Sen. Maria Cantwell, D-Wash., sent a letter to Big Ten presidents on Friday, warning that a move into private equity could have negative consequences, including impacting the tax-exempt status of schools.
“The primary goal of these companies is to make money for the company, which is unlikely to align with your university’s academic goals or its obligations as a nonprofit organization,” Cantwell said.
The Big Ten is exploring partnering with private equity firms, with reports suggesting it may be eyeing a $2 billion investment that would include putting the sale of its media rights and other assets under a new entity partly owned by equity investors.
Big Ten Commissioner Tony Pettitte was short on details at the conference’s basketball media days this week.
“Whether we need strategic investment to help us or not, we will determine that,” he said. “This will be done by all eighteen commanders. I think it’s no different than looking at the other buckets we have to maximize resources. Just another means that may or may not be available to us.”
Cantwell, the ranking member on the Senate Commerce Committee whose state has a Big Ten school, said in her letter that she was told that not all of the conference’s regents and secretaries were fully briefed on the deal.
“It is not clear from my conversations with these regents and trustees whether the sports-focused conference has fully considered the potential impact of the deal on your university and its overall educational mission,” she wrote.
Her letter comes a day after the senator spoke at a Knight Commission symposium that looked at the changes happening in college sports, which settled a long-running lawsuit that now allows schools to pay players for their name, image and likeness.
Cantwell spoke in favor of her recently introduced SAFE Act, which proposes to rewrite a 1961 law that would make it legal for conferences to pool their television rights. She was followed at the event by Cody Campbell, chairman of Texas Tech’s board of directors, a supporter of the changes to the law and who He criticized the idea of the Big Ten To consider private equity.
“The fact that we are bringing private equity into something that, in my opinion, is owned by the American public in college sports, is bizarre,” Campbell said.
Campbell estimates that pooling television rights could bring in an additional $7 billion for schools, a figure he doesn’t support with any data and with which conference commissioners disagree.
“I have never said — publicly or privately — that pooling media rights would increase revenue, and I don’t believe it will,” said Greg Sankey of the Southeastern Conference.
One of the issues involved in bundling TV rights is that each conference has a variety of deals with different expiration dates, making it difficult to synchronize deals and bring them under one umbrella.
Petitti acknowledged that the Big Ten’s private equity move could create the same challenges.
“If we were to do something different, we would honor everything we made in our current deals,” Petitti said. “There is nothing being contemplated that would change anything in our current media relations.”
One Michigan trustee, Jordan Acker, recently Posted on social media “Selling Michigan’s valuable public university assets would betray our responsibility to students and taxpayers.”
In her letter, Cantwell was frank in outlining the risks that private equity investing can entail.
“Your university’s media revenues are not currently taxable because they are considered ‘substantially related’ to your tax-exempt goal,” she wrote. “However, when a for-profit private investor owns a stake in those revenues, it raises questions about whether the revenues lose connection to your organization’s educational purpose.”
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