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Should non-P4 conferences set NIL Salary Caps?

Plus: what if the PE firms flying into professional and college sports are making a mistake?

Good morning, and thanks for spending part of your day with Extra Points.

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I hope you all had a wonderful and restful holiday weekend. After a few days of R&R, my kids are back to summer camp, I’ve poured myself a Celsius, and I’m about ready to tackle the roughly 212 unread email messages sitting in my inbox.

Should conferences try to set “caps” on how member schools participate in revenue sharing?

Last week, new AAC commissioner Tim Pernetti sat down for a wide-ranging interview with the Memphis Commercial-Appeal. There’s a lot here, from the P4-ambitions at Memphis, to non-football future additions to the league, to the AAC’s place in the CFP, and more. But I want to talk about Pernetti’s answer to a question about revenue sharing, which seems to have rankled a few fans in AAC land. Via the story:

CA: New Memphis athletic director Ed Scott said the Tigers' athletic department would opt-in to revenue sharing with athletes. Is that something that's been discussed conference-wide?

Pernetti: Everybody has their own point of view. I think some institutions in our conference are resourced in different ways than others. What we want to try to avoid is creating competition and gaps in our own league. For instance, and I'm just throwing it out there, the idea of us discussing as a membership, which I think we will, the prospect of revenue sharing within our conference. And should we have an agreed-upon conference cap for revenue sharing to try to create as much of a level playing field as we possible can. Nothing's off the table on that front.

First, in my professional experience…there are generally two types of senior college athletics administrators. You have folks that refuse to say anything outside Serious Thought Leader Speak Platitudes, no matter how innocuous or anodyne the question, because by God they are going to be On Message and Disciplined. And then you have administrators who are, you know…willing to just say stuff.

I don’t mean that pejoratively in the slightest! As a reporter, I wish that everybody felt empowered and comfortable just sayin’ stuff…to be comfortable talking through an idea out loud, or sharing their own personal thoughts before they had a chance to be vetted by three subcommittees. Former AAC commissioner Mike Aresco, in my experience, was in the “sure I’ll say stuff” camp. I have not yet had the pleasure of meeting Pernetti, but my read here is that he also falls into that category.

So I’m going to view this quote through that perspective…that the concept of a “cap” is not the signed and notarized official opinion of AAC presidents.

Now, the idea of conference leaders getting together to discuss a unified House strategy isn’t unique to the AAC. I’m aware of at least four leagues, including at least two in FBS, who have already begun to discuss how their league will approach revenue sharing from a league, and campus, basis. I imagine everybody has, or will at their next executive meeting.

Rather than a hard “cap”, I’ve heard more leagues discuss the idea of unified “floors” (i.e, we will all pledge to fully fund X number of scholarships in Y sports, we’ll offer Alston money to X athletes, etc.), as well as more unified messaging.

But the AAC is probably unique among non P4/Big East conferences in that they probably do have a few schools that may be willing to spend a lot more on revenue sharing than their conference peers.

I struggle to see how more than one or two non-power schools fund the entire $21 million of revenue sharing. Once you remove university subsidies, student fees and throw in the House payments…most non-power schools aren’t earning $21 million in revenue, period, let alone enough in excess to share that with athletes.

But there are a few outliers, like Memphis, a program that transparently wants to join a bigger conference, and who has a massive corporate partner (FedEx) that has indicated they’re willing to make NIL investments far beyond that of typical corporate partners.

Right now, I don’t think it’s worth freaking out about how a conference could hypothetically decide to “limit” revenue sharing money. We don’t know that the settlement terms will be approved by a judge, we don’t know to what extent the NCAA will actually be able to enforce policies meant to limit outside donor activity in NIL, and we don’t know what type of money will be considered in that $21 million or so.

Could a league-wide decision to cap spending below what a Memphis or USF wants to spend potentially drive one of those schools out of the league? I mean…maybe? But the AAC could move their conference offices into the Bass Pro Shop Pyramid and replace the national anthem with ‘That's What's Up’ at every conference game and Memphis would still bolt the second an invitation from the Big 12 or ACC materialized. So would everybody else in the league.

I don’t think you can craft league policy with the goal of placating a potential realignment target.

Worth keeping an eye on over the next few months though, as the nuts and bolts of the settlement become closer to something that can actually be executed.

Private Equity wants into sports in a big way, and not just college sports

It’s no secret that private equity wants in on college sports. I’m very uh, skeptical, of the benefits of such an arrangement, but I do understand the appeal for both institutional capital and athletic departments.

But it isn’t just college sports that many PE firms are excited about. It’s sports, period. Via FOS:

According to stats from CNBC, seen by Front Office Sports, annual global investment in the professional sports industry rose from below $10 billion in 2008 to more than $30 billion last year, while the number of deals lept from only a handful to nearly 160.

A confluence of trends in the past five to 10 years has turbocharged the sports business, propelling it as a golden opportunity for PE firms. “There is an appetite among investors for a more tribal kind of technology, things that bring people together that are unifying,” says Michael Proman, managing director of Scrum Ventures, which invests in sports-adjacent companies. “We’re moving towards this experience economy.”

The whole story is worth a read, in my opinion, highlighting how skyrocketing professional franchise valuations, live sports being the only thing that really props up the traditional cable bundle, and the maturation of sports technology…along with perhaps some good ol’ fashioned herd mentality and hype among investors, have created an environment that is much more attractive for institutional capital.

All of that may be completely well and good and correct. If I was good enough at financial analysis to pick investment opportunities for institutional capital, I wouldn’t be writing an $8/mo newsletter and getting screamed at by video game fans on Twitter all day.

But every time I read stories like this, I think back to something I read in Sportico from last December. What if we’re actually overdue for a sports industry market correction?

Is it possible that over the next few years, the streaming mega-giants like Apple and Amazon are far less franchise-friendly media partners than their (substantially smaller) cable competition? Will we see more aggressive carriage disputes? What if there’s a legislative backlash against sports gambling, or economic instability elsewhere slows the projected growth of real estate and non-media related revenue streams?

In established professional sports, maybe none of this really matters. If one institutional investor takes a haircut, there will be another rich guy or group of rich guys willing to move in and replace them.

But there are only so many established professional sports teams and leagues, and only so many adjacent companies built to support them. Will these new institutional investors be willing to hold those investments if they aren’t able to find 20% margins right away? Or maybe the line just keeps going up long enough that we never have to find out?

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Real quick, because I’ll probably be asked about it today, here’s what I know about my EA Sports College Football 25 schedule/updates

As you are probably aware, EA Sports will publish a ~20ish minute long clip today featuring head-to-head gameplay of the video game. They’ll share updates on Ultimate Team tomorrow, a “Launch Roster Reveal” on Wednesday, and an update on Road to Glory on Thursday.

I know that many of you still have lots of questions…about when Teambuilder turns on (and what that feature set looks like), about exactly what type of player and roster customization options exist (and how they differ between real players and randomly generated one), about the depth and frequency of in-game updates, etc.

I will do my best to try and get some of those questions answered for you. I have several outstanding questions of my own right now! As we get closer and closer to release, I suspect my ability to get folks on the phone will get harder and harder, but I will continue to ask. If and when I get those answers, I will publish them here.

I don’t have a copy of the game yet. My assumption is that I probably won’t be able to get a copy too much earlier than the 15th, but I don’t know details and timelines yet. When I do get a copy, I will play as much as possible so I can file a more formal review for another outlet, as well as pre-write a few newsletters here.

I leave for family vacation on July 18th, and won’t return until the 24th. My plan is to continue to have newsletters publish while I’m out. This trip was planned well before I knew the video game was going to be released on the 19th. I know the timing is inconvenient. But if I don’t take some extended time off, I won’t make it to football season.

When I get back, we’ll look at finding ways to incorporate video into Extra Points, and for creative and informative ways to tell stories about and around the video game post-release…in an Extra Points sort of way. I’m open to ideas, because I am very, very new to the idea of streaming.

And with that, I gotta get back to cleaning out these 200 or so emails, before I hit the phones this week. Thanks for reading. I’ll see you in your inbox.

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