Altius Sports Partners provides schools with direction amid seismic industry change

If you’re an athletic director, navigating the current college sports landscape can be like making your way through unfamiliar terrain on a stormy night without a GPS.

You need to assess countless complexities from the NCAA’s reform proposal, weigh a potential enormous damages bill from the landmark House antitrust case and grapple with a myriad of implications from a possible employee model – all the while knowing there is no certainty the NCAA will even govern big-time college sports in the coming years.

Altius Sports Partners knows it has a proven track record serving as that GPS for athletic departments in search of direction during uncertain times.

Founded in 2020, the company has demonstrated an uncanny knack for identifying what change is coming around the bend and helping schools best position themselves for a new ecosystem – and that’s never been more important than in this time of unprecedented disruption. 

The company started preparing university partners to support athletes’ NIL endeavors almost a year before the era began in July 2021. It helped brands enter the NIL space by planning and executing successful NIL campaigns on their behalf. And it has been helping clients prepare for something like NCAA President Charlie Baker’s proposal for the better part of the last year, laying out in a white paper in the spring what big-picture changes were likely on the horizon.

More than 40 universities – including Notre Dame, Georgia and LSU and brands like Powerade, Shake Shack and NBC Sports Group – in college sports lean on ASP for strategic guidance and on-the-ground support. All 14 of their university partners that were up for renewal in 2023 renewed, nearly all for multiple years. Almost half of the 40 university partners have an Altius employee embedded on campus.

Altius Sports Partners’ GPS for college sports

ASP’s leadership provided On3 with an inside look at how it is identifying what’s likely on the horizon and preparing partners to enter a brave new world of college sports.

As it looks to future-proof athletic departments, it is also helping to evaluate new college sports governance structures and model future budget scenarios that encompass revenue sharing, collective bargaining and employment models.

“I can safely say that big-time football players in college and big-time basketball players, as defined by Power Five, plus the Big East in basketball, will be sharing in the revenue,” Casey Schwab, CEO and founding partner of ASP, told On3. “The real question is how do we get there? And how ugly and how difficult and painful is the path to get there?”

In short, does the industry want to be reactive to litigation or proactive? The clock is ticking, legal experts say, and the window to make the decision is growing short.

Implications of House case weigh on stakeholders

Talk with Schwab enough and you’ll start following his lead by putting each of the many big questions facing college sports into one of four quadrants: known knowns, unknown knowns, known unknowns and unknown unknowns.

In that vein, we know there could be a significant outcome in the House antitrust case. Unknown is whether that outcome could come via trial, scheduled for next January, or settlement, which is highly likely.

To be clear, the once impenetrable walls separating athletes from receiving a portion of media rights revenue could come tumbling down. Thousands of athletes could be owed some $4.2 billion in retroactive NIL pay and broadcast revenue rights if plaintiffs succeed in the House class-action case. 

There could be a hefty bill to be paid by schools, conferences, the NCAA – or all three. 

While the NCAA and Power Five conferences are defendants, Baker for the first time said during last week’s Congressional hearing that damages will likely need to be absorbed by all of college sports.

Mindful of the House implications, the two levers every athletic director needs to think about are cutting expenses and growing revenue. With several athletic directors and their university leadership, Altius has conducted an exercise where they start with a whiteboard and a question: In a perfect world, what should an athletic department look like in 2024? 

What should the administration look like? What should the coaching staff look like? Plus, what should the relationship with the university look like? How about the relationship with the fundraising foundation? 

One conclusion Schwab is convinced of is that there needs to be a new athlete-facing division within every athletics department that meets them where they are.

After outlining the contours of the athletic department’s organizational structure, you go from there. And you compare that “perfect as it gets” organizational structure with the current environment.

“I am suggesting taking a long, hard look at those two buckets (revenue, expenses),” Schwab said of how athletic departments should think now. “How do we raise revenue, knowing we’re going to have to share it and knowing there is going to come a day when House is either going to be litigated to the fullest extent, and there’s going to be a judgment that could result in a large number, or it is going to be settled. And in all likelihood, it is going to be settled.”

Across college sports, some progressive athletic directors are embracing the new reality ahead with revenue sharing, according to interviews by On3. Others remain resistant to the expected sea change.

“Our perspective on this is that we’re absolutely going to see some form of revenue sharing, possibly in combination with some form of athlete employment, quasi-employment, or collective bargaining,” ASP chief operating officer Tommy Gray told On3. “Things are going to continue to shift and athletes are going to gain more rights. They’re going to have more benefits, and they’re going to be sharing in revenues that have historically flowed exclusively to athletics departments. 

“So our recommendation to athletic departments is to start preparing now for many different models of governance, organizational structure, staffing levels, and athlete support services. Let’s start looking at each of those things proactively, and let’s scenario plan, including forecasting what your revenues and expenses look like under different models.”

Chances of Congress passing federal reform bill?

Will the NCAA secure the federal reform bill it has long sought from Congress?

If he were the czar of college athletics, Schwab said, he would be spending the majority of his time on settling the House case. In turn, he believes that outcome could create “probably the strongest path” toward getting the two things the NCAA covets most from Congress: antitrust protection – so the NCAA can implement a cap – and codification that athletes are not employees.

If there is a settlement in the House case, one possibility Schwab heard has been on the table is the potential for a global settlement that would involve joint lobbying efforts from athlete advocates, the NCAA and the conferences. However slim that possibility is, absent that, Congressional intervention right now appears dead on arrival. 

Among the unknowns in the industry is exactly how college sports will reach the destination of revenue sharing in a way that is not subject to further antitrust lawsuits. To unionize, athletes must be deemed employees. To be governed and covered by the National Labor Relations Act, you must be an employee.

The National Labor Relations Board trial involving USC, the Pac-12 Conference and the NCAA is continuing through next week in Los Angeles. A Boston-based NLRB regional director may rule any day on the employee question related to Dartmouth’s men’s basketball team. 

Additionally, in Pennsylvania, plaintiffs in Johnson v. NCAA, former Villanova football player Trey Johnson and other Division I athletes are asking that athletes be deemed employees subject to the Fair Labor Standards Act.

ADs feel ‘aversion plus fear’ of employee model

If at least some athletes are ultimately deemed employees of their universities – the process could take years – it could usher in unionization, collective bargaining and a host of other radical elements.

How are athletic directors reacting to this possibility?

“The sentiment is aversion plus fear of college athletes becoming employees,” Schwab said. “We have heard a lot of commissioners, athletics directors, and others speak up about why a wholesale employment model would be detrimental, if not the death knell to college athletics.”

If employee status applies to Olympic sports, then the question for some is how will college sports survive. During the Congressional hearing, Baker said a wholesale employee model could result in anywhere from half to two-thirds of sports teams being cut across all of college sports.

ASP is educating institutional stakeholders on foundational and potential employment issues, covering everything including collective bargaining, wage law, tax law and workers’ compensation, and exploring models such as unions, full-time employees, and independent contractors. 

“Part of the service that we offer our clients is trying to cut through the noise and figure out what matters,” Andrew Donovan, president of ASP College, told On3. “The stuff that matters most. And what we’re trying to get our clients to focus on, and a lot of them are starting to listen more and more, is some percentage of your revenue that has traditionally come to your athletic department is going to be going to athletes in some way, shape or form. Whether that’s 10% or 50%. Let’s plan for those scenarios. Your athletes are going to have more power than they already have today.”

What triggers further conference consolidation?

Another variable facing college sports is when further conference consolidation will occur, and what forces will trigger that consolidation. Industry sources believe it is virtually inevitable – the only question is when.

At the same time, private equity could also be entering college sports. Florida State has been working with JPMorgan Chase to explore how the athletic department could raise capital from institutional funds such as private equity, Sportico reported in early August.

Over the last six months, Schwab has spent considerable time talking with numerous private equity firms on behalf of their school partners. 

Private equity could play two important roles:

In Baker’s proposal, it would require an additional $6 to $10 million annually for schools to be positioned to pay half their athletes at least $30,000 annually from a trust fund. Outside capital could help some schools in a precarious financial position keep up with those table stakes financially: most, if not all of the Big 12, much of the ACC and the bottom 25% of the Big Ten and SEC. 

Secondly, we’re also going to see more conference consolidation – and the need for athletic directors to find a way into super conferences has never been greater. 

“You don’t want to be the AD that was at the helm when you didn’t get into the super conference,” Schwab said. “No AD wants that.”

How to handle private equity college sports

If you’re going to partner with a private equity firm, Schwab said, you have to believe it’s not just about money. You have to believe that the PE firm is going to bring operational expertise that you don’t currently have, expertise that will help grow your commercial revenues or reduce expenses. 

Also important for athletic directors, is how much control are you actually going to have in operating the business.

Schway said some ADs are “pretty far down the road” in discussing what these different private equity models look like – whether they are more like a loan or a joint venture concept.

“If one school goes and does it, it’s very much a follow-the-leader industry, where other schools will be more likely to follow,” Schwab said. “Do I think outside capital is going to come into college athletics? Yes, I absolutely do.”

As conference consolidation continues, we’re going to see schools increasingly try to be more creative in making themselves more appealing to super conferences. For instance, SMU was so determined to finagle its way into the ACC that it was willing to forfeit broadcast revenue for the first nine years. 

That’s one area where outside capital could play a role. It could be a lifeline to supplement losses both on the athlete revenue sharing front and schools’ pro rata portions of media rights deals when schools approach power leagues and say, “We’re willing to take less.”

At some point, all the industry forces will come to a head. As Gordon Gekko famously said in the 1987 hit “Wall Street,“ “Wake up, will ya, pal? If you’re not inside, you’re outside, okay? … A player, or nothing.”

“There’s going to come a moment in time: Who’s at the adult table? And who’s at the kids’ table when it comes to big-time football contracts?” Schwab said. “I think it’s going to be a mad rush. It’s like a game of musical chairs. And there’s not going to be enough chairs for everybody.”