The Big Ten's B1G deal
Probably should read the contracts before you sign them, right?
I’m sure you’ve figured this out already, but there are two main driving forces that orchestrate everything that happens in college football. If you answered money and national championships, you’d be right. But I was thinking more along the lines of the Big Ten and SEC.
After all, the two have a lot of power. They have full control of the playoff. Last year’s playoff saw over half of its teams come from the two leagues. If it wasn’t for Clemson, all of the four-team playoffs were won by Big Ten and SEC teams. The biggest brands rely there.
You also see their teams plastered on every surface you can. Big Noon Kickoff? More like the Big Nut Kickoff with how often Ohio State is picked for that timeslot. College Gameday is more liberal with their locations, actually moving outside of the conference-based footprint. But ESPN’s ABC schedule is routinely answering the question of “which SEC helmets would look best on my TV?”
It’s clear that, if you want to get all doom and gloom, these two leagues are going to determine the future of college football. If there’s going to be superleagues, playoff play-in games, massive expansion and autobids, financial cap manipulations, it’s going to come from these two leagues.
Which is what makes the Big Ten’s cracks showing all that more surprising. You see, the conference is apparently strongly considering a massive, multi-billion dollar deal with a private equity firm. That’s right, it’s private equity’s time to shine.
The deal
We’ll start with the obvious question: what is private equity?
I broke it down in detail last time it came up and into the news, so I’ll give a quick refresher. In its simplest form, private equity is when a group of investors pool their cash to make a massive investment into an organization. We see this happen a lot in real estate and healthcare, but the creep of private equity into sports isn’t anything new.
In fact, it’s what I talked about last year. Feel free to check out the post about private equity as it’s a great baseline for what we’ll cover today. Plus, most of it is still true.
Further Reading:
Now that we know what private equity is, why does it matter to the Big Ten? The league is considering a 10-year, $2.4 billion deal with a California pension fund called UC Investments.
This isn’t a new thing, as the deal has been on the table and been looked at by the league’s presidents and chancellors since mid-October. It’s a surprisingly necessary windfall for a league with rising costs in roster management, facility maintenance and coaching buyouts - thanks, Penn State. But it’s making a new round of news that’s made it interesting enough to me to dig into it.
Let’s start with what the deal is on the surface. The Big Ten isn’t a publicly-traded company, so UC Investments can’t just pour money into it. That’s further complicated with the fact that many of the conference’s schools - Northwestern and USC aside - are public institutions. That would be akin to allowing an investment pool to pour billions upon billions of dollars into purchasing stake in a state or the federal government. But Griffin, you may ask, isn’t that just lobbying or the fallout of Citizens United? Silly us, this is college football, there’s no politics here!
To deal with this hiccup, the conference would create an offshoot called Big Ten Enterprises, which the investment fund would be able to pour cash into. Ah, sweet, sweet loopholes. In return for that cool $2 billion, UC Investments would receive a 10 percent stake in Big Ten Enterprises. Wow, a $20 billion valuation for a new enterprise, that’s great for them!
If you are looking at this and seeing that Big Ten Enterprises is just smoke and mirrors to allow the league’s teams to take cash from investors, congratulations, you’ve figured them out. Of course, this is college athletics and billions of dollars we’re talking about, so it’s more complicated than that.
Once created - yes, it’s still not off the ground - Big Ten Enterprises would hold the conference’s business-related holdings. Things like media rights, jersey patches, on-field sponsorship logos. You know, the things I’m sure we’re all sick of hearing about. But the structural conference things - scheduling, officiating, championship operations, compliance, etc. - would stay with the conference office like it is now.
But we’re talking about an entity with a $20 billion valuation. Surely it’s more than just sponsorship revenue and media rights that are calling for that hefty of a price tag, right? Again, you’d be right. My friend Matt Brown over at Extra Points covered it in detail about a month ago in October when news first broke. Matt talked about multi-media rights and how they’re a potential piece of the puzzle. For a full breakdown of that side of the deal, check out Matt’s reporting.
The big part of the deal
So this deal’s been circulated and talked about in the background for about a month. Why no movement?
That’s a great question - and the reason we’re here today.
Like any multi-billion dollar athletics deal, there’s a bunch of interesting clauses. Like non-uniform payment distributions with the bigger brands like Ohio State and Michigan, taking home the most money and smaller schools like Purdue and Rutgers getting the short end of the admittedly still rich stick. The big one, though, is an extension of the conference’s Grant of Rights.
That’s a term we discussed a lot during the realignment bubble of 2022, so I forgive you if you forget or weren’t here when we talked about it. A Grant of Rights is a deal that a conference signs with a school, granting the conference the rights to negotiate on behalf of the school. We see this in media deals, which are always negotiated at the conference-level. To make things as simple as possible, you can think of a Grant of Rights like a membership contract. A school either has to break the Grant of Rights or wait for it to expire before they can move conferences.
This proposed deal has a 10-year extension of the Big Ten’s Grant of Rights, taking it through 2046. That’s incredibly interesting to me. For one, it would stabilize the conference and prevent schools from jumping ship for a potential super league. On the other, it could give the Big Ten the power and confidence to become that super league.
And, while that’s an interesting enough topic for its own newsletter, that’s not the reason we’re here.
There’s a battle brewing on who even has the authority to sign this deal. The American Council on Trustees and Alumni, a non-profit advocacy representing over 20,000 university board members across the nation, called the deal “preposterous.” The letter goes on to call out the Big Ten, stating:
“Boards cannot discharge their fiduciary duties without having access to the full text of any proposed agreement, sufficient time to study its implications, and a formal role in authorizing or declining their institution’s participation before a binding vote is cast.
By bypassing their governing boards, the Big Ten universities risk undermining the legitimacy of any decision and eroding confidence in their leadership.
Furthermore, the Big Ten’s governance structure should be amended to ensure that boards of trustees and regents are not merely informed but serve as the ultimate authorities on any future decision involving the sale, transfer, or monetization of university-owned athletic assets.”
You know how there’s always that debate about if university athletics are even a part of a university’s goals of providing a quality education? The Big Ten is deciding to fight that battle now.
For those of you that don’t work in higher education, this is a massive deal. A university’s board of trustees or regents is the end-all, be-all of the university. They are in charge of everything, no matter how minute that detail is. Need an athletic director? Board of trustees will make that hire. Need a president? Board of trustees. Want to renovate the library? Board of trustees will decide on that. Want to build a new dorm to account for a larger amount of students, or run more classes and hire more professors to account for that? You can guess it - Board of trustees will give the go ahead.
Things get muddier when we go into athletics. A common misconception is that the athletic department and university share funds. They don’t, athletic departments have completely separate budgets and fundraising and capital funds to pull from. Universities - through their boards - can decide to move funds over to athletics to fund bigger projects that will help the student body at large. But the athletic director, the head honcho of the athletics side of things, will answer to the president. Who answers to, you guessed it, the Board of Trustees.
For Big Ten boards to not have access to the full text of an agreement or even be able to read the agreement before getting into bed with private investors and selling off who knows what part of the university is patently insane. It’s like you work at an office and decide to sell off the office building to line your own pocket without consulting with your direct boss, let alone the CEO or owner of the business.
This is a battle that’s long been raged on college campuses, but with athletics winning. Now, the biggest brands and universities are gearing up to wage a war between academics and athletics. And sure, at a place like Ohio State, athletics may win. Not to discount the Ohio State education because it is a great school. But places like Michigan, USC, Northwestern, Purdue, UCLA and others are known as academic schools long before they hosted athletic programs. Northwestern ranks seventh in the U.S. World and News’s college rankings, UCLA clocks in at 17th and second in public schools, Michigan at 20th and third in public schools, and many others fill the top of the rankings.
If you think the Board of Trustees at these prestigious academic schools are going to just flop over and let the sports people have their way, you’re sorely mistaken.
The media mess
If we look past the possible board-led revolts, there’s also another major issue. One that’s unprecedented at the athletics level.
Remember when I mentioned the Grant of Rights extension? That extension would take the conference membership for the signing institutions up to 2046, 10 whole years longer than it currently is. Which is scheduled to end alongside most of its media deals.
That wouldn’t be a big deal if all the schools were willing to sign. They’re not. Michigan and USC are definitely against the deal. Michigan’s board of trustees are going public, likening the deal to a predatory payday loan, or taking out a new credit card to pay off the debt on the previous one. USC is going more private, but they have made their displeasure known.
The Big Ten’s response is to send a strongly-worded letter to the two holdouts and let them know they’re going to take the deal anyway, even if they don’t sign. Sure, the league gave Michigan and USC plenty of time to sign on before the final vote, which has yet to be scheduled, and even offered a three or six-month grace period after the deal was accepted. But to make the threat, they have to be able to go along with it.
And going along with it would be unlike anything we’ve seen from an athletics standpoint. Michigan and USC would have their Grant of Rights expire a whole 10 years prior to the league’s other 16 teams. And those Grant of Rights would expire the same time as the Big Ten’s current media deals.
How would negotiating a deal look with two massive brands in Michigan and USC up in the air? Would they leave the conference? Would it harm the conference’s media deal?
Most certainly on the second part. Ohio State-Michigan in football is the single most valuable regular-season college sports contest for media partners. And, if this deal goes through and nothing is done to patch up the cracks, it could be on the outs.
There’s a very clear path, though unlikely, to Ohio State and Michigan separating themselves from each other. If the Grant of Rights expires for these two programs, what’s stopping them from going the Notre Dame route? Both already have longstanding rivalries with the Irish and have the pull to negotiate their own very lucrative media rights deal.
And that’s if we wait until everything expires. You have the ultra-litigious Michigan alumni base to consider. You know, the one so large that Jim Harbaugh’s appeal for a temporary restraining order stopping his Connor Stalions-related suspension from going into affect had to be moved away from the Washtenaw County area and to a new judge so there wasn’t a perceived conflict of interest because all the judges were Michigan graduates. The one that hails from the eighth best and top public law school in America.
Yeah, this has the potential to get ugly ugly.
So what’s going to happen?
That’s a question I just can’t answer at this point in time.
It’s clear that the Big Ten is seriously wanting to get this deal done. They’ve been hammering away at this deal for months before it went public, and now have another month of working on it. Big Ten commissioner Tony Petitti has been talking a lot about generating more revenue for the conference as a whole, and this is his latest idea alongside more playoff games and play-ins.
If 16 schools at this point are able to sign on, you can bet that Petitti is going to keep pounding away to get this deal done. It’s within his sights. That sweet payday is so close he can taste it.
But I don’t know if Michigan and USC fold. Michigan in particular seems vehemently against it. And we also have to consider a potential civil war brewing amongst the boards at each institution, who are clearly against the deal.
Will this result in a fracturing of the Big Ten conference? It’s just way too early to tell. Right now, we’re in the posturing phase where programs and teams are trying to play hardball in the media to get this done. Except, neither side is really taking to the media aside from the ACTA.
This is a weird situation. And with so much on the line not just for the budgets at each school, but for the stability of one of the nation’s premier conferences and their entire institutions, it’s going to be a big deal no matter what happens.
But, one thing to keep in mind is that it’s a bit of an open secret that realignment is going to kick up again around 2030 when media deals start to expire. If Big Ten Enterprises is founded and this deal goes through without Michigan and USC, that looks like a near certainty. I still think the conference will stay together and figure out a way to make everyone unhappy, but crazier things have happened in college football.
Just look at the PAC-12, once the Conference of Champions. Now relegated to a wild mess of Group of Six schools looking to move up and form a league that might possibly contend to be the best of the bunch. Nobody is invincible. Everybody is vulnerable.
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