The Shamateurism of our Games.

January means the sharp end of the NFL, the gorilla of the entire sports industry. American football, and where it now sits, will always demand attention, Taylor Swift, or not.

During Victoria’s Industrial Revolution, sport began its process of a more formal codification, via England’s elite public schools. This culture, coming from old money and privilege, obviously always considered games as Corinthian. The 19th century gentleman never needed money from sport for their living and, as such, our industry started as rigidly amateur.

Not for long.

 

Football became the property of the working man.

Products that gain mass popularity drag money into the picture pretty close behind. The elite players very soon became assets to be acquired.

From the book “Sport’s Perfect Storm

It has always been impossible for products of value to remain detached from market forces for too long. Association football went profession quite quickly, after a rather silly period of faux shamateurism.

Samuel Tyzack and his ilk will always appear, and that’s classic financial arbitrage, so we shouldn’t be surprised. Rather, one should plan for exactly that.

Just follow the money

On reflection, considering all of this, college sport in the USA has done rather well to last so long. But if it’s now on its last legs, as it appears, we should remind ourselves what this may mean.

 

Universities are the R&D division of US Pro Sport.

They have been always surfaced and trained the very best talent, showcasing it to be chosen by the NFL, NBA and MLB, in the Combine and the Draft.

They are Morgan Freeman at Wayne Enterprises, feeding all the cool stuff to Batman.

In this way, college sport has played a fundamental role as the absolute cornerstone of the sports industry in America.

Part of the Wonder Years.

 

College have a unique advantage as a business.

They don’t pay the athletes and, thus, have no cost of sales.

Like our old public school chums on the green fields of England’s Jerusalem, US universities absolutely maintain that their sports players are there principally as students (to learn). This is of course all nonsense.

The vast monies generated by universities in their major sports are crucial, and have gone to pay for other minor programs, and the university in general. And of course for the coaches of course, like legendary Nick Saban of Alabama, whose last contract was for $94m over 8 years.

That’s a lot of money, but he has dominated college football for decades, as a giants of this world.

My friend, Grant Williams, astutely commented that him retiring, at the same time as Bill Belichick of the Patriots, was not coincidental. It was a signal.

A warning of the perfect storm.

Why?

In his retirement speeches Saban talks about the grind getting too much, about him getting old. Much like the German at Anfield.

What Saban really means is this: he no longer recognises the world that he has inhabited for so long. Maybe he feels he no longer belongs.

Sport is in a “Fourth Turning perhaps.

College football, college sports, is undergoing a revolution that will change everything in this industry in America. It’s now literally a whole new ball game. Sham amateurism has the clock running down in the 4th quarter. No time-outs left.

 

Some people say: “Evolution not revolution“.

As an observation, this is almost always wrong, but it’s understandable.

Revolution is scary, whereas evolution seems more civilised and controlled. It’s a comfort blanket, and they are Linus.

John Henry told us the reality. People earn a crust in the world of today, so the last thing they want to acknowledge is a “revolution” that is going to blow it all away. They instead can mentally handle “evolution“, of which they hope to be a part. No now wants to feel yesterday’s man, so they overestimate the ongoing importante of what they do.

The cemeteries are full of “indispensable” men.

Keep this clip in your head every day, especially in these times.

Nick Saban is going because he no longer has full control, and the world of player recruitement from high schools is now under full guerrilla revolution.

That is the truth.

 

The patriarchal head of a sport’s program is dead.

In the past, like a Busby or a Stein in soccer, Saban, with his force of personality, could convince the best high school stars to join his Alabama program, though reputation and charisma. Today, money rules, and he just can’t be bothered having to deal with the “booster” dudes who now dominate the human-trafficking into university sport.

A booster is likely to be an independently wealthy alumnus of the school, eager to be able to claim that he/she is helping the alma mater in a material way. That’s serious bragging rights in all the dinner parties that count. These people have always existed in some shape of form, but not like this.

The only ever constant in life is change, and we are living right in the middle of a big one now.

Eighteen months ago, the Supreme Court in America decided that not paying college athletes was illegal, stating that it could no longe (…)

(…)seek immunity from this country’s normal laws of antitrust and cannot justify to build a massive money-raising enterprise on the backs of student athletes who are not fairly compensated. Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate. The NCAA (the governing body of college sport) It is not above the law.

Boom!

 

This was American sports’ Bosman ruling. There is no doubt. 

The NCAA was forced to react, and stated that college athletes would, from then on, have the opportunity to benefit from their name, image and likeness (NIL).

European football has also played contractual games with players’ image rights, and we all know that was, and is, normally just a tax strategy.

NIL is also a fig leaf.

The NCAA thought that this was a nice compromise tat they could manage, without utterly undermining in what they need to believe. In the game still being amateur.

It is perfect example of half-pregnant delusion, so prevalent in the creative industries like sport. Romance and hardball don’t ever share the same bed, and market focus don’t do half-pregnant.

Game on!

One needs to admire the commitment to the macro “trade” that capitalism always delivers. When it goes, it goes with serious weight.

High school stars, pre University, are now being “recruited” to top college programs via these payments, in the most grey of unregulated markets. This is shadow banking applied to sports. Risk on risk.

Some may say that these incentives, this laundering of remuneration, have always been around, but with NIL it’s totally different we need to realise it’s now totally different.

 

NIL really means Now It’s Legal. 

College sport is on the brink of full professionalisation, just like association football 150 years ago. Let’s cut the BS and call it for what it is.

Saban and his generation, with their old-style charm and gravitas, are overnight rendered close to obsolete, in recruitment at least. And they know it.

In such a short time, it has become a Wild West of macho chaos, as this amazing podcast tells us.

An investigative reporter from the New York Times, specialising in not-for-profit organisations, as universities are, tells us the reality.

Rich guys, gloriously named “boosters”, crazy overly passionate loose cannons, are camping for days outside ballparks in RVs (big caravans) doing deals, networking inserting themselves into what is frankly illegal. Using NIL for recruitment.

They organise themselves into what they (again gloriously) call “collectives” and go on the hunt for big linemen. They are offering real money to these unsung heroes of football, and those young boys from poor families openly concede that it’s hard to refuse. It changes a way of life for their mothers and sibilings.

Who can blame them? One injury and it’s over. Many will never see the NFL, so monetise when you can.

This is all life-changing; ergo, sport-changing.

 

 

Samuel Tyzack on acid. 

Collectives are bending all kind of rules, but in an ironically amusing way, rather similar to our fake priest.

They claim that they too are doing good in the community!

With this description, the booster collectives are often qualifying as tax-exempt charities, raising significant funds, and then paying huge amounts for a simple social media post.

Charity?

Sure, one could argue that a successful college ball tea does make the local community exceptionally happy, but I suspect that the IRS may take dimmer view.

In the meantime, it’s almost comical. The going rate is $50k per lineman, at least that’s what the Longhorns were publicly offering.

Nod and a wink… Hut, hut!

There are 140 collectives nationwide and this is aggressive unregulated capitalism at its most feral. Half-pregnant my ass. Welcome to America.

For sure NIL was needed, and the concept is fair, but as usual the leaders of sport, in this case, the NCAA, have stuck their head in the sand too too long, and now the market forces (with the law) have done what they couldn’t or wouldn’t.

Paying ballers studying at uni, via NIL, could have been eased in with success, but is is now in such mess that is needs serious management by proper leaders to try and put order in the madness. The true amateurs in all this are not the athletes, but the CEOs of the governing bodies.

Semper ita.

My friends at SportsPundit summarise the issue well.

 

The market is now ripping the NCAA apart.

This is an organisation pitifully trying to hold onto its dignity as best it can, managing decline and its own inevitable irrelevance. And it’s not just about this NIL shamateurism. It’s much wider.

For example, college basketball is a pallid shadow of what it once was. The best college players don’t live there anymore, at least not for long. They either go to Overtime Elite (doing very well) or pass directly to the NBA, maybe after an elegant passing visit to a college team for a year.

 

One and Done.

The regular season of college basketball, by consequence, is a dreadful product, and everyone knows it. The March Madness playoffs is an event that hides the reality, but if you strip all that away, college basketball today is merely a vehicle for gambling.

College baseball with some exceptions is irrelevant. The minor leagues are more important as a pathway.

College football is different. It’s literally in a different league.

 

American football utterly dwarfs anything else. 

But itthe college gam is being ripped apart in classic “Hollywood versus Arthouse” screenplay.

Once there were many conferences of teams, based geographically, but now they are polarising into two mega Conferences of the SEC and the Big Ten, who are hoovering up the elite brand programs at historic universities.

This is a repeat play-action of exactly what happened in European soccer, where once all leagues were valid, then just the Big Five, and now the EPL counts.

We know how it ends.

The big get bigger and can afford the best talents, now via NIL. The small teams and their weak conferences are orphaned to their inevitable poverty, spin off in confusion, until they get sucked down the sinkhole.

 

The NCASS is like UEFA, trying to hang on.

But you just can not buck the market, and it is in plain sight, in all its glory.

Adam Smith isn’t a theory, and this below is the leitmotif of our entire industry:

 

Something like this…

Sport and its old structures get adjusted. Not-for-profit will need to go for one;

Athletes as employees. They are bid up by who has the biggest stack;

The pursuit of revenue is relentless, to pay athletes. Bringing a glut of tournaments, a cluttered calendar, and an oversupply of product to the media sector;

The commercial side of the business is hived off into new investment vehicles, as we have seen in European sport. SPVs ring-fenced to hold the media rights of leagues and clubs, structured in the right way to attract revenue-stream cash flow investor,s like private equity;

PE firms starting bidding for those rights and ultimately own the sport. Often with copious amounts of debt.

The followingarticle is as clear as a bell, and for whom it tolls.

 

PE deals are already getting done. 

Learfield is a company who already operates in the middle of the business of college sports as handleing multimedia deals for universities, controlling much of their merchandise sales, stadium sponsorships, ticketing, and content development. Private equity firms Fortress, Charlesbank and Clearlake just brought them.

Outside capitalist money like this does what it always does: it tends to monopoly and creates winners and losers. The big bucks will back to top brands and stars to grow, leaving the rest of athletics programs scrambling for funds.

They too will need capital, and that too will come from Big Finance. Just likely in its more vulture version. Florida State, recently reported that they had engaged in discussions with Sixth Street Partners for a potential investment in the athletic department. The University of Arizona also announced that it may have to cut athletic programs.

 

It’s boom times for deal making in sports PE.

As this Column, and Goal Own Goal, have said for a long time, the world of private equity is murky and poorly understood. Whilst there re some excellent operators who know well how to structure good fair deals across the Balance Sheet, it is not all ice-cream and mom’s apple pie.

Club valuations continue to richen under scarcity value or greater fool thinking, but smart money needs to find protection in the form of some seniority in the capital structure. There remain elegant ways of finding excess return, other than limping in as minority equity with blind reliance on the majority owner to make sensible decisions. Soon, exactly that will begin to matter… It always does.

Tom Pitts LionsRock (ex preferential equity holder in Inter Milan)

Tom, one of the Como 50 from the Summit, knows that when the tide goes out there will be hell to pay, and we will then see who indeed has been swimming naked in sport PE. a mark-to-market day of reckoning.

Other commentators are starting to smell the same coffee of  “realism”.

 

It’s a shell game Rog. 

Grant Williams AYNE

 

This is where we are.

Everywhere, we have opened up the traditions of sport to big bad finance, the story is the same.

The cohesion in European football and golf are long gone. Rugby is dying a death of a thousand cuts under PE. And now the glories and tradtiions of American college sport.

We’ve fucked up havent we?

So as the industry, in collective madness, speeds towards its End of Days, I console myself with the idea that my South Carolina buddy, Mr Williams, with his mega-rich hedge mates, can perhaps start a Collective, and turn the GameCocks into a top winning program.

I can see him in his RV right now.


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