D1 Sports Business - Kentucky to Shift Athletic Department to an LLC

[kingtidge]

Interesting new model...

How Kentucky’s New LLC Will Change the Business of College Sports​

"Kentucky announced plans to house its athletic department under an LLC or holding company called Champions Blue, creating a governance board of UK officials and outside industry experts that will allow the school to increase its funds in new and unique ways to help it navigate this new era in college athletics... This new and innovative LLC strategy, UK said, will provide the department with the flexibility to unlock new revenue streams through public-private partnerships and potentially other transactions that it previously wouldn’t have had access to... As an LLC, it will be easier for the athletic department to make use of various loans and lines of credit as well as directly raise funds instead of having to utilize a third-party group like an NIL collective."

 

[capeorange]

Just when you thought it couldn't get any crazier.

 

[HtownOrange]

Per the article, Kentucky made $50K. Not sure how establishing the department as an LLC will help in ways they cannot already pursue themselves. They can only cut programs to the minimum the SEC and NCAA require for D1. Without revenue, they likely will not get loans or investors.

ESPN's offer for $50MM-$80MM/year for a 9th game is spread across 16 teams, or approximately $3MM-$5MM/school. If they take loans, they pay interest. If they invite investment, they will pay higher rates in percentage of revenues.

This could get interesting.

 

[Reilly35]

Interesting new model...

How Kentucky’s New LLC Will Change the Business of College Sports​

Will they have to pay taxes?

 

[kingtidge]

Will they have to pay taxes?

Yep, and not required to break even as most current not-for-profit Athletic Depts...

If they are going to have a real-estate development arm to supercharge revenue growth, they damn well better pay uncle sam... Plus it sounds like they intend to cut-out collectives altogether on their funds raised... Do their own deals and eliminate the collective "middleman" cut of the revenue.

 

[orangemass]

Will they have to pay taxes?

Corporate tax rates may come down soon. Not meant to be political

 

[Scooch]

All headed to the model where a university is essentially licensing their name to a private entity that runs a sporting club.

Basically, the Wildcats at the University of Kentucky instead of the Wildcats of the University of Kentucky.

 

[Col. Bleep]

All headed to the model where a university is essentially licensing their name to a private entity that runs a sporting club.

Basically, the Wildcats at the University of Kentucky instead of the Wildcats of the University of Kentucky.

Yes.
Exactly.

Major college sports becoming teams affiliated with a college instead of college teams.
This is a big step in that direction.
Kentucky, Inc.
And presumably this can have an even bigger effect at private colleges.

Glad this article was posted.

 

[kingtidge]

All headed to the model where a university is essentially licensing their name to a private entity that runs a sporting club.

Basically, the Wildcats at the University of Kentucky instead of the Wildcats of the University of Kentucky.

Yep - I wonder if they will keep the non-revenue olympic sports under the schools normal administrative purview ??

I think part of all this is to also ensure what comes in from revenue sports stays with revenue sports (i.e. the years of re-allocating athletic revenues to other areas of the university are over.)

 

[HtownOrange]

Scholarships will need to be paid back to the universities. For at least the revenue sports, the IRS may decide that scholarships are taxable, too.

The legal issues are going to make some lawyers wealthy.

 

[Zelda Zonk]

Smart. And disgusting. UK bought two hospitals under similar LLC systems? So, this new one could buy hospitals and overcharge patients, and it can buy rental real estate and become a slumlord, all to pay college kids millions of dollars.

The world blows.

 

[Scooch]

Yep - I wonder if they will keep the non-revenue olympic sports under the schools normal administrative purview ??

I think part of all this is to also ensure what comes in from revenue sports stays with revenue sports (i.e. the years of re-allocating athletic revenues to other areas of the university are over.)

Good question. I’m no lawyer, but I do wonder if legally they’d have to keep all the athletics together for compliance with federal statutes. No clue.

 

[OttoinGrotto]

Lol sure why not

 

[FireballPhil]

Per the article, Kentucky made $50K. Not sure how establishing the department as an LLC will help in ways they cannot already pursue themselves. They can only cut programs to the minimum the SEC and NCAA require for D1. Without revenue, they likely will not get loans or investors.

ESPN's offer for $50MM-$80MM/year for a 9th game is spread across 16 teams, or approximately $3MM-$5MM/school. If they take loans, they pay interest. If they invite investment, they will pay higher rates in percentage of revenues.

This could get interesting.

One would have to suspect part of this is due to the whole Trump/Harvard fiasco. By spinning it off into an LLC, they shield themselves from certain liabilities while allowing them to say the university is still doing education thus any funding cuts from the federal government will be minimal. Although this sort of makes sense now,in a year or two it might be moot.

 

[HtownOrange]

One would have to suspect part of this is due to the whole Trump/Harvard fiasco. By spinning it off into an LLC, they shield themselves from certain liabilities while allowing them to say the university is still doing education thus any funding cuts from the federal government will be minimal. Although this sort of makes sense now,in a year or two it might be moot.

There was talk of incorporating or forming LLCs a year or two ago. This was when FSU was looking into Venture Capital options. I don't think this has anything to do with politics.

From the article, forming an LLC allows for loans, but the fundamental basis for lending is that the money will be repaid, unless your school is located on the Raritan. Same with VC, they will want payback with greater interest than a loan. That is part of why FSU never proceeded, essentially, the lenders and VC determined the loans were bad business, they cannot even take the property because it is state property.*. Under an LLC, if the property is moved to the LLC, it may be possible to take the property in lieu of repayment. It will be interesting to see how it all pans out.

*The same is not true for a private school.

 

[Bulldog04]

I know that cuse inquired about kentuckys back up center. He’s currently getting 2.3m a year. The back up. They are in different world.

 

[Capt. Tuttle]

Scholarships will need to be paid back to the universities. For at least the revenue sports, the IRS may decide that scholarships are taxable, too.

The legal issues are going to make some lawyers wealthy.

Room and board are already taxable

 

[PoppyHart]

I know that cuse inquired about kentuckys back up center. He’s currently getting 2.3m a year. The back up. They are in different

Garrison's gonna pay a much bigger role this year. Very misleading post.

 

[Bulldog04]

Garrison's gonna pay a much bigger role this year. Very misleading post.

He got 2.3m last year. To be the back up. Not this year. Last year. What’s misleading?

 

[HtownOrange]

Room and board are already taxable

Death and taxes, the two sureties of life…kids have to learn both.

 

[AlaskaSU]

It is obvious that this is where it's heading; teams will be leased out and deals will be cut regarding facilities. Once big money TV contracts came into being the days of amateur athletics were numbered.

 

[kingtidge]

It is obvious that this is where it's heading; teams will be leased out and deals will be cut regarding facilities. Once big money TV contracts came into being the days of amateur athletics were numbered.

Every change is an opportunity.

Hopefully "NIL Caps" becomes part of that opportunity. Now that both sides are run as a business, some type of team total NIL cap (like salary cap in pro sports leagues) is a great way to promote parity, and yes, I know the whale schools with huge nil warchests will fight it and may require actual law modifications nationally to set the table properly (congressional oversight.)

 

[Col. Bleep]

There was talk of incorporating or forming LLCs a year or two ago. This was when FSU was looking into Venture Capital options. I don't think this has anything to do with politics.

From the article, forming an LLC allows for loans, but the fundamental basis for lending is that the money will be repaid, unless your school is located on the Raritan. Same with VC, they will want payback with greater interest than a loan. That is part of why FSU never proceeded, essentially, the lenders and VC determined the loans were bad business, they cannot even take the property because it is state property.*. Under an LLC, if the property is moved to the LLC, it may be possible to take the property in lieu of repayment. It will be interesting to see how it all pans out.

*The same is not true for a private school.

Ha...whatever the game is you can rest assured Rutgers will dig an ever deeper hole.
Some of it will set taxpayer dough adrift in the Raritan.

 

[HtownOrange]

Every change is an opportunity.

Hopefully "NIL Caps" becomes part of that opportunity. Now that both sides are run as a business, some type of team total NIL cap (like salary cap in pro sports leagues) is a great way to promote parity, and yes, I know the whale schools with huge nil warchests will fight it...

The whales may not fight it, they may simply go back to the "old ways" of the "Oprah pays": "Here's a bag for you. Here's a bag for you..."

 

[kingtidge]

The whales may not fight it, they may simply go back to the "old ways" of the "Oprah pays": "Here's a bag for you. Here's a bag for you..."

Whatever the crossed-Ts and dotted-Is solution is, there will always be the greasy handshakers trying to run bags and perks under the radar...