As colleges face acute pressure points with declining tuition dollars caused by the enrollment cliff, tighter restrictions on international student admissions under the Trump administration, diminishing opportunities for researchers to obtain government-funded grants and House settlement revenue-sharing with athletes, it’s no surprise private equity groups are eying an opportunity to lend a hand—and dollars.
Private equity’s budding involvement with college sports arrives as the NFL is one year into permitting PE groups to buy up to 10% of a franchise. The NFL joined the NBA, NHL, MLB and MLS, all of which allow for up to 30% of franchises to be owned by private equity. As Sportico recently detailed, the NFL’s move has been viewed as a success, especially in raising franchise values.
As the NFL opens the door to private equity, its owners, along with owners of other major leagues’ team franchises, might see opportunities to invest in college sports. Many NFL owners are connected to private equity firms. Washington Commanders controlling owner Josh Harris, for example, is co-founder of Apollo Global Management, while Las Vegas Raiders minority owners Egon Durban is a founding principal of Silver Lake. (Harris exited Apollo in 2022 and went on to found 26North, another private equity firm, the same year.)
The merits of investing in college sports are another story. To the extent private equity groups buy equity in conferences, acquire a share of a college’s media rights and other sources of licensing revenues or otherwise obtain a stake, those groups run the risk of forming economic relationships with college players and becoming defendants in lawsuits, NLRB petitions and other court filings.
From a legal standpoint, that is currently a danger zone.
There’s the unresolved question of college athlete employment and unionization. There’s also the flow of athlete antitrust lawsuits that, despite the House settlement, hasn’t slowed.
For NFL owners who are accustomed to a predictable bargaining relationship with a players’ union, where their agreements on rules are exempt from antitrust scrutiny, involvement in college sports—and the athletes—would be an entirely different creature.
College athletes aren’t recognized as employees, but that is subject to change. There have been several recent initiatives—including since-withdrawn NLRB petitions on behalf of Dartmouth men’s basketball players and USC football and basketball players, as well as the ongoing lawsuit Johnson v. NCAA—that seek to flip the employment switch from off to on. These efforts demand that certain groups of Division I college athletes be recognized as employees of their school, and potentially joint employees of their conference and the NCAA.
The basic legal argument in favor of college athlete employment is that universities, as well as conferences and the NCAA, control D-I athletes in ways that resemble employment relationships.
Athletes are under the command of coaches and athletic administrators. They are expected to spend many hours playing a sport, training, attending team meetings and traveling, and their academic course selection can hinge on compatibility with athletic duties. Some D-I athletes, especially those who play football and basketball at power conference schools, help their teams generate millions of dollars in revenue from media rights, ticket sales and licensing of apparel and merchandise. Those college athletes have been described as economic drivers, much like NFL, NBA or WNBA players.
If college athletes are eventually recognized as employees, some would be able to form unions and engage in collective bargaining. The word “some” plays an instrumental role in the analysis and disrupts a straightforward thinking of college sports as another version of pro sports.
For one, employment recognition wouldn’t automatically provide the opportunity to unionize. Some athletes play at public universities, where employment and labor rights are determined by state—not federal—laws. Some states prohibit public university employees from unionizing, and many impose substantial hurdles. Consider this chart provided by the New Mexico’s Public Employee Labor Relations Board. It reveals the high degree of variance by state on whether and how public university employees can unionize.
Athletes at private universities might not necessarily be able to unionize if deemed employees. A private university athlete recognized as an employee within the meaning of the Fair Labor Standards Act, which guarantees minimum wage and overtime pay and applies to work study, wouldn’t gain the right to unionize. If that same athlete is recognized as an employee within the meaning of the National Labor Relations Act, they would gain that right.
Then there’s the question of whether athletes who could unionize would, in fact, unionize. The decision to unionize requires voting and other procedures that can lead to legal challenges by employees and employers. It’s possible, for example, that the women’s basketball team of one university could vote to unionize while the women’s basketball team at another university decides not to unionize.
The identity of the bargaining unit is also unclear. Would all athletes at one university form a unit that negotiates a CBA? That might work well for players on the track team, tennis team and other teams that typically don’t generate much money, but less so for players on the football team since they generate most of the athletics department’s revenue and would presumably want most of the pay. Alternatively, would all men’s basketball players in a conference form a unit, or maybe basketball and football players in the power conferences? There are myriad possibilities. Labor law accords wide discretion in formation of bargaining units, but sometimes too many options make a decision more difficult.
The legal importance of economic restraints on college athletes being borne through collective bargaining can’t be overstated. The NCAA and its members have faced a bevy of antitrust lawsuits over the last two decades. The cases mainly concern restrictions on athlete compensation, be it NIL opportunities, reimbursements for education-related expenses or payment for playing. More recently, cases have involved NCAA eligibility rules limiting how long college students can remain in school to play a sport and thus how long they can earn NIL and revenue shares.
These antitrust lawsuits all center on the idea that NCAA member schools and conferences are, like pro franchises, competing businesses. They compete for students, staff, faculty, fundraising, media attention, grants and numerous other sources of value in higher ed. When competitors join hands to limit how they can compete—such as when NCAA members adopt rules saying college athletes can’t be paid to play—those rules are fair game for antitrust challenges. That’s because antitrust law forbids competing businesses from conspiring to limit how they compete. If those “conspiracies” cause more harm than good to competition, they are attractive targets to antitrust plaintiffs’ attorneys—especially since antitrust damages are often automatically multiplied by three.
Businesses can avoid antitrust scrutiny by collectively bargaining economic rules with employees’ unions. That’s because of the non-statutory labor exemption. It reflects a series of U.S. Supreme Court decisions that encourage management to bargain with unions by exempting their agreed-upon rules for wages, hours and other working conditions from antitrust scrutiny. In a world where college athletes are employees who unionize, their union(s) could negotiate workplace rules with colleges, conferences and the NCAA that are exempt from antitrust scrutiny.
That reveals another distinction from pro sports. The NFL and other pro leagues rely on multiple employer bargaining associations to serve as their collective bargaining representatives. Those associations bargain on behalf of competing and independently owned teams, which ensures that all teams and their players play by the same set of rules. That’s true for major economic restraints like player drafts and free agency that might otherwise run afoul of antitrust law. Colleges and conferences could conceivably form a multitargeting association (or associations), though that’s another layer of complexity to an already complex framework.
“Investing in college sports” sounds appealing, but it might prove more of a sound bite or talking point than a well-reasoned conclusion.
Expect NFL owners to think long and hard about the prospect of joining private equity in college sports investments.
“I think NFL owners, like seasoned investors, will be less interested in investing [in college sports] with all the legal uncertainty [of NCAA legal issues],” a senior official at a players’ association told Sportico.
“The NFL is used to a bargaining relationship with a union,” the official added. “If nothing else, [bargaining with the NFLPA] is predictable and pretty stable. That’s not college sports and probably won’t be for a while.”
(This story has been updated in the third paragraph to note that Egon Durbin is a founding principal of Silver Lake and that Josh Harris is leading 26North after departing Apollo Global Management in 2022.)
