TIME just published the piece (TIME article) I've been waiting for someone to write. Jeff Selingo outlines how the college business model is broken and about to get worse. I think he's right.
For large athletics departments, the economic challenges are front page news. As a dear friend of mine from a P4 school said to me last week, everyone is facing the same set of financial challenges, we just have more commas ($50M athletics budget vs $150M athletics budget).
Jeff’s article outlines it as well as I have seen. The enrollment cliff is here. The class of 2026 is the first of a long line of shrinking class sizes. This hits the university's #1 revenue source, tuition. Grant funding, the #2 revenue source for a university, has been flat to negative for the past two years. For example, NIH awarded 66% fewer grants during this time.
Jeff covers what's coming next in higher ed, while Inside Higher Ed recently reports what’s already impacted. In June alone, University of Minnesota cut 230 jobs and raised tuition 3.8%. The Johns Hopkins University cut 110 more on top of last year's 2,000. Syracuse's new chancellor perhaps did the best job outlining the whole story using his school as the anecdote. They missed their enrollment target. They have their first deficit in years. 20% of academic programs cut. The chancellor calls volatility the new normal.
It’s not lost on me, ‘Cuse continued their commitment to pay athletes the full revenue sharing cap, and likely well above it. ‘Cuse is not the outlier. They are the new norm.
A colleague once described the relationship between the chancellor, the AD, and the football coach as a three legged stool. One leg goes out on you and the whole thing tips over. That always stuck with me.
Here’s my Three Legged Stool 2.0. The modern university: campus, the community (alumni, fans and merchants), and the athletics department.
On most campuses, the first two legs help to (significantly) fund the third. Institutional support and student fees from campus largely support athletics. Yet for decades, these three areas ran in silos. As Jeff from Time outlined, things are about to change - see below Bloomberg: Plunging US Birth Rate Leaves Too Many Colleges With Too Few Kids
Industry insiders are writing that athletics has a spending problem. You can make the argument that the challenge is not just athletics, it's pervasive across campus. Either way, it's hard to argue their logic.
Given that, every dollar is now being scrutinized and we're already seeing what happens next. Academic programs with poor enrollment demand and no community connection. Sport cut backs. Facility projects that could drain the budget. These cuts are happening on campuses nationally.
As Jeff outlined, the winners will reinvent higher ed. It’s not rocket science to think a major goal for this reinvention is the need to grow the higher ed revenue pie. The good news is there's a strong foundation to build from.
Over the past few years, MMR leaders like LEARFIELD , Playfly Sports , Van Wagner , and JMI Sports have all reinvented themselves around the modern higher education market. The old MMR sold static inventory: signage, radio, logos. The new MMR is becoming something closer to a chief revenue officer for the whole campus ecosystem, sourcing partners and building categories that didn't exist just a few years back.
Then there's innovation from new partners. REVELxp built a real business running turnkey tailgates and premium hospitality across dozens of programs. SMU partnered with Krida on Mustang Coin, a fan engagement platform connecting fans, student athletes, and students, with rewards, real NIL, and a learning cohort of 125 students built in. This is the three legged stool, standing on its own, in one deal. And maybe the best part, Mustang Coin was brought to Southern Methodist University by its rights holder, Learfield. The new definition of partnership.
The movement of capital into college athletics from leading private equity and private credit firms has been significant, and it is accelerating. The University of Utah just finalized a first of its kind agreement with Otro Capital , creating a for profit entity that houses ticketing, licensing, multimedia and sponsorship revenue, with Otro committing significant capital to fund growth.
The Big 12 Conference became the first major conference to sign a private capital deal, partnering with RedBird Capital Partners and Weatherford Capital, a structure that includes credit lines and new sponsorship revenue, anchored by a PayPal partnership.
Sophisticated investors have concluded that the university ecosystem holds enormous untapped commercial value, and they are moving quickly to capture it.
The university and its partners will build on the one asset that isn't shrinking: alumni and fans who are irrationally loyal. Innovation converts that loyalty into a revenue engine.
This is the intersection where we've been building. We're getting ready to make our own announcement here at Impact Card, and we could not be more excited. So much opportunity, and wonderful people to build with, in service of the most valuable mission there is. Grow the pie, together.
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