What Utah's private equity deal means for the future of college athletics

Thoughts on the landmark deal with reaction from the college sports world

The Utah Utes football team generated $79.1 million in revenue during the 2024 fiscal year. | James Snook-Imagn Images

The spectrum of emotions college sports fans are feeling in the wake of Utah's landmark private equity deal with a New York-based firm is about as long as the length of Rice-Eccles Stadium's football field.

While some are dubbing it the "death" of college athletics as we know it, others simply feel it's the way of the world now. Regardless of which camp you fall in, it's hardly worth denying the fact that what Mark Harlan and Utah administrators are pursuing through private capital has been a long time coming, and will likely set a precedent for other schools and major conferences to follow moving forward.

The facts

On Dec. 9, Utah's board of trustees unanimously approved a first-of-its-kind partnership with a private equity firm called Otro Capital. The marriage, along with help from donors, will see an infusion of over $500 million in capital for the university's athletics, as well as the creation of a for-profit entity called Utah Brands & Entertainment LLC.

Utah Brands & Entertainment's goal will be to generate more revenue through ticketing, concessions, corporate sales and sponsorships. It'll also be charged with overseeing the revenue-share pay system for Utah student-athletes.

Certain donors will have the ability to purchase a stake in the new entity, though any decisions regarding coaching and player personnel will remain with the school. Harlan will be the chairman of a board that will include two Otro members and a Utah donor.

Utah athletic director Mark Harlan said in a statement that the formation of Utah Brands & Entertainment was to address the financial challenges created by revenue-sharing with student-athletes and the emergence of the transfer portal. Utah's athletic department reported about $126.8 million in operating costs and about $109.8 million in revenue for the 2024 fiscal year. Football ($26.8 million) and men's basketball ($2.6 million) were the only programs that brought in more revenue than their operating costs.

Otro is expected to earn a large percentage of the annual revenues generated by Utah Brands & Entertainment. The school will have the right to buy shares back if Otro decides to move on or if certain parameters are not met.

How does this deal come to fruition?

Private equity in professional sports is not new. A few franchises across the four major leagues (MLB, NBA, NHL and NFL) and the MLS have entered the sector over the past few years. Arctos Sports Partner (Golden State Warriors, Los Angeles Dodgers) and Ares Management (Miami Dolphins, Inter Miami) are just a couple of firms invested in North American sports teams.

At the collegiate level, though, Utah's arrangement with Otro is the first of its kind. And it's a rather intriguing one, considering it involved a public institution setting up a for-profit entity to essentially make way for Otro and its experts to come in and infuse capital into the school's athletic department.

"[The University of Utah is] a public institution, meaning you have to deal with the public charter and you have to deal with the local space laws," said Irwin Kishner, the co-chair of the sports law group with New York law firm Herrick. "But that said, universities or endowments or not-for-profits do own assets that are often sold or monetized for liquidity purposes.

Just as an example: if the University of Utah were to own some property somewhere and it said, 'It would be better if we could take that property and convert that into cash by selling the property and then taking that cash and building' — whether it's classroom laboratories or infrastructure — those types of things happen all the time."

Utah Brands & Entertainment, basically, is the space the school has created for Otro to invest in. Investors, including Otro, will receive a percentage of the revenue generated by the new entity, while the school maintains control over roster management, hiring and firing coaches, conference management and scholarship management.

Along with Utah's board of regents, the NCAA had a say in the school's deal as well. NCAA president Charlie Baker, who's warned about the risks of private equity in the past, said it was a well-thought-out arrangement when the university brought it to his attention.

"I can assure you that the University of Utah was keeping the NCAA very informed of exactly what was going on," Kishner said. "The NCAA was absolutely kept up to speed."

The approval from Utah's board of regents, along with the NCAA, gives Kishner reason to believe the deal was crafted with a great deal of diligence and care.

The risks

There are general risks associated with private equity. Some of them are unforeseen circumstances, like a global pandemic or an asteroid hitting Earth, that drastically change the financial outlook of every party involved. In sports, that would look like a decline in merchandising, TV rights and stadium sales, to name a few.

Outside of a catastrophic event, any potential concerns regarding Utah's private equity deal surround the school's Olympic sports programs.

When excluding football and men's basketball, Utah athletic teams brought in about $10.6 million in revenue and cost roughly $31.8 million to operate. Now, housing those teams isn't about turning a profit — a majority of athletic programs are seen as a way to enhance students' college experience or simply bring notoriety to the institution.

Bringing in a private equity firm doesn't automatically change those values either, at least in Utah's case. But generally speaking, what's the outlook and role the non-revenue-generating sports play in a deal involving a firm that's looking to maximize its profits?

"There could potentially be tension there," Kishner said. "The programs would typically be relegated, I would imagine, to the universities as to what they decide to run. But there might be some kind of guardrails that say, you can't lose more than 'X' dollars or 'X' percentage of dollars in any one of these programs. Those are things that will have to be negotiated going in."

Whatever the fine print of Utah's deal with Otro reads, it's clear the university intends to maintain control over decisions regarding coaching and player personnel. How the firm's goals of turning a profit influence the school's decision to continue to run several programs in the red, however, remains to be seen.

"That ability of the university today to cut those programs still exists," Kishner said. "So are they going to do it now that there's a private equity firm? It's within the possibilities, but I would technically think that would be a decision that would require the university's buy-in, also."

Financials aside, eliminating programs could also have Title IX implications. The NCAA's Title IX rules don't require institutions to offer identical sports for men and women, but do enforce that schools provide "an equal opportunity to play."

What it means for the future

It appears Utah's innovative deal is set to usher in more private equity into the college sports ecosystem. Several schools and a couple of conferences, such as the Big Ten and Big 12, have explored the idea before, though the Utes were just the first to get the punch.

However, there has been pushback from federal lawmakers seeking to prevent colleges from entering private equity deals, potentially putting Utah's plans at risk.

Legislation to block schools from coming to terms with firms has been in play since Rep. Michael Baumgartner of Washington filed the Protect College Sports from Private Equity and Foreign Influence Act, or PROTECT Act, in early October.

The bill would prohibit agreements with private equity groups that involve ownership or shared ownership in athletics revenue, exercise control over athletics decisions or hold any interest in the athletics facilities or property. It's unclear when the proposal could advance, as the House Education and Workforce Committee panel is "actively examining" the issue of private equity in college sports, according to a report from the Deseret News.

Those opposed to the PROTECT Act point to the Student Compensation and Opportunity through Rights and Endorsements, or SCORE Act, as a potential avenue athletic programs could turn to address their financial concerns. The SCORE Act would guarantee students' rights to sign NIL contracts without facing restrictions from their schools or athletic organizations on a national level, replacing individual state laws so all schools could be held to the same standard.

Another route many feel is the only viable way to curb uncertainty surrounding NIL transactions and the transfer portal is through student-athlete unionization and collective bargaining agreements between players and the NCAA — or another entity in charge of negotiating on behalf of schools. The House settlement caps athletic departments at $20.5 million per year in revenue-sharing, though there's already a sense the guidelines laid out in the multi-billion dollar arrangement won't stop schools from exceeding that threshold in order to assemble the best rosters in football and men's basketball.

Kishner doesn't believe private equity would have any direct correlation to schools funneling money under the table, so to speak. Nor is he sure it'll ever lead to students being considered employees. But he does know efficiency and profit are two important values to any private equity firm, which means the average fan experience inside Rice-Eccles Stadium or Jon M. Huntsman Center could look different in the future.

"One of the things that private equity will bring to the table is refined management and refined business skills," Kishner said.

Harlan has already acknowledged ticket prices will be raised.

“Certainly since 2018, since my arrival, we don’t run from it — we’ve raised prices," Harlan said during a press conference. "I think what is true before today and will remain true afterwards is that whenever I have, and my team has, examined season tickets, single-game pricing — it is an intense process."

It's not clear how much ticket prices will be increased by, though the price of admission probably won't be the only alteration made as a result of Otro's presence. Concessions and merchandising could be impacted if it means increasing efficiency and profit margins.

On the field, there's no doubting the infusion of upfront cash will be utilized as a way of acquiring and retaining talented players. Harlan made it clear when the House settlement was approved that Utah would be spending the full $20.5 million it was allowed to use on its student-athletes. Partnering with Otro is supposed to alleviate some of the financial burdens the school would otherwise be faced with, such as deciding whether to increase student tuition or defund other athletic programs.

Time will tell how much influence Otro has regarding player personnel and coaching decisions from a financial standpoint. Utah reserves the right to have the final say in those matters, but it would be unusual for a private equity firm to sit silently on the sidelines while another entity spends its investments.

"It's very unusual to see a private equity shop just be silent," Kisner said. "That's not the way these work."

At least from the NCAA's point of view, ensuring schools hold on to their right to make on-the-field decisions will be one of the keys to crafting a successful private equity deal.

Sometimes, though, the access to resources determines what sort of players or coaches are available for a school to sign. That's where the influence of the private equity firms comes into play.

"There may be something [in the deal] like, if you want to hire XYZ coach and pay them — I'm making this up — $20 million a year, you can't do that unless I approve it," Kishner said. "If you looked at the salaries of coaches and the salaries of players — and I'm not saying they shouldn't be compensated — but if there was $100 that was generated by the program, the players were getting zero of that,"

Bottom line

There have been a lot of dissenting opinions about private equity's involvement with college sports since Utah's deal with Otro was announced, many of which painted a gloomy picture for the future of collegiate athletics.

In reality, though, there's no telling how the coming weeks, months or years will reshape a volatile landscape that's used to getting turned on its head. Whether lawmakers step in and have their way, or every conference and member school seeks out private capital in the future, Utah's landmark deal will have a ripple effect on the university and the college sports ecosystem.

"I'm wondering how it all plays out," Kishner said. "There's been talk about this now for several years, but seeing it come to fruition and the floodgates sort of opening, you can certainly predict that there's going to be a lot more deals. And it's all very interesting."