Locked On Jayhawks - Daily Podcast On Kansas Jayhawks Football & Basketball - DOOMED?: Utah’s $500 Million Private Equity Deal and How It Could DESTROY College Sports

Starting point is 00:00:00 Utah just signed a giant private equity deal. I'm talking $500 million, and I'm worried that it is the beginning of the end of college sports, as we know it. You are locked on Jayhawks, your daily podcast on the Kansas Jayhawks. Part of the Locked on podcast network, your team every day. What's going on? Derek Johnson here. This is Locked on Jayhawks. Thanks for making it your first listen every day. Thank you for making the Lockdown Podcast Network to the number one sports podcast network. And on today's edition of LOJ, we are breaking down about this private equity deal that was

Starting point is 00:00:44 wrung in by Utah for $500 million and why I think it's a very bad thing for where college sports could be turning. We're going to break down what is private equity. What could this mean for Kansas? What could this mean for college sports as a whole? And what is all this? for Utah in general. It just feels like you look at it. I mean, okay, you've got teams opting out of bowl games. You've got, you know, Notre Dame, whether it's them, whether it's Iowa State, whether it's Kansas state, whether it's teams declining bowl games like Kansas.

Starting point is 00:01:14 All that's being talked about nationally, the only thing that you can hear about from the national talking heads is the college football playoff. And that's probably going to expand even more soon. And then eventually like the bowls going back to all these opt-outs, like those are going to poof away, right? like, well, what if what if the bull games go away by the next time Kansas becomes a bowl eligible, you know, and then Kansas just never gets to go to another bowl game again, right?

Starting point is 00:01:36 Players are getting paid now, which is cool, but they want to play less. Like in the era where they weren't getting paid, they were cool playing the bowl games, but now they're getting paid, they're not cool playing the bowl games. That doesn't add up to me. You would think it would be, oh, you're getting paid, you're cool playing the extra game with the bowl game, right? NIL, the transfer portal, they are just insane at this point in time. The NCAA can't govern anything.

Starting point is 00:01:57 They constantly get sued. They lose in court, college programs, despite the fact that, you know, 10 years ago, if you would have told them that, hey, you're going to be making X amount of dollars from your TV deal or whatever, like, oh, if you were just said 10, 15 years ago, this is how much money you're going to be making. Now, you'd be like, oh, we'd be golden and no, but all these schools are in debt somehow because they spend everything they get and more. And things are teetering big time in college sports. And nothing to me threatens it more.

Starting point is 00:02:27 then this move of private equity for Utah. Utah Athletics is entering. This is according to Ross Delinger of Yahoo Sports earlier on Tuesday. What could be a $500 million plus equity partnership with Ocho Capital featuring the creation and shared ownership of a for-profit entity to operate athletics. I just think this is really bad news. I think this is really bad news for the world of college athletics. I think this is bad news, honestly, for Utah, at least in the long term. And honestly, this could end up being bad news for KU one day if they kind of try to go into this world too. And I think it is kind of just a continuation of everything we're seeing right now in college sports. Money is being prioritized over long-term success and sustainability over and over

Starting point is 00:03:14 and over again. So let's break down what exactly is happening at Utah. Why is this such a bad thing in just a moment? This episode of the show is brought to you by Omaha Stakes. The holiday is always feel a little easier when you already know the perfect gift. And Omaha Steaks makes it almost too simple. Whether you're treating yourself this season or sending something memorable to family and friends, Omaha Steaks has got you covered with delivering handcrafted perfection right to your door or their door, if you're ordering for them. And this week is the best time to jump in because their cyber sale is here and the deals

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Starting point is 00:04:29 So what exactly is private equity? Why is this a big deal? Why is this a bad deal for Utah? I think in the short term, this will be good for Utah in the long term. I don't know about that. So here's what specifically happening in Utah. So Otrow is this private equity group. They paid $500 million to basically be this like investor or part owner, basically in

Starting point is 00:04:49 Utah for lack of better terms there. Utah uses the money to get out of debt. and then they get to finance whatever. I don't know what they're going to use to finance on. Player acquisition, athletic department raises, facility upgrades, like whatever they're looking to do with the money. Then private equity is basically a co-owner and has a way of trying to diversify their account

Starting point is 00:05:13 and make money off a venture like this. They're also, you know, big money donor. There's a lot to go. I guess it'll be like a degree. May Packers, you have part, I don't know. This whole thing gets weird, right? Although part of me is like, if I was a big money donor, wouldn't I just be like, hey, you just signed a $500 million

Starting point is 00:05:33 dollar private equity deal. Why should donate more money out? But I don't, anyway. Obviously, though, you know, the thing about flex is if somebody made $15 million, if the first is going to be on, it's going to be spent. You know, one of the things that I guess is at least

Starting point is 00:05:54 a little cool about the the David Booth deal right is the idea that um with the David Booth deal it's not like necessarily 300 million just like straight up like up front that's going one way or one direction it's like being slow played into to prevent I guess that same situation then again KU just announced Tuesday night like some expanded partnership with legends global to handle their fundraising ticketing and so on. So maybe Kansas is eventually going to be headed down this path to that kind of sounds similar to this, though different. Honestly, like, just in general, how long before we see like the Saudi Arabia, like the, we've seen live golf, like how long before we see like that money work its way to a college brand, a college team or conference or whatever it is, right? Now, what is private equity you might be asking?

Starting point is 00:06:44 So basically it's like a collection of investment capital that can help back or fund someone, right? It can be a group of people. It can be a fund. but it's going to take some control of a business, or in this case, Utah Athletics, and basically take control of it, give you money for the upfront, and basically they view it as a way of like you're buying into a business that's going to make you some extra money on the side. Think of it as like, I don't know,

Starting point is 00:07:09 if I bought a bunch of like real estate and started renting out real estate in the Lawrence area, and not the same, but like it'd be like if I was in a big group of people who owned a lot of money and then we bought the real estate and then we were renting, it out, I guess. Again, that's not a perfect comparison, but just trying to simplify it as much as possible. It just basically means private equity is controlling and then a lot of times private equity is the one who wins, not the other people. And the idea here typically is, hey, we get an influx of money. This is going to be great. And then what ends up happening is private equity, all they care about. Like, okay, Utah athletics, they want to win. Their goal is to

Starting point is 00:07:51 win in all their different sports. They want to make enough money as well, but they want to win. And that's the same for the other college athletic departments. Private equity doesn't care if they win or lose. I mean, they care if they win because it'll probably mean more sales and more money, but they don't care if they win or lose on the field. They just want the money. And what does that typically lead to?

Starting point is 00:08:09 In a lot of these businesses and places that use private equity, usually get a worse product at a more expensive price. And there's a lot of cost cutting measures that come with it. And here's some reasons that it can be bad. they're going to prioritize quick returns. That's one of the things that, you know, private equity kind of looks into, right? And that can lead to those cost cutting additions. It usually is something where, like, sometimes you're going to see people lose their jobs

Starting point is 00:08:39 or people get outsourced jobs or benefits get cut, right? Like just finding ways to strip down the costs. You may lose some decision making in there. And it's also like private. So, like, you're not going to get the same type of, I guess, scrutiny and public notion of regular companies. And some of them even, like, sell off company assets to, you know, get some extra value there. And so I think I just wanted to list out, like, a couple examples of this, Toys R.S, they were got by private equity and that obviously ended up leading to mass layoffs and then eventually bankruptcy. Go look up steward health care and private equity.

Starting point is 00:09:20 That's like basically a health care hospital or whatever was bought up by by private equity. They got charged like insane rent numbers to make back up the money. And then because of that, they ended up not being able to like do surgeries on people. Like people would come in being like, hey, I need this surgery. And they'd be like, okay, we need to do this surgery. And then they'd be like, oh, we don't have the equipment for that because private equity made us sell it or something like that. Like stuff like that. There was a dentist office that got bought up by private equity that a two year old like ended up dying.

Starting point is 00:09:50 because they did way too much tooth work that the private equity was forcing like the dentist's office or making their, I guess, standards and requirements that you need to do this, this, this, and this. Remember Radio Shack? Yeah, that was a private equity thing as well. You can just Google search like a lot of this stuff. Here's one that sticks out to me in terms of like when you're talking about a worst product that's more expensive. I don't know if the products were. If you ever been to like Coldstone is Coldstone Creamery, Coldstone Creamery, I don't know, it's probably about the same from what it was, but certainly the prices are more expensive now. So right now, and part of this, too, like inflation has happened. But like the smallest size ice cream is like nine bucks now with no

Starting point is 00:10:31 mix-ins at Coldstone. This is one location in L.A. I don't think it's this bad in Kansas yet, at least. But like, there's this one that was going viral of a video in Los Angeles where to get two mix-ins, a waffle cone, and the smallest size ice cream cost $19.60. That is a company that was bought out by private equity. And yes, things get more expensive. I would just venture to say this. If you feel like there is a brand or company that you've liked to at some point, their product got worse.

Starting point is 00:11:01 Typically, if you look at that company, you'll find a private equity firm that is kind of behind it. So short term, yes, I'm sure this will be outstanding for Utah and any other school that does this because that's the thing, you would be naive to think Utah is going to be the only school does this. This is just opening the can of worms. There's going to be other people who get involved in it. I really hope Kansas does not get involved in it. But long term for Utah fans, get ready, because again, short term, this might be great.

Starting point is 00:11:26 You might win the Big 12 for a couple of years, right? Because you're able to afford all these great players, and that'll be great for you. But long term, get ready for much higher ticket prices, get ready for more expensive apparel that's probably cheaper made, get ready for less employees and less jobs around the Utah Athletic Department, who probably are going to be getting paid less to do more. And in general, get ready for decisions that are going to affect. factor in price over anything else, right? And imagine if in 10 years like Utah is hiring a coach to this same notion, um, and they want their number one candidate, but their number one candidate is

Starting point is 00:12:02 going to cost five million more on a buyout from that school than their number two candidate. You bet the private equity is going to probably like, hey, we should look at the one who's five million dollars cheaper. And you might think that's crazy, but like this is an excerpt like, again, maybe you think I'm just taking that to the extreme. This is an excellent. from the athletic by Andrew Baggerly, who covers the Giants on the Athletic just a few weeks ago, who the Giants just last year got, I forget the exact number, but got a minority ownership investment by private equity. And this was for this offseason. Baggerly wrote this in the Athletic. The Giants might be concerned taking substantial operational losses on paper,

Starting point is 00:12:41 would have failed to demonstrate responsible corporate governance so soon after entering the partnership. Basically, that means they're afraid to spend money on free agents. are the San Francisco Giants in case they lose some operational money and what the consequences would be with private equity. That is a terrifying thing to come to sports and to come to your specific team. And so if you thought that tickets were more expensive this year for your collegiate sports team, for KU or whatever, if private equity gets involved, those numbers are only going up and you're probably getting a worse product out of it as well.

Starting point is 00:13:17 All right. I call it sports doomed. Let's get to that next. today's episode of the show is brought to you by game time the world cup is coming back to north america for the first time since 1994 and with 48 teams for the first time ever it's going to be massive but let's be honest getting tickets is usually the hardest part that's why the game time app is clutch finally giving fans a real advantage when it comes to snagging seats with game time you can track price drops in real time get alerts when at great seats open and buy tickets the moment

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Starting point is 00:14:17 Terms apply. Download the app, make an account, use code Lockdown College for $20 off. Swipe, tap, ticket, go. Game time. Thanks, Jim, for joining us here on Lockdown Jayhawks. You can find our show anywhere you get your podcast, including on our YouTube page. We're going to have the KU defensive side of the ball for needs in the off season where KU needs to attack the portal coming up on tomorrow's episode. Don't forget check out our offensive side from today's episode as well. Are our college sports doomed?

Starting point is 00:14:46 I think just a very open-ended question. obviously there's this private equity thing. I talked about some of those things at the beginning, that it feels like things are starting to collapse on itself. And it's kind of like, because they updated on this as well, that they continually the updates we hear is that they're wanting to push toward NCAA tournament expansion. And that's another thing where it's like,

Starting point is 00:15:07 do not mess with the NCAA tournament. But it seems like they're going to. And the reason why is simple, right? They can make more money. They're going to have more inventory of games to sell. They're going to make more money. And that is the case with everything here. Everything is about, can you make more money?

Starting point is 00:15:23 If the answer is yes, they're going to do it, right? There is a bubble. I don't know where that bubble is, but it's going to pop, right? Like, eventually you have too many tournament games to get water. It gets watered down. People lose excitement. Like, I don't know what it is, right? And it's the same thing with all this stuff.

Starting point is 00:15:37 It's the same thing with Caldry alignment, right? It's a teams leaving conferences and leaving behind rivalries and leaving behind regionality, all these West Coast schools joining the Big Ten. all these rivalries that get destroyed, all this conference realignment, you know, schools are going to other conferences to get a short term dollar. Hey, I'm making 50 million in my conference, but I can make 70 if I join that conference. Great. Let's go do it. But then in 10 years, even when you're making 70, you still end up in debt because again, you spend it all. So it's like, does it even matter? Right. And in the short term, sure, it's good for you to leave for

Starting point is 00:16:12 the bottom dollar. But like, I don't know, man. I kind of refuse to believe that the health of college sports, the landscape is going to be better in 20 years from now. And the level of interest won't be as strong if these kind of short-sighted approaches like continue to happen, which is because everyone's just kind of greedy here, right? And this is kind of the bottom line to me. And this is what's tough too. Like if you are a college athletic department and you want to be competitive, every other school in your conference is doing it too. So it is a keeping up with the Joneses. And then it's just like everybody's doing it to compete with everybody else and that it can never stop and here's kind of the bottom line to me this is fully

Starting point is 00:16:50 trending to a point where division one college sports are going to become minor league sports that's what it feels like to me and that's fine in a way but also the appeal to college sports at least in my eye has never been hey the product is better than pro sports if i'm looking for the very best product i will go watch the NFL over a college football game if i want the very best players I'll watch the NBA over a college basketball game. But the reason I want to turn on one of those college games, it is the tradition, it is the pageantry, it is the rivalries, it is the regional games, it is the fan support and the, I don't know, just kind of local flavor and feel

Starting point is 00:17:26 and the passion to everything. And if you become minor league sports, which is trending that way, those things all go away. Now it's just a product that is a worse product than the pro stuff. And then at that point, it becomes, like think about a minor league baseball or minor league hockey game fun to attend nice night of entertainment maybe a fun cheaper way to take your family out than go to a major league game cool but is it really something that you're like die hard invested in no it's not um and like the full on tv investment the watchability in the mind like it's just severely less and so yes like all these decisions become money driven as more and more fans get priced

Starting point is 00:18:04 out as as more people don't want to play the game as ESPN continues to be the puppet master and all this, as corrupt as the world of college sports is and has become behind closed doors, it would not shock me if in 10 to 20 years, this thing is beefed up to minor league sports. And that loses a ton of long-term interest, all in the vein of everybody chasing short-term millions of dollars right now. Just one man's thought. All right, that'll know for this episode of Locked on Jayhawks. You can find our show anywhere you get your podcast, including on our YouTube page or you can like and subscribe to the show.

Locked On Jayhawks - Daily Podcast On Kansas Jayhawks Football & Basketball - DOOMED?: Utah’s $500 Million Private Equity Deal and How It Could DESTROY College Sports

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