(04-20-2022 10:45 AM)Wahoowa84 Wrote: I don’t understand your proposed business model. Athletic departments are mainly the “front porch” to large universities. They merely provide curb appeal to potential students and donors.
For example, as a kid I grew up a fan of the University of Maryland’s athletic teams. I watched players such as Randy White and John Lucas with great passion. Nevertheless, as a young adult I decided to attend UVa and immediately switched allegiances. I love watching UVa sports and donate to UVa. I still attend a few games in College Park but never watch them on TV nor donate to UMCP. Both schools have had generally mediocre football, good basketball and excellent non-revenue sports during the past 50 years; and both schools are multi-billion dollar entities that have $100M athletic departments.
How does outsourcing (or leasing) the athletic department help UVa or UMCP?
The school gets that front porch benefit either way though. The only change really is donors are able to become investors. Which should entice more influx of cash into these ADs that struggle to keep up otherwise.
The fundamental principle I’m trying to exploit is these ADs are often live to means, break even. Make more to spend more. Just share that with donors. If you go to your donor/investor base and say- we need $30 million to be above the competitive line, do you get that more likely as donations or as a swap- $30 million buy in in exchange for whatever the revenue?
As donations these places will be lucky to get $10 million. And they’ll spend accordingly, and likely compete accordingly.
Now add in the squeeze to have and have nots, and the huge implications. These fringe programs that become have’s are set to make hundreds of millions more in the next decades. The losers, likely struggling to pay debt acquired the past decade.
There is a huge delta there, which means investment opportunity. Transfer of risk in exchange for upside.
If you’re an AD at Maryland, which knowingly had budget problems, let’s say the BIG doesn’t save you. But you’re a candidate for P2. Why not lease your revenue sports to an investor/donor group that’s trying to buy the current $x million revenue business and turn it into the P2 $150 million revenue entity? Do a 10 year lease with required funding at some index (average P2 mbb and fb budget plus fixed capital costs) and adder for whatever non-revenue, plus premium, and donor-investors get upside. Will the investors make money? Perhaps not, but they have s chance to, likely break around even, and are far better off than donations. The AD gets the benefits of having budget growth without needing the cash. It’s just money management.
A similar question is why not borrow for more than facilities? Coaching and players (soon?) are the foremost inputs. Granted, right now it’s tough to get a coach without facilities, but a market leading salary can help punch above the arms race much more cost effectively. Those buildings won’t be as advantageous after the years of hiring/firing of discount coaches
Maybe they do that already to a degree. Maybe Boone Pickens did this? COVID likely helped facilitate unconventional financing. But given these are basically franchises with inherent market share, and the trimming to a upper level league, buy/lease a franchise and invest before it’s too late.
It likely already is. I can’t imagine it’s easy to get capital right now in the B12
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Leasing a CFB or MBB program?
