As the news was breaking that potentially Penn State and UCLA committed to a private equity commitment to Elevate, the shockwaves were deafening.
As reporters attempted to dig to get to the bottom of the situation, Yahoo’s Ross Dellenger got a denial from Penn State’s Athletic Director Pat Kraft,
“Elevate serves as our partner in ticketing strategy and operations. To clarify, our relationship is strictly limited to these services. We have no affiliation or involvement with any private equity firm or fund.”
What alarmed me a bit in Dellenger’s Tweet feed of the event was a comment he made saying “it was only a matter of time.”
Quite frankly, it shouldn’t even be a matter of time that collegiate athletics programs or universities should dabble in private equity. Private equity, if it were to get involved for schools and universities to fund athletic programs should be major red flags for ethical, legal, and other potential operational concerns.
Ultimately, the hope many have when athletes attend a major university is they are getting a quality education. We have to first realize that Penn State and other universities are nonprofit at its core and not in the business being a profit maximizing enterprise.
Schools ultimately try to mold student athletes and give them ample opportunities to develop as people on and off the field. PE firms don’t look at the people involved. They prioritize financial returns on their investments that would radically shift the focus from molding student athletes to what revenue they can produce.
While NIL legislation and reforms have given student athletes more opportunities to monetize themselves, the key thing that can’t be forgotten is they aren’t professional employees. The influence of private equity could return student athletes back to exploitative labor models that they fought to end.
We also see in sport as other NIL influencers get involved athletes are getting compensated on different scales.
Think about the following examples. Texas Tech softball pitching phenom NiJaree Canady received her second million dollar NIL Deal from the Texas Tech collective The Matador Club. Just from her own roster. I can’t imagine many others close in compensation to Canady and across women’s softball, and now there’s a divide not only on her roster but across the sport.
Football isn’t immune to the inequality in collegiate athletics.
Illinois coach Bret Bielema said on SiriusXM radio, “You’re gonna see teams this year…that are probably in the neighborhood of $30-35, maybe even…$40 million rosters.”
Bielema seconded what Indiana’s Curt Cignetti said about $40 million rosters.
“This is an unprecedented couple days, weeks, where everybody’s waiting on this rev share, and the five or six out there that have unlimited NIL resources, it’s kind of scary for everybody else,” Cignetti told John Talty of CBS Sports. “I think our little pot of gold is pretty nice, but we’re not at $40 million. Or $30 million. Or even $25 million.”
Cignetti indicated that Ohio State, Oregon, Texas, Texas Tech, Miami, and Notre Dame have rosters near or over $40 million.
The disparity in collegiate sports continues to grow without private equity and that has to be addressed. If a school like Penn State received PE, what would be the bidding war of the nation’s other top brands? Conversely, the allure of partnering with major brands like Penn State, Ohio State, Oregon, Michigan isn’t the same as partnering with Illinois, Indiana, Iowa, or Purdue.
Photo by Penn State Athletics: Pat Kraft
As PE would get entrenched into these schools finances, the worst kept secret is football is the primary revenue driver to fuel all the non-revenue sports. In the world of PE, non-revenue is not part of their equation. If PE solely focused on revenue generating sports, the gap of opportunities and resources those student athletes receive versus what non-revenue athletes only widens further.
If PE’s influence was far and wide ranging, their decisions often come from a balance sheet where they would cut non-revenue sports raising more legal questions around TItle IX – for example. With schools receiving PE, you could argue that tax-exempt status at least for athletic departments are now in question.
The greater PE has influence on an athletic program, you start to wonder how pillars of those departments become perverted. Think about academic oversight, if you have a star athlete that can help your team win a major game that has a lot of eyes on it, if that athlete is ineligible, would they be with PE influence? Think about how the Pac-12 collapsed with no network deals and one at risk on the Apple TV+ streaming platform? The university presidents collectively rejected and fled. PE may push a university to take a higher risk for a potential greater return and the short-term gains could very well come at the expense for long-term goals for the university.
Lastly, let’s remember college sports are steeped in tradition, with unwavering alumni loyalty along with community identity with the “subway alumni.” When it feels that the community has been marginalized, people won’t be back and that has an economic impact. Keep in mind, according to a 2022 study by EConsult Solutions, Penn State football had an $87 million impact on Centre County that impacts nearly 1,000 jobs and $26.3 million in employee compensation.
Any negative impact to Penn State football hits home directly throughout Centre County’s main streets.
To tie a bow, Kraft said it best in July 2023, “But, like, why would Penn State take private equity money? I got 94,000 season ticket holders. We sell out hockey. We sell out wrestling. I’ve got the best fan base in the country. Why do I need private equity?”
Penn State doesn’t, and neither does any other collegiate program.
