University of Utah nearing landmark private equity deal expected to generate $500 million
If the Big Ten undergoes a true PE takeover, the PE overlords will at some point have leverage to oust Tony Petitti. This is part of the strategy. If the pattern holds, expect him to be replaced by somebody who's never watched college or American sports, much less worked in the industry. At the behest of PE overlords, they will carry out orders that will alienate University Presidents and Athletic Directors.
Quoting myself to build on another less discussed nuance of Private Equity leverages...
Back in October the example I used to depict how hostile PE takeovers are was Vegas:
You ever wonder why there's no more free parking? Free drink services are cut back to almost nothing at the tables and slots? Blackjack odds were raised in favor of the house from 3:2 to 6:5? And the prices on absolutely everything are nearly doubled in the last four years? Private Equity stepped in and forced these changes for the sake of short term profit. Lost is any sense of courting the customer loyalty that Vegas was famous for and well tipped for - like with free drink service and gambling comps.
There's another nuance to understanding the aims of how Private Equity generates revenue for its backers, most notably for aggressive firms like Blackstone, Apollo, Silver Lake, and Bain. The first is pretty well stated: increase the shares by any short-term means necessary (see Vegas example above). This allows its PE backers to cash out on increased value of their takeover. The second, less-stated method is to control enough of the company (like MGM) to then promote and eventually facilitate its sale to a much bigger entity. This second type of a highly sought cash-out position is the longer-term aim of Private Equity.
Hollywood Studios are somewhat of an example of how a PE takeover is playing out, similarly to how a PE takeover of college football might play out (the same aims will remain).
To be clear, the major Hollywood Studios are not yet strictly controlled by PE Firms. Studios are only partially funded by (increasing) PE investment. However, the direction of Hollywood's future has fallen under irrevocable influence of PE Firms. This is because PE focused so heavily on bankrolling the streaming model, both in infrastructure and content. Disney+, HBO Max, Hulu, and Paramount were all created to chase Netflix. Meanwhile Apple and Amazon got in the game of streaming. In turn, Hollywood was so quick to open its arms to the streaming model because for the first time the streaming model promised a financially stable subscription-based model that Hollywood long sought.
So why did PE back the streaming model? Remember the second cash-out method of selling the company leveraged by PE? The streaming model has made Hollywood much easier to sell. Specifically to Big Tech.
How? The streaming model is compatible with Big Tech operations and can be billed as a promising acquisition for Big Tech, especially as Apple and Amazon created their own, albeit limited streaming platforms.
So why does PE strategize selling to Big Tech? Because PE seeks a cash-out that only the wealthiest companies in the world can afford. These wealthiest companies in the world comprise Big Tech - Alphabet (Google), Meta (Facebook, Instagram), Netflix, Amazon, and Apple. PE's long-play is to conform its investments for eventual sale to Big Tech. Because Big Tech is the only entity that can afford a large acquisition like this.
How is this already working for Hollywood?
It used to be that directors took their artistic vision to a studio for financing, distribution, and marketing. Studios were staffed by business heads that though cutthroat also appreciated film and were learned enough in film to understand the director as artist of their vision. Though risky - art is always a risk - this approach resulted in tremendous pop-culture payoffs like Bladerunner, Lion King, The Matrix, Office Space, and Blair Witch Project, among other hits. This worked often enough for Hollywood to profit while higher Film retained worthy status as art.
Fast forward to the advent of the streaming model, and the ongoing Big Tech takeover of Hollywood, and film-as-art is now film-as-content. Directors are now "cast" by studios and often have no interest in the genres they're directing. Intellectual Properties such as Star Wars, Star Trek and Marvel become developmentally stunted by relentless prequels, sequels, and remakes. With Warner Brothers - one of Hollywood's originally studios - in the midst of a buyout by Netflix, Hollywood will become a side hustle of Big Tech.
Where am I going with all of this? In terms of Private Equity's interest in College Football? In the short-term PE will want to raise CFB's value like a stock. In the long-term, PE will look to sell its College Football takeover to Big Tech, which in turn will treat College Football like another form of its "content." It's all very soulless. Athletic Directors and Conference Commissioners who know nothing about sports will be "cast."
How will this specifically look for college football? My guess is that Private Equity will seek to model the business of College Football after the NFL. This means aligning college football as closely to its betting partners as possible, like the NFL now does.
