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The Life of an Athletic Director
A lot going on at the moment.
Law school changes the way that you watch football. Like, can the University of Oklahoma be sued for negligence because of the unpadded brick wall they have right behind the end zone after wide receiver Keontez Lewis plowed into it and had to be carted off? Seems like a foreseeable injury to me. But we just started the negligence unit, so ask me again in a few weeks.
It also changes the way that you doomscroll Twitter. I’ve been bookmarking hot takes and news updates just dying to debate amateurism, contract terms, and more. However, I know that some of the most alarming headlines are easily buried among the blowouts and upsets (yes, UCLA did that!!).
Here’s what I think we should all be talking more about, and what I imagine is top of mind for most athletic directors these days:
Private equity.
It reared its ugly head again this week as the news broke that the Big Ten has been in serious discussions with multiple firms, exploring the potential influx of billions. The short and sweet summary is that the chosen firm would hand over a casual $2B to be distributed among the 18 member institutions in exchange for “sponsorship and branding rights,” and it would all flow through the newly-established Big Ten Enterprises. Why create a new entity to manage this? Because, much like its members, the Big Ten itself is a non-profit organization.
The Athletic aptly points out that 16 of the 18 member schools are public universities, “de facto state agencies” that cannot simply sell off their assets (ie, licensing rights) to private investors. This article suggests the workaround is to go through the Big Ten, who believes its assets to be “undervalued.” But… at the end of the day… aren’t the “Big Ten’s assets” just their member institutions’ IP by a different name? What difference does it make if the university is ultimately profiting from the sale of their institutional assets either way?
That’s just one of the many questions I have. What I really want to talk about - and what I haven’t really seen come up on Twitter yet - is taxes. Congress and the IRS have long held that college athletics are a valid component of a university’s educational mission. However, it hasn’t been without controversy - everything from ticket sales to broadcasting deals and obscene coaching contracts have raised questions about to what extent an athletic department’s tax-exempt status is justified. I don’t really have a problem with maintaining this status while the players get paid - we pay professors and administrators - but private equity? Tens of millions of dollars in private equity?
I won’t pretend that I understand the intricacies of tax exemption, or, frankly, private equity. At a basic level, I understand there are two primary ways that PE funds get involved, but that’s to unpack in another blog post. The fact is, every time this question has been raised at the federal level, there is so much blowback. The idea of taxing college sports is extremely politically unpopular across the board. But will that continue to hold?
Anyways, I won’t have to wait long for an update on all of this. Allegedly, according to the Athletic, we could have a final decision on this by the end of the month. Stay tuned! And RIP Senator Pascrell - I think you were on to something, buddy. [If you really want to nerd out about college sports and taxes, check this out]
The NCAA’s control of college sports continues to crumble.
A few recent examples: just last week, another college football player was granted a preliminary injunction against the NCAA after successfully arguing that the “five year clock” rule violates the Sherman Antitrust Act. Specifically, Tatuo Martinson claimed that the rule, which only allows a student-athlete to participate in four seasons within a five year timespan, is unfair to JUCO athletes. I won’t go into details because my fellow law student Michael Baldocchi wrote a great summary here, but it is extremely interesting that Judge Boulware explicitly called out the NCAA for being “a labor market with compensated workers.” With revenue sharing underway and the courts having successfully picked apart the compensation limits, will the NCAA be able to define amateurism by eligibility limits? Or will those be the next to go?
On a different front, the NIL Go system - a desperate effort by the NCAA and its contracted partner Deloitte to put some guardrails on NIL compensation - is struggling. The concept was simple: a review system for third party NIL deals to ensure that collegiate athlete sponsorships are true marketing deals and not poorly disguised pay-for-play contracts. Once terms are agreed upon with the athlete, the third party submits the deal to an online portal. Submissions are either approved, or remanded with suggested edits. However, my friend Amanda Christovich recently explored the dysfunction and growing sense of frustration surrounding the system. Millions left in limbo, radio silence in response to submissions, and other (foreseeable?) issues have driven sponsors, namely collectives, to skip the review process entirely. Assuming more will follow suit, the underlying issue of unchecked cash flow to prospects is likely to continue.
Stories like Martinson’s and Amanda’s leave me wondering - what is the future of enforcement in college sports? The NCAA is losing in court, Deloitte’s solution hasn’t even hit the six month mark yet…And sure, Congress is talking about getting involved but, uh, the government is shut down.
Tying the two points above together: the private equity proposal would lock in Big Ten members for the next twenty years. A twenty year commitment when the landscape is changing by the day, and the infrastructure is feeling particularly unstable, seems like a pretty big gamble.
Good thing sports betting is all the rage!
A sign of hope? Or a dead canary?
The MLS just announced a new partnership with Syracuse University that offers “customized degree programs” that are “designed for the unique demands of professional athletes.” Online degrees, certifications, and other professional development opportunities will now be available to current and former players, as well as their families. Notably, this program is also available to MLS Next Pro and MLS Next athletes, expanding the opportunities to young players in the development leagues.
My immediate reaction was “wow, this is really cool.” And, to be clear, I still think it’s cool. This is the type of creative innovation and entrepreneurial thinking that the industry needs.
But, as a chronic Extreme Case Scenario Thinker, my next thought was “what if this is the beginning of the end?” So much of the conversation around college sports right now is about what to do with Olympic sports programs. I’ll go as far as to say - what to do about men’s Olympic sports programs that don’t have the (ever-waning) protections of Title IX. What if the MLS continues to expand this program to other universities, and young soccer players have an alternative, specially-designed pathway to higher education that prioritizes their athletic development? What if that experience is actually healthier for young athletes than the notoriously taxing NCAA model (see the NCAA’s own research). Is the beloved American College Experience enough to keep top talent on campuses?
The 1976 Tax Reform Act (yeah, we’re talking about taxes again) officially recognized “national or international amateur sports competition” as a tax exempt activity. It doesn’t specifically say collegiate athletics, because - until recently - it was relatively unquestionable that college sports fall under this umbrella. Just as the Big Ten wants to create a private enterprise to manage its new private funding, couldn’t the MLS turn its development leagues into non-profit organizations that offer higher education opportunities? Should athletic departments lose their tax exemption status, I’m sure Olympic sports boosters would be happy to get their write-offs from someone else with a similar mission.
To answer my own question, I do think that the draw of college campuses is enough to keep young athletes on university rosters. The continued commercial growth of women’s collegiate sports in particular gives me hope that schools will find a way to sustain these programs. But I don’t think it’s unrealistic to imagine a not-far-off world where there are fewer Olympic sports opportunities, especially for male athletes. If that’s the direction we’re heading in, then the MLS deserves a lot of credit for committing to the educational and professional development of the next generation of soccer players.
So if you’re an athletic director looking at all of this, what do you do?
Do you start rewriting your job description to account for managing private investment? Do you reach out to your university’s Board of Directors to advocate for a MLS-partnership program similar to Syracuse’s? Or do you just focus on this year’s red line as best you can and hope your football team pulls off some big upsets in the meantime? We haven’t even talked about the demands of federal advocacy, coaching hires, and day-to-day student athlete engagement.
This isn't meant to be admin-apologist propaganda. Athletic directors are paid the big bucks to make these decisions. However, I don’t envy those in the hot seat these days. The life of an athletic director is putting out fires while fighting the war - you can’t lose sight of the big picture while dealing with what’s right in front of you. With plenty of football left to play this season, who knows what the next few weeks will bring!
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