As college sports faces more change, is private equity money coming in?
by Pete Thamel, ESPN
There are high-stakes lawsuits and labor relations boards, congressional hearings and an NCAA president's controversial overhaul plan. There's an angry school taking its conference to court over a grant of rights, and that conference preemptively striking against the school.
There's the disruption of name, image and likeness, grumbling over essentially unlimited transfers and million-dollar portal acquisitions. There are Hall of Fame coaches in football and men's basketball sprinting to retirement. There's a yawning gap between the SEC and Big Ten and the rest of the leagues, with those Power 2 commissioners beginning to realize the power of leveraging their ascension above the fray.
There are only two certainties in college sports -- sweeping change is coming, and no one knows what it will look like.
Amid this backdrop, a new market force has emerged as potentially interested in the future of college sports. From email inboxes to Zoom meetings to glad-handing at high-end events, representatives from private equity and other types of outside financial entities have emerged as interested in the chaos of college sports.
"What are you looking for if you are private equity?" asked an industry source. "You are looking for a poorly managed business that nevertheless has a strong market. That's the definition of college athletics."
There's also a search for solutions, which include a "Think Tank" shepherded by search firm executive Len Perna and includes names like billionaire David Blitzer, one of the country's most prolific investors in sports, former MLS president Mark Abbott and a handful of university leaders, including Syracuse chancellor Kent Syverud.
They stress they have no direct tie to any financial arm and are attempting to figure out a solution that includes more than 130 FBS football teams while keeping intact Olympic and women's sports.
"It's been obvious the whole college sports system has been a dead man walking for three years, driven by legal developments," Syverud told ESPN. "What's going to come out of it is the thing that hasn't been clear. The current system can't continue, it's a dead man walking."
The forces of Congress, legal decisions, a suddenly proactive NCAA and billion-dollar television contracts are colliding to shape some type of ambiguous future. Meanwhile, the inefficiencies between the far-flung conferences, the cost of nonrevenue sports and athletic department funding models remain glaring.
Uncertainty is nothing new in college athletics, a billion-dollar enterprise awkwardly tied to an educational model. But to see just how tenuous things are, it's always instructive to follow the money. Private equity officials have found profitable avenues in everything from professional sports to the WWE.
"It's a way of doing business that college athletics has never really engaged in," said a Power Five athletic director familiar with the space. "In the professional world, it's common practice -- for facilities, projects and payments."
So what's happening? There's Gerry Cardinale, founder of Redbird Capital, offering ideas on how to change college sports at the Sports Business Journal's Intercollegiate Athletics forum in December. He pointed out the power of the schools collectively negotiating television contracts, as opposed to having leagues do it. And he's engaging with officials around college athletics.
Former Florida State quarterback Drew Weatherford has been setting up and taking meetings with campus officials around the sport, as he's a partner in Weatherford Capital. There's Otro Capital, co-founded by a former Redbird partner -- former NFL executive Alec Scheiner -- also expressing curiosity about the space.
Another financial firm, Sixth Street Partners, is expected to engage with FSU if it needs a financial infusion in the wake of its attempt to detangle from the ACC's Grant of Rights.
"There's four or five venture capital companies all circling," said another industry source. "These are big-time places that will come in. It means that if these guys are circling, it means we're not maximizing our revenue."
The most intriguing group exploring the future of college sports that's emerged in recent months is Perna's, who works as the chairman and CEO of the search firm TurnkeyZRG. He acknowledges the complications for holistic solutions, as keeping some semblance of the college model is key.
When it's mentioned this idea could include football breaking away from the NCAA, he counters that it already has in many ways. (The NCAA gets virtually no revenue from football and doesn't control its postseason, unlike basketball.)
"We're studying ways to unlock more value from and for college football for the betterment of all," Perna said in a statement to ESPN. "Centralizing FBS football scheduling, promotion and commercial rights would be better for football student-athletes, because it would enable them to collectively bargain and be rewarded for their value, without limiting their choices or needing to be 'employees.'"
Added Syverud: "There's more than 100 universities with fine football teams and histories, and the Hunger Games is going to hurt a majority of them very seriously, and whole states and regions. Unless we come up with a decision that's fair to marquee programs and enables others to participate and [improve]."
The group has engaged leaders around the sport in conversations over the past few months. And while there's no formal link to a specific financial firm, one of the members is Blitzer, who is an executive at Blackstone and is one of the country's best-known investors in professional sports, including a role as managing partner in the Philadelphia 76ers and New Jersey Devils, the owner of Real Salt Lake of the MLS and a limited partner in the MLB's Guardians and NFL's Commanders.
Blitzer's role is one mostly of intellectual curiosity at this point, as this is the earliest days of what's only a potential project. Right now, there are just discussions with a crew of other high-profile names across the sports spectrum. (Perna declined to give all the names.)
"All forms of investment capital, including private equity, can help grow an enterprise that's properly structured," Perna told ESPN. "College sports isn't properly structured legally, politically, commercially, etc. PE alone can't fix the core structural problems, but can play a role once they're solved. The difference between our group and other groups is that we're focusing first and foremost on how to correct the big, daunting, holistic structural issues in college sports."
Perna has engaged with the NCAA about this idea, but it's not sanctioned or specifically supported.
Perna also noted the geographic inefficiencies of the current conference construct.
"It would also be better for other student-athletes in other sports, because they need not be flying all over the United States due to conference affiliations driven by one-game-a-week football," Perna's statement said. "The current rubric isn't academically tenable, nor affordable, nor even logical. It's worth the time to explore what alternative models could work better for student-athletes, schools, media partners, fans, etc."
With the complications of college football both sticking with or detaching from the current structure, the Think Tank plan is very much in the thinking phase. There remain plenty of headwinds to any change that would attempt to turn the college athletics battleship. Especially those that need congressional help.
When asked specifically about private equity being part of college sports, Syverud told ESPN: "I don't have a philosophical objection to almost anyone who wants to be part of the solution or can be a part of the solution. That includes legislators, that includes NIL boosters, private equity and it includes college presidents and athletic directors.
"I don't look at private equity as perfect or evil. I think we have to look at all the different pieces of the problem. There's a significant financial piece to this."
The search for answers is part of an overall environment where the issues are much easier to point out than the solutions.
"The next six months are going to be fascinating to watch unfold," said Oklahoma athletic director Joe Castiglione to ESPN, speaking generally about the state of college athletics. "The next half of the year, a path is going to start forming. Whether it gets support or is possible, plausible or legal, we don't know.
"Candidly, something needs to start forming. There's so many things happening simultaneously, there's never been a time like this in college athletics. Ever."
Added Syverud: "Let's come up with the best we can and see what happens. Otherwise the dead man walking is going to produce something crazy."
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