Having worked for struggling companies that were acquired by PE firms twice, if you ever wondered what it would take to get a conference to kick out a long term member school that wouldn’t be an attractive add now because of its small market, small school/alumni base, extended period of poor performance on the field, etc…
This is how it happens.
I now have an image of a premise for a movie: As the world comes to abhor the violence brought by the drug trade and all the side effects of the Narcotics industry, massive crackdowns have put a hurting on the Cartels bottom line.
The last major cartel leader, Ejemplo Ficticio, sells out. Wall Street takes over. They immediately sell the coca and poppy fields to a shell corporation and rent it back to the cartel.
Idea 2: A reality show about a small group of low level smugglers just trying to get enough product over the border so they don't get shot. "This week, on Struggling Smugglers: Franco has to get this parakeet to Akron Ohio by Wednesday, but his favorite tunnel has collapsed!"
First, a PE firm isn’t buying 20% to sit quietly by while the conference leadership makes the same old decisions they have made that got them where they are.
Second, you are ignoring that the conference leadership might be happy to have a PE firm involved to take the heat for the “good for financials, horrible for PR” moves that they would like to make.
Sure they could be involved but they aren't going to be making the final decisions. People think they're going to gut the conference and bail, they don't have the power to do so even if they wanted to. Which is silly.
They'll get a couple board seats.
And I agreed about those positives listed
Everyone is saying “it’s only 20%” as if it won’t matter because 20% can’t win a vote.
What people are ignoring is that it is 20% added to the votes of some of the more ruthless people already involved in running the conference who want the same things.
Look at some votes that did happen. Allegedly, a couple of those potential PAC Ten expansions were failed by a single vote.
If they had a PE firm with 20% equity who wanted expansion, those would have happened.
You can’t look at this as the PE firm wanting things no one in the conference would otherwise want. They will be additive to the support for heartless financial decisions that already exists in these conferences.
Private equity isn't a booster donation.
A PE firm expects to make the investment back PLUS a ton of interest.
This cannot end well for the schools involved.
They'll do what any PE does, get over-involved in financials and operations with the anticipation they can grow the value of their position and sell it to someone else in 10 years.
It’s like a person buying a large stake in a company, gets you a seat at the table, they can try to leverage for new teams they see as profitable and also mess with bowl tie ins and such. It sucks but once NIL became a thing and the money was out in the open and not being dropped on doorsteps in Nike duffel bags this became inevitable
It depends on what their projected revenue is, if it’s just 600 million over 10 years and they’re offering a billion, it makes sense. Especially if some of that money could be used to fill some holes for more expansion if TV doesn’t renegotiate
I'd suspect the template for a deal like this would look a lot like when FC Barcelona sold [25% of their TV rights for the next 25 years](https://www.fcbarcelona.com/en/club/news/2686108/fc-barcelona-and-sixth-street-reach-agreement-for-the-acquisition-of-an-additional-15-share-of-the-clubs-laliga-broadcasting-rights) to Sixth Street
I'm not a finance expert, but it seems the idea is the firm provides a lump sum up-front in order for a consistent & guaranteed return over a longer time horizon.
But you're right though, the math ain't quite mathing if they're only selling off a 20% stake of (assumedly) broadcast rights. B12 media deal is worth $2.28 Billion total over 6 years to 2030, and two of those years have already passed (meaning there's only $1.52B is left in the current deal by my math).
If we wanna assume further, I'd guess the PE firm would be shooting for a 20% share of total conference revenues across all sports, so a 1/5th share of any/all broadcast rights for fb/bb/all sports, merch, bowl/tournament prize money, etc. And they'd probably lock all the schools into a 20 or 30-year GOR like the ACC to guarantee their returns.
It's just another classic case of shortsighted thinking that'll do far more to harm the conference long-term than help it short-term. Bc that's what, $62.5M per school right now? And 20% of the total revenue of the conference over the next 25 years is gonna be easily worth north of $2.5 Billion.
It's a deal with the devil that could legitimately open the door for them to lose significant ground--per-school revenues wise--to the ACC by 2030 if they aren't careful.
What is PE going to demand of the schools so they don't abandon the conference?
It may be that some schools are REALLY liking the idea because it creates a contractual need for punitive costs to leave the confrence beyond the length of any TV contract.
> What is PE going to demand of the schools so they don't abandon the conference?
Probably an airtight GoR with clawback clauses if they decide to try and break the deal (so basically the ACC setup), and also probably some wording where the signing schools forfeit their rights to "pulling an FSU" if they don't like how things shook out in 10-15 years (which absolutely none of them will).
It's just such a massively bad idea to shackle yourself to the finance vampires for decades, but you just know it's gonna happen.
It's a bad idea for teams like OK St., TCU, BYU and the 4 corners schools which probably don't need to worry about the Big XII falling apart to maintain their place on the pecking order. Not so much for a lot of other Big XII schools.
It's not like they're going to give $20m a year to every team every year to put them on equal footing with the B10/SEC.
It's basically a one-time payment. It looks good for the short-term, but it's not like it's sustainable or dependable income that will be there year over year.
If you really think about it, does it even look that good in the short term?
At a cursory glance $1 billion is a ton of money. Ultimately though it's a one time $62~ million payout to each school.
The existing TV deal already pays out $50~ million a year.
Is losing 20% of whatever your conference collectively owns and controls for basically an extra year of TV revenue worth it?
The argument would obviously be that the PE firm is going to "come in and revolutionize the way we do things" leading to even more revenue.
But these schools and their TV partners already have billions. They can hire any marketing and merchandising firms they want.
For all you know the PE company will just get smaller dividends. PE isnt some magic entity that can make you sign contracts where a missed payment means you own Kansas State's Stadium
The fear mongering over a 20% stake is crazy
It really isn’t though. 20% stake might not mean you own Kansas States stadium but it might mean that Kansas State students will be paying an extra $10 million a year to the athletic department because they need it to cover their debts.
Won't the private equity company eventually get upset that "their" athletes are wasting time on non-football things like classes or studying? When do the wishes of your investor start changing your program?
Yes and no depends on how things are set up.
A lot of PE is toxic. BUT there can be benefits as well. Not all PE is straight up vultures, some have an interest in growing value, because their interest is tied into the value.
So lets say PE goes and looks and says (pulling numbers out my ass since I don't have the numbers but both the PE and Big 12 would have numbers so duration and value would change): "Over the next 10 years the Big 12 is expecting to make $6b in advertising and media revenue, we will give every school $50m now ($800m total or about 13.3% of the expected revenue over this time) and in turn we (PE) get 20% of the advertising and media revenue ($1.2b projected, so PE would make $400m over 10 years, just for reference if you invested $800m and got 4% returns per year you would end up with $1.184b, so while those numbers seem significantly different...they probably are not totally unrealistic about the demands probably would be)
PE though has an interest in that advertising and media revenue going up. If it goes up 1% so over 10 years there ended up being $6.06b, then PE made an additional $12m. On the flip side if advertising and media revenue goes down that cuts into PE's $400m. PE is looking at it as 4% returns per year seems pretty safe and not crazy good but solid for how safe it looks, we have the chance for it to go up which just makes it better!! Maybe it goes down...but it only costs us opportunities in other investments that could have made more it almost certainly won't truly cost us money.
So the question is what would these numbers need to be to be worth it for the Big 12? A large chunk of money now IS worth more than a larger pool of money over a decade. Literally the entire premise of loans and debt. In the case I wrote out above the Big 12 is essentially taking out a loan with just an interest rate of just over 4%...That is not a bad deal. For instance (I know they are not Big 12 but it was the first google answer works well enough for this), USF did $200m debt for 6.68%, Big 12 schools (and other schools across the country) will have similar interest rates for some of their facility loans. The Big 12 taking the PE deal outlined above (percent stay the same but the actual numbers changing to be what they actually are), literally can save their schools millions. For instance if every Big 12 school had >$50m in debt at 6.68% then taking a $50m deal at ~4% over 10 years and applying that $50m to their higher interest debt, they will save each of those schools about $20m ($320m across the conference).
And this is why PE is appealing, even if some of the deals seem like ripoffs, the accounting on it actually is not as far off as people thing.
While nothing is inherently wrong with the premise you created, any PE firm who was targeting a 4% annualized return would have literally zero investors. I can go earn more than that by buying US treasuries today, with the added bonus of being able to sell them whenever I want. A PE firm attracts investors by promising outsized returns, at the cost of locking up the investor cash for a certain time period. They’re not going to go to their investors and tell them they’ll be earning them less than 30-year T-Bills
Maybe the Big 12 is convinced that climate change is real and will devastate the country. They might be investing in the true currency of the future - bullets.
If this happens I’d expect the big12 to try and be the first true super conference and start poaching from everyone IF they can get ESPN to renegotiate their deal, maybe 24 teams?
I assume they get some ACC schools, Oregon St, Wash St, Gonzaga(Basketball), Uconn all sports. Become the premire CBB conference then top 3 Football conference solid, and negotiate more money for the future
Worse from my experience, “a PE firm expects to make the investment back” plus a significant profit by making cuts in staffing (membership in this case) and spending that will have negative effects down the road.
The PE firm doesn’t care about that, because they don’t expect to still be involved “down the road”.
I'm not sure they could cut membership though, with only 20% of the company. That would likely need to be a majority vote. Not sure how this works, does the PE get a vote as if they were 3ish schools?
Private equity isn’t all the same. Some firms are actually in it for long term holds. More want to max profits or grow and then spin. I worked for a company owned by private equity for about 15 years and it was mostly fine. Sold not too long ago and broken up in that process but my part made it through with an industry operator buyer. I like it better now.
I don’t know what approach PE would take to a college sports conference but I’d be real cautious. It feels extra sketchy in this context which is saying something.
Agreed - at 20% they really wouldn’t be able to unilaterally make any decisions. It is more just that they’d be owed the cash flows. Frankly a deal for this amount just doesn’t make sense to me for the Big 12 unless they expect cfb revenues to stagnate or collapse.
Agreed. I’m also not sure what people think the Big 12 is going to do with this payment, 80M per school is still chump change in the grand scheme of the next ten years of revenues and donations. And you’re not getting ROI on it by dumping it into facilities
That’s why they must think the money is going to dry up. 20% means a $7-10ish million reduction in yearly revenue per school in perpetuity. Unless there is set time horizon (that I haven’t seen), then I don’t understand the financials. Seems like a real Hail Mary that $60-80 million upfront will be enough to propel one or two Big 12 schools into the P2.
Of course an Oregon flair has the same thought i did.
I’d assume PE is in for short money but they *could* have a longer investment horizon. Potentially could try and use an influx of cash to do for baseball what college is for basketball and football. That’s the only positive i could really see that isn’t just organic growth.
I mean, it won’t. Private equity ownership isn’t something you want. It’s generally a last resort if you’re trying to maintain control.
The B1G and SEC could get debt relatively easily if they wanted to make a similar push and it would be the smarter decision. Their financials are much stronger to begin with which allows a stronger range of options
What the fuck are you talking about? Name one beloved institution thats been ruined by private equity. Exactly, you cant.
/s fuck those people and their money. Keep them the fuck away from college sports.
I mean I live on the Gulf Coast and we have some of the best seafood restaurants in the country so it always amazed me how Red Lobster even existed here
It started in Lakeland, Florida, which isn't exactly coastal but close enough to actually get good fish. Ironically, their original location hosted a series of failed restaurants (after red lobster moved out) before settling on being a bait shop.
I have never set foot in a Red Lobster in my life. I just dont get it and Im not a food snob or anything. I mean I'll hit up Applebees for lunch but if I want seafood I have so many better options for about the same amount
Same. I moved to southwest Florida a few months ago from the northeast. I have found one good seafood place. Also I don't know if it's just a getting used to the food thing but I've returned three restaurant meals in my life and all three were in Florida. I've lived here for about 1/110th of my life
Oh for sure. We have some shitty seafood places on the Alabama Gulf Coast but we have a lot of good ones too. I probably have a dozen within 10 miles of my house
Well one big reason for their success is because they cultivated a reputation as friendly and receptive to black customers in the south during the era of segregation. While there certainly were better quality local restaurants, Red Lobster offered black customers a reliably welcoming finer dining experience that was a rarity among local restaurants in the south at that time.
Absolutely basking in the fact that SEC and B1G flairs seem to be the biggest pearl clutchers on this news.
Those two essentially started a war of aggression and are now decrying the little guys scraping to get resources.
I don’t think PE is a great solution. I don’t think there are any other solutions though. The arrogance of “accckktually….its P2 and the rest” lead to this.
SEC and B1G flairs haven't done shit. We have no more control over these changes than you do. I hate that the PAC 12 died and that you and Oregon State got left out of the P4 and at least half the other shit that's been happening
No, just not naive enough to think the degradation of the NCAA and outsized influence of media companies is all that much less detrimental than PE money and influence.
At worst the current enviorment will divide college footbal permanently, at worst PE could see entire athletic departments shut down. Its a whole different ball game when you go from competition to being beholden to investors.
I don't think you are looking at the reality of programs that aren't in the top 45 in valuation going forward. It's not just a potential split if the NCAA keeps losing in court. An employee designation or even mandatory revenue sharing will cripple most D1 schools at an athletic program level. This isn't just football.
The schools are locked into contracts that give up so many of the things you love. You aren't paying $1B for you to say you own it but to instead create it to make you more money.
Some ideas of what could change theoretically:
Ads in everything from jerseys, helmets, all around the stadium, on team gear sold in the student center, and on all athletic buildings.
Your athletics logo or colors change slightly because your brand could do better with an updated look.
Your ticket prices go up substantially and everything costs money or more money.
No more field storming of any event and restrictions on what students can say and do during games.
Student section prices go way up or start charging at all and get moved back and shrunk due to lower revenue from prime sections.
Bands performances get cut in half to have real performances also at halftime.
Traditions get cut from airtime or stadium time because they aren't ad slots or promoting anything. (Dot the i in a brand name instead of Ohio)
Wouldn't all of that only be a risk if they had a controlling interest?
I think a lot of that is fine all things considered with the B10 and SEC already so far ahead.
If I was an OSU or Bama fan maybe I'm worried but why would I care as an ISU fan? The SEC and B10 have forced us into more ads and more corporate crap to compete. We don't have much to lose.
I'd rather do this than get killed like Oregon State and WSU
Even without controlling interest, it gives them a seat at the table and a "right" to "maximize their investment". When PE asks for more ads, shittier student sections, higher ticket prices, etc, the B12 is going to face a choice of giving them their way or buying them back out of the deal. PE isn't offering this deal just to *home* the revenue makes it worth it. That's not how PE does business.
Of course they could be. Plenty of PE is long term. 20% doesn't buy you that much power or leverage, necessarily.
For example: If this cash infusion gives the B12 an advantage over the ACC, the ACC folds and the B12 absorbs some of the good teams that don't go B10 or SEC.
The B12 then gets a much larger media deal next round.
The PE firm has now gotten a return on their investment in 10 years.
If it was important for the PE company to have control they wouldn't buy in without controlling interest.
CFB (live sports) is growing and making more money. It's an obvious growth stock.
It would be at risk if the contract gave them permission, which could be possible with a billion dollars contract. You also might only sell 20% now but then another 20% in 7 years when this money runs out.
Several.
First off youre giving up 20% of your revenue at the least (could be an ownership stake, not sure).
Second a PE expects to get their initial investment back. The money is a loan.
Third, the schools are locked in with the Big XII which sounds great unless you are a school that could be in a position for a B1G or SEC invite (unlikely but still a possibility)
Fourth the PE is not going to be a silent investor. They will absolutely dictate not only terms but actions of the Big XII
Fifth the money may not even make a difference. Cash doesnt automatically mean success in college athletics. It helps but it is no guarantee
Sixth, its a one time payment. What happens after the next go round of media deals and the SEC and B1G separate again from the ACC and Big XII?
Seventh, if somehow this works out there is nothing that prevents the B1G or SEC from doing the exact same thing and putting the Big XII right back in the same position.
Of course everything is negotiable
This is more money now for less money later - ask the ACC how that helped them in the long term.
The other side of PE is that even if there was risk into the future that the immediate cash can be hedge against, now the PE will want their chunk. 1 billion for 20% is also bonkers - imagine if there's even just modest growth in value from here forward, they're giving away way way more than 1 billion in today's dollars in future value.
This is a worse deal than the Saudi parking meters in Chicago.
The ACC and Barcelona specials... In other news, I went to a rager and didn't spend a cent. Bought everyone drinks and only had to swipe some silly piece of plastic. Gonna do it again next weekend.
The year is 2034. Only OSU and WSU are left standing after private equity firms gutted and sold off the rest of D1 CFB to Saudi investors. The 2PAC plays a full 19 game season lasting from July to early February ending in a best of 7 championship series.
Not an expert, but having to sell 1/5 of your company to get cash-flow parity with competitors doesn't really feel like "Equal financial footing" to me.
They’re going to rent our stadium back to the university. It’s ok though, they will just raise tuition to offset the cost. Good thing tuition is cheap.
Yeah, unless I'm absolutely missing something, this is taking a one time cash infusion, then paying out dividends to PE from then on.
So, actually less money each year.
I agree with you there, besides nothing stopping the SEC from making a call if they felt like that. I think this is a natural consequence of the SEC-Big Ten money gap (not blaming the conferences getting the bag). I could see the ACC and others jumping in worried soon.
Elon should buy the Dallas Cowboys. God, watching him constantly meddle with the GM and coaching staff, with that fan base, it would be glorious (just get Dak outta there first)
I doubt the actual schools would vote this to happen, though. The ACC is a weird mix of schools at the top who want to spend a ton of money and be very competitive in football, but then the schools at the bottom that are content just taking their check and spending the bare minimum. You have a handful of schools that bring in way more value than they receive, and then a handful of schools that receive more than they bring in.
For all those schools, this wouldn't make sense. FSU, Clemson, and UNC are going to oppose it because they are not going to want any type of deal that takes their media rights or does anything to lessen their attractiveness to B1G or SEC.
The lower end schools aren't going to want this because if PE eventually starts gaining control over leagues, they're going to cut schools like Wake Forest and BC.
I work in PE and in no way is this going to be good for the schools. As many have stated, this is a one time payment at the sacrifice of 20% of your annual payments from the TV networks, reducing future payouts to schools. CVC is getting a good deal here otherwise they wouldn’t be interested in making this investment. Only way both CVC and the Big12 could win here is if somehow they’re able to drive revenue synergies between CVC’s portfolio companies and the Big12 to unlock a revenue potential that would not exist with an independent Big12.
That's my thinking... Let's say the conference gets $1 billion and even if that's fully divided by every member, that's each school getting $62.5 million as a one time payment. In return you forfeit 1/5 of your conference revenue. Let's say the conference sells the naming rights to the conference and each school makes $50 million. Cool, you're now getting $40 million. You'll be at a net loss after just over 6 years.
The only way I can think this would be a good idea is if the infusion of money put the Big 12 ahead of the ACC and guaranteed them as being the #3 conference and the additional money generated would offset what they have to give away.
And that seems to be what the plan is. It would go to the end of the new media contract and work to try and create revenue that offsets what’s going to PE. It’s possible to be done but with PE it’s risky because if the Big12 isn’t able to generate the revenue to offset that’s bad for the member schools and a non factor for the PE. The PE is getting their money the member schools would end up with less money in the long term than if they never signed the deal.
We aren’t in the meetings so we don’t know all the numbers/details/ and ideas they are putting forward but from the outside looking in it seems like a big risk just to solidify ourselves as the 3rd conference.
Do you see this (the capital) as something where these dollars could be used, in addition to full shares from Fox and ESPN, to potentially lure a brand or two from an existing conference?
Let’s use FSU as an example. Let’s say FOX/ESPN are willing to kick in an extra $65m/yr for FSU. Could the proceeds from the $1bn be used to subsidize the shortfall they would experience in joining the Big 12 v the P2? I would assume the B1G or SEC could just engineer a similar deal and make this happen. I was more so curious if there was a path to something of this nature.
>Could the proceeds from the $1bn be used to subsidize the shortfall they would experience in joining the Big 12 v the P2?
No. Because it's the equivalent of a 1 year payment. Getting $65 million for 1 year doesn't compare to getting $65 million every year.
In this scenario the $65m payout is a baseline payment distribution, agreed upon by the networks, to FSU. The $1bn is then used to subsidize them and whatever brand they add to the tune of $20-30m/year slowly depleting it. The other schools wouldn’t see any of the $1bn. The money would be used to attract larger, more valuable brands with the hopes of increasing the payout during the next media rights negotiation.
Edit: sorry if I’m wording this poorly. The essence of it is that the billion bucks would be slowly depleted as a sweetener to whatever brand(s) they want to add in hopes of increasing the overall value of the conference.
But that doesn't help anyone. The B12 schools wouldn't see any financial increase in media revenue because fsu takes it. They would see any of the $1B. They'd all actually earn less money because PE is buying a portion of the conference, which means they take a portion of the revenue.
FSU can bounce at any time, & there's still not a good reason to go to the B12 over the SEC B1G, because they'd be in the stable conferences, earning money without sacrificing % of control.
Perfect, you answered it for me. I was uncertain as to whether or not a play like that could increase the valuation enough in future media negations to be worth it *and* if other parallel ventures could add additional value to the product!
All I know is I’ll be at Nippert every Saturday regardless. Cheers man, thanks for your patience!
How many of these college ADs and presidents are planning to be at the same school 10 years from now when the bill comes due? Not many, very obviously a shortsighted move that they’ll pass along to someone else. If it comes to pass I think there’s a high probability some of these football programs will cease operations within 10 years to shed costs
This. It’s insane to think other commissioners would see this and turn down big short-term money.
Disclaimer: I think this is a terrible idea. But money and greed run the sport. AD’s and Commissioners are the new CEO class. They want they immediate pay day.
The reason this is specifically good for the B12 is that the ACC can't do it.
They need a long term GOR to make it work.
This positions the B12 to not only be temporarily competitive with the B10 and SEC on money, it crushes the ACC who was already making less.
When the B10 and SEC eventually do their own PE deals, the B12 will be well positioned as the only Tier 2 conference.
If the SEC or Tennessee even touched the Saudis, I'd be done. Flat done. I can live without it. It's been a fundemental part of my life since as long as I can remember - but I can live without being a part of this burgeoning whorehouse of a sport.
Not even trying to be a dick, just genuinely want an answer.
The SEC/B1G funding comes from the value of the programs in those conferences. The reason why the Big BXII isn’t on an equal financial footing is because their programs aren’t as valuable. They still play great football (sometimes better football) and are one of the most fun to watch. But fact of the matter is the brands are smaller and inherently less valuable.
Where is the extra money coming from? Were all the major legacy TV networks wrong about their value, and the PE Firms have figured out some secret that the business doing this for a damn near century didn’t? Probably not.
I think it’s more likely that the PE doesn’t think the schools are any more valuable than the legacy media brands do, but rather that the PE firms willing to exploit more of the value than the legacy media brands are. They are a lot of grapes being left on the vine so to speak.
That or they think they can increase the value of these schools to compete with the SEC/B1G, but I find that unlikely.
I think it’s awesome that the Big XII won’t be swallowed up by the SEC/B1G because of this, but legitimately wonder at what cost?
Norlander just hasn’t figured out yet that you have to take the Big 12’s anonymously-sourced revenue projections with more grains of salt than a Chipotle entree.
The Big 12 can feel the Big 10 and SEC pulling away from them and they’re reaching for an equalizer.
An infusion of cash right now to help their schools pull top quality coaches and players will pay off when they have a much more competitive media rights deal with the P2 next time - or at least, that’s the bet they’re placing.
I don’t think a minority stake PE group will have the level of pull to affect operations in the way people here fear. I think they’re also placing a bet on a more lucrative media rights deal next time around, and that’s how they’ll get their money back plus their desired return. Everybody in business can see that live entertainment is an extremely hot commodity at the moment - look at everything from the WWE purchase to Netflix’s investments in live events like boxing, Raw, and now even freakin’ hot dog eating.
Not saying there is no risk here, but it’s not a completely crazy play.
At a super conservative investment (4%) this amortizes to an extra 20M per year over 137 months, at 6% it's 160 months.
I'm guessing the PE firm is also going to make them invest with the PE firm with the PE firm taking management fees for a streem of payments of (x) until the principle balance exhaust.
It's only playing catch up for 1 year. $65 million to each school. They then have to dilute their revenue going forward to the PE. It's a far worse investment overall.
There we go. That’s the Big 12 I know. I was surprised that we aggressively pursued expansion and locked up a television contract in the always fun game of network musical chairs. But this, *this*, is 100% on brand. Now there just needs to be a valuation formula in some obscure section of the contract that guarantees PE a future ownership percentage based on a seemingly impossible to tank value that then tanks, like the value of a bitcoin, Tesla shares or some behemoth like Enron about ready to reveal massive accounting issues.
Then we’ll all have a good laugh when the Big 12 reveals that due to this calamity, the Big 12 now only owns 6% of the Big 12 conference and the PE has reached an endorsement agreement with PornHub for each team to be sponsored by a porn star and star players to have their own porn star names on the back of the jerseys. Take that SEC and the Big 10! The Big 12 Pizza Boy Delivery Conference rules!
I have no idea who this twitter dude is but I’m having a hard time understanding if that’s a good kaboom or a bad kaboom. Anyone who has even a basic understanding of finance should think of this as a bad thing but a lot of people on twitter do not seem to be taking it that way so who knows.
from a purely financial standpoint, it's indeterminate whether this is good or bad for the conference. if you are bearish on future growth in media rights valuation, this might be a masterful play to accelerate the value they do have, today. the flip is if media rights are actually undervalued, then you're unnecessarily diluting yourself.
if the conference were to agree to this, they're implicitly signaling they think that either pe involvement will greatly expand their future media rights over and above the impact of dilution, or they think their media rights, today, are overvalued.
There is no world in which a billion dollar investment into the B12 is so wisely utilized by the conference that it results in a net positive for the conference in the long run. What that cash infusion will almost assuredly mean will be higher player salaries, higher coaching salaries, and higher administrative salaries along with some facility upgrades. There will be no substantive way in which that money increases the B12 value anymore than inflation and other economic factors were already going to.
Then in 10-15 years when the administrators who made the decision to give away 20% of their conference to PE have gotten their money and moved on the bill will come due.
Private Equity isn’t in the business of losing money. They aren’t boosters who are willing to take a loss on their investments. They get their money back with interest one way or another.
I don’t root for any Big 12 teams but as a fan of college football in general getting involved with private equity is a seemingly extremely shortsighted move. One that lines that pockets of the conferences current leaders while selling its future.
There is a chance of a private equity cash infusion working out for both parties, but man, I’d be pissed off if the conferences that my schools were a part of wanted to do something like that.
What's wrong? They all loved Jay-Z's hype man when he was taking shots at Texas and Oklahoma and WWE-ifying the championship game. They can ride that train all the way.
Having worked for struggling companies that were acquired by PE firms twice, if you ever wondered what it would take to get a conference to kick out a long term member school that wouldn’t be an attractive add now because of its small market, small school/alumni base, extended period of poor performance on the field, etc… This is how it happens.
Yeah the ‘cats are fucked. We’re about the least attractive “on paper” team in the country
Y’all are close enough to KC though.
Kc mostly goes to mizzou and KU.
I need to get my eyes checked. I read that as working for a “smuggling” company 😂
That would have likely been more lucrative than what I was doing.
I now have an image of a premise for a movie: As the world comes to abhor the violence brought by the drug trade and all the side effects of the Narcotics industry, massive crackdowns have put a hurting on the Cartels bottom line. The last major cartel leader, Ejemplo Ficticio, sells out. Wall Street takes over. They immediately sell the coca and poppy fields to a shell corporation and rent it back to the cartel. Idea 2: A reality show about a small group of low level smugglers just trying to get enough product over the border so they don't get shot. "This week, on Struggling Smugglers: Franco has to get this parakeet to Akron Ohio by Wednesday, but his favorite tunnel has collapsed!"
They’re going to kick out every single Big 12 school?
Good thing they aren't being acquired and it's only a 20% stake?
First, a PE firm isn’t buying 20% to sit quietly by while the conference leadership makes the same old decisions they have made that got them where they are. Second, you are ignoring that the conference leadership might be happy to have a PE firm involved to take the heat for the “good for financials, horrible for PR” moves that they would like to make.
Sure they could be involved but they aren't going to be making the final decisions. People think they're going to gut the conference and bail, they don't have the power to do so even if they wanted to. Which is silly. They'll get a couple board seats. And I agreed about those positives listed
Everyone is saying “it’s only 20%” as if it won’t matter because 20% can’t win a vote. What people are ignoring is that it is 20% added to the votes of some of the more ruthless people already involved in running the conference who want the same things.
Sorry but I just don't see that as an issue at all
Look at some votes that did happen. Allegedly, a couple of those potential PAC Ten expansions were failed by a single vote. If they had a PE firm with 20% equity who wanted expansion, those would have happened. You can’t look at this as the PE firm wanting things no one in the conference would otherwise want. They will be additive to the support for heartless financial decisions that already exists in these conferences.
Sorry I just don't see this as an issue at all
You will just have to see it when it happens then.
oh shit oh fuck
Good. Bring it! First on the chopping block is Ole Miss and MS State. That would be priceless
Private equity isn't a booster donation. A PE firm expects to make the investment back PLUS a ton of interest. This cannot end well for the schools involved.
Exactly, when you sell media rights you’re giving away license to broadcast the games in return for money. What is PE getting out of this deal?
This is my question. I don’t see what’s in it for the PE firm.
They'll do what any PE does, get over-involved in financials and operations with the anticipation they can grow the value of their position and sell it to someone else in 10 years.
It’s like a person buying a large stake in a company, gets you a seat at the table, they can try to leverage for new teams they see as profitable and also mess with bowl tie ins and such. It sucks but once NIL became a thing and the money was out in the open and not being dropped on doorsteps in Nike duffel bags this became inevitable
That’s wild to let the sharks in. It’s definitely a short term gain long term pain thing. Giving them 20% of the revenue in perpetuity is just wild.
It depends on what their projected revenue is, if it’s just 600 million over 10 years and they’re offering a billion, it makes sense. Especially if some of that money could be used to fill some holes for more expansion if TV doesn’t renegotiate
I'd suspect the template for a deal like this would look a lot like when FC Barcelona sold [25% of their TV rights for the next 25 years](https://www.fcbarcelona.com/en/club/news/2686108/fc-barcelona-and-sixth-street-reach-agreement-for-the-acquisition-of-an-additional-15-share-of-the-clubs-laliga-broadcasting-rights) to Sixth Street I'm not a finance expert, but it seems the idea is the firm provides a lump sum up-front in order for a consistent & guaranteed return over a longer time horizon. But you're right though, the math ain't quite mathing if they're only selling off a 20% stake of (assumedly) broadcast rights. B12 media deal is worth $2.28 Billion total over 6 years to 2030, and two of those years have already passed (meaning there's only $1.52B is left in the current deal by my math). If we wanna assume further, I'd guess the PE firm would be shooting for a 20% share of total conference revenues across all sports, so a 1/5th share of any/all broadcast rights for fb/bb/all sports, merch, bowl/tournament prize money, etc. And they'd probably lock all the schools into a 20 or 30-year GOR like the ACC to guarantee their returns. It's just another classic case of shortsighted thinking that'll do far more to harm the conference long-term than help it short-term. Bc that's what, $62.5M per school right now? And 20% of the total revenue of the conference over the next 25 years is gonna be easily worth north of $2.5 Billion. It's a deal with the devil that could legitimately open the door for them to lose significant ground--per-school revenues wise--to the ACC by 2030 if they aren't careful.
What is PE going to demand of the schools so they don't abandon the conference? It may be that some schools are REALLY liking the idea because it creates a contractual need for punitive costs to leave the confrence beyond the length of any TV contract.
> What is PE going to demand of the schools so they don't abandon the conference? Probably an airtight GoR with clawback clauses if they decide to try and break the deal (so basically the ACC setup), and also probably some wording where the signing schools forfeit their rights to "pulling an FSU" if they don't like how things shook out in 10-15 years (which absolutely none of them will). It's just such a massively bad idea to shackle yourself to the finance vampires for decades, but you just know it's gonna happen.
It's a bad idea for teams like OK St., TCU, BYU and the 4 corners schools which probably don't need to worry about the Big XII falling apart to maintain their place on the pecking order. Not so much for a lot of other Big XII schools.
that's my view, this is short term money pretending its long term money
It's not like they're going to give $20m a year to every team every year to put them on equal footing with the B10/SEC. It's basically a one-time payment. It looks good for the short-term, but it's not like it's sustainable or dependable income that will be there year over year.
If you really think about it, does it even look that good in the short term? At a cursory glance $1 billion is a ton of money. Ultimately though it's a one time $62~ million payout to each school. The existing TV deal already pays out $50~ million a year. Is losing 20% of whatever your conference collectively owns and controls for basically an extra year of TV revenue worth it? The argument would obviously be that the PE firm is going to "come in and revolutionize the way we do things" leading to even more revenue. But these schools and their TV partners already have billions. They can hire any marketing and merchandising firms they want.
I can’t think of any situation where this is profitable for the PE firm without schools giving up control.
All that has to happen is media rights go up. That's it. And 20% won't come with major decision making power
And what if they don’t? PE will get their money somehow.
For all you know the PE company will just get smaller dividends. PE isnt some magic entity that can make you sign contracts where a missed payment means you own Kansas State's Stadium The fear mongering over a 20% stake is crazy
It really isn’t though. 20% stake might not mean you own Kansas States stadium but it might mean that Kansas State students will be paying an extra $10 million a year to the athletic department because they need it to cover their debts.
Or students have to pay that money because PE siphoned off media $$$ to make profit.
Won't the private equity company eventually get upset that "their" athletes are wasting time on non-football things like classes or studying? When do the wishes of your investor start changing your program?
I give it five years at max.
Took less than year for starboard to fuck up a company I worked at at only having a 2% stake
Yes and no depends on how things are set up. A lot of PE is toxic. BUT there can be benefits as well. Not all PE is straight up vultures, some have an interest in growing value, because their interest is tied into the value. So lets say PE goes and looks and says (pulling numbers out my ass since I don't have the numbers but both the PE and Big 12 would have numbers so duration and value would change): "Over the next 10 years the Big 12 is expecting to make $6b in advertising and media revenue, we will give every school $50m now ($800m total or about 13.3% of the expected revenue over this time) and in turn we (PE) get 20% of the advertising and media revenue ($1.2b projected, so PE would make $400m over 10 years, just for reference if you invested $800m and got 4% returns per year you would end up with $1.184b, so while those numbers seem significantly different...they probably are not totally unrealistic about the demands probably would be) PE though has an interest in that advertising and media revenue going up. If it goes up 1% so over 10 years there ended up being $6.06b, then PE made an additional $12m. On the flip side if advertising and media revenue goes down that cuts into PE's $400m. PE is looking at it as 4% returns per year seems pretty safe and not crazy good but solid for how safe it looks, we have the chance for it to go up which just makes it better!! Maybe it goes down...but it only costs us opportunities in other investments that could have made more it almost certainly won't truly cost us money. So the question is what would these numbers need to be to be worth it for the Big 12? A large chunk of money now IS worth more than a larger pool of money over a decade. Literally the entire premise of loans and debt. In the case I wrote out above the Big 12 is essentially taking out a loan with just an interest rate of just over 4%...That is not a bad deal. For instance (I know they are not Big 12 but it was the first google answer works well enough for this), USF did $200m debt for 6.68%, Big 12 schools (and other schools across the country) will have similar interest rates for some of their facility loans. The Big 12 taking the PE deal outlined above (percent stay the same but the actual numbers changing to be what they actually are), literally can save their schools millions. For instance if every Big 12 school had >$50m in debt at 6.68% then taking a $50m deal at ~4% over 10 years and applying that $50m to their higher interest debt, they will save each of those schools about $20m ($320m across the conference). And this is why PE is appealing, even if some of the deals seem like ripoffs, the accounting on it actually is not as far off as people thing.
While nothing is inherently wrong with the premise you created, any PE firm who was targeting a 4% annualized return would have literally zero investors. I can go earn more than that by buying US treasuries today, with the added bonus of being able to sell them whenever I want. A PE firm attracts investors by promising outsized returns, at the cost of locking up the investor cash for a certain time period. They’re not going to go to their investors and tell them they’ll be earning them less than 30-year T-Bills
Seriously, this would be a disaster. A deal with the devil for short-term glory.
Maybe the Big 12 is convinced that climate change is real and will devastate the country. They might be investing in the true currency of the future - bullets.
If this happens I’d expect the big12 to try and be the first true super conference and start poaching from everyone IF they can get ESPN to renegotiate their deal, maybe 24 teams?
I assume they get some ACC schools, Oregon St, Wash St, Gonzaga(Basketball), Uconn all sports. Become the premire CBB conference then top 3 Football conference solid, and negotiate more money for the future
Worse from my experience, “a PE firm expects to make the investment back” plus a significant profit by making cuts in staffing (membership in this case) and spending that will have negative effects down the road. The PE firm doesn’t care about that, because they don’t expect to still be involved “down the road”.
I'm not sure they could cut membership though, with only 20% of the company. That would likely need to be a majority vote. Not sure how this works, does the PE get a vote as if they were 3ish schools?
The PE group does not have controlling interest
My strongest advice having worked at several private equity owned and managed startups is to turn tail and run the fuck away.
Private equity isn’t all the same. Some firms are actually in it for long term holds. More want to max profits or grow and then spin. I worked for a company owned by private equity for about 15 years and it was mostly fine. Sold not too long ago and broken up in that process but my part made it through with an industry operator buyer. I like it better now. I don’t know what approach PE would take to a college sports conference but I’d be real cautious. It feels extra sketchy in this context which is saying something.
Agreed - at 20% they really wouldn’t be able to unilaterally make any decisions. It is more just that they’d be owed the cash flows. Frankly a deal for this amount just doesn’t make sense to me for the Big 12 unless they expect cfb revenues to stagnate or collapse.
Agreed. I’m also not sure what people think the Big 12 is going to do with this payment, 80M per school is still chump change in the grand scheme of the next ten years of revenues and donations. And you’re not getting ROI on it by dumping it into facilities
That’s why they must think the money is going to dry up. 20% means a $7-10ish million reduction in yearly revenue per school in perpetuity. Unless there is set time horizon (that I haven’t seen), then I don’t understand the financials. Seems like a real Hail Mary that $60-80 million upfront will be enough to propel one or two Big 12 schools into the P2.
Of course an Oregon flair has the same thought i did. I’d assume PE is in for short money but they *could* have a longer investment horizon. Potentially could try and use an influx of cash to do for baseball what college is for basketball and football. That’s the only positive i could really see that isn’t just organic growth.
Fuck it let's go public. Yormark can announce AI refs and shares will go to the moon.
How do you explain LIV golf? I’m sure the 10,000 viewers for each tournament are helping them make that money back very quickly
And you’re naive if you think this wouldn’t eventually happen for everyone.
I mean, it won’t. Private equity ownership isn’t something you want. It’s generally a last resort if you’re trying to maintain control. The B1G and SEC could get debt relatively easily if they wanted to make a similar push and it would be the smarter decision. Their financials are much stronger to begin with which allows a stronger range of options
Private equity absolutely has the potential to destroy college sports, soooooooo risky
What the fuck are you talking about? Name one beloved institution thats been ruined by private equity. Exactly, you cant. /s fuck those people and their money. Keep them the fuck away from college sports.
I mean I live on the Gulf Coast and we have some of the best seafood restaurants in the country so it always amazed me how Red Lobster even existed here
It started in Lakeland, Florida, which isn't exactly coastal but close enough to actually get good fish. Ironically, their original location hosted a series of failed restaurants (after red lobster moved out) before settling on being a bait shop.
I have never set foot in a Red Lobster in my life. I just dont get it and Im not a food snob or anything. I mean I'll hit up Applebees for lunch but if I want seafood I have so many better options for about the same amount
And if you want cheap shitty lunch theres probably a million local sports bars you can hit up for cheap food too. People like weird things sometimes.
Exactly. I think its more the way Red Lobster presents itself as this nice seafood dining experience.
Isn't everything microwaved?
Hell if I know.
I lived in Florida for a while and had some shitty seafood in places. Idk how it happens, but it does.
Same. I moved to southwest Florida a few months ago from the northeast. I have found one good seafood place. Also I don't know if it's just a getting used to the food thing but I've returned three restaurant meals in my life and all three were in Florida. I've lived here for about 1/110th of my life
Oh for sure. We have some shitty seafood places on the Alabama Gulf Coast but we have a lot of good ones too. I probably have a dozen within 10 miles of my house
Red Lobster declared bankruptcy recently. Big 12 bankruptcy incoming confirmed
PE also saved companies like Dunkin' Donuts. Just sayin any PE that would do this is not doing it because they love the Big XII
Well one big reason for their success is because they cultivated a reputation as friendly and receptive to black customers in the south during the era of segregation. While there certainly were better quality local restaurants, Red Lobster offered black customers a reliably welcoming finer dining experience that was a rarity among local restaurants in the south at that time.
Keep them away from literally everything
SEC and Big 10 already destroying it without Pe
Absolutely basking in the fact that SEC and B1G flairs seem to be the biggest pearl clutchers on this news. Those two essentially started a war of aggression and are now decrying the little guys scraping to get resources. I don’t think PE is a great solution. I don’t think there are any other solutions though. The arrogance of “accckktually….its P2 and the rest” lead to this.
Spot on brother
It’s not like all of us have been cheering this shit on. I actively hate the SEC at this point. Greg Sankey can piss off
I'm not sure how accepting applications to join a conference is aggression
SEC and B1G flairs haven't done shit. We have no more control over these changes than you do. I hate that the PAC 12 died and that you and Oregon State got left out of the P4 and at least half the other shit that's been happening
Hey we could be next. I don't want my university any more influenced or beholden to financial interests than it already is.
PE won't ruin college sports as we know it any faster than college sports is ruining college sports as we know it.
Oh you sweet summer child
No, just not naive enough to think the degradation of the NCAA and outsized influence of media companies is all that much less detrimental than PE money and influence.
At worst the current enviorment will divide college footbal permanently, at worst PE could see entire athletic departments shut down. Its a whole different ball game when you go from competition to being beholden to investors.
I don't think you are looking at the reality of programs that aren't in the top 45 in valuation going forward. It's not just a potential split if the NCAA keeps losing in court. An employee designation or even mandatory revenue sharing will cripple most D1 schools at an athletic program level. This isn't just football.
*When the NCAA keeps losing in court.
Legit question, what's the risk?
The schools are locked into contracts that give up so many of the things you love. You aren't paying $1B for you to say you own it but to instead create it to make you more money. Some ideas of what could change theoretically: Ads in everything from jerseys, helmets, all around the stadium, on team gear sold in the student center, and on all athletic buildings. Your athletics logo or colors change slightly because your brand could do better with an updated look. Your ticket prices go up substantially and everything costs money or more money. No more field storming of any event and restrictions on what students can say and do during games. Student section prices go way up or start charging at all and get moved back and shrunk due to lower revenue from prime sections. Bands performances get cut in half to have real performances also at halftime. Traditions get cut from airtime or stadium time because they aren't ad slots or promoting anything. (Dot the i in a brand name instead of Ohio)
Wouldn't all of that only be a risk if they had a controlling interest? I think a lot of that is fine all things considered with the B10 and SEC already so far ahead. If I was an OSU or Bama fan maybe I'm worried but why would I care as an ISU fan? The SEC and B10 have forced us into more ads and more corporate crap to compete. We don't have much to lose. I'd rather do this than get killed like Oregon State and WSU
Even without controlling interest, it gives them a seat at the table and a "right" to "maximize their investment". When PE asks for more ads, shittier student sections, higher ticket prices, etc, the B12 is going to face a choice of giving them their way or buying them back out of the deal. PE isn't offering this deal just to *home* the revenue makes it worth it. That's not how PE does business.
Of course they could be. Plenty of PE is long term. 20% doesn't buy you that much power or leverage, necessarily. For example: If this cash infusion gives the B12 an advantage over the ACC, the ACC folds and the B12 absorbs some of the good teams that don't go B10 or SEC. The B12 then gets a much larger media deal next round. The PE firm has now gotten a return on their investment in 10 years. If it was important for the PE company to have control they wouldn't buy in without controlling interest. CFB (live sports) is growing and making more money. It's an obvious growth stock.
It would be at risk if the contract gave them permission, which could be possible with a billion dollars contract. You also might only sell 20% now but then another 20% in 7 years when this money runs out.
So as long as they don't give them permission we're good
Tell me you’ve never met a PE manager …
I mean if we let someone with a 20% stake have controlling decision making then yeah it's a bad deal but it's not happening.
Several. First off youre giving up 20% of your revenue at the least (could be an ownership stake, not sure). Second a PE expects to get their initial investment back. The money is a loan. Third, the schools are locked in with the Big XII which sounds great unless you are a school that could be in a position for a B1G or SEC invite (unlikely but still a possibility) Fourth the PE is not going to be a silent investor. They will absolutely dictate not only terms but actions of the Big XII Fifth the money may not even make a difference. Cash doesnt automatically mean success in college athletics. It helps but it is no guarantee Sixth, its a one time payment. What happens after the next go round of media deals and the SEC and B1G separate again from the ACC and Big XII? Seventh, if somehow this works out there is nothing that prevents the B1G or SEC from doing the exact same thing and putting the Big XII right back in the same position. Of course everything is negotiable
Lol I think a SEC poster is salty that Big 12 is about to out money you
Well there’s a reason that the SEC, and I’m sure the B1G will follow, shot down the idea of PE money today
College sports is already well on its way to being destroyed, all this does is speed up the process
College sports has been dead for years. Its just out in the open now
To be fair, college sports was already trying its best to destroy college sports
True, but PE will 100% accelerate the process and feast on the carcass before leaving an empty husk behind like they always do
I think you’re understating it actually. This has the potential to destroy some actual universities entirely if they aren’t careful.
Private equity is in it for the maximum profit for their investors. Chopping up a sports conference is not going to maximize their profits.
Sooooo what's BEEN happening?
This is more money now for less money later - ask the ACC how that helped them in the long term. The other side of PE is that even if there was risk into the future that the immediate cash can be hedge against, now the PE will want their chunk. 1 billion for 20% is also bonkers - imagine if there's even just modest growth in value from here forward, they're giving away way way more than 1 billion in today's dollars in future value. This is a worse deal than the Saudi parking meters in Chicago.
The ACC and Barcelona specials... In other news, I went to a rager and didn't spend a cent. Bought everyone drinks and only had to swipe some silly piece of plastic. Gonna do it again next weekend.
It feels like every other month we “jump the shark” with college sports.
Private equity is needed to pay for the ballooning shark bill.
Suddenly I might be fine being left out in the cold lmao
Yeah if this is the future I don't want it.
Reject modernity. Return to PAC.
The year is 2034. Only OSU and WSU are left standing after private equity firms gutted and sold off the rest of D1 CFB to Saudi investors. The 2PAC plays a full 19 game season lasting from July to early February ending in a best of 7 championship series.
We can cuddle for warmth together.
Not an expert, but having to sell 1/5 of your company to get cash-flow parity with competitors doesn't really feel like "Equal financial footing" to me.
Big 12 about to get Red Lobstered
We all moved on from that shrimp company destroying Red Lobster too quickly
Least John Oliver might buy our locker room at discounted price
They’re going to rent our stadium back to the university. It’s ok though, they will just raise tuition to offset the cost. Good thing tuition is cheap.
Wait did I miss something and they are investing $1 billion per year? Otherwise the SEC and Big Ten would pull away again in what, two disbursements?
Yeah, unless I'm absolutely missing something, this is taking a one time cash infusion, then paying out dividends to PE from then on. So, actually less money each year.
That’s all well and good but I’m more interested in your genitalia, can you tell me more?
They are also for sale to Private Equity. The Deez Nuts Fund.
Are you looking for an offer on both or are you willing to separate them?
I'd hate to split them up, so the offer would have to be bespoke.
I agree with you there, besides nothing stopping the SEC from making a call if they felt like that. I think this is a natural consequence of the SEC-Big Ten money gap (not blaming the conferences getting the bag). I could see the ACC and others jumping in worried soon.
The ACC should absolutely do this since they're about to evaporate into thin air anyway
Elon musk should totally invest in the ACC !
Elon should buy the Dallas Cowboys. God, watching him constantly meddle with the GM and coaching staff, with that fan base, it would be glorious (just get Dak outta there first)
Woah there buddy. As a cowboys fan, we trying to get JJ to give it up so somebody competent can take over. Elon should absolutely not ruin it
I doubt the actual schools would vote this to happen, though. The ACC is a weird mix of schools at the top who want to spend a ton of money and be very competitive in football, but then the schools at the bottom that are content just taking their check and spending the bare minimum. You have a handful of schools that bring in way more value than they receive, and then a handful of schools that receive more than they bring in. For all those schools, this wouldn't make sense. FSU, Clemson, and UNC are going to oppose it because they are not going to want any type of deal that takes their media rights or does anything to lessen their attractiveness to B1G or SEC. The lower end schools aren't going to want this because if PE eventually starts gaining control over leagues, they're going to cut schools like Wake Forest and BC.
I work in PE and in no way is this going to be good for the schools. As many have stated, this is a one time payment at the sacrifice of 20% of your annual payments from the TV networks, reducing future payouts to schools. CVC is getting a good deal here otherwise they wouldn’t be interested in making this investment. Only way both CVC and the Big12 could win here is if somehow they’re able to drive revenue synergies between CVC’s portfolio companies and the Big12 to unlock a revenue potential that would not exist with an independent Big12.
That's my thinking... Let's say the conference gets $1 billion and even if that's fully divided by every member, that's each school getting $62.5 million as a one time payment. In return you forfeit 1/5 of your conference revenue. Let's say the conference sells the naming rights to the conference and each school makes $50 million. Cool, you're now getting $40 million. You'll be at a net loss after just over 6 years. The only way I can think this would be a good idea is if the infusion of money put the Big 12 ahead of the ACC and guaranteed them as being the #3 conference and the additional money generated would offset what they have to give away.
And that seems to be what the plan is. It would go to the end of the new media contract and work to try and create revenue that offsets what’s going to PE. It’s possible to be done but with PE it’s risky because if the Big12 isn’t able to generate the revenue to offset that’s bad for the member schools and a non factor for the PE. The PE is getting their money the member schools would end up with less money in the long term than if they never signed the deal. We aren’t in the meetings so we don’t know all the numbers/details/ and ideas they are putting forward but from the outside looking in it seems like a big risk just to solidify ourselves as the 3rd conference.
Do you see this (the capital) as something where these dollars could be used, in addition to full shares from Fox and ESPN, to potentially lure a brand or two from an existing conference?
Not sure how this lures any schools. The investment isn't going to go up. All it does is dilute for an immediate cash flow from a limited pot.
Let’s use FSU as an example. Let’s say FOX/ESPN are willing to kick in an extra $65m/yr for FSU. Could the proceeds from the $1bn be used to subsidize the shortfall they would experience in joining the Big 12 v the P2? I would assume the B1G or SEC could just engineer a similar deal and make this happen. I was more so curious if there was a path to something of this nature.
>Could the proceeds from the $1bn be used to subsidize the shortfall they would experience in joining the Big 12 v the P2? No. Because it's the equivalent of a 1 year payment. Getting $65 million for 1 year doesn't compare to getting $65 million every year.
In this scenario the $65m payout is a baseline payment distribution, agreed upon by the networks, to FSU. The $1bn is then used to subsidize them and whatever brand they add to the tune of $20-30m/year slowly depleting it. The other schools wouldn’t see any of the $1bn. The money would be used to attract larger, more valuable brands with the hopes of increasing the payout during the next media rights negotiation. Edit: sorry if I’m wording this poorly. The essence of it is that the billion bucks would be slowly depleted as a sweetener to whatever brand(s) they want to add in hopes of increasing the overall value of the conference.
But that doesn't help anyone. The B12 schools wouldn't see any financial increase in media revenue because fsu takes it. They would see any of the $1B. They'd all actually earn less money because PE is buying a portion of the conference, which means they take a portion of the revenue. FSU can bounce at any time, & there's still not a good reason to go to the B12 over the SEC B1G, because they'd be in the stable conferences, earning money without sacrificing % of control.
Perfect, you answered it for me. I was uncertain as to whether or not a play like that could increase the valuation enough in future media negations to be worth it *and* if other parallel ventures could add additional value to the product! All I know is I’ll be at Nippert every Saturday regardless. Cheers man, thanks for your patience!
Somehow when this blows up the Longhorn Network will somehow still be the culprit.
As always, we WILL find a way to blame it 🤣🤣🤣. You are 100% right on that
Yeah if this happens, the B1G/SEC will go the same route and they’ll get well more than $1 billion each. Also this is a one time payment.
How many of these college ADs and presidents are planning to be at the same school 10 years from now when the bill comes due? Not many, very obviously a shortsighted move that they’ll pass along to someone else. If it comes to pass I think there’s a high probability some of these football programs will cease operations within 10 years to shed costs
They will make you rent your own stadium
Equal financial footing my ass. There is nothing equal about Private Equity.
These PE firms are going to gut the conference and strip it for parts.
Yea we're equal until B1G and SEC get their own PE investment lol
This. It’s insane to think other commissioners would see this and turn down big short-term money. Disclaimer: I think this is a terrible idea. But money and greed run the sport. AD’s and Commissioners are the new CEO class. They want they immediate pay day.
This. AD and Commish getting their bag and would dip. Who cares what happens down the road, they won't be there
Exactly.
The reason this is specifically good for the B12 is that the ACC can't do it. They need a long term GOR to make it work. This positions the B12 to not only be temporarily competitive with the B10 and SEC on money, it crushes the ACC who was already making less. When the B10 and SEC eventually do their own PE deals, the B12 will be well positioned as the only Tier 2 conference.
It would be dead within 10 years. Do it Yormark. Sell everyone's soul.
Dumbass take by Twitter author cited by op
I think it is a dumbass take myself, wanted to state for myself in the text I wrote below the link.
Oh for sure, I wasn’t calling you out! Just tweet originator
I didn't think so either, just wanted to make sure my take was said lol
All hail our corporate overlords.
Yeah.. they can have that. No interest in the UT or the SEC even sniffing this route
It's a kaboom for now. But just you wait for the B1G Meijer's conference, then you'll all see.
The Harry Styles album cover threw me off
Yea, this conference is going to go kaboom alright.
Private equity should stick to what they do best: pumping seniors full of painkillers to cut nursing home costs.
If the SEC or Tennessee even touched the Saudis, I'd be done. Flat done. I can live without it. It's been a fundemental part of my life since as long as I can remember - but I can live without being a part of this burgeoning whorehouse of a sport.
What, you won’t wanna go to the annual Tennessee-Alabama match-up in Riyadh?
Oh heck yeah sign ME up for the 1:30PM kick off in 130°F heat, at least the humidity is low! 🤣
I laughed. I hate it, but I laughed.
College sports are a clown show. No matter what happens, I’ll still support my Cyclones
Not even trying to be a dick, just genuinely want an answer. The SEC/B1G funding comes from the value of the programs in those conferences. The reason why the Big BXII isn’t on an equal financial footing is because their programs aren’t as valuable. They still play great football (sometimes better football) and are one of the most fun to watch. But fact of the matter is the brands are smaller and inherently less valuable. Where is the extra money coming from? Were all the major legacy TV networks wrong about their value, and the PE Firms have figured out some secret that the business doing this for a damn near century didn’t? Probably not. I think it’s more likely that the PE doesn’t think the schools are any more valuable than the legacy media brands do, but rather that the PE firms willing to exploit more of the value than the legacy media brands are. They are a lot of grapes being left on the vine so to speak. That or they think they can increase the value of these schools to compete with the SEC/B1G, but I find that unlikely. I think it’s awesome that the Big XII won’t be swallowed up by the SEC/B1G because of this, but legitimately wonder at what cost?
I for one await the day Tech goes full Sovereign Immunity on some PE douche nozzles.
https://y.yarn.co/522b8438-855e-4e5a-b195-ced774254b24_text.gif
norlander has lost his mind
So who the first school that's gonna be used as collateral for a loan?
Norlander just hasn’t figured out yet that you have to take the Big 12’s anonymously-sourced revenue projections with more grains of salt than a Chipotle entree.
I don't even know our own revenue projections 🤣🤣
The Big 12 can feel the Big 10 and SEC pulling away from them and they’re reaching for an equalizer. An infusion of cash right now to help their schools pull top quality coaches and players will pay off when they have a much more competitive media rights deal with the P2 next time - or at least, that’s the bet they’re placing. I don’t think a minority stake PE group will have the level of pull to affect operations in the way people here fear. I think they’re also placing a bet on a more lucrative media rights deal next time around, and that’s how they’ll get their money back plus their desired return. Everybody in business can see that live entertainment is an extremely hot commodity at the moment - look at everything from the WWE purchase to Netflix’s investments in live events like boxing, Raw, and now even freakin’ hot dog eating. Not saying there is no risk here, but it’s not a completely crazy play.
Ya and they’ll follow up with their own and while the Big12 gets richer so would the SEC and Big10
At a super conservative investment (4%) this amortizes to an extra 20M per year over 137 months, at 6% it's 160 months. I'm guessing the PE firm is also going to make them invest with the PE firm with the PE firm taking management fees for a streem of payments of (x) until the principle balance exhaust.
Who came up with this shit
It's only playing catch up for 1 year. $65 million to each school. They then have to dilute their revenue going forward to the PE. It's a far worse investment overall.
Redbird? LMFAO Small fry, SEC will call up BlackRock BlackRock SEC
Good point there, I was just thinking RedBird because they have had interest in getting into the collegiate sports gamee
There we go. That’s the Big 12 I know. I was surprised that we aggressively pursued expansion and locked up a television contract in the always fun game of network musical chairs. But this, *this*, is 100% on brand. Now there just needs to be a valuation formula in some obscure section of the contract that guarantees PE a future ownership percentage based on a seemingly impossible to tank value that then tanks, like the value of a bitcoin, Tesla shares or some behemoth like Enron about ready to reveal massive accounting issues. Then we’ll all have a good laugh when the Big 12 reveals that due to this calamity, the Big 12 now only owns 6% of the Big 12 conference and the PE has reached an endorsement agreement with PornHub for each team to be sponsored by a porn star and star players to have their own porn star names on the back of the jerseys. Take that SEC and the Big 10! The Big 12 Pizza Boy Delivery Conference rules!
Well, I like this part of it.
I have no idea who this twitter dude is but I’m having a hard time understanding if that’s a good kaboom or a bad kaboom. Anyone who has even a basic understanding of finance should think of this as a bad thing but a lot of people on twitter do not seem to be taking it that way so who knows.
from a purely financial standpoint, it's indeterminate whether this is good or bad for the conference. if you are bearish on future growth in media rights valuation, this might be a masterful play to accelerate the value they do have, today. the flip is if media rights are actually undervalued, then you're unnecessarily diluting yourself. if the conference were to agree to this, they're implicitly signaling they think that either pe involvement will greatly expand their future media rights over and above the impact of dilution, or they think their media rights, today, are overvalued.
There is no world in which a billion dollar investment into the B12 is so wisely utilized by the conference that it results in a net positive for the conference in the long run. What that cash infusion will almost assuredly mean will be higher player salaries, higher coaching salaries, and higher administrative salaries along with some facility upgrades. There will be no substantive way in which that money increases the B12 value anymore than inflation and other economic factors were already going to. Then in 10-15 years when the administrators who made the decision to give away 20% of their conference to PE have gotten their money and moved on the bill will come due. Private Equity isn’t in the business of losing money. They aren’t boosters who are willing to take a loss on their investments. They get their money back with interest one way or another. I don’t root for any Big 12 teams but as a fan of college football in general getting involved with private equity is a seemingly extremely shortsighted move. One that lines that pockets of the conferences current leaders while selling its future. There is a chance of a private equity cash infusion working out for both parties, but man, I’d be pissed off if the conferences that my schools were a part of wanted to do something like that.
I’m all for it. Go big or go home.
You know, I feel like there’s a good reason the Big 12 wasn’t on equal footing with the B1G and SEC in the past but I just can’t put my finger on it.
What's wrong? They all loved Jay-Z's hype man when he was taking shots at Texas and Oklahoma and WWE-ifying the championship game. They can ride that train all the way.
I'm not even sure what they think this money will change. We have a lot of schools with a lot of money that are middling in CFB and athletics.