Big Ten Discussing $2 Billion Private Capital Deal

[HRE Otto IV]

Does this mean that B1G expansion is over for the next 20 years? They are now dividing revenue 20 ways. Pretty much any school added would need to add $100M/y to break even for the existing schools. Notre Dame +1 would achieve that. Not many others would. I don't think UNC would alone. Unless conferences have expanded championships, then that would cover additions.

And how much will the new investor have veto power on expansion?

How the heck does the BTN fit into this? Does it become 40% owned by BTE? In which case the investor now has equity in the network? If not the investor will want the BTE to charge the BTN a good amount of money for content. The BTN currently gets content on the cheap. So indirectly the schools will need to pay more money for their own content via the BTN. They get the money back via BTE, but not all of it as the investor takes their cut.

Also if new schools are added the BTE shares would need to come from the school's and conference's equity. The investor will not reduce theirs. When you create a real company, it makes expansion so much more messy.

 

[rocklloyd]

I’m close to checking out. College sports is turning into everything I hate about pro sports.

 

[HRE Otto IV]

The B1G already started unbundling their FB contract. I would guess that the BTE would want to unbundle all sports. Which could be great for the entirety of college sports. If we see BTN for the FB gets X, BBall gets Y, Olympics Z then we know the market value of each.

So when the ACC GOR runs out, do we not push for an ACC FB Conference only and let the rest disperse? What is the point in an all sports conference spanning the entire country if the contracts are unbundled?

In which case we can create a non FB Northeastern conference. SU, BC, Pitt, West Virginia, UConn, Temple, Nova, St Johns, Georgetown, Providence. So pretty much the OG Big East BBall minus Seton Hall.

 

[HtownOrange]

$2BB, split 20 ways over 20 years. Or $100MM/per team with the conference and PE each getting a share, spread over 20 years is merely $5MM/year. Or a QB under a 1 year contract at some schools.

All we see is the cash flow in. PE does not work that way, they will want something in return. That $5MM per year share does not begin to pay back the $2BB initial cash outlay. PE will want collateral guarantees, too. The B1G are majority state schools and the legal issues with securing loans against property when the sovereign does not allow lawsuits to obtain the property in the event of a default is not collateral.

PE will want much bigger returns than average. High risk high reward. Where is the new revenue generated from? In reality, even if the B1G could root out competition, no one outside of B1G fandom will watch NFL lite, nor will schools take a small payoff to be abused on a Saturday, they will demand $5MM or $10MM for body bag games. And most fans will remain loyal to their teams, there will not be as many watching B1G football as they dream. The SEC has already confirmed a P2 concept is not sustainable, now a P1 concept of 18 teams is going to do what even the NFL can’t do.

We don’t need broadcasters anymore as games can be streamed easily. Especially when games can be streamed for lower costs. Think ESPN origins. It was just die hard fans having fun, a hobby turned into a business model.

Before anyone gets excited, I would want to see the real terms. Does anyone think any school can jump merchandise and commercial ads to $5 in profit, probably double or triple to support the new marketing costs so revenue generated will need to be $10MM - $15MM per team per year to reach a $5 MM mark. Nebraska fandom is saturated, how will they generate additional revenue? Explain Rutgers, Maryland, Northwestern, Indiana, Illinois, et al. In truth, the bottom feeders and some middle range teams will merely be riding UM, tOSU and a couple other names’ coattails. If tOSU, UM, PSU and a couple others can generate enough revenue to support their profits and others profits, why not do it anyway under the present system? They would benefit far more from managing the new revenue generation than by sharing.

There is a lot more to the story and it looks more like PE overstretching their true capabilities. People who don’t need money don’t borrow at loan shark rates.

 

[PAcuse]

Do they? People like having something to do that's relatively inexpensive and convenient. They don't really love them enough to be big money makers.

Alot of areas really do, we have a ton of minor league teams in the driveable area and lots of die hard fans.
See Hersey Bears for a prime example of a diehard fanbase for minor leagues.

 

[PAcuse]

I work in the IT world and we have a cilent that was bought up buy a PE last year, they just came to us and said they need to cut their budget with us by 65% for the 4th quarter and then layed off 150 people and closed a plant.

So when the PE loses money does Rutgers and Maryland close down?

 

[PhatOrange]

Do they? People like having something to do that's relatively inexpensive and convenient. They don't really love them enough to be big money makers.

nothing would change here, the big 10 will still be packed every Saturday. People who want to hold onto amateur sports will have to go watch HS football. Deals like this might be what ultimately save schools like Syracuse.

 

[jr4750]

I work in the IT world and we have a cilent that was bought up buy a PE last year, they just came to us and said they need to cut their budget with us by 65% for the 4th quarter and then layed off 150 people and closed a plant.

So when the PE loses money does Rutgers and Maryland close down?

exactly what they do. Slash costs wherever they can. Could be in that scenario more than those two. I get NW is a great academic school, but are they worth the money? Is Nebraska helping anymore?

 

[OCESIP]

Who would have ever thought you needed an MBA to understand where college sports are headed. Maybe Dartmouth will take my application. Always liked their program.

 

[Chip]

I’m close to checking out. College sports is turning into everything I hate about pro sports.

College sports went into ludicrous speed mode, passed the pros by.

The pro sports have some semblance of control.

 

[HRE Otto IV]

$2BB, split 20 ways over 20 years. Or $100MM/per team with the conference and PE each getting a share, spread over 20 years is merely $5MM/year. Or a QB under a 1 year contract at some schools.

All we see is the cash flow in. PE does not work that way, they will want something in return. That $5MM per year share does not begin to pay back the $2BB initial cash outlay. PE will want collateral guarantees, too. The B1G are majority state schools and the legal issues with securing loans against property when the sovereign does not allow lawsuits to obtain the property in the event of a default is not collateral.

PE will want much bigger returns than average. High risk high reward. Where is the new revenue generated from? In reality, even if the B1G could root out competition, no one outside of B1G fandom will watch NFL lite, nor will schools take a small payoff to be abused on a Saturday, they will demand $5MM or $10MM for body bag games. And most fans will remain loyal to their teams, there will not be as many watching B1G football as they dream. The SEC has already confirmed a P2 concept is not sustainable, now a P1 concept of 18 teams is going to do what even the NFL can’t do.

We don’t need broadcasters anymore as games can be streamed easily. Especially when games can be streamed for lower costs. Think ESPN origins. It was just die hard fans having fun, a hobby turned into a business model.

Before anyone gets excited, I would want to see the real terms. Does anyone think any school can jump merchandise and commercial ads to $5 in profit, probably double or triple to support the new marketing costs so revenue generated will need to be $10MM - $15MM per team per year to reach a $5 MM mark. Nebraska fandom is saturated, how will they generate additional revenue? Explain Rutgers, Maryland, Northwestern, Indiana, Illinois, et al. In truth, the bottom feeders and some middle range teams will merely be riding UM, tOSU and a couple other names’ coattails. If tOSU, UM, PSU and a couple others can generate enough revenue to support their profits and others profits, why not do it anyway under the present system? They would benefit far more from managing the new revenue generation than by sharing.

There is a lot more to the story and it looks more like PE overstretching their true capabilities. People who don’t need money don’t borrow at loan shark rates.

I interpreted it that the investor/s will get 1/20th of the B1G yearly payouts, with a 20 year guarantee as a minimum commitment (I guess that ends any Super League talk for awhile). How much does the B1G distribute? About $1.5B a year? So the investor will get close to $75M a year.

But it sounds like Ohio State and Michigan do not want to tie themselves in for that long and/or do not want even distribution/shares.

I believe that the $2B is a one time payment that will be buy in and start up cash for the new BTE. After some of that money is taken up the rest goes to the B1G. Then the B1G wets their beak before distributing to the schools. The schools will likely take a piece of that for the general fund, before giving money to the AD. Who will use some of that money for facilities and other sports. By the time it trickles down to the FB team it isn't much money, and is only a one time influx. Maybe that makes a difference for a season or two, but not long term.

The BTE makes sense. It is a business venture. The schools and ADs are run by academics. They have no clue how to run a for profit enterprise. Now with the BTE they will have that expertise and be able to maximize revenue. Which means more $ per year, even with giving that 1/20th to the investor.

 

[sufandu]

Alot of areas really do, we have a ton of minor league teams in the driveable area and lots of die hard fans.
See Hersey Bears for a prime example of a diehard fanbase for minor leagues.

I wonder how profitable they are, though. Sports revenue is driven so much by broadcast contracts.

 

[HtownOrange]

I interpreted it that the investor/s will get 1/20th of the B1G yearly payouts, with a 20 year guarantee as a minimum commitment (I guess that ends any Super League talk for awhile). How much does the B1G distribute? About $1.5B a year? So the investor will get close to $75M a year.

But it sounds like Ohio State and Michigan do not want to tie themselves in for that long and/or do not want even distribution/shares.

I believe that the $2B is a one time payment that will be buy in and start up cash for the new BTE. After some of that money is taken up the rest goes to the B1G. Then the B1G wets their beak before distributing to the schools. The schools will likely take a piece of that for the general fund, before giving money to the AD. Who will use some of that money for facilities and other sports. By the time it trickles down to the FB team it isn't much money, and is only a one time influx. Maybe that makes a difference for a season or two, but not long term.

The BTE makes sense. It is a business venture. The schools and ADs are run by academics. They have no clue how to run a for profit enterprise. Now with the BTE they will have that expertise and be able to maximize revenue. Which means more $ per year, even with giving that 1/20th to the investor.

The point is that the BTE would need to generate the equivalent of $10MM-$15MM per school per year to move $5MM to each school annually. That number is just to make the expected share from PE, it would require doubling that number minimum to repay the investment of the PE firm. Schools like tOSU and UM will carry the heavy load while schools like Rutgers, Maryland, Northwestern, Indiana and Illinois will not raise revenues significantly enough to pay their respective ways. The power schools should do the marketing themselves and keep the revenue in lieu of sharing it.

Assuming the lower half could improve their standing and win conference championships in hoops and football (the winning cures all ills theory), this would only lessen the current powers, trading one hot fan base for another hot fan base. Where is there that much new money available to the conference to warrant the risk and costs of the BTE? If it is readily there, then the power schools are still better off developing it themselves, reaping their own rewards in lieu of propping up Rutgers. Rutgers runs in the red $30MM-$50MM annually, for three decades or more. They do not have the potential growth promised by the PE.

I respectfully disagree that the universities don't know how to run businesses. While the academics may drain the business side, the BOT of each university is made up of generally successful people who oversee the university. Further, many universities, especially larger research universities (the majority of B1G universities if not all), are experts in developing products and technology which is then marketed for maximum benefit.