Funding revenue sharing is one of the reasons the Big Ten is considering a $ 2.4 billion private equity deal
Occam’s Razor is the centuries old principle of logic that states that the simplest explanation is most often the one closest to the truth. A few insiders associated with the proposed equity deal are touting undefined benefits to “long-term value” and “brand enhancement”. But the simplest reason this proposal has many Big Ten members salivating is a reported up-front cash distribution of around $ 150 million per school.
However, with Big Ten schools running average net operating losses of $ 55 million annually (and at least one member running a $ 100 million annual loss) before the additional costs of revenue sharing, the $ 150 million payday loan equivalent will be quickly used up at most schools. The equity deal is a short-term band aid and doesn’t address the issue of runaway athletic department costs. It could however, result in long-term injury to collegiate athletics.
A Big Ten equity deal will result in an aggressive push for a disastrous College “Super League”
One of the few certainties in life is that if a private equity fund invests over $ 2 billion in any venture, they are expecting a lucrative return. In the proposed Big Ten Equity deal, the payout will be based on significantly enhancing the value of the Conference’s media rights. And it’s pretty clear how they intend to do so:
Current Big Ten Media Distribution: $ 75 million per School
Current NFL Media Distribution: $ 433 million per Team
So how do you get a media deal anywhere close to the NFL numbers? Simply by forming a college “super league” that operates similar to the NFL. And like any professional league, the schedule would only be games between league teams … “marquee” matchups every week would be one of the key selling points. There are currently 136 FBS schools so most would be excluded. You hear talk of maybe 60 or 70 schools being in the proposed league, but these numbers are probably overstated. To make sense operationally and to maximize revenue, the super league would likely end up closer to the current NFL size of 32 teams – which means 104 FBS schools would be left out in the cold. Additionally, many of the 129 FCS schools would also be adversely affected as they would lose the game guarantee revenues and visibility of playing an elite FBS program once a year.
An NFL style college super league would be a pure and simple money grab and would likely destroy intercollegiate athletics. A handful of big budget athletic programs would benefit immensely, while the vast majority of current NCAA I schools would be adversely affected. It would also negatively impact many if not most of the 170,000 student athletes who currently compete at the Division I level, including potential loss of athletic scholarships and revenue sharing opportunities.
However, the worst result of a college super league is that it would significantly benefit a handful of “elite” universities – those with undergrad enrollments increasingly composed of out of state students paying higher tuition, while negatively impacting the schools that actually do the best job of providing an affordable college education to students across the country.
We already have an affordability issue and a troubling decline in US college enrollment nationwide, let’s not make it worse.
Questions on our data? Contact us at: NIL-NCAA.com
Statistics compiled & edited by Patrick O’Rourke, CPA Washington, DC 