Chris Wilford
Associate Editor
Loyola University Chicago School of Law, JD 2026
In October 2024, a judge gave preliminary approval of a settlement over a multibillion-dollar class action lawsuit involving former collegiate athletes being denied compensation, House v. NCAA. One of the settlement conditions will be that universities can now pay players directly. Teams must now decide whether to pay players directly or rely on NIL compensation to remain competitive in recruiting top talent. This demand for players has made some speculate that conferences and their member universities will turn to private equity to help fund these teams.
Since when can universities pay players?
Technically, this rule is not in place yet. The final hearing for the House v. NCAA settlement is scheduled for April 7th, 2025-interstingly the same day as the NCAA Division I basketball championship. The settlement stems from a collection of three class action suits involving former collegiate athletes who were looking for back pay from the NCAA. The settlement primarily accomplishes three things: (1) it compels retroactive compensation for players going back to 2016, (2) it creates guidelines for how universities can directly share athletic revenues from things like media contracts and ticket sales, and (3) it removes scholarship limits. Additionally, the settlement gives the NCAA the ability to regulate player compensation going forward.
Why private equity?
Even with players only allowed to earn through NIL deals and not yet by direct payment, some rosters in college football already cost tens of millions of dollars a year. The current football champion, Ohio State University, had a roster last season that cost over $20,000,000. Basketball programs face slightly smaller rosters but still extremely high prices for athletes-with the five highest-paid players in college basketball all estimated to be making over $1,500,000 for this season. Once the House settlement is finalized, the ability to directly compensate players with a portion of media revenue will only create an even bigger cost for universities who want to recruit top-level talent and private equity will be one of the few funding sources that is willing to help give millions of dollars to an entity whose value is mainly based off of the athletic performance 18 and 19-year olds.
Do schools want these investors?
Starting in 2021, the NCAA experienced a major shift called conference realignment where many schools left the athletic conference they were in for a new one, in the hopes of larger media contract revenues that are distributed to the member institutions who agree to the contract. The Big 10 and SEC emerged as the primary winners during this realignment, with each conference gaining multiple large name brand schools which in turn garnered multibillion-dollar media deals, all at the expense of the Big12, ACC, and now essentially defunct PAC12. Because the Big 10 and SEC secured more prominent schools and significantly larger media contracts, both conferences have publicly opposed private equity with their member institutions. On the other hand, because the Big12 and ACC lost some of their biggest brand names and had smaller media deals, these conferences and member institutions are interested in staying competitive, and to replace the lost revenue, they support private equity’s investments.
What does a private equity investment look like with collegiate sports?
There are currently two suggested ways of investing in collegiate sports that have been made public. One is where a firm will use the IP of a team to build a business that can generate revenue off of that IP which will then be shared between the firm and the partner university. This is the business model of a company called Collegiate Athletic Solutions, or CAS, which is owned by RedBird Capital founder Gerry Cardinale. The other route is a more traditional-looking private equity investment, where the firm will give capital in return for some sort of ownership in the athletic program or conference. CVC Capital is the private equity firm that is currently the Big12’s prospective partner. CVC has experience investing in professional sports leagues like La Liga but collegiate athletics have always been different than professional sports teams because even when generating revenue, these teams have been viewed as extensions of their nonprofit academic institutions and those funds would be used to cover a different cost within the school’s budget. Because of the lack of profits, how a private equity firm would recoup its investment remains to be seen. However, it is predicted that the private equity returns would come from the annual revenue of media contracts and sponsorships. The Big 12 conference commissioner, Brett Yormark, even admitted that he viewed the current landscape of collegiate athletics as no different than professional sports and said he’d been doing his job poorly if he didn’t try and go after every revenue stream possible. And if it is just like professional sports, how much control does a 12% investment get?
Small short-term gains for a long-term unknown
The NCAA gained the ability to regulate player compensation from the House settlement and with those powers, they should ban the involvement of private equity. If private equity invests, their return would be expected. What happens if the school or conference doesn’t generate that revenue, or the next media contract’s value is much lower than expected? Will the firm still get its dividends? Will the universities have to cut something else to meet that obligation or will the conference have to give less media revenue to the universities? None of these questions have answers and more importantly it takes away from the theme of the House settlement, which was that the athletes should be the focus of the compensation. The issues over who will ultimately have control over hundreds of millions in revenue for nonprofit, largely public institutions should generate too much concern to be approved by the NCAA, conferences or their member universities.