USC and Michigan, an unlikely pairing in every regard but their sanity, joined forces last week to save the Big Ten from itself by opposing a plan to accept $2.4 billion in private capital from a pension fund tied to the University of California.
Under the proposed terms, which were approved by the other 16 universities, according to a source, the Big Ten would accept the cash infusion and sell 10 percent of its new commercial arm to UC Investments. The deal also requires a 10-year extension of the Big Ten’s grant-of-rights agreement, binding the schools together through 2046.
There’s much more to the arrangement, which was presented to the membership in a 200-page document.
For example, the new commercial arm would house all the Big Ten’s revenue streams, including media rights and sponsorship deals. Each of the 18 schools would receive a cut of the annual distributions, as would the Big Ten office and UC Investments (for a total of 20 shares).
But the proposal required unanimous approval. The Trojans and Wolverines saw the flaws immediately, derailing a vote and sending commissioner Tony Petitti back to the boardroom to seek alternative solutions. According to multiple sources, he is pushing hard to get the proposal approved — perhaps without USC and Michigan on board. (Good luck with that.)
The pause offers a chance for the Hotline to pose a few questions and take our best stab at the answers. We have spoken to more than a half-dozen sources with expertise in the business of college sports. None of them are affiliated with the Big Ten (or any of the power conferences). All of them think the private capital infusion is a bad idea.
Before we get started, please note: The broad terms of the deal explained here are based on published reports and information provided by Hotline sources. But the situation is as fluid as it is complicated. The details could differ in the next iteration of the proposal, if there is one.
Here we go.
Who benefits?
We’ll begin with the easiest question: Nobody benefits more than the investor, although it’s a sweet situation for Petitti, as well.
UC Investments, which has $190 billion in assets, is counting on the Big Ten’s media rights increasing in value over 20 years. That’s a safe bet given the media ecosystem’s thirst for live sports, the primacy of football within the sports space and the Big Ten’s immensely popular product.
The company would own 10 percent of the commercial arm, dubbed Big Ten Enterprises, for at least 15 years and a maximum of 20.
The conference currently receives about $1 billion annually from Fox, NBC and CBS and would, in theory, negotiate new deals three times during the UC Investment’s holding period: in 2029-30, again in 2035-36 and finally in the 2041-42 window.
In theory, the Big Ten’s media rights will triple or quadruple in price over three negotiating cycles, thus increasing the value of the UC Investment’s 10 percent stake in Big Ten Enterprises. Additionally, the company would receive its annual 1/20th cut of the Big Ten’s revenue. Those shares could generate in excess of $100 million annually.
“I guarantee you the (UC Investments) fund manager is more savvy about this stuff than the Big Ten athletic directors, presidents and commissioner,” a source with expertise in college sports finances said.
Petitti would also benefit, although the degree is unknown.
At minimum, the grant-of-rights extension would lock in the Big Ten’s biggest brands for 20 years and render a college football super league untenable, thus eliminating a major threat to Petitti’s job security. After all, he would be unemployed if Ohio State and Michigan leave and the Big Ten fractures.
(The same goes for the commissioners of the SEC and Big 12; both conferences have examined proposals for private capital and declined to accept outside investments.)
Another consideration: We don’t know whether Petitti’s contract includes performance bonuses tied to conference revenue growth, but it’s a safe bet.
How will the money be used?
The most important question lacks an answer — at least, it lacks a satisfactory answer.
The $2.4 billion would be distributed in tiered fashion based on brand value, with Michigan, Ohio State and Penn State potentially receiving $190 million (each), according to a source with knowledge of the proposal. Oregon and USC would be on the next tier with roughly $150 million; everyone else would collect approximately $110 million.
Published reports and Hotline sources have indicated the schools might use the cash infusion to cover revenue sharing with the athletes, a $20.5 million annual expense — at least for now. (The rev-share amount is based on conference revenues. If the Big Ten accepts $2.4 billion, it could impact the cap in future years.)
Some schools could use the cash to service debt on (past or present) facility projects.
One owes its recently fired football coach $49 million.
But would any of the athletic departments deploy the cash in a fashion that allows them to grow their business?
That’s not clear.
“College sports as an industry has proven we cannot control costs,’’ one college sports administrator said. “We don’t have a revenue problem. We have a cost-containment problem.
“What specifically do schools like Purdue and Illinois need the money for? If it’s for capital project debt, you can get that money cheaper than by selling 10 percent of your revenue.
“But nobody has answered that question and as public institutions’’ — only Northwestern and USC are private schools — “they should be obligated to.”
How do the small brands benefit?
If a college football super league forms in the 2030s, schools with lower media valuations and limited on-field success will get left behind. They see an extension of the Big Ten’s grant-of-rights through 2046 as a security blanket that prevents Ohio State and Michigan from leaving and ensures that the conference remains intact.
But the smaller brands had to give something up in exchange for the security, and that something was cash. The biggest football schools would collect approximately $80 million more from the UC Investments infusion, thus codifying an inferior status for the smaller brands.
Additionally, the Big Ten plans to implement a performance-based model for annual revenue distributions that should further benefit the heavyweight football schools.
Why would the big brands agree?
USC and Michigan executives are smart enough to see the trap. Their counterparts at Ohio State are focused on the present — the $190 million payday — at the expense of the future.
The Buckeyes are the biggest brand in college athletics, a TV ratings machine that won the 2024 national championship, a playoff stalwart that generates more than $250 million in annual revenue.
They already have massive competitive and financial advantages. What do they gain by hitching the football program to Rutgers and Minnesota for 20 years? That’s three lifetimes in college sports. And with changes brought by AI, it could become 10 lifetimes.
Trading away future flexibility — not to mention 10 percent of the Big Ten’s revenue — would be an epic whiff.
“The revenue tiers the Big Ten is talking about,” the financial expert explained, “don’t begin to reflect Ohio State’s real value.”
This being college sports, the executives responsible for Ohio State’s decision, particularly president Ted Carter, would be long gone when the bill comes due.
What about Petitti and his staff?
The Big Ten’s new commercial arm would have its own leadership team to pursue revenue opportunities, particularly in the sponsorship realm.
What does that leave for the conference office? Operational matters such as scheduling, officiating and running championship events.
As mentioned above, the proposal divides whatever annual revenue that flows through Big Ten Enterprises into 20 shares: one for each of the schools, one for UC Investments and one for the conference office.
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Are those equal shares?
If so, the conference office seemingly would be in line for annual payments exceeding $75 million — an immense sum for the limited scope of its responsibilities.
And if the shares aren’t equal, how much would be allocated for conference operations? How much would Petitti control?
What are the investor’s exit terms?
This is a massive issue but has little clarity thus far.
UC Investments would hold its stake in Big Ten Enterprises for at least 15 years and a maximum of 20 (until the grant-of-rights expires in 2046).
In a news release, the company explained that any member school would have “the opportunity to buy down UC Investments’ stake in Big Ten Enterprises if it wishes to acquire a larger ownership stake for itself.”
But when it comes time to depart, could UC Investments sell the 10 percent ownership stake to a private equity firm?
Could it sell to an individual investor?
Could it sell to the NFL?
The consequences of the Big Ten’s private capital play are equally unknowable and immense, potentially impacting the entirety of college sports for generations to come. And it’s all based on borrowing cash to cover debt and committing to a fixed existence in a changing world.
“The presidents would be tying the hands of their successors for years to come,” a source said, “because they need more money now.”
For the moment, USC and Michigan have saved the conference — and the industry — from a monumental mistake.
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