Not content with his radical option for the College Football Playoff format or alternative calendar for the transfer portal, Big Ten commissioner Tony Petitti’s latest proposal takes aim at the foundation of major college sports.
Presumably, that’s not his intent. But make no mistake: If the Big Ten accepts at least $2 billion in private capital, creates a commercial arm, locks down its grant-of-rights for 20 years and implements a tiered revenue distribution structure, the whole shebang will change — and not incrementally.
The order-of-magnitude impact would resonate throughout Petitti’s sprawling conference, careen across the SEC, ACC and Big 12, whack the Group of Five leagues and ripple through the entirety of Division I.
Some changes might be helpful for the industry writ large. Many changes could be detrimental. And a few — the ones nobody can foresee, the unknown unknowns — could be outright destructive.
Private equity in college sports, especially at the highest level, is like AI. It looks smart until the Terminator shows up.
And let’s be clear on the terminology: Although the $2 billion cash infusion has been framed as private capital, it’s effectively equity. The investing entity would own 5 percent of the Big Ten’s athletic machinery. And by any measure, 5 percent ownership equates to a pound of flesh.
Petitti’s plan reportedly calls for the Big Ten to create a commercial arm with 20 shares. Each of the 18 schools would own a share; the conference office would have one; and the investing entity would receive the 20th.
Ultimately, the university presidents would have oversight of Big Ten Enterprises, as the commercial arm has been dubbed. But in all likelihood, the entity would operate as a for-profit business, with a leadership group separate and distinct from the Big Ten office. It would house all the Big Ten’s revenue-generating arms, with media rights atop the list, and distribute cash to the campuses annually.
Yep, it’s radical — just like a 16-team College Football Playoff with four automatic bids for the Big Ten and SEC was radical.
And in all candor, it’s difficult to fully assess the merits of Petitti’s plan without knowing the details, including:
— How would the investor’s strategic aims align with those of the schools and the conference?
— What’s the exit strategy for the investing entity and what annual rate of return would it require?
Private capital could demand 7 percent, if not substantially more, according to an industry source who has dealt with private investment firms.
“I just don’t see how you can create enough revenue to pay principal and interest back and have the ability to grow your budget,” the source said.
— How would the Big Ten craft the various tiers of revenue distribution?
Petitti’s plan calls for the dollars generated by the commercial arm to be spun off to the campuses in a predetermined hierarchy. Michigan and Ohio State would receive the largest shares, and we presume Penn State would be on the next tier, along with USC and perhaps Oregon.
But what of Washington, Nebraska and Iowa? How about UCLA and the likes of Purdue and Minnesota?
The proposal includes a 10-year extension of the Big Ten’s grant-of-rights, which binds the schools’ media rights to the conference, from 2036 to 2046.
In other words, Ohio State and Michigan could not leave for the long-theorized super league in the 2030s — there would be no super league if the Big Ten goes this route — thereby ensuring peace and security for the conference’s lower-tier schools.
But in exchange for that security, the UCLAs, Purdues and Minnesotas would willingly accept less annual revenue, likely relegating them to a future in the far back of the Big Ten bus. (It’s a tweaked version of the ACC’s tiered revenue plan.)
In addition to squashing a super league, the Big Ten’s private capital play might limit the next realignment wave. The schools wouldn’t be as desperate for the cash that typically accompanies conference expansion, and the investing entity assuredly would need to approve new members. Also, potential expansion targets would join the Big Ten after the $2 billion infusion and would therefore be playing from behind financially.
“It doesn’t block realignment and adding schools, but those schools will have missed out on the sale,” another industry source said. “That lump sum of money will be gone to the existing 18.”
Petitti’s plan has already drawn scrutiny from Sen. Maria Cantwell (D-Washington).
“You’re going to let someone take and monetize what is really a public resource? … That’s a real problem,” she told ESPN.
In theory, the Big Ten’s legal team would not have allowed the concept of private capital to morph into a proposal if there were insurmountable legal hurdles. Whether it’s the right strategy for public universities and institutions of higher learning is a decision for the presidents, regents and trustees.
One regent, Michigan’s Jordan Acker, has already spoken out:
“As a Regent,” he wrote on the social media platform X, “I believe selling off Michigan’s precious public university assets would betray our responsibility to students and taxpayers. I will firmly oppose any such effort—and I hope colleagues at (Michigan State) and (Ohio State) will stand with me as well.”
So far, the Wolverines and Buckeyes — the behemoths whose brand power accounts for more than half of the Big Ten’s total media valuation — are understandably wary of Petitti’s proposal.
Binding their grant-of-rights to the conference would constitute a repeat of the same mistake they made in the late 2010s, when former commissioner Jim Delany secured a media deal that tied the schools’ rights to Fox for two decades.
Given the surreal speed of change in both college sports and the sports media ecosystem, why would Ohio State and Michigan commit to a 20-year pact with the Big Ten’s bottom feeders?
This isn’t about what they know. It’s about what they cannot foresee, the unknown unknowns. (The top brands in the SEC have rejected private capital pitches.)
Another issue to consider: How does Fox feel about the Big Ten accepting private capital and creating a commercial arm?
The network effectively owns the conference’s highly valuable media rights through its majority stake in the Big Ten Network. Anything that extends the Big Ten’s grant-of-rights to 2046 could provide Fox with security and cost certainty.
Except the creation of Big Ten Enterprises might be a threat to Fox by reducing the conference’s reliance on network dollars and laying the foundation for an aggressive approach to the Big Ten’s media rights negotiations in the 2030s.
In other words, Big Ten Enterprises, with private capital holding immense sway, could be the vehicle that allows the conference to tell Fox to pound sand.
Ultimately, Big Ten presidents must ponder one question: Who benefits the most from an infusion of $2 billion in private capital?
The investors, obviously. (There are at least three, according to sources.) After all, private equity/private capital sees weakness in others as a pathway to profits for itself. The Big Ten’s inefficiency, combined with the value of its biggest brands, is an attractive combination.
Another beneficiary: Petitti.
The super league stands as a direct threat to the Power Four commissioners. If the top brands leave to create a 32- or 48-team mini-NFL, there would be no conferences left to lead. Petitti’s own job is more secure if Michigan and Ohio State have no place to go for 20 years.
Which brings us to a final point.
The Big Ten generally and Petitti specifically have been on the wrong side of several major strategic initiatives lately.
They were on the wrong side of the College Football Playoff format debate, pushing the AQ-heavy model that the ACC, Big 12 and SEC opposed.
They were on the wrong side of the transfer portal discussion, proposing a spring window that was eventually overruled by everyone else. (The portal window is set for January.)
And they are on the wrong side of the College Sports Commission (CSC) debate over enforcement. As reported by On3, the Big Ten opposes the inclusion of postseason bans in the CSC’s penalty matrix in the event schools commit major violations of revenue-sharing rules. (Of note: The SEC supports postseason bans.)
Granted, there is nothing inherently wrong with zagging when others zig.
Nor are there existential consequences to Big Ten athletic departments for being on the wrong side of the CFP debate or the transfer portal discussion.
But if Petitti is wrong about this — if the Big Ten welcomes private capital into its home and the situation metastasizes — the consequences could be dire.
The minority owner could become a major problem.
One pound of flesh could lead to uncontrollable internal rot.
The heavyweights could miss out on a better opportunity, the lightweights could get squeezed to ash and those responsible would walk away with smiles on their faces and profits in hand.
Big Ten presidents better be careful. This is college sports, where a good crisis is never wasted and the best intentions are no match for unintended consequences.
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