Should CU Buy Some “Magic Beans”?

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Should CU Buy Some “Magic Beans”?

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This past week, the Big 12 struck a long-discussed private capital deal — the first such publicized conference-wide agreement in major college sports.

Okay, quite the headline … But what does all this mean for college sports, for the Big 12, and, more importantly, what does it mean for CU?

What happened? 

The Big 12’s presidents and chancellors have ratified a five-year agreement with capital partner RedBird, as well as Weatherford Capital, finalizing a three-prong package:

• First, the conference receives an infusion of capital — at least $12.5 million — to the league office to drive commercial development and business growth;
• Second, a deal which creates a strategic business partnership that could pay off when the conference next goes to market for its media rights contract; and
• Third, schools will be offered an opt-in capital credit line of $30 million each.

The Big 12 is describing the deal as the “RedBird Business Development Partnership.” As part of their Collegiate Athletic Solutions partnership, the firms are co-investing the infusion into the conference with an expected return. However, the capital partners will hold no ownership in the league and the deal will not change the operation or governance of the conference, commissioner Brett Yormark told Yahoo Sports.

The vote from presidents and chancellors last Thursday finalized an agreement that’s been under discussion now for more than two years — a deal spearheaded by Yormark and his board chair, Doug Girod, the Kansas president.

“At the highest level what I hope to get out of this is a really strong partnership that positions our conference well into the future, including for our next media deal by creating increased value,” Girod told Yahoo Sports in an interview this week.

Okay, so let’s break down each of the elements …

Cash for the Big 12 conference 

The $12.5 million in capital to the league — a number that could grow — will be invested in “revenue-generating opportunities,” according to Girod.

This latest move — the first of its kind — sends a unified message and signals a “strong degree of alignment” from the Big 12’s presidents and athletic directors, Girod said.

“RedBird has the capability to bring new business, partnerships and ideas,” he added. “We’re about as innovative and aligned as they come as a conference. That combination is powerful.”

Okay, so far, so good. The Big 12 doesn’t have the television revenue to distribute to its members like that which is received by the Big Ten and SEC.

How bad is the discrepancy? For the fiscal year 2025, the SEC distributed $1.03 billion to its members, or about $72.4 million per school. The Big 12, meanwhile, distributed $558 million or about $34.8 million per school.

The extra cash for the conference, even if used for “revenue-generating opportunities” instead of a direct distribution to schools, is welcome.

Not a game-changer, but welcome.

Strategic business partnership

This prong of the deal has received the least amount of notice, but may have the most long-lasting benefits to the Big 12.

The arrangement provides an exclusive college partnership with RedBird, a New York-based investment management firm with $15 billion in assets and an array of companies within its portfolio, including Paramount Global.

Paramount holds ownership of CBS and soon is expected to acquire TNT — two of the leading broadcast partners within the college sports ecosystem. The Big 12’s current media deal — primarily owned by ESPN and Fox — ends in 2031. A league’s media rights deal usually accounts for a majority of a conference’s revenue distributed to its member schools.

“We did the necessary due diligence in order to land in a great place,” Yormark told Yahoo Sports. “I appreciate the board and athletic directors for all of their feedback and guidance and support. In times of uncertainty, RedBird provides us with incredible bench strength.”

So, while there may not be an immediate cash benefit to the Big 12 in making this deal with RedBird, it could help in the quest for the Big 12 to survive as an entity in the next round of realignment, coming as soon as the end of the decade.

Line of credit for schools

Schools have one year to make a decision on the one-time capital infusion, with the option of receiving up to $30 million from RedBird. Those within the conference believe that as few as two and as many as a half-dozen programs plan to take the money, which comes at a rate just south of 10%.

On the face of it, the deal doesn’t sound that appealing. While schools are not giving up equity (like Utah did in its private equity deal), all that schools are getting is access to a high-interest loan.

Now, it is reasonable to expect that schools will be receiving a higher payout from television revenue with the next round of television contracts … but that’s assuming that the school will be part of the package.

This offer is being compared by some to “magic beans”, or a “payday loan”, and it would be madness to take the money now, with a high interest payback looming down the road.

But will schools take the plunge?

Could CU be one of the schools to take the money?

It was reported last December that the University of Colorado athletic department had the potential to finish the current fiscal year with a budget deficit nearing $27 million. Much of the projected deficit was attributable to providing $20.5 million in revenue sharing payments to student-athletes after the NCAA v. House settlement last summer. Raises given to Coach Prime and defensive coordinator Robert Livingston last year were also commonly cited as a contributing factor to CU’s red ink.

While the fiscal year is not over, and CU has been trying to find extra revenue – like the $6 million donation from the Crawford Family Foundation, announced last month – it’s not hard to see CU finishing up the fiscal year June 30th with more out-go than in-come.

Would it be worth it, then to take the RedBird money, bringing CU back into the black?

If the money is going only to be used to balance the budget, the answer would be “no”.

Taking a $30 million advance, payable at a hefty interest rate, while banking on future dollars which are not guaranteed, doesn’t make fiscal sense (See: Colorado State’s stadium gamble, with CSU running deficits of $24 million in 2021; $28 million in 2022; and $29.8 million in 2023). To be sure, there will be huge television contracts in the 2030s, but there are no guarantees that CU will be part of the mega-conference discussion.

Which is why there is an argument to be made for taking the money now … as a means to get into the “Club” at the end of the decade.

There will be only so many chairs available when the conference realignment music stops, and, right now, CU might be on the outside looking in.

Colorado has a strong football history, but almost none of that has come about in the 21st century, now over one-quarter gone. CU finished last season with a 3-9 record, posting a losing record for the 17th time in the past 20 seasons.

Even Coach Prime’s cache can’t keep CU relevant if the Buffs keep losing.

What if CU were to take the $30 million, and spend $15 million over the next two seasons “investing” in its football roster (and, to a much lesser extent, in its men’s and women’s basketball teams)?

Granted, adding $15 million to roster enhancement is not going to put CU in the same lane as Ohio State, Oregon, Texas Tech and LSU, where salary budgets are reportedly already north of $40 million per year.

But, you know the old joke: Two guys are camping, when they are surprised by a bear. One camper calmly puts on a pair of sneakers. “What are you doing?”, his companion screams. “You can’t out run a bear!” … To which the first camper calmly states: “I don’t have to outrun the bear, I just have to outrun you”.

CU doesn’t need to have a roster which is the equivalent of those at Texas Tech and BYU. The Buffs just need a roster which can stand up against Utah, Arizona State, Baylor and Houston.

The reverse can also be true: If other mid-tier Big 12 schools take the infusion in cash to bolster their rosters, can CU afford not to take the money?

CU desperately needs relevance. The Buffs finished 15th in the Big 12 last season. They are almost universally projected to finish at or near the bottom of the Big 12 conference this fall.

An irrelevant CU won’t be invited to the big boys table in the next round of realignment.

Taking $30 million at 10% interest sounds like a bad business deal … unless it’s an investment which will pay larger dividends than 10%.

We’ve seen what a relevant CU can look like under Coach Prime … Every game nationally televised … Every game sold out … Increased enrollment and exposure for the University … Increased merchandise sales … An overall boost to CU’s brand.

Success breeds success, and a significant investment in the football program today may bring back more than enough revenue in future years to justify the expense.

We’ll see how this plays out …

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