What is the point of the money, exactly?

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

On Wednesday afternoon, Pete Thamel and Dan Wetzel over at ESPN took a crowbar to my editorial calendar, reporting that the Big Ten is in discussions over a substantial private capital deal.

That the Big Ten was sniffing around private capital wasn’t huge news, as multiple sports business outlets reported at least some measure of interest earlier this year. Just about every major college sports conference has taken multiple meetings with outside investors. But so far, no deal has actually been executed, despite substantial interest from both sides.

Via the ESPN story, which other reporters have since confirmed:

Unlike other private capital and equity models that have floated around college sports over the past year or so, the models the Big Ten is reportedly considering don’t actually give up equity in the league. Instead, our mystery PE firm is giving up front capital in exchange for a piece of future revenues over an extended period of time.

It’s not that different from what most Power 4 athletic departments (and heck, most athletic departments, period) do with their multimedia (MMR) rights. The school gets a guaranteed amount of money up front, and the two entities split future revenues beyond a certain point.

A lot of people in college sports are taking meetings like this — not just P4 athletic departments (off the top of my head, I know of at least eight schools that have at least listened to firms pitching similar relationships), but also coaches associations, the FCS football playoffs, conferences and probably other entities I’ve forgotten about.

It isn’t a secret that everybody in college sports, from Washington to Eastern Washington, is concerned about budgets.

Higher education is often one of the few places state lawmakers can constitutionally slash spending, and public funding has been in decline across the country. Slashing research funding has also been a major federal priority from the current White House.

Throw in concerns over inflation, construction materials, labor costs, enrollment cliffs and, oh yeah, suddenly needing to pay millions of dollars directly to college athletes, and administrators everywhere are looking under every couch cushion they can possibly find to generate additional revenues.

Talk to athletic directors and industry professionals, and generally, those conversations will center on a desire to improve incremental sponsorship revenues, facility use percentages, new sponsorship IP and licensing revenues. You’ll also hear more and more schools talk about jersey patches.

But those, generally, aren’t going to be silver bullets. If you suddenly get much better at generating sponsorship revenues, you earn an extra $6 million. A significant improvement in licensing revenues might be $2 million. Booking two country music concerts might net you $900,000 in profits. All of that is real money, to be sure, but it won’t fix an athletic department budget hole by itself. These ideas are singles. If you’re $45 million behind where you want to be, you want a home run.

But the Big Ten is different from those other groups. This is the richest conference in college sports, with some of the richest individual brands in college sports. It’s got one of the two best TV deals, the highest locked-in revenue floors and the most political and governance power over its peers.

No disrespect intended for the American Conference, but it would be one thing if that league decided to raise capital. It’s a challenger league of member institutions with far fewer financial advantages, trying to compete for championships.

But Ohio State?!? Michigan?!? Oregon?!?

To me, the most interesting part of this story isn’t the particulars of a hypothetical financial transaction, or which schools end up in which “tier” of resource distribution, or what other leagues do to catch up, or even what this does to kill or delay a potential BREAKAWAY in the future.

What I want to know is: What’s the money for?

Consider the following clip:

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