Podcast Alert: Super Leagues & The Path Forward for College Sports

Transcript

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Charles Rolston: [00:00:00] Welcome to the Navigating Sports Business Podcast. I’m Charles Rolston, VP of Consulting here at Navigate, and I’m joined by our founder, AJ Maestas. And today surprise, AJ, we’re gonna talk about the state of college sports and our predictions for where it looks over the next decade. And I know that we could be here all day on this topic, so we’re gonna keep it as high level as possible. 

We see directionally that college sports is continuing to expand. Viewership is getting higher, revenues are increasing, expenses are increasing obviously with the implementation of HAUS. Where do you think we reach a point where athletic departments and boosters have to start making trade-offs, or are budgets going to continue to rise? 

Because the traditional model with outside booster fundraising, it can’t really fund the pressures that are inflating at this high level. So where do you think that the trade-off starts to begin, where we start to see more [00:01:00] institutional capital actually funding athletic departments versus private fundraising? 

AJ Maestas: The big picture question is, yeah, and costs are going to rise. This coaching cycle what you’re seeing out there in the name, image, and likeness marketplace even if it’s really pay for play, what you’re seeing out there, it’s very clear. And the cost curves are usually very easy to predict. 

You can see, this among other costs. I don’t think we’re anywhere near, a real settlement here with the SCORE Act or any of the alternatives either. And the direction those will go from where they are today is, I think, more favorable to the athletes a-and their compensation and benefits, so that’s another, bump up on the cost curve. 

So yeah, I think it’s pretty realistic. It has to come from somewhere. Now, we’ve noted this in past podcasts, but just as a reminder for, someone who’s hearing this for the first time we basically believe college athletics gets about fifty-seven cents on the dollar if it was a private for-profit entity. 

Now, do I believe you can close all of that gap? No. That’s easy to say and hard to do. And it’s a university. It’s a not-for-profit. There’s other missions a university is [00:02:00] serving. So I don’t think you would get there all the way to a for-profit professional sports entity, but certainly you can bridge that gap that we’re describing. 

Charles Rolston: Yeah, what you were talking about, monetized currently at fifty-seven cents on the dollar compared to the pro space. You wouldn’t see so much interest from private equity and institutional investors unless they thought that the sport, the athletics ecosystem as a whole in collegiate athletics, was under-monetized. 

But it’s tough to think about that as a fan when you see that. The SEC and the Big Ten, for example, they’re on track for somewhere around a hundred and six and ninety-six million dollars respectively per school with their next wave of media contracts. That sounds like a lot of money when you’re just within the collegiate a-athletics bubble And that some of these various Super League concepts, they project as high as 207 million per school per year. 

And I know that this is a topic, that hasn’t received a lot of attention since the start of the season. But do you think that we ever see something like that come to be and these conversations start to bubble up a little bit more? 

AJ Maestas: You mean the [00:03:00] Super League the threat is there. 

I don’t know about 270 million per, university on average but and I think some of these Super League efforts are overstating what can be drawn out of the media marketplace, and we can dive into that and drill down if you want to. But yeah the temptation is there, and I do think it’s true that some consolidation that collective bargaining, not splintering those rights among so many conferences, playing tougher schedules. 

I think creative, better scheduling essentially overall especially the non-conference games. I think there’s a bunch of ways that a lot more money is on the table there, and that’s before you get into other things that could be run, more efficiently. This is a positive for the effort and what the Big Ten’s trying to do, right? 

In creating entity that sells sponsorships. Look at the way the pro leagues do these activities and, if you’re to do that for a super conference, would it yield more dollars than currently to date? Yeah. The answer is yes. So it’s a threat. It’s a threat and a heck of a temptation for some of those schools that would definitely be included in a Super League to not only step forward as they will with their next television deal, but maybe even go further. 

Yeah, it’s very real. [00:04:00] And the private equity money will be there. 

Charles Rolston: And honestly yeah, I just wanna give our audience a little bit of context to some of the numbers that we’ve done and the research that, provides a little bit more evidence as to what the thesis is for these Super Leagues. 

But just giving you a little bit of context, and then AJ would just love you to popcorn or with your thoughts around this. But for context, the NBA teams average around 233 million per year. And currently right now, the SEC games average around four million viewers per game, and our team projects that in a 32 team super conference scenario, they could average around 4.8 to 5 million. 

So let me put that into the context of weekly viewership. The NBA playoffs generate around 50 to 80 million viewers per week on a week during the playoffs. For what we would presume under the presume under a super conference model, weekly viewership related to college football would be in the 80 to 110 million. 

And we know how big college football is in the context of fandom, affinity, passion amongst people across the United States. Is it that [00:05:00] crazy that we start to see media deals comparative to the NBA teams and not getting close to NFL, but being a clear number two amongst sports organizations and sports rights within the US. 

AJ Maestas: I think it should be the clear number two and that’s really helpful context. NBA, two hundred and thirty plus million per team per year. And are we saying the NBA and basketball is worth more than these top twenty-five college programs with basketball and football on the same campus, plus, twenty other sports? Boy, there’s some things we have to do to adjust, right? 

They have a eighty-two, game regular season in college basketball is what? Thirty, thirty-five. Same thing with football, more games in the NFL than college. So there’s some things to make it a little more like for to be fair. But yeah no question. Those numbers don’t make sense if you just look at those high-level metrics and say, “What’s going on here?” 

Now, the NBA has global appeal and there’s some real strong things with, younger viewers that the NBA has and social media. But could that not be [00:06:00] replicated by college basketball? What– basketball’s going to be the number two most popular sport in the world behind soccer, and so why couldn’t college basketball draft off that with international games? 

Makes complete sense. So they could be relevant. Maybe not as much as the NBA, but they could build relevancy. So yeah no doubt in my mind, that there’s money there and there’s potential there. Of course, it takes this consolidated, concerted effort, right? The NBA has been almost fifty years, in, in Asia thirty years in India. 

They really invest long term. There’s going to be an NBA league in Europe. There’s going to be an NBA league in Africa someday. Pretty good bet, right? Where is the centralized entity that’s making long-term bets to grow fandom, that’s making long-term investments like this in the sport around the world in college athletics? 

We’re just now playing some games overseas, right? First football game in London is coming up this fall. There’s yet to be a Mexico City football or basketball game in college athletics. Stuff that is just so obvious, and there for the taking, low-hanging fruit. So yeah, can that– Boy, that makes it look like college athletics isn’t getting [00:07:00] anything near what it’s worth, right? 

But but we’re not promoting ourselves or they are not promoting themselves in the same ways. And keep in mind the short careers. These kids are there for four years. 

Charles Rolston: What have we touched on? Private equity. We’ve touched on super league concepts. We’ve touched on new legislation. 

We could touch on potential lawsuits. If you were an athletic director, how are you keeping track of all the possible paths forward? 

AJ Maestas: I’d love you to answer the same question , what you would do in this situation. But but it’s too much to ask of these people, to be perfectly honest, because it’s a lifestyle job where they have hundreds, possibly two hundred events a year they have to be at night. 

They have twenty sports they’re spreading themselves across. Keep in mind, the CEO of one of these teams has just that league, just that season, just that team to deal with. And again, all those stakeholders we discussed, student, staff, faculty, alumni, the state legislator. You know what I mean? 

Your president, your board that that’s really splintered attention. So it’s quite a bit a lot to ask, I think, of an athletic director. Those jobs are not easy jobs right now [00:08:00] and this makes it even harder. It’s another reason I think the idea of some of this privatization makes sense. 

Some of these entities, some of these structures which, bring some of those resources, to the table for these folks because, yeah, tough job. And and then where’s your league? Where’s your commissioner, that’s driving it forward? Where’s your global strategy? 

It’s not there. The NCAA has not done that at real serious scale, not globally, not in the way a league would. It’s too much to ask of regionalized conferences to do that. They’re concentrating on their specific footprint. Man, you can see the argument for a super league. You can see the argument, right? 

Charles Rolston: If I’m an AD, I’m really operating on two timelines simultaneously. On the near term, it’s just the average stuff, my day job, compliance, roster limits. But now add on top of that house settlement implementation, revenue-sharing mechanics, NIL infrastructure. 

And on the long term, I’m still thinking about media modeling for my conference distribution rights. I’m thinking about conference scenarios, private [00:09:00] equity, the institutional politics that I battle on a daily basis, a football breakup. How can there possibly be enough internal bandwidth for one person or even a team within an athletic department to be able to handle all of these various paths and scenarios? 

And I know that they’re relying on consultants like like us, peer networks, lawyers, and obviously their conference office to function as an extended staff of each individual athletic department. But I think the key thing is, without this centralized, model, you have some leagues that move fast and obviously some institutions that move fast with it, with sophisticated planning, and then you have others that are totally reactive. 

So you have ADs having to prepare for decisions, that they ultimately won’t control in the future. And I think the biggest thing that’s changed over the past several years is that the pace of the change has exceeded the pace of the governance. Most universities usually operate on a twelve to eighteen-month cycle, but now college sports Is shifting towards a three to six month or even faster with all [00:10:00] of these changes that have been happening over the past year. 

And so how do athletic directors who have grown up in this role and been in college athletics for the past thirty years adapt to something that’s changed so drastically from what they’re used to? 

AJ Maestas: Oh, yeah. So brutal. I was at the National Football Foundation Hall of Fame dinner this week, and and I don’t blame them for this in the slightest. 

There’s a lot of athletic directors like, “Wow, this is not what I signed up for. This is brutal.” For all the reasons you just described. I’ll add one more. They’re increasingly a public figure, fans can come after them, attack them, say things to them and their family. So they, they have this kind of risk. 

They can get fired so quickly and so easily for a misstep. And they have this level of control quite often, right? You’ve got your board and all those stakeholders I just described. That doesn’t sound fun. The risk/reward is just not commensurate there for this job. 

You would make more money running a pro team, be less visible, and and work and have a fraction of the amount of demands on your schedule. [00:11:00] So it’s tough. I love it. I love college athletics. I love the mission, and that’s why these people do it, right? They believe they’re serving a larger mission with everything that athletics and universities do for this country and this world. But woof, brutal. 

Charles Rolston: This is a tall task and, I wanna help our athletic administrators who might be listening to this episode out there and get them a little bit of a peek behind the curtain and get your thoughts. I’ll chime in as well, but, what does college football, college athletics look like in the next ten years? 

If you were to plant your flag right now, what are you gonna say it looks like? Just to give them a little bit of confidence on certain scenarios that they can count on. 

AJ Maestas: Oh, you gotta discount this. I don’t have high confidence on this. I really don’t. I need to put more thought into this but to answer I think that there’s some form of football independence. 

Given that it’s not currently run through the NCAA anyway the championship, the playoff it creates a lot of opportunity to, self-govern and create separate entities and what have you. I think that oof, yeah. I think that [00:12:00] there’s the settlement, the concept of the SCORE Act or whichever act you think might pass, I think that it is light on rights and benefits to athletes. 

So I think we’ll ultimately have collective bargaining. I think that’s the only realistic way to get there. Good news, by the way for folks listening who don’t like the idea of that. I think it’ll be a very weak union. Maybe weaker than the NFL when you think of the length of career and the age of these, kids and what have you, and they’re gonna wanna choose where they go to school. 

They’re gonna wanna choose, their major. They’re gonna wanna choose, where they live, what have you. It’s just there’s a lot of things I think they will trade off in exchange of what, in comparison a pro athlete would want just to optimize money out of its union. So I think that there’s collective bargaining, and even if one of these acts get passed, it’ll slide way toward athletes and benefits, and, less caps, more minimums and more benefits and what have you. 

It’s really hard for me to see NIL getting reined in and having antitrust protection for the NCAA. It just feels [00:13:00] to me that it’s an entity that time and time again has shown, that it won’t be progressive enough to be, really taking care of all stakeholders and constituents. 

I think I might have shared this in two or three episodes ago in the past, but the average college basketball coach makes two to three times that that of an NBA coach as far as a percent of revenue to the team. If you’re like, “Oh, it’s an efficient marketplace, in the pro world,” and what have you, are, the coaches you would think the budget would be somewhat proportionate. 

It’s not. And by the way, the number’s the same for college football’s coaches. Two to three X that of their professional peers on a percent of what the entity earns of the business. So it’s an indicator in my mind of there being a constrained marketplace with talent and the athletes and so I would say, “Oh, okay, there’s room to give here,” even though people would say, “God, no.” 

Now I’m about to contradict myself in the world’s longest answer here. I’m sorry for this, but but it just happens to be I was with a retired commissioner the day before yesterday, and he shared with me, that [00:14:00] sports are eventually gonna get cut. And I asked, and I shared, some of the stuff that we know, right? 

That something like eighty-seven women’s sports have been net added in the last few years. And his counter to that was that’s because scholarships have gone up for the male sports, so that’s Title IX compliance, and some people weren’t making compliance anyway, so they had to catch up to it.” 

But his prediction was ultimately that o-over time, one of these settlements goes through, it’s gonna cost men’s Olympic sports first, and eventually women Olympic sports will be cut as well. So there’s a counter to this, so take what I say with a grain of salt. But yeah, I would say further investment. Further investment. 

Charles Rolston: So right now we’re seeing between twenty-two and twenty-three percent revenue sharing with athletes. You think that looks more like a pro model where you get between forty-five and forty-eight percent. But I assume in exchange for that the the institutions would have more security over how long that they’re keeping their players. 

Maybe it’s multi-year instead of just, the way that the portal chaos happens on an annual basis now. 

AJ Maestas: Yeah I wouldn’t even say that far. I wouldn’t go anywhere near as far as where the pro sports world, [00:15:00] because there’s all these other benefits and reasons and things that these kids will want, including an education, right? 

But but yeah, the transfer rules, tampering some of these things that are just obvious. Collective bargaining gives us all of these things. And and you either have to uncap what they’re able to earn, even if it’s this pay-for-play model. There isn’t parity in most sports around the world. 

You don’t see parity in the football leagues around the world, soccer leagues that is. You don’t see perfect parity in most US sports. Look at baseball as an example. So you either uncap it and unrestrict their earnings, or you have to raise up the minimum of the benefits. 

But, I could be wrong. You gotta give me your prediction, Charles. Let’s take two bets on this so we have a better chance of being right. 

Charles Rolston: Yeah I’m kinda in the same line with you. I honestly see pro-level revenue sharing, or at least somewhere in the middle between where it currently is and where the the pro-level thresholds are. 

I do see those multi-year enforceable contracts, to be honest, because I just think that transfers and at student athletes sitting out, in the first few weeks of the season. I think it’s just getting [00:16:00] absolutely too chaotic for the ecosystem to be able to handle. I do see roster caps and, more of a quasi-free agency cycle rather than, multiple windows or transfer windows and early signing periods and things like that. 

I also think from a structural governance perspective, I think we see more of this tiered system within FBS, where you kinda have a clearer breakaway of the delineation between the haves within the FBS and the have-nots. So it might be forty to fifty institutions who are committed to full revenue sharing. 

And then you have the tier two, which is more of the resource-constrained FBS where You know, they’re gonna be considering on an annual basis whether to keep funding their football program or to drop it entirely. I think we need this centralized model. I don’t think that we can keep going through this cycle of trying to get new legislation passed, new rules that end up, having gray areas and loopholes that can be taken advantage of every single year. 

I think we need some clear rules [00:17:00] here and a clear structure and some type of centralized entity that can really focus on what is best for the sport, but also collegiate athletics as a whole. And I think if they have that type of objective in mind, the revenue is gonna follow. I know that external cost pressures are gonna keep, pounding on the doors of athletic departments, but I think with a centralized model, they will be able to to clear those expense growth rates by coming up with new ways to generate revenue and consolidating media rights and consolidating sponsorships and licensing across the top schools. 

That’s my opinion. I’m putting a grain of salt on that too because I don’t have a high level of confidence. But, we like to put ourselves out there on this podcast. 

AJ Maestas: Good. We should, right? It’s fun. And honestly, it’s our job to see the future on behalf of our clients and prepare for it. So yeah, we should have a point of view. 

Charles Rolston: Absolutely. All right. Thank you again for listening to another episode of Navigating Sports Business. I’m Charles Rolston, joined by AJ Maestas. Again, if you have any [00:18:00] questions or comments for us, you can find us on our website, www.NVGT.com, or our personal LinkedIn, and you can always email me at Charles@NVGT.com. If you’ve listened all the way to the end, we appreciate you, and we will see you on the next episode.