SBJ College: NCAA needs clearer case for March Madness expansion

Spring-meetings season starts in earnest next week with the ACC’s gathering in Amelia Island. Media days aren’t that far away. Soon enough, football will return. Wild, I know.

With things picking up here in short order, I popped out of the office the last 48 hours for a quick golf trip to the North Carolina Sandhills. I spent an amazing few days checking out Tobacco Road for the first time.

I’m not expecting my swing to get any better between now and the fall. Maybe one day, things will slow enough to shave down my handicap a few more strokes — probably 40 years from now, when I retire.

NCAA men’s and women’s basketball tournament expansion is on the horizon, but the path forward remains murky.

Members of the basketball committees have effectively been given a gag order on discussing expansion. That said, sources with knowledge of the talks told Sports Business Journal that they had not seen any materials related to expansion as of late last week.

Non-FBS football conference commissioners were slated to meet with NCAA President Charlie Baker early this week. The NCAA men’s and women’s basketball oversight committees were also scheduled for a joint session.

In the wake of these talks, I’ve gotten plenty of questions from people in the industry and the broader media rights world on how the financial math related to expansion might work.

It’s believed neither CBS/TNT nor ESPN would be required to increase rights fees if the tournament expands, so don’t expect the networks to pay more if they don’t have to.

So, what’s the funding source for expansion? NCAA SVP/Basketball Dan Gavitt has teased that the NCAA is likely to open additional sponsorship categories. Combine that with new ad inventory from eight additional games and there’s more money to be made. Would it be enough to cover expansion costs? We’ll see.

Another consideration: Expanding now positions the NCAA for its next TV deal. The men’s basketball tournament’s contract isn’t up until 2032. The women’s tournament — which is part of a broader package that includes dozens of Olympic sport championships — expires the same year.

Think of expansion as a sampling of the options. If this were to go into effect in 2026-27, the NCAA would have at least three years’ worth of data and, if it gets its wish, proof that people will watch additional early-round games. That translates into more cash in the next media rights deal.

NCAA tournament expansion hasn’t exactly been a popular discussion. Public criticism has been widespread. The NCAA and Baker also have yet to give a clear explanation as to why the tournament needs to grow.

Either way, it’s likely tournament expansion is coming. Yippee?

College basketball has drawn its share of headlines over the last few days.

On top of NCAA tournament expansion, Duke raised eyebrows with its multiyear agreement with Amazon to broadcast a handful of high-major matchups next season.

Exact terms of the deal have been hard to come by, but what we do know includes:

• Duke will play games against UConn in Las Vegas, Michigan in New York City and Gonzaga in Detroit.
• To sell the package to Amazon, the school also committed to participate in “select additional ESPN owned and operated men’s basketball neutral-site events across the 2027-28 and 2028-29 seasons,” per the release. Details on those are TBD.

To pull this off, Duke needed the blessing of the ACC office — which oversees non-conference scheduling for member schools and has strict regulations — and ESPN. That’s a hell of a needle to thread considering the exclusivity around these kinds of rights.

One important caveat — the games were not sold directly by Duke to Amazon, sources briefed on the matter told SBJ. Third-party brokers (sources didn’t divulge the names) served as intermediaries in each game’s case, which were then subsequently sold to Amazon.

Sources I spoke with characterized the deal as essentially a replacement for a multi-team event. So, instead of playing a couple games in, say, the Maui Invitational, Duke created and packaged three high-major matchups.

Multi-team event broadcasts by non-league partners is not unprecedented. North Carolina has played in the CBS Sports Champions Classic every year since 2014 and will do so through 2029. That said, Duke taking the initiative to create matchups and package them for a streamer is a different thing entirely.

It is also worth noting Amazon Head of Sports Partnerships Charlie Neiman is a former Duke water polo player.

The first place my brain jumped to was, “What happens when Florida State wants to sell its annual football game against Florida to Fox and pocket the profits?”

Sources I spoke with pushed back on the notion Duke’s agreement as a crack in the armor around the exclusivity of media rights. However, it’s hard to imagine people in the industry aren’t looking at trying to pull off something similar.

Still, why couldn’t Alabama football add two marquee non-conference matchups and sell them to Apple TV? Could South Carolina women’s basketball put together a series against UConn, UCLA and NC State and sell it to Hulu?

USC and Notre Dame tried with their annual football matchup before the Big Ten put the kibosh on it.

What Duke pulled off is novel and creative. Is it going to add another $100 million annually to the budget? No. But it’s a different way of thinking — and you’d be hard-pressed to believe there won’t be imitators in the market.

It’s been a busy couple weeks for the “private equity is taking over college sports” crowd.

Learfield’s sale to TPG was our cover story last week, while the Big 12 also got across the finish line on its deal with RedBird Capital.

What should we make of all of it? I chatted recently with David Sunkin, the co-lead of the sports practice at Sheppard, who advised Big Ten schools amid the conference’s dalliances into private equity last year.

Here were a couple of his thoughts:

Answers have been lightly edited for clarity and length.

SBJ: What do you foresee as private equity’s role in college sports, and how might that tie into TPG’s purchase of Learfield?

David Sunkin: “It’s interesting, and it makes an awful lot of sense when I think about it. ... What I really think is sports generally is a big asset class. College sports in particular is a new focused asset class, a bunch of monies circling. There’s a lot of private equity folks that want to be in that asset class. And frankly, I think it’s harder right now to put private equity into a college athletic department or a conference because it’s just made up of college athletic directives. That’s not a private-type investment that private equity is used. ... The recipient of that money when it’s a college or a college conference exclusively, sure, everybody likes money. They need money for all the reasons everybody knows about, but they look at it differently than I think a private enterprise does.

“For private equity, there’s a learning curve and a comfort curve that needs to be addressed. Because if you’re a college athletic director or the Big Ten conference chairperson or Big 12 or SEC, whatever the case may be, your constituents, they’re not entirely driven by commercialism and capitalism. There’s the academic side. There’s a lot of politics involved within a campus, a lot of politics when you’re talking to public schools. You have the regents. It’s going to take some time for private equity to find [its] way where both sides are comfortable.

“So, if you’re TPG or Ares or Arctos or whatever, you say, ‘OK, let’s invest in another part of the college sport ecosystem. It makes perfect sense to go into a company like Learfield that controls so much in the media rights world, because they’re not owned by the taxpayers of California. They’re owned by private individuals that look at it in a more traditional kind of way.”

SBJ: This might be a basic question, but why is it that PE firms are actually interested in college sports?

DS: “Look at the asset class for professional [sports] — NFL teams, NBA teams, many MLB teams, MLS. There’s a lot of investment in emerging sports. ... Institutional capital is investing in those things and will continue to do so. But college sports dwarfs all of that stuff. It’s huge. And the colleges need the money now because of the professionalization. They’ve got to pay the players now. NIL. All that stuff. The media rights are massive. There’s tremendous revenue sources that are really traditional and can be examined with diligence.

“It’s sort of a perfect time where the money is really big in college athletics — primarily media rights, venue development, all that kind of stuff. The programs need money now more than ever in order to compete and to provide a phenomenal game-day experience for their fans. So, you look at that and you look at the hockey stick returns in professional major sports franchises, and it’s viewed as a really, really attractive asset class.”

SBJ: What are maybe some of the misconceptions about PE trying to jump into college sports? What is PE? What isn’t it?

DS: “The public perception of private equity on Main Street is, unfortunately, generally not great, because it’s very complicated. Politically, people use it as sort of a stalking horse to say, ‘Oh, that’s wrong. They come in. They break it up. They lay people off, and then they take it public or they sell it and they get their big returns.’ Sometimes that happens. But if you look at sophistication that many of the private equity firms have developed over the years, primarily through their investments in professional franchises — the NFL obviously expanding for the first time ever, allowing that to happen — they bring in financial discipline, which is not another word for ‘cutting costs.’ Financial discipline, whether it’s in your household budget or state budget or federal budget or a large company budget, is not a bad thing.

“... Media rights have exploded. The kinds of money that these media rightsholder companies have to pay for a major Notre Dame, USC, Penn State, whatever the case may be, is huge. The market has driven that, and I think that has put stress on some of these folks. Learfield has experienced that stress. Others have. Having somebody in the room that’s already invested significant amounts of capital allows them to get follow-on capital to help maybe smooth things over and be less distressed at times. That’s good. They have a lot of operating asset management know-how. That helps.”

• Northwestern’s $870 million Ryan Field project is the opposite of its Big Ten counterparts: intimate, with lots of rooms for fans, no bleachers and cupholders for all. It showcases the “premium for everyone” philosophy behind its design, my SBJ colleague Bret McCormick writes in his Insiders column.
• Full Day Productions and GSE Worldwide aim to break the record for the highest attendance at a volleyball game with Spikes Under the Lights, a Aug. 27 showcase at AT&T Stadium featuring Nebraska, Penn State, Florida and SMU, reports SBJ’s Irving Mejia-Hilario.
• The CW is among the networks interested in the Holiday Bowl and newly returned Poinsettia Bowl — the only bowl games on the market — but the door has not been shut on a potential reunion with Fox, sources tell SBJ’s Austin Karp in this week’s SBJ Media newsletter.
• Notre Dame is restructuring its athletic department, making Ron Powlus the first COO in school history and Garrett Chapman the deputy AD/finance (effectively CFO).
• Marshall is the first Sun Belt Conference school to agree to a corporate jersey patch sponsorship, signing a five-year deal with Marshall Health Network, a source tells me.