Realignment Megathread (All The Moves)

[Mr.G.Spot]

My understanding is BTE.

Now, who owns BTE? IDK but would assume the member universities own it, and/or shell companies owned by the universities. The distributions from BTE go TO the member universities, and that's pretty much how you define "owner".

Now its entirely possible there is a majorly tortured ownership structure that tries to shield the universities from liability. But even then, they would get sued for any kind of bond default - because they have money. And if you have money, you get sued.

Will the BTE be a non-profit?

If they are legally outside of complete university ownership, then this tax free status will be very difficult to maintain. Can 16 universities create a JV with a PE firm and be tax free. Unlikely.

If the universities each own a prorata amount, trust me, if capital is ever needed, then the universities will get a nice letter for a capital call. Normal course of business.

 

[cykadelic2]

Will the BTE be a non-profit? If they are legally outside of complete university ownership, then this tax free status will be very difficult to maintain. Can 16 universities create a JV with a PE firm and be tax free. Unlikely.

If the universities each own a prorata amount, trust me, if capital is ever needed, then the universities will get a nice letter for a capital call. Normal course of business.

 

[Kinch]

Whens the last time a media company didn't pay their rights fees for college football?

What's the difference in interest on AAA vs. Ba1 20 year debt?

Regardless the Big 10 can structure a deal meeting investor return requirements without giving up equity in BTE.

The only caveat would be if the Big 10 is looking at the $2.4B being the first distribution from Cal Investments. Which could be because $100M won't last the Little 13 very long.

It's not a long-term answer unless the Big 10 foresees a HUGH jump in the 2030+ media deal. Or schools finds a way to drastically cut costs.

Even for Ba1, default rates are very low less than 1.5 percent, compared to 0.5 percent for investment grade and higher. The big difference is in the payback for accepting that small extra risk. In the Big 10s case, the difference in payback for A and Ba1 is about 50 million a year. Even if it is 10 million, if I was a retiree or current worker I would be furious. Why would you choose a fund that didn’t pay corresponding to your risk?

 

[Clark]

the dumbest ******* people on the planet. The U of I hospital generates 3 billion in revenue annually but sure remove the non profit status of the university because they got 80 million in a tv deal (or whatever it was) That's not even getting into the billions in research funding.

 

[NetflixAndClone]

I figured this was the best thread for this post.

My bet it is Nebraska that is mad they are on the lowest level.

 

[SCNCY]

I figured this was the best thread for this post.

My bet it is Nebraska that is mad they are on the lowest level.

I’d be curious on how the PE gets their money back. Does come out of the Big 10 media before the equal sharing amongst the schools? Or is the PE payback tiered also where the top tier school have to pay more since they got more?

 

[Mr.G.Spot]

I’d be curious on how the PE gets their money back. Does come out of the Big 10 media before the equal sharing amongst the schools? Or is the PE payback tiered also where the top tier school have to pay more since they got more?

The devil will be in the details. That Waterfall Agreement will be very interesting to see how it is structured. I don't know why it wouldn't be tiered the way the initial money received is structured.

 

[Clark]

I’d be curious on how the PE gets their money back. Does come out of the Big 10 media before the equal sharing amongst the schools? Or is the PE payback tiered also where the top tier school have to pay more since they got more?

The way I understand it is the one time payouts would be unequal but everything after that is split evenly.

The tv revenue would go to a newly created entity (Big Ten Entertainment, or something like that) which the PE owns 10% of. The other Big 10 schools split the remaining 90% evenly.

So if the Big 10 generates 1.5 billion in tv revenue for the year the PE gets a distribution of 150 million (their 10% and the schools get the even split of 75 million each.

The bet the PE group is making, and where the real ROI is found, is that over the 20 year timeframe that they will be paid out, the Big 10 tv deals will go up from where they are now and instead of getting 10% of 1.5 billion they're getting 10% of 2-3 billion towards the middle of that deal.

I can see why Penn St might like this deal. I can see why Rutgers, Maryland, or UCLA might like this deal. I can't really see why anyone else in the league does though.

 

[Kinch]

I figured this was the best thread for this post.

My bet it is Nebraska that is mad they are on the lowest level.

Or Michigan State.

 

[FriendlySpartan]

Or Michigan State.

Nah sparty is desperate for money for the AD, they would take any cut

 

[FriendlySpartan]

The way I understand it is the one time payouts would be unequal but everything after that is split evenly.

The tv revenue would go to a newly created entity (Big Ten Entertainment, or something like that) which the PE owns 10% of. The other Big 10 schools split the remaining 90% evenly.

So if the Big 10 generates 1.5 billion in tv revenue for the year the PE gets a distribution of 150 million (their 10% and the schools get the even split of 75 million each.

The bet the PE group is making, and where the real ROI is found, is that over the 20 year timeframe that they will be paid out, the Big 10 tv deals will go up from where they are now and instead of getting 10% of 1.5 billion they're getting 10% of 2-3 billion towards the middle of that deal.

I can see why Penn St might like this deal. I can see why Rutgers, Maryland, or UCLA might like this deal. I can't really see why anyone else in the league does though.

See the last part I get which is why it’s Michigan mainly being smart and holding this up from happening.

With the AD’s getting that immediate infusion of money the AD will be able to do just about anything they want to make their mark on the program. Want some stadium upgrades for Rutgers and Indiana? Done. Want to fire the coach at Wisconsin or MSU, zero issues.

This brings all the schools back into the black right away (only in the red in most cases for their own short sightedness) and allows them to pursue whatever they want during their reign.

It’s still a horrible idea and 100% shouldn’t happen

 

[CascadeClone]

I can see why Penn St might like this deal. I can see why Rutgers, Maryland, or UCLA might like this deal. I can't really see why anyone else in the league does though.

It could be step 1 in prising away the Tippy Top brands to make the Premier League for college football.

Someone like Ohio St or USC, mad about this deal and mad at their lesser conference mates, might now be open to listening to a proposal for their FB team to go play elsewhere for even more money. And once a couple get in line, others will follow out of fear, jealousy, greed, and just general game theory.

If you put on your tinfoil hat and squint a little anyway...

 

[isucy86]

The way I understand it is the one time payouts would be unequal but everything after that is split evenly.

The tv revenue would go to a newly created entity (Big Ten Entertainment, or something like that) which the PE owns 10% of. The other Big 10 schools split the remaining 90% evenly.

So if the Big 10 generates 1.5 billion in tv revenue for the year the PE gets a distribution of 150 million (their 10% and the schools get the even split of 75 million each.

The bet the PE group is making, and where the real ROI is found, is that over the 20 year timeframe that they will be paid out, the Big 10 tv deals will go up from where they are now and instead of getting 10% of 1.5 billion they're getting 10% of 2-3 billion towards the middle of that deal.

I can see why Penn St might like this deal. I can see why Rutgers, Maryland, or UCLA might like this deal. I can't really see why anyone else in the league does though.

Couple things:

1. I thought I read where the Big10 Conference Office also getting a share as well. Don't know if that was PE upfront money or % equity in Big10 Enterprises.
2. It might be UC Investment's 10% equity is 10% of the annual media payments. But I thought they were 2 distinct pools of money for UC Investments. The Big10 Enterprises would pay UC Investments back principal and interest using media rights revenue. And at the same time UC Investments would own 10% of BTE. BTE is the holding entity for media rights monies but also sponsorship and other marketing money generated at the conference level.

I could be wrong as limited information has been released.

 

[1UNI2ISU]

Couple things:

1. I thought I read where the Big10 Conference Office also getting a share as well. Don't know if that was PE upfront money or % equity in Big10 Enterprises.
2. It might be UC Investment's 10% equity is 10% of the annual media payments. But I thought they were 2 distinct pools of money for UC Investments. The Big10 Enterprises would pay UC Investments back principal and interest using media rights revenue. And at the same time UC Investments would own 10% of BTE. BTE is the holding entity for media rights monies but also sponsorship and other marketing money generated at the conference level.

I could be wrong as limited information has been released.

From #1.

The Big Ten office, and every other league for that manner, always has a share or half share depending on the league. So their media deal is really split 19 ways and that funds non-rev championship events and league staff and operating expenses.

 

[Cloneon]

I think you are way off base if you think the next 2 Big 10 media deals stand any chance of being less than the current deal.

Streamers like Amazon, Netflix, Apple and Amazon are all poised to expand their live sports content.

And traditional media companies like Disney, Universal, Paramount and FOX are all investing in platforms and moving toward growing their subscription platforms.

I'd say the Big 10 media deal will be highly credit worthy. Payments increasing and companies making payments are some of richest companies.

That's why I question need for Big 10 to give Cal Investments equity share in BTE. IMO Big 10 could just structure it like a securitization transaction.

How many media companies actually negotiated the last B1G media contract? I ask because the 'liability' can be used as leverage to reduce the next bid.

 

[Big_Sill]

Money "invested" in a non-profit will have to be debt like, not equity... which also means there is no PE exit strategy of selling the equity interest as it doesn't exist.

The 10% equity ownership of BTE would have to make BTE a taxable entity no? I'm sure they found a way around this because introducing a 40% tax haircut on all this $$ is not an option, but haven't seen it reported how.

 

[CycloneT]

I’d be curious on how the PE gets their money back. Does come out of the Big 10 media before the equal sharing amongst the schools? Or is the PE payback tiered also where the top tier school have to pay more since they got more?

They’ll be entitled to a certain percentage of Big Ten Enterprises revenue then they’ll likely be able to sell off their 10% stake in it at some point if they want to. Who they’ll be able to sell it too who knows

 

[jbhtexas]

the dumbest ******* people on the planet. The U of I hospital generates 3 billion in revenue annually but sure remove the non profit status of the university because they got 80 million in a tv deal (or whatever it was) That's not even getting into the billions in research funding.

Did you bother to read the letter before ranting? It seems that you didn't...

She's asking Congress to :

• Review whether the NCAA and athletic conferences should be allowed to continue as non-profits
• Review whether university athletic income should continue to be exempt from UBIT
• Review whether NIL collectives should be allowed to continue as non-profits
• Review the tax status of athletes who get NIL
• Review whether the existing excise tax rules are effective in addressing excessive compensation issues for coaches.

There's nothing in there about taking away the general non-profit status of universities, or jacking with the revenue generated by the U of I hospital.

 

[Kinch]

How many media companies actually negotiated the last B1G media contract? I ask because the 'liability' can be used as leverage to reduce the next bid.

Isn’t Fox a member of the Big 10 board?

 

[Clark]

Did you bother to read the letter before ranting? It seems that you didn't...

She's asking Congress to :

• Review whether the NCAA and athletic conferences should be allowed to continue as non-profits
• Review whether university athletic income should continue to be exempt from UBIT
• Review whether NIL collectives should be allowed to continue as non-profits
• Review the tax status of athletes who get NIL
• Review whether the existing excise tax rules are effective in addressing excessive compensation issues for coaches.

There's nothing in there about taking away the general non-profit status of universities, or jacking with the revenue generated by the U of I hospital.

I was trying to make the point that these universities have far, far bigger revenue generators that aren't being this heavily scrutinized and to single out sports specifically is dumb. It's dumb for several reasons, most notably that just about all of these entities can show very little profit if they want to so it's fairly pointless. They already did this song and dance with the NFL who was technically a non profit, they saber rattled and the NFL gave it up because it was a pointless designation for what is essentially a passthrough entity. Same for the NCAA and conferences.