How an OU-Texas early exit set the stage for Big 12 expansion

How an OU-Texas early exit set the stage for Big 12 expansion

The USA Today Network recently reported that OU and Texas will pay only $100 million of the $160 million required for both schools to leave the Big 12 a year earlier than they were contractually bound. Not much of that $100 million is hard cash.

Berry Tramel

By Berry Tramel

| Oct 4, 2023, 1:46pm CDT

Berry Tramel

By Berry Tramel

Oct 4, 2023, 1:46pm CDT

Editor’s Note: Sellout Crowd’s Coverage of the Oklahoma-Texas game in Dallas is Sponsored by Modelo – The Official Beer of Fans with the Fighting Spirit (https://www.modelousa.com)

Ancient football rivals OU and Texas convene Saturday in the Cotton Bowl. But when the Sooners and Longhorns aren’t on green grass or diamond dirt or hardwoods, they are business partners.

Not just in the economic juggernaut called OU-Texas, or Texas-OU depending on your geography. But in conference alignment. And realignment.

This will be the 29th OU-Texas game contested under a Big 12 banner. Next year, Red River will be a Southeastern Conference game. Meanwhile, the Big 12 begins a 16-member era that includes newcomers Utah, Arizona, Colorado and Arizona State. Those two massive developments of conference realignment most definitely are related.

The USA Today Network recently reported that OU and Texas will pay only $100 million of the $160 million required for both schools to leave the Big 12 a year earlier than they were contractually bound. Not much of that $100 million is hard cash. Much of it is redirected money involving television.

The Big 12 initially had a hard-line strategy at either keeping OU and Texas in the conference as long as possible or exacting maximum pounds of flesh. But the league eventually switched course not just on the advice of lawyers, but because the presence of OU and Texas in the Big 12 for the 2024 football season could have created a bottleneck for Big 12 expansion opportunities. The addition of the Pac-12’s four-corner schools in 2024 was made possible by the departures of the Red River rivals.

Here’s what Sellout Crowd has learned from a variety of sources talking about the OU-Texas/Big 12 settlement.

Why the Big 12 compromised with OU and Texas

When OU and Texas announced in summer 2021 their intention to leave for the SEC, the feeling, at least on the Sooner side, was that the Big 12 would capitulate and let OU leave early at a reduced rate, just to have the Sooners gone.

Instead, Big 12 members were resolute that they would hold OU and Texas to the contractual obligations. Keeping the conference’s television deals in place would maximize Big 12 revenues until the summer of 2025. That was important to schools that figured to take a financial haircut, perhaps as much as $10 million per year, without the Sooners and Longhorns.

Once it became clear that OU, particularly, and Texas were not inclined to pay the extreme exit fees and were willing to stay at least until summer 2024, a year’s early exit made financial sense and conference-future sense for the Big 12.

The Big 12 studied the history of legal wranglings over early departures from conference membership. Of primary interest were the exits of Maryland from the Atlantic Coast Conference and Rutgers from the Big East, both to the Big Ten.

“Everything we were reading, nobody was getting 100 percent of what they were owed,” said Iowa State coach Jamie Pollard. “I was told it was roughly 65 percent So you could go to court and argue or figure out something that was a win-win for both parties.”

If the Big 12 gets $100 million from the $160 million OU and Texas owe from leaving early, that’s 62.5 percent. That was in the neighborhood of the Big 12’s research. “And neither side had to invest in legal fees,” Pollard said.

The settlement didn’t wash the remaining Big 12 members with cash. But it did keep the legacy Big 12 members with virtually the same revenue levels as they had with OU and Texas in the league, while also providing the Big 12 a path to further realignment and a more solid future.

Conference realignment reasons

The Big 12 had another reason to be OK with the Sooners and Longhorns leaving early. Their 2024 departure aligned with the opportunity to lure four new members from the Pac-12. Indeed that happened — Utah, Arizona State, Colorado and Arizona announced in August they would join the Big 12 in the summer of 2024.

If the Sooners and Longhorns had one more year in the conference, adding the four Pac-12 schools would have been problematic.

ESPN and Fox, the Big 12’s television partners, have agreed to pay the conference pro rata for new members, provided they were from Power Five leagues. That means the Big 12 pie expands, with every member still getting the same piece as previously.

But that number was capped at 16. With OU and Texas still in the league, the Big 12 could not take on the four new members from the Pac-12 and still be assured of receiving the same network payouts.

OU athletic director Joe Castiglione and Texas athletic director Chris del Conte declined to share details of the separation agreement.

An OU source said the Sooners weren’t privy to the Big 12’s expansion plans but knew the league wanted some wiggle room to make decisions that would affect the future.

“We worked collaboratively,” the Sooner source said. “The goal was to allow all the parties to move forward with some certainty. Particularly when we knew the Big 12 had its own vision and wanted clarity to act on that. Ends up being the type of final arrangement that’s positive for all.”

The SEC’s new television contract, negotiated before the OU and Texas decisions, begins in 2024. The Pac-12 television contracts ended in 2024. It was to the Big 12’s advantage to have a clean slate in the  summer of 2024.

Pollard called the OU-Texas exit fees “seed money” to go after the Pac-12’s four-corner schools. “Turned out the best it could.”

What OU & Texas owe

USA Today reported that of the roughly $100 million owed in exit fees, more than $80 million is based on money that OU and Texas won’t get in 2024-25, but money that will remain in Big 12 coffers. And in 2024-25, the Sooners and Longhorns don’t get a cut of the SEC television money but will get other income from the SEC.

OU and Texas also will leave behind $13 million from the Big 12 in NCAA basketball tournament distribution money. The rest of the OU-Texas payout comes from cuts in full revenue from 2023-24 that will go to 2023 newcomers Brigham Young, Central Florida, Cincinnati and Houston. All 10 Big 12 members will get about $7 million less than its allotted payout, to fund the $18 million each newcomer is getting this season, which still is significantly less than the legacy members will receive.

Also part of the negotiated settlement, the Big 12’s network partners, ESPN and Fox, agreed to fund the conference’s football package at the same levels in 2024-25, even without OU and Texas. ESPN wanted to get the new-look SEC rolling next season, when Fox will debut the 18-team Big Ten that will include Southern Cal, UCLA, Washington and Oregon.

“We get the same amount of money for television, so we are in essence getting them and allowed them to move on sooner rather than later, which was better for everybody on a lot of fronts,” Pollard said.

The television talks were deep-seated. USA Today reported that as part of the deal, OU will not cancel its upcoming non-conference series against Michigan and Nebraska. Those Sooner road games will be the property of Fox.

OU-Texas future revenues

OU and Texas are getting the same Big 12 payments for the 2023-24 season as the rest of the conference members. OU and Texas begin getting full SEC shares in the summer of 2025 and will get none in 2024-25 from the prime SEC distribution. But they will supplement the financial void in other ways.

USA Today reported that ESPN will make payments to both schools to facilitate the early move. Also, for one year, both the Sooners and Longhorns will receive partial shares in SEC revenue from the new College Football Playoff format, which for the 2024 season expands to 12 teams and is expected to be a financial bonanza for the upper-tier programs. OU and UT also will get NCAA basketball tournament distribution money from the SEC, according to USA Today, as well as “new and additional marginal net revenue,” such as new licensing agreements and extra television when modifications were made to the ESPN contract.

The network reported that some Big 12 athletic directors wanted to be more punitive towards OU and Texas but said the conference lawyers advised against it.

Iowa State’s Pollard was much more pragmatic.

“Would I rather have Oklahoma and Texas still in our league? Who wouldn’t?” asked Pollard. “But it’s not that way, so move on. I couldn’t be happier how it’s turned out.”

 

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Berry Tramel is a 45-year veteran of Oklahoma journalism, having spent 13 years at the Norman Transcript and 32 years at The Oklahoman. He has been named Oklahoma Sportswriter of the Year by the National Sports Media Association. Born and raised in Norman, Tramel grew up reading four newspapers a day and began his career at age 17. His first assignment was the Lexington-Elmore City high school football game, and he’s enjoyed the journey ever since, having covered NBA Finals and Rose Bowls and everything in between. Tramel and his wife, Tricia, were married in 1980 and live in Norman near their daughter, son-in-law and three granddaughters. Tramel can be reached at 405-760-8080 or at [email protected].

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