Big Ten and other Conference Expansion

[Jaxbuck]

“The new entity being created would focus on business development, and it would include an outside investor with a small financial stake."

Sorry I missed this part. If the source is accurate that means they are creating a new entity (probably some sort of JV).

It gets real difficult to steal/fuck over/ strip assets from the B1G when you are only a financial partner in another entity.

I’ve seen some crazy shit but to date I’ve never seen anyone take anything from company A when they didn’t have any equity or a perfected debt interest to collateral of company A because they were business partners in company B (and only company B)

It’s almost like the B1G has some serious lawyers and consultants of their own that know how to structure a deal so they don’t get bitten while swimming with the sharks( on top of being on the side of real negotiating leverage because they don’t need the money).

 

[dragurd]

“The new entity being created would focus on business development, and it would include an outside investor with a small financial stake."

Sorry I missed this part. If the source is accurate that means they are creating a new entity (probably some sort of JV).

It gets real difficult to steal/fuck over/ strip assets from the B1G when you are only a financial partner in another entity.

I’ve seen some crazy shit but to date I’ve never seen anyone take anything from company A when they didn’t have any equity or a perfected debt interest to collateral of company A because they were business partners in company B (and only company B)

It’s almost like the B1G has some serious lawyers and consultants of their own that know how to structure a deal so they don’t get bitten while swimming with the sharks( on top of being on the side of real negotiating leverage because they don’t need the money).

Also the UC System has less incentive to fuck them over as long as UCLA is a member. Now maybe they will hem and haw about Cal but 10% non voting interest means they can't really force things. I was more worried about a 50/50 partnership ala Big Ten network

 

[woofermazing]

Only if all the schools have to stick it in an endowment and fund NIL deals with some of the return. We'll be unstoppable.

 

[Jaxbuck]

Also the UC System has less incentive to fuck them over as long as UCLA is a member. Now maybe they will hem and haw about Cal but 10% non voting interest means they can't really force things. I was more worried about a 50/50 partnership ala Big Ten network

10% in a separate entity apparently.

You can’t force shit. If you can, then the other side made a bad deal.

 

[cincibuck]

So, is this something that only involves the ath. depts., or is this to include the academic side too?

Is this part of the GOP clamp down on research grants in order to make schools turn to PE for funds?

 

[TampaBuckeyes]

$2 billion? They are selling their future for 2 years of media rights money? Are you kidding me? They need to add another zero to that number.

 

[heisman]

All these universities run their athletic departments like the federal government. They operate at a loss and are in deep debt. Problem, of course, is that they can’t just go print some shiny new currency.

 

[CincyInterloper]

“The new entity being created would focus on business development, and it would include an outside investor with a small financial stake."

Sorry I missed this part. If the source is accurate that means they are creating a new entity (probably some sort of JV).

It gets real difficult to steal/fuck over/ strip assets from the B1G when you are only a financial partner in another entity.

I’ve seen some crazy shit but to date I’ve never seen anyone take anything from company A when they didn’t have any equity or a perfected debt interest to collateral of company A because they were business partners in company B (and only company B)

It’s almost like the B1G has some serious lawyers and consultants of their own that know how to structure a deal so they don’t get bitten while swimming with the sharks( on top of being on the side of real negotiating leverage because they don’t need the money).

I don’t disagree, but it’s difficult to think of all the ways someone could screw you down the road if they are negotiating in bad faith, and draft a contract that protects you from that. Sometimes it’s best to take a pass. I think this might be one of those times. But like you said, the B1G is well represented and doesn’t need the money, so I’m not too worried about it.

 

[BUCKYLE]

The problem is how many of the B1Gs great representation or more likely, how many of the people paying those high powered legal teams, are in bed with the capital? This smells fishy. If they dont need the money then what are we doing here? Why get in bed with the devil if you're not sleepy?

 

[cincibuck]

NY Times:
Of the 13 public universities collecting Big Ten funding during fiscal 2024, 11 secured around $50.8 million as part of the league’s media contract plus $11 million or so for other disbursals, including bowl revenue. Maryland and Rutgers received lower amounts as part of their payback process after borrowing during their six years of non-vested membership.

The 2024 fiscal year began July 1, 2023, and concluded June 30, 2024. Although UCLA, Oregon and Washington competed in the Pac-12 during that year, their data was included for this analysis of the financial situation faced by the membership of one of college sports’ richest conferences. Here are seven things that stood out after examining the 16 athletic departments’ financial data.

Revenues and expenses: Explaining Ohio State’s near-$38 million deficit​

Perhaps the most jarring number within the data involved college football’s new national champions: Ohio State’s athletic department spent nearly $292.7 million in the 2023-24 school year, almost $38 million more than its $254.9 million in reported revenue. That’s an eye-popping deficit, there are reasons why the Buckeyes’ shortfall was exclusive to this particular year.

With five Big Ten road trips and a nonconference game at Notre Dame, Ohio State played only six home football games in 2023, down from eight during the 2022 season. That led to a $14.5 million drop in overall ticket sales from 2022. Ohio State also paid $9.2 million in severance and other benefits to former coaches and administrators. The department covered the shortfall with reserves. With an expected jump of about $15 million more from the Big Ten’s coffers — budgets call for $75 million for each vested member in the current fiscal year — and eight home games in 2024-25, Ohio State’s deficit is a one-time situation.

 

[Jaxbuck]

The problem is how many of the B1Gs great representation or more likely, how many of the people paying those high powered legal teams, are in bed with the capital? This smells fishy. If they dont need the money then what are we doing here? Why get in bed with the devil if you're not sleepy?

Well, if the separate entity scenario is true (which is highly likely) then there is no getting into bed with them because the B1G as we know it, isn't part of the deal. It's a new venture you are going into with someone else as a minority partner.

Why would you do it? To spread risk. We are going into a biz dev venture together, I supply the brand, the business and run operations. In return for a 10% stake, you supply some ready cash. If it goes tits up, you lose your cash, if it goes well you have a 10% stake in something that is worth 3-10x (or more) the valuation you bought in at. You sell that 10% stake to me at future value or you are allowed to sell it to the market if I get first right of refusal typically.

The B1G doesn't "need" the money but there is no such thing as unlimited resources, even for entities like the B1G.

My .02 on what this is:
-They saw something they wanted to do (this Biz dev venture) that they think is of strategic importance to continue to grow the brand/grab market share/find new markets/whatever...
-so they sit around with the finance guys and figure out how to pay for it. There are only 2 ways Debt or Equity.
-They can go borrow it as debt but that might screw up their lending ratios and covenants in any number of other places on their collective balance sheets AND debt could just be too expensive. Rates are up for everyone. Even the B1G.
-So debts is an inefficient and expensive way to go raise money for something that has some risk to it (unproven venture) then you go find a partner who is ok with that kind of risk and has a couple of billion dollars to throw at it.
-This is why PE and VC firms exist

I'm not defending the track record of PE or VC funds. Everyone is going to have their opinions on that. I just hate seeing people get so spun up over something and that fear is largely not fact based.

 

[DZ83CK]

Well, if the separate entity scenario is true (which is highly likely) then there is no getting into bed with them because the B1G as we know it, isn't part of the deal. It's a new venture you are going into with someone else as a minority partner.

Why would you do it? To spread risk. We are going into a biz dev venture together, I supply the brand, the business and run operations. In return for a 10% stake, you supply some ready cash. If it goes tits up, you lose your cash, if it goes well you have a 10% stake in something that is worth 3-10x (or more) the valuation you bought in at. You sell that 10% stake to me at future value or you are allowed to sell it to the market if I get first right of refusal typically.

The B1G doesn't "need" the money but there is no such thing as unlimited resources, even for entities like the B1G.

My .02 on what this is:
-They saw something they wanted to do (this Biz dev venture) that they think is of strategic importance to continue to grow the brand/grab market share/find new markets/whatever...
-so they sit around with the finance guys and figure out how to pay for it. There are only 2 ways Debt or Equity.
-They can go borrow it as debt but that might screw up their lending ratios and covenants in any number of other places on their collective balance sheets AND debt could just be too expensive. Rates are up for everyone. Even the B1G.
-So debts is an inefficient and expensive way to go raise money for something that has some risk to it (unproven venture) then you go find a partner who is ok with that kind of risk and has a couple of billion dollars to throw at it.
-This is why PE and VC firms exist

I'm not defending the track record of PE or VC funds. Everyone is going to have their opinions on that. I just hate seeing people get so spun up over something and that fear is largely not fact based.

To be fair, this is a creation of a new, permanent entity. The media and sponsorship rights of every school in the B1G will now not be entirely within the control of the individual schools for the next 20 years. That is a very long time for things to go wrong. There are a lot of unknowns. You think this is going to work, that it will result in more money for everyone involved. The rights of some of these schools like OSU would probably be worth more than they're getting if they were Independent. I realize OSU didn't control things in many ways already, but clearly the trend is the more we sell self-control for money, the more we end up with Big Noon games and other undesirable outcomes because fans come last and making money comes first.

 

[Jaxbuck]

To be fair, this is a creation of a new, permanent entity. The media and sponsorship rights of every school in the B1G will now not be entirely within the control of the individual schools for the next 20 years. That is a very long time for things to go wrong. There are a lot of unknowns. You think this is going to work, that it will result in more money for everyone involved. The rights of some of these schools like OSU would probably be worth more than they're getting if they were Independent. I realize OSU didn't control things in many ways already, but clearly the trend is the more we sell self-control for money, the more we end up with Big Noon games and other undesirable outcomes because fans come last and making money comes first.

Absolutely. That is what I think of when I say their is risk (for both parties)

It's why you don't borrow money for something like this. You find a partner to share the risks.

 

[calibuck]

Am a bit confused here. OK, so $2B gets meted out to B10 teams + B10 office. Got that, however the split occurs. Is this an 'equity' position, or a discrete 'bond/loan' type of thing, which stretches for now until end of current TV contract? I also understand that the $2B is tied to a new 'shell corporation', with (from what it sounds like), so if tOSU defaults, they cannot come and take Orton Hall...OK. If the shell corp earning revenue from the TV contract, then all the revenue will be split 20 ways (18 schools + B10 HQ + equity partner). Or is other revenue included? Am guessing for 10 years? If the TV contract was billed as a 'billion a year', then divided by 20, is around $50M per year. Times 10 years is $500M. which is one quarter of the original investment amount. Guess my confusion is: Is this a ten year note? or a perpetual (forever) note. Or might it be equity, which is forever. Note: owning a piece of a shell corp limits the liability to the amount of assets inside it. Probably overthinking this thing, and am certain there are sharper minds than me that are looking at/analyzing it, but.....when I saw how poorly the TV contract was negotiated, and how little oversight the Chancellors reviewed (and not using prior B10 chair to help the clown that did it), I tend to worry alot. Anyone help me clear away the fog? Everyone is focusing on the initial payout, and what it can do to help recruiting etc. but have concerns about the 'rest of the story'....Go Bucks!

 

[Jaxbuck]

Am a bit confused here. OK, so $2B gets meted out to B10 teams + B10 office. Got that, however the split occurs. Is this an 'equity' position, or a discrete 'bond/loan' type of thing, which stretches for now until end of current TV contract? I also understand that the $2B is tied to a new 'shell corporation', with (from what it sounds like), so if tOSU defaults, they cannot come and take Orton Hall...OK. If the shell corp earning revenue from the TV contract, then all the revenue will be split 20 ways (18 schools + B10 HQ + equity partner). Or is other revenue included? Am guessing for 10 years? If the TV contract was billed as a 'billion a year', then divided by 20, is around $50M per year. Times 10 years is $500M. which is one quarter of the original investment amount. Guess my confusion is: Is this a ten year note? or a perpetual (forever) note. Or might it be equity, which is forever. Note: owning a piece of a shell corp limits the liability to the amount of assets inside it. Probably overthinking this thing, and am certain there are sharper minds than me that are looking at/analyzing it, but.....when I saw how poorly the TV contract was negotiated, and how little oversight the Chancellors reviewed (and not using prior B10 chair to help the clown that did it), I tend to worry alot. Anyone help me clear away the fog? Everyone is focusing on the initial payout, and what it can do to help recruiting etc. but have concerns about the 'rest of the story'....Go Bucks!

You are mixing the concepts of debt and equity. There is no note or bond or any of those kind of structures (from what we know and what makes logical sense). It's equity.

You hit the key right here:

Or might it be equity, which is forever. Note: owning a piece of a shell corp limits the liability to the amount of assets inside it.

It won't be forever because the investor wants to make a profit sometime in the next 3-5 years most likely. Different groups have different time lines.

I think it's important for people to really see this as a win for the "academic" side of the University house. Keeping it very high level-you have two businesses in one. The "school side of all these places and the "sports" side, let's call it.

By doing it this way, you are keeping all risk, any kind of contagion from a blow up in sports, firewalled away from the "school" side of the balance sheet. The same concept applies when people ask why do it this way. If you don't go get the money this way then you have to borrow it or take it from the school side of the ledger. Borrowing would indeed create the nightmare scenario a lot of people are expressing here in which school side assets get put at risk for sports side borrowing.

This is a win for the school side and for the record, I very much believe in and hope we continue to see them go this way. I've been on record many times saying they should split sports off entirely. The University mission is far mar important (and bigger money) so sports shouldn't be out there as a possible risk t it.

Well, now we are seeing that play out in a way. This new venture is keeping sports from hurting school.