I believe people disengaging will continue to grow in rural markets if parity is not built in. There's a reason why all professional leagues have boundaries.
Big 12 Considering $1B in Private Equity
- Thread starter AgronAlum
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I've been stocking up specifically for this.
College athletics has never in history of its existence has had parity and it has flourished.
Also, why rural areas specifically?
Con is that it is a joke to be the Coca Cola conference or whatever. Pro is the money and cuts the gap (I mean chasm) to the Big 10 and SEC. No way will they ever do something like this. Or if they do, it will be a limited thing like Big 10 Ford Conference.
Sounds l
The PE investment is a separate thing. That's more like selling shares in your business for $X, and then they get a % down the road for a period of time (either set or forever, not sure what this is).
I haven't seen details, but here's a hypothetical:
PE pays $1B over 5 years... that's $12.5M per school per year in guaranteed money those 5 years. Then they get 20% of the conference - let's assume that means 20% of the TV money, including CFP and NCAA tournament money, all of it. Say that's $500M annually, they would get $100M of that annually. Assume that increases 5% annually. Over 30 years, the IRR on that is 22%, which is strong, especially if you think there is little risk of college sports evaporating and there could be upside if TV/streaming money goes up higher than 5% annual.
From the conference's perspective, it's kind of an expensive way to get money now. You're giving up $6.6B in the above example over 30 years in exch for $1B now. It's kind of JG Wentworth. But if you are desperate right now for money, and you think this could enable you to survive during hte next few years... then it's better than starving to death. Maybe you only go 20 years, the details will be super interesting to see.
Hmm, at 20 years, the IRR is still 21%, but you give up half as much total money. Maybe that's how it makes more sense for the conference.
It might be cheaper long term to issue bonds for this, but idk who would buy such bonds? Talk about a new and different concept. Here's $1B in bonds at a 10% coupon payable over 20 years, from the Big12's CFP proceeds... talk about junk bonds.
From what I see on twitter, it is two separate animals. e.g. the naming rights (AllState 12) is an annual cash for naming rights gig. That's pretty straightforward, although you'd think a beer sponsor (12-pack) would make more sense...
The PE investment is a separate thing. That's more like selling shares in your business for $X, and then they get a % down the road for a period of time (either set or forever, not sure what this is).
I haven't seen details, but here's a hypothetical:
PE pays $1B over 5 years... that's $12.5M per school per year in guaranteed money those 5 years. Then they get 20% of the conference - let's assume that means 20% of the TV money, including CFP and NCAA tournament money, all of it. Say that's $500M annually, they would get $100M of that annually. Assume that increases 5% annually. Over 30 years, the IRR on that is 22%, which is strong, especially if you think there is little risk of college sports evaporating and there could be upside if TV/streaming money goes up higher than 5% annual.
From the conference's perspective, it's kind of an expensive way to get money now. You're giving up $6.6B in the above example over 30 years in exch for $1B now. It's kind of JG Wentworth. But if you are desperate right now for money, and you think this could enable you to survive during hte next few years... then it's better than starving to death. Maybe you only go 20 years, the details will be super interesting to see.
Hmm, at 20 years, the IRR is still 21%, but you give up half as much total money. Maybe that's how it makes more sense for the conference.
It might be cheaper long term to issue bonds for this, but idk who would buy such bonds? Talk about a new and different concept. Here's $1B in bonds at a 10% coupon payable over 20 years, from the Big12's CFP proceeds... talk about junk bonds.
I am wondering if a lot of people will have the same limit and so it will be less of a slope and more of a cliff. I also think the drop off will be less to do with parity and more to do with the connection between the school and team. It’s also possible most people won’t care
Legends & Leaders should have been Ford and Chevy. Could've made a fortune.
edit - having them bid over who got to be East division rather than the crap West would have been a money spinner!
I remember joking with someone about why the Big Ten didn't rename these stupid divisions to sponsors. They could have moved teams around to balance out divisions and made a ton of money on it.
Where does the PE’s return come from? Either they will want a share of the annual TV rights or they’ll flip it to someone else in X years. This isn’t free money.
Companies often take PE money so they can accelerate growth (and it often works). No one should take PE money so you can be financially equal to your competitors. Because the bill will come due eventually.
Legends and Leaders is right up there with one of the worst college decisions ever. I still had no idea who was in either conference.
Correct - supporters of the big clubs stood against the super league for the health and success of smaller clubs and leagues.
SEC and Big 10 fans would dance on the graves of the Big 12 and ACC if they got the chance. Totally different fan cultures.
I honestly don't care about the name of things and never have. It's more of a joke to be in a division of sports where we just cannot compete financially with the other leagues.
As far as PE money goes, I'd much rather just take the Saudi money. bring on our keffiyeh wearing overlords.
Exactly, equity firms are in it to make money. So...how do non-profit organizations, like college athletic departments and conferences, go about "making money" for the equity firm? Are ADs and the conference going to give up their 501(c)(3) non-profit status?
They already are and have been for years. OUT was widely celebrated even by Big 10 fans even though they had nothing to gain from it. Then we did it for the Pac 12 collapsing.
Kind of symbolic of our American mindset vs European mindset.
See my other post for thoughts. They will absolutely be taking a share of the conference proceeds. I don't see how it makes sense any other way.
Its sort of like adding 4 more teams in terms of paying them out of the annual take. But they don't play games, and instead give you $250M each as a buy in.
While there are absolutely SEC and Big 10 fans who do this, is now not a good time to say that this is true across conferences?
No conference is immune from this
