Jun 143 min read

The Big 12 Conference Is Considering Major Revenue-Generating Deals

According to ESPN's Pete Thamel and other reputable sources, the Big 12 Conference is exploring two groundbreaking deals to generate significant revenue. First, the conference is considering a corporate sponsorship arrangement in which it would relinquish its naming rights in exchange for $30 million to $50 million annually to be split among its 16 member universities. Second, the Big 12 is mulling a private equity deal in which a private equity fund would infuse the conference with $800 million to $1 billion in exchange for a 15-20 percent stake in the Big 12.

Corporate Sponsorship

Regarding potential corporate sponsorship, the Big 12 is reportedly in talks with Allstate. If the deal comes to fruition, Allstate would pay an annual eight-figure fee in exchange for the right to rename the conference. "The Big Allstate Conference" and "The Allstate 12 Conference" are among the names under consideration.

Private Equity Investment

Separately, the Big 12 is exploring a private equity investment from a Luxembourg-based firm, CVC Capital Partners, that manages over $200 billion in worldwide investments. As noted, if the private equity deal materializes, the conference will receive an enormous infusion of cash, and CVC will acquire partial ownership of the conference.

Necessity of Revenue

The Big 12 is actively pursuing revenue streams to maintain long-term financial stability and successfully compete with the two conferences which are the runaway leaders in revenue generation—the Southeastern Conference and the Big Ten Conference. In addition, the Big 12, like other Power 5 conferences, needs increased revenue to meet its obligations pursuant to the House v. NCAA settlement, in which the NCAA and the Power 5 conferences agreed to pay $2.8 billion to former collegiate athletes and to share revenue with athletes in the future. The future revenue-sharing aspect of the settlement ushers in a new era of college sports, paving the way for schools to pay student-athletes.

Leading Proponent

Big 12 Commissioner Brett Yormark, depicted below, is leading the charge for one or both of the major revenue-generating deals outlined above. Indeed, he has publicly proclaimed that the conference is "open for business."

Yormark's position is that with the advent of name, image and likeness (NIL) and the revenue-sharing model entailed by the House v. NCAA settlement, the future viability of conferences depends on access to revenue streams. In this new era, conferences, universities, administrators and players all have stakes in the game. It is an environment in which a conference and its member universities will fail in the absence of competitive revenue generation.

Hence, as commissioner, Yormark is seeking to open up as many revenue streams as possible for the Big 12.

By making the private equity deal with CVC and/or the corporate sponsorship deal, the Big 12 could close the significant revenue gap between itself and the SEC and Big Ten.

Resistance Within the Big 12 Conference

Yormark's pursuit of major revenue-generating deals is being met with resistance from some, including school officials who believe relinquishig naming rights to a coporate sponsor like Allstate is tantamount to "selling out" the conference and its brand. Understandably, some are uncomfortable with "the Big 12" being renamed something like "the Allstate12".

There is also resistance to the private equity deal. The prospect of granting part ownership of the conference to an outside investor is offputting to some school presidents. Additionally, CBS Sports reports that CVC will only agree to make an investment in the amount of somewhere around $1 billion if it receives assurances that the Big 12 will stay together long term. Thus, member universities would be forced to make lengthy contractual commitments. Finally, concerns have been raised by some about a prior relationship between Yormark and CVC. When CBS Sports contacted Yormark to inquire about the prior relationship, he declined to comment.

Ultimately, if CVC and/or a corporate sponsor like Allstate are willing to make these deals, the presidents of the universities will have to give their approval for the deals to be consummated.

Potential Implications

If the Big 12 strikes one of these deals, would the Big Ten, SEC and other conferences follow suit? If the Big 12 does the private equity deal with CVC, will private equity become the new normal for capitalization of college football conferences? Is private equity inevitable in the future of college sports?

RedBird Capital founder Gerry Cardinale labeled college football as "vastly undervalued." RedBird owns stakes in soccer powerhouse AC Milan, the Pittsburgh Penguins and the Boston Red Sox. Thus, companies like RedBird may seek to acquire ownership interests in college football conferences or teams.

College conferences and teams are in uncharted territory. All will need to adapt in order to stay competitive in an era when players are paid and new revenue streams are open.