Should Universities Divest Big-Time Sports?

I have long thought that universities should sell their big-time sports and be better off as a result. My rationale has largely been related to institutional integrity, but now it is also firmly economic. I’m more convinced of the benefits of selling than ever; indeed, I think the timing is now perfect, and I recommend getting out ahead of what’s assuredly coming and be prepared to be the offeror as opposed to the respondent. It is just smart to be thinking about how to manage the future that’s already happened.

Selling off football has occasionally been suggested before as an out to the persistent moral and financial albatross that football and basketball have been for even major universities,¹ but I’ve never seen a serious case made, and I wonder whether anyone has looked—really looked—at it.   There is no doubt of the complexity involved, especially among public universities, but also no doubt of its do-ability. To a smaller or larger extent, it’s already happening, with private equity firms entering to take ownership in bowls and tournaments, Fox owning a majority stake in B1G, and in a recent case, the private equity investment in University of Utah football through a newly formed for-profit entity.

But this is not what I mean by selling. Note that these deals are designed to benefit the sport—they do not directly benefit the university. They are not an exit strategy from the problems that plague football and basketball or their institutional hosts. The Utah deal is still centered around the AD and boosters, only now they can be rewarded with an equity stake. Perhaps these outside investments are a form of universities testing the waters—or of investors trying to hold onto the last, convenient vestiges of the student-athlete myth—but I think the opportunity for universities is more expansive, and with less longer-term risk.

The potential benefits to the university of a properly structured complete exit from big-time sports, both tangible and intangible, are multi-faceted; the right deal could go a long way to solving multiple financial, educational, ethical, and public perception problems: it is not just the money, but what you can do with the money, and, at the reputational and trust level, what the release of teams can do for you.  As will be discussed in the next post, divesting big-time sports is, in the end, a path to greater independence and creativity in university ‘s core missions of teaching and research. Properly managed, it should not mean giving up school spirit or pride, and could increase it.

It is worrisome to think that the Utah deal could be a model for others—universities have a tendency to be bandwagon jumpers—and it is prudent for other universities to be skeptical and to examine alternatives. First-mover plays are often short-sighted, and there is no evidence for the claims attached to the Utah PR of benefits to the university; these same claims have been used to justify big-time sports in colleges for decades, and they are largely hollow.

On the face of it, this is a pure money deal to turn Utah’s football team into a semi-pro league while pretending it’s not. They are still going to collect over $6 million in student fees despite a claimed injection of up to $500,000, and the university remains connected to the myriad other problems attached to big-time sports, and to having to navigate any fallout associated with trying to professionalize operations run by people accustomed to doing whatever they want, or even with finding ways to increase revenue beyond the obvious but already inflated items like ticket sales.  They still operate under the weakened NCAA.

Perhaps most of all, it is incrementalism—a partial, neither-here-nor there solution, in which it is difficult to see what the true end-goal of the investor (or even the school) is. The dominant design for football, which you could argue has been in place for more than 100 years, is collapsing. There will be lots of incremental change, a lot of efforts to tweak within the current model—and there will be a lot failures along the way.

I’m for structuring a complete handover, driven from the university, in an effort to completely reinvent the sector with a focus on creating value for the university at minimal risk. As it became known that teams were for sale, investors might create leagues, either traditional or, more likely at this stage, single-entity.

Who Should Think About Selling?