in 2036. This led to a legal dispute as both schools explored potential membership in other conferences, seeking more equitable revenue sharing and flexibility in their media rights.

The settlement introduces a “brand initiative” that will distribute 60% of the ACC’s media revenue based on a five-year rolling average of viewership. This means schools with higher viewership, such as Clemson and Florida State, will receive a larger share of the revenue. The remaining 40% will be distributed evenly among all member schools.

Historically, most conferences have distributed revenue evenly among member schools. However, as the financial gap between the ACC and other power conferences like the SEC and Big Ten grew, schools with strong brand recognition in the ACC began seeking a more equitable share based on their success and viewership.

“The idea was that they are the sum of their parts; not the individual parts,” said David Hale, an ESPN college football journalist who reported on the settlement.

While some schools could see a greater influx of funds from the conference, Hale said this new model could be detrimental to other schools.

“The schools who are not going to benefit, actually are losing money from what they had originally gotten,” Hale said. “ … This is actual losses. They’re going backward, for some of these schools.”

Paul Haagen, a professor in sports law at Duke University, said NC State would likely be among the universities being hurt by this model. He said NC State, while consistently competitive, is not typically among the top performers in the ACC regarding revenue sports — football and men’s basketball.

Hale said this new model implies that universities will likely funnel more investments into their revenue sports teams. He said this can be done through either raising student fees, finding new fundraising opportunities or cutting funding for other programs.

Hale said NC State has already started new fundraising opportunities when it sold the naming rights to the athletics director position for $5 million earlier this year. NC State Athletics has also partnered with Independent Sports and Entertainment to find a partner to sell the naming rights of Carter-Finley Stadium.

Following unsuccessful attempts at cutting sports programs during the COVID-19 pandemic, Hale said it is more likely that universities will divert funds from Olympic and women’s sports, rather than cutting their programs entirely.

“Where you’ll probably see the biggest impact is that instead of flying charter, they’re flying commercial,” Hale said. “And instead of paying your head coach $900k a year, you’re paying them $250k a year. Instead of building a new facility for your swimming and diving team, they’re going to go another 10 years in their dilapidated facility. Those types of things are where I think the biggest impact will show up.”

Haagen said the new distribution model only exacerbates the current situation in which revenue sports are already given priority, especially while universities await the implementation of the parameters set by the House v. NCAA , which will allow universities to distribute up to 22% of their revenue to their student athletes.

“If [the House v. NCAA settlement] gets approved, given the distribution model in the settlement, you’re just taking a fifth of the significant revenues of the athletic department, and you’re spending that on the athletes, that just means you’ve got fewer resources to spend in other places and more pressure to generate as much as you can out of those programs that generate money or might generate money,” Haagen said. “Many of them lose a lot of money. So I think the incentives haven’t changed, they’re the ones that were in place before all of this. They’re just getting much more intense.”

The settlement also significantly reduces the exit penalties for schools looking to leave the ACC. Previously, universities would have faced a penalty of three times their operating budget plus control of their media rights. It would’ve cost Florida State $572 million to leave the conference before the settlement.

Under the new agreement, the exit fee will start at $165 million next year and decrease annually, reaching $75 million by 2030-31. Schools that pay this fee can leave with their media rights intact.

“What I think this is, is buying time for the ACC to adjust to the new environment,” Haagen said. “And possibly to change in ways that would make it either more attractive to stay or a recognition that it’s going to go the way of the PAC-12 at the end.”

Haagen said these eased penalties make it “extremely attractive” for schools like Florida State, who have already shown interest in joining another conference, to leave the ACC, along with the conference’s present shortcomings.

“[The ACC] ended up with a group of schools that don’t actually fit well together and don’t constitute an extremely attractive package to sell, and it’s also that the deals they got from ESPN are just much less, much less lucrative than the [SEC and Big 10].”

As the ACC’s new revenue distribution model takes effect, NC State faces significant financial challenges. The school, which has historically been competitive but not a top revenue generator, may see a reduction in its share of conference funds. This could lead to difficult decisions regarding budget allocations within the athletic department.

NC State has already begun exploring alternative revenue streams. However, these efforts might not fully offset the potential losses from the new model. The University may need to consider further cost-cutting measures or fundraising strategies to maintain its athletic programs.

The broader implications for NC State include potential impacts on non-revenue sports and student-athlete support. As universities prioritize revenue-generating programs, there may be less funding available for Olympic and women’s sports. Additionally, the pressure to generate revenue could lead to increased reliance on student fees or private donations.