The transformative House v. NCAA settlement is approaching by the day, which means soon that sooner than later many athletics departments will need to find up to $30 million annually between revenue sharing with athletes and/or reduced distributions from the NCAA.
Needless to say, that's not the type of cash hidden between couch cushions, and so a possible solution has emerged.
On Wednesday, RedBird Capital and Weatherford Capital jointly announced the creation of Collegiate Athletic Solutions, "a purpose-driven, dedicated capital and business-building platform for public and private university athletic departments across the United States."
Though both are private equity firms -- RedBird manages more than $10 billion in assets, Weatherford surpassed $1 billion in March -- CAS would not operate like private equity.
In a companion piece on Yahoo Sports, Ross Dellenger explained that CAS will provide between $50 million and $200 million in "private capital" that athletics departments would be free to spend as they see fit. CAS would only recoup its investment by taking a cut on new revenue generated through their involvement.
This differs from private equity, where firms take an equity stake in underperforming business, oftentimes strip them down to the studs, and then flip the company for a profit.
What's in it for RedBird and Weatherford, where they're laying out eight or nine figures in essentially interest-free loans while assuming all the risk?
“I deeply personally believe in college athletics,” Weatherford told Yahoo. “As an ex-athlete, I owe a lot to it and so does my family. We believe in college athletics. I don’t like the fact that 10 to 15 teams have a chance to win a national title every year. I’d like that to be 40-50. It’s not a level playing field. Not everyone has the resources to compete.”
Weatherford played quarterback at Florida State from 2004-08 and now sits on FSU's Board of Trustees. He's also been a major voice in attempting to drive the Seminoles out of the ACC.
RedBird has previously invested in AC Milan, the Boston Red Sox, a Formula One team, and is funding an 8-team college basketball tournament this winter that will pay out $2 million in NIL appearance fees to players.
“The paradigm shift we are seeing in the collegiate athletics ecosystem is similar to the ones we’ve seen with media distribution models, collective bargaining rights, and premium hospitality – they’re all centered around the need to create long-term growth by bridging the gap between premium IP and optimizing revenue streams. CAS addresses athletic departments’ need for near-term capital with additional operational expertise across strategies that can improve competitive positioning," RedBird founder Gerry Cardinale said.
“If you want to compete at this level, private equity and capital is really important,” one athletic director told Yahoo. “I’ve been talking to these people for 10-12 months. I haven’t pulled the trigger. But is this what you are going to need to be successful and survive? Yes, it is.”
Essentially an interest-free loan at just the right time when many schools desperately need it -- think primarily those in the Big 12 and ACC, who desire to remain at the top but aren't paid like the Big Ten and SEC -- where the lender takes on all the risk? It's enough to make one wonder: What's the catch?
As always, stay tuned to The Scoop for the latest.