This week, Gov. Jeff Landry and LSU President Wade Rousse will convene a pair of private meetings with top donors to LSU’s sports programs to lay out a new revenue model that could “change the future of college sports in America.”
Grandiose statements aside, part of the deal may already be done: Baton Rouge news website RedEye reported Monday morning that LSU had already entered into an agreement with a private equity firm for $100 million.
None of this should be surprising. College sports is now more than ever a big-money arms race. Every school is looking for new revenue sources that will help keep it at the top of the heap. That’s why LSU is searching so hard for more cash.
RedEye’s report, which is anonymously sourced, says that the investors will provide $100 million in upfront cash. It’s similar to deals inked by Michigan State and the University of Utah, the report says.
In return, the firm will receive either a minimum guarantee or a percentage of media rights when the SEC negotiates its next football deal, RedEye reported.
It’s an important infusion for LSU, which runs deficits in most sports other than football, even popular ones like gymnastics, baseball and women’s basketball.
Player compensation is a major expense. This is not the old days, with recruiting battles playing out in living rooms and at kitchen tables with mothers and fathers. They are waged in boardrooms and at conference tables, with agents and consultants.
But it would be wrong to lay the blame for this at the feet of the players.
For years, college sports was a top-down, closed economy. Within the last half-century, as television brought more and more games into American homes, the money began flowing in. Athletics departments began to act like businesses. But they didn’t pay players in proportion to their value; the money went to coaches, administrators and facilities.
This arrangement was justified for years under the farcical ideal of “amateurism,” even as increasingly wealthy coaches put ever-increasing demands on their players’ time and effort. Players haven’t been “student-athletes” for years.
This system allowed schools to keep the major labor costs down (coaches excluded) while pulling revenue from media rights.
Today, college athletics is a market-driven economy. Top players are looking for the best deal for them and their families. They are finally being compensated in relation to the value they bring to their organizations, the same as every other employee.
But it puts those at the top of the program in a bind. To keep LSU’s sports roaring, to keep Tiger Stadium one of the best places to be on a Saturday night, to keep the PMAC shaking at the conclusion of a flawless floor routine, LSU officials need to pay competitive rates. That’s not cheap.
And so, we are in a spot where LSU has cut its first private equity deal. More than the taxpayers, residents, fans, donors or the state’s political leadership, one private company now has an actual share of the flagship public university’s sports programs. Investors aren’t looking for wins. They’re looking for a return.
But there is a bright spot. The best way for private investors to get that return is for LSU sports to remain a hot commodity. And the best way for that to happen is for the program to win on the field and on the court. That will do two things: keep fans happy and drive investor returns. It also puts a lot of pressure on those at the top.
It likely will lead to more such deals. Critics will say LSU has sold out. The truth is, it had no choice.
