Getting serious about monetizing college sports

[Hibush]

I enjoy my academic* subscription to the Wall Street Journal because it has solid news with a distinctive context--business. The very language used to describe college operations is different from the way we do it in department meetings and the faculty senate.

Today there is an article about private capital jumping in to provide colleges the funds and expertise to fully leverage the value and good-will of their sports. This offer is limited to the most financially valuable Power Five programs, of course. They are not going to waste their money, or invest in competitors.

Here are some tidbits.

College sports is on the precipice of a total about-face of its business model, with the NCAA poised to agree this week on a legal settlement that could soon see schools paying tens of millions to players every year. The deal ... stands to upend the economics of an entire industry that had long insisted revenue sharing would make it financially impossible to operate many programs.

Enter private equity.

A new business called Collegiate Athletic Solutions, led by RedBird Capital** founder Gerry Cardinale, plans to invest $50 million to $200 million apiece in a select group of universities, Cardinale said. CAS is a partnership between RedBird and Weatherford Capital, founded by former Florida State quarterback Drew Weatherford, who is also a member of the school's board of trustees. They say they will invest in five to 10 schools to start and are in talks with dozens more, including members of every power conference.

Cardinale says, the idea is to build businesses that help monetize a school's intellectual property and provide them with the advice and capital to do that at a time when the stakes have never been higher.

"Capitalism is finding everybody," Cardinale says. "This is about partnering with universities and athletic departments and helping them grow their sports business."

How will this complete professionalization of one sector of college sports affect your place?
Will your school be one of the chosen?
Mine won't. We also won't be recruiting any pro prospects.

*Free with an .edu email.
** They own AC Milan, part of NY Yankees, Bosox and Liverpool FC.

[dismalist]

So these guys are gonna run so-called college sports teams and pay a fee to colleges in return, now that college players have to be paid their market value. Look at it this way: College owns the brand, then rents it out.

I'm very glad! The more the college athletes earn, the happier I am.

It's just like selling branded sweatshirts in the so-called book store. Yes, we also offer courses and lectures and stuff.

[spork]

The NCAA and universities have reaped huge profits from treating "student athletes" as indentured servants. Subjecting the system to market forces is long overdue.

[marshwiggle]

But does this mean that if these athletic programs lose money, the institutions will be on the hook to the investors? I forsee places going under because of a problem with their athletics, even though their finances would otherwise be OK.

[ciao_yall]

But does this mean that if these athletic programs lose money, the institutions will be on the hook to the investors? I forsee places going under because of a problem with their athletics, even though their finances would otherwise be OK.

This is a good point. These guys are very good at taking profit while outsourcing risk.

[apl68]

But does this mean that if these athletic programs lose money, the institutions will be on the hook to the investors? I forsee places going under because of a problem with their athletics, even though their finances would otherwise be OK.

That's what has me concerned--that some schools could fool around and make bad deals and lose money that could better have been used for, you know, education.  There's been discussion here in the past about how most college athletic programs are money-losing boondoggles--even some well-known football and basketball programs that people imagine are cash cows.  They were losing money before they had to start paying their players.  It's very easy to see university admins being taken to the cleaners by savvy and unscrupulous corporate partners.

Yesterday I saw an anonymous University of Arkansas booster say that he was not about to keep donating to their athletic programs just to help some 19-year-old drive a better car than he does.

[Wahoo Redux]

Obviously, colleges will lose control of their big money athletic programs (wrestling and volleyball are safe, I assume).  I wonder if this is the first step in establishing minor professional leagues which will fail.

[Kron3007]

Gross...

This is just the next step on our Uber capitalist dystopian journey.

[dismalist]

Viva la evolution!

[Hibush]

Viva la evolution!

Redbird is apparently a different kind of PC firm than Elliot (the seller of one team, called "vulture capital" in the article). How do you think the particular business models of the firms that are getting in will produce secondary effects on the finances of schools like Florida State or Georgia?

[dismalist]

Viva la evolution!

Redbird is apparently a different kind of PC firm than Elliot (the seller of one team, called "vulture capital" in the article). How do you think the particular business models of the firms that are getting in will produce secondary effects on the finances of schools like Florida State or Georgia?

I have no clue! Let them experiment and find out.

[Wahoo Redux]

ABC News: NCAA, Power 5 agree to deal that will let schools pay players

Not exactly the thread topic, but allied, I think.

[ciao_yall]

Viva la evolution!

Redbird is apparently a different kind of PC firm than Elliot (the seller of one team, called "vulture capital" in the article). How do you think the particular business models of the firms that are getting in will produce secondary effects on the finances of schools like Florida State or Georgia?

Their business model is to make money.

If, for some reason, the returns are not what the firms expect, we will find out how they manage to get the colleges/taxpayers to meet the obligation.

[Hibush]

Viva la evolution!

Redbird is apparently a different kind of PC firm than Elliot (the seller of one team, called "vulture capital" in the article). How do you think the particular business models of the firms that are getting in will produce secondary effects on the finances of schools like Florida State or Georgia?

I have no clue! Let them experiment and find out.

This sea change seems like a great natural econ experiment, with an opportunity to set up the hypotheses in advance. Enterprising professors should be getting grants to do that experiment!

[Hibush]

Viva la evolution!

Redbird is apparently a different kind of PC firm than Elliot (the seller of one team, called "vulture capital" in the article). How do you think the particular business models of the firms that are getting in will produce secondary effects on the finances of schools like Florida State or Georgia?

I have no clue! Let them experiment and find out.

This sea change seems like a great natural econ experiment, with an opportunity to set up the hypotheses in advance. Enterprising professors should be getting grants to do that experiment!

ABC News: NCAA, Power 5 agree to deal that will let schools pay players

Not exactly the thread topic, but allied, I think.

This change by NCAA, and some other legal actions are part of the picture.

In the next year or two, a student-athlete's value will come down to how much advertising time the sell on TV, and how many shoes they sell. Not how much talent they have.

I also saw a move by NAACP to try to make sure Black student-athletes get their fair share since about half the football and basketball players at schools producing broadcast revenue are Black. What if they unified somehow to bargain together?