In his capacity as a Columnist for California Sports Lawyer®, Founder and Managing Attorney Jeremy Evans has written a column about the House v. NCAA settlement that shook the foundations of college sports and also raises more questions.
You can read the full column below.
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The National Basketball Association (NBA) was the first big five professional sports league in the United States to allow private equity funds to invest in NBA franchises. The list of allowable investments also include sovereign foreign wealth funds (with a limit of 20% ownership), pension funds, and endowments. The NBA like the National Hockey League and Major League Baseball do have a regional sports network issue in finding new broadcast and streaming partners as Diamond Sports Group goes though bankruptcy proceedings.
Athletic departments at colleges and universities will now be welcoming private equity to invest. This means that companies like RedBird Capital Partners will be infusing cash into collegiate athletic departments to make the universities more competitive to build new arenas, stadiums, and recruit the best players, coaches, and personnel. The cash will also help with equipment and travel, which is needed in light of the cross-country travel that comes with conference realignment.
Private equity will likely be welcomed with news of the House v. NCAA settlement providing for immediate payment of $2.7 billion to former college athletes, but also a share of the revenue every year with an initial cap of $20 million that rises with athletic department revenues. With television revenues at an all-time high, it seems the schools and the student-athletes are set to cash-in their chips.
However, there are several thoughts that need addressing. The first is in compliance. Compliance and rule-making and enforcement will continue to be hot topics and essential to success of the new college sports setting.
The second is with regard to competitive balance, in two parts. The first is with regard to universities being able to effectively compete with one another at the Division 1 level. Again, compliance, rule-making, and enforcement will be essential to broad success and parity. The second part of competitive balance comes in the form of establishing the differences between professional football (National Football League) and the NBA compared to the new look NCAA football and basketball.
One concern for colleges sports going forward is whether fans will also adapt to the new system that mirrors (on an albeit smaller scale) professional football and basketball, but is larger than the minor leagues of all professional sports combined on scale and moneymaking. A more direct question would be at what point does college football and basketball compete with the NFL and NBA? In the current model with the NBA’s one-and-done rule and the NFL’s junior year rule, the leagues do not compete. If those rules change, there is a stronger argument for competition between them.
The House settlement also assumes that athletes will accept the outcome and not challenge the agreement further. Challenges for employment status, unionization, and more money, etc. The House settlement places college sports under the NCAA in the NIL and transfer portal era closer to professionalization and other major league sports than ever before. The settlement also raises questions about the future of Title IX enforcement, the effect on non-revenue producing sports, and the future of Division 1 sports that are not blue chip programs in a Power Four conference.
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About Jeremy M. Evans:
Jeremy M. Evans is the Chief Entrepreneur Officer, Founder & Managing Attorney at California Sports Lawyer®, representing entertainment, media, and sports clients in contractual, intellectual property, and dealmaking matters. Evans is an award-winning attorney and industry leader based in Los Angeles and Newport Beach, California. He can be reached at Jeremy@CSLlegal.com. www.CSLlegal.com.
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