The Future Is Here and It Sucks: Utah Is Partnering With a Private Equity Firm To Run Its Athletic Department
Yahoo Sports — Private equity has officially arrived in college athletics.
The University of Utah is on the cusp of striking the industry’s first partnership with an equity firm in a marriage that features a nine-figure capital infusion and the creation and shared ownership of a for-profit entity to operate athletics outside of the university.
The new venture is expected to generate as much or more than $500 million in capital — a groundbreaking and innovative move that may pave the way for more schools and conferences to pursue such a concept.
Finalization of the project is expected soon pending authorization on Tuesday from the University of Utah Board of Trustees. The board is granting the university permission to move forward with the agreement with Otro Capital, a New York-based sports private equity firm.
At the center of the project is the creation of a private, independent offshoot of the athletic department — Utah Brands & Entertainment LLC — in a first-of-its-kind partnership between a university athletic department and an equity partner. An executive team from Otro Capital, combined with athletics department personnel, will lead the creation and operation of the new company.
The university retains majority ownership and decision-making authority of Utah Brands & Entertainment. Otro marries the capital infusion with a team of experienced operators. A president from outside the university will preside over the company and report to a board, chaired by Utah athletic director Mark Harlan, with seats for trustees and Otro executives.
It's here, folks. Have you always thought, "I wish the funding for my school's athletic department came from a New York City private equity firm looking solely to turn a profit instead of boosters who are spending money because they're fans of the school?" Well, you may soon get your wish.
The University of Utah is taking half a billion dollars in exchange for essentially turning its athletic department into an offshoot of Otro Capital. I would imagine we'll see this at multiple schools relatively quickly. The top 30 or 40 athletic departments in the country won't need this right away, but universities looking for immediate short-term cash to compete with those top dogs will.
It's hard to quantify how much any one thing actually changes collegiate athletics anymore with how rapidly things have shifted in the last decade, but this feels like a massive deal that will strip away what little soul we have left.
The economic model of college football and basketball is built on irrational emotion. Schools bank on getting money from boosters spending emotionally, because there really isn't a tangible payoff short of having great seats, going to dinners at the athletic director's house and hopefully winning championships. Those people are paying to be part of a club where the only real benefit is getting to feel good that you helped build something you love.
That model isn't going to fly when the people spending the money are number crunchers in an office on Park Avenue. The University of Utah athletic department is now just a line item on the Otro Capital budget and they expect to see a financial return on this investment.
The new company’s primary goal is to generate more revenue across an assortment of areas, including ticketing, concessions, corporate sales and sponsorships.
This is the future. You will pay more for a product that is hardly reminiscent of what it was when you fell in love with it and there's nothing you can do about it.
Sad times.