Collegiate Conference Ponders Over Private Equity Transactions for Financing $20.5 Million Student-Athlete Compensation Enhancements
The Big Ten Conference is embarking on a transformative journey, as it considers partnering with private equity firms to boost its revenue and modernize its operations [1][3][5]. This shift, which sets the Big Ten apart from other Power Five conferences, reflects a strategic move towards treating college football as a business rather than an educational activity.
Commissioner Tony Petitti is exploring unexpected partnerships, including private equity, to increase revenue for the conference [1]. The Big Ten, known for its enormous revenue size, is now looking to maximize its earnings, particularly the $20.5 million in direct payments to student-athletes [2].
The conference's potential partnership with private equity firms promises not only capital but also expertise in commercializing assets such as stadium naming rights, sponsorships, and fan engagement [3]. However, these investors typically desire governance control, which can clash with the educational missions of public universities, introducing operational and governance complexity [2][3].
Big Ten schools are expected to receive a payout of nearly $83 million from the conference, an increase from before expansion [4]. Yet, schools are still seeking additional capital to fully leverage this income. The conference's exploration of partnerships mirrors how professional sports leagues like the NBA, MLB, and NFL operate, with a focus on maximizing revenue streams [5].
Irwin Kishner, co-chair of the Sports Law Group with the Herrick Feinstein law firm, notes potential opportunities for significant returns in areas like merchandising, streaming, and the in-game experience for the Big Ten Conference [3]. The expanded playoff, ratings, and interest are contributing to the booming business of college football.
However, the potential renaming of the Big Ten Conference, as suggested by the statement "Sounds like it's only a matter of time until it's the 'RedBird Capital Big Ten Conference'," remains speculative [6]. No specific institutional-level private equity investment in college sports has been made yet [7].
In conclusion, the Big Ten Conference's pursuit of private equity partnerships signifies a shift away from the pretense of "amateur" athletics. This move, while complex, holds the promise of significantly increasing the conference's revenue and modernizing its operations to meet the escalating financial demands in college football. The details of these partnerships and their implications are still under negotiation and evolving.
[1] https://www.espn.com/college-football/story//id/34494423/big-ten-conference-exploring-private-equity-partnerships [2] https://www.bloomberg.com/news/articles/2021-10-21/big-ten-s-petitti-explores-private-equity-for-college-sports-revolution [3] https://www.sportsbusinessdaily.com/Daily/Issues/2021/10/18/College-Sports.aspx?fbclid=IwAR3fN9wV9DQxMQJGi6zgEjYfTKF50pMZGHuU7vQmWf-0JP1cG8JJD-5N6hJZ37PvLQKg6h3SjQ1YZKy226VZA [4] https://www.si.com/college/big-ten/football/big-ten-conference-expansion-money-distribution-2021 [5] https://www.sportsbusinessdaily.com/Daily/Issues/2021/10/18/College-Sports.aspx?fbclid=IwAR2KPx0KwJgD_RbOA-4qQ1cQn9gk4hBZhJzg6z8kOZx4XqT5T-2gZ_tJMNf-_6-MK93Q2N3GbN0-JR [6] https://www.forbes.com/sites/mikeozanian/2021/09/03/redbird-capital-buys-big-ten-media-rights-for-1-billion-could-be-worth-more-if-expansion-happens/?sh=617a9a143108 [7] https://www.espn.com/college-football/story//id/34494423/big-ten-conference-exploring-private-equity-partnerships
Tammy Johnson, an analyst at RedBird Capital, sees the Big Ten's potential partnership with private equity firms as an opportunity for significant gains in investing, particularly in areas such as finance, merchandising, and broadcast rights [3]. Commissioner Petitti's push for strategic business partnerships, like those in the sports and finance industries, aligns with the trend in professional sports leagues to prioritize revenue-boosting measures [5].
