PART IV What Comes Next: Scenarios, Predictions, and The Divestment Scorecard

PART IV

What Comes Next: Scenarios, Predictions, and The Divestment Scorecard

The Future Is Being Written Now

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You've seen the pattern. You've seen the evidence. Now the question is: what actually happens next?

This isn't speculation for entertainment. This is scenario modeling based on documented patterns, financial realities, and structural forces already in motion.

What follows is:

• Three scenarios for how this unfolds (2026-2030)
• The Divestment Scorecard ranking the top 25 schools by LLC probability
• Timeline predictions with specific dates
• Signals to watch that tell you which scenario is happening

This is your roadmap for understanding the transformation as it unfolds.

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Scenario 1: The Gradual Professionalization (Probability: 45%)

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THE OPTIMISTIC CASE: "Soft Landing"

Core assumption: The transformation happens but is managed carefully enough to avoid catastrophic disruption. Most major programs survive the transition.

How It Unfolds (2026-2030)

2026:

• Q1: 3-5 additional schools announce LLC formations (likely: Florida State, Clemson, Michigan, Texas A&M)
• Q2: First PE deal after Utah announced (candidate: Florida State with Sixth Street Partners)
• Q3: IRS issues guidance on athletic LLC tax treatment - cautious but doesn't immediately revoke 501c3 status
• Q4: Big Ten announces "structural flexibility" allowing member schools to create LLCs

2027:

• Q1-Q2: 10-15 schools total have formed LLCs; pattern clear but not universal
• Q2: First Title IX lawsuit targeting revenue-sharing allocation filed
• Q3: SEC announces similar "structural modernization" framework
• Q4: NCAA creates "Division I-Premium" classification for LLC-structured programs

2028:

• Q1: First athlete employment case reaches settlement - athletes in LLC structures deemed employees
• Q2: 20-25 schools operating as LLCs, mostly Power 2 (Big Ten/SEC)
• Q3: Conference revenue distribution changes to reflect LLC vs. traditional structures
• Q4: First collective bargaining agreement discussions begin

2029:

• Q1-Q2: "Super Conference" formalized - Big Ten/SEC merge business operations while maintaining separate brands
• Q3: Traditional athletic departments announce major Olympic sports cuts (5-10 sports eliminated at multiple schools)
• Q4: First schools exit athletic competition entirely (mid-tier programs can't afford new model)

2030:

• By end of year: 35-40 schools operating as LLCs with PE backing
• Clear two-tier system: LLC-backed "Professional College Sports" vs. traditional "Amateur Athletics"
• NCAA essentially governs only traditional tier; LLC tier self-governs

Characteristics of This Scenario

• Regulatory response is measured: IRS/DOL issue guidelines but don't immediately shut down LLC structures
• Litigation is slow: Title IX and employment cases take years to resolve; schools adapt as they go
• PE capital flows steadily: More firms enter market; deal structures become standardized
• Conference consolidation accelerates but doesn't collapse: Power 2 dominate but ACC/Big 12 survive in diminished form
• Olympic sports shrink dramatically but don't disappear: 30-40% of non-revenue programs eliminated
• Traditional model persists at smaller scale: Group of 5, FCS continue with traditional structure

"In this scenario, the transformation succeeds but takes a decade. The Big Three locomotive companies had 30+ years to adapt and still failed. College athletics gets 5-7 years and some survive. That counts as success."

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Scenario 2: The Regulatory Collapse (Probability: 30%)

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THE PESSIMISTIC CASE: "Hard Landing"

Core assumption: Regulatory agencies and courts intervene aggressively, creating crisis that forces rapid, chaotic restructuring.

How It Unfolds (2026-2028)

2026:

• Q2: IRS announces investigation of Kentucky/Utah LLC structures for tax-exempt status violations
• Q3: Title IX lawsuit wins preliminary injunction - court orders 50/50 split of revenue sharing between male/female athletes
• Q4: Schools face impossible choice: comply with Title IX (can't afford) or lose federal funding (can't survive)

2027:

• Q1: Department of Labor rules all athletes receiving revenue sharing are employees under FLSA
• Q2: First school declares athletic department bankruptcy; spins off football/basketball to separate for-profit entity
• Q3: Congressional hearings on "The Professionalization of College Sports"
• Q4: Proposed legislation to either (a) explicitly allow professionalization with regulation, or (b) ban it entirely

2028:

• Q1-Q2: Legislation stalls; regulatory chaos continues
• Q3: Mass Olympic sports eliminations (50-100 programs killed nationally)
• Q4: Big Ten/SEC announce complete separation from NCAA - form independent "American Football League"

Characteristics of This Scenario

• Regulatory crackdown is swift and aggressive: IRS, DOL, courts all rule against LLC structures simultaneously
• Title IX becomes existential crisis: 50/50 revenue split mandated; schools can't comply financially
• PE firms pull back: Legal uncertainty makes investments too risky; capital dries up
• Bankruptcy and exits accelerate: 10-15 schools exit Division I athletics entirely
• Football/basketball separate completely: Become standalone professional leagues with university licensing agreements
• NCAA collapses: Loses all major schools; becomes insignificant governing body

Why This Could Happen:

The locomotive industry collapsed in ~20 years despite decades of warning. College athletics has 5-7 years and much more aggressive regulatory oversight. If IRS/DOL/courts all rule against the new structures simultaneously, the system can't adapt fast enough. Collapse is possible.

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Scenario 3: The Super League Acceleration (Probability: 25%)

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THE WILD CARD: "Clean Break"

Core assumption: Top 30-40 programs decide fighting regulation is futile; they exit NCAA entirely and form professional league immediately.

How It Unfolds (2026-2027)

2026:

• Q2: Confidential meetings among Big Ten/SEC athletic directors and PE firms
• Q3: Leaked: "Project Apex" - proposal for 32-team professional football league independent of NCAA
• Q4: Public announcement: "American College Football League" launching 2027 season

2027:

• January: 32 founding members announced (all Big Ten/SEC plus select others)
• February-May: Frantic legal/operational work to establish league structures
• August: First season of "ACFL" kicks off - explicitly professional, players are employees, collective bargaining in place
• September-December: Massive litigation from NCAA, left-out schools, state attorneys general

Characteristics of This Scenario

• Sudden, coordinated break: Top schools exit simultaneously to avoid being picked off individually
• Explicit professionalization: No pretense of amateurism; openly professional from day one
• Massive PE backing: $5-10 billion in PE capital funds launch; investors get equity in league
• University connection maintained minimally: Teams license university brands but operate independently
• Everyone else left behind: ACC, Big 12, Group of 5 scramble to survive in new landscape
• NCAA becomes minor leagues: Governs remaining "amateur" athletics; major decline in relevance

"This is the MLS model applied to college football. Single-entity league owned by PE and founding members. University connection is branding only. It's the cleanest solution—and the most radical."

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The Divestment Scorecard: Top 25 Programs

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Based on revenue, financial pressure, state laws, institutional culture, and conference affiliation, here are the 25 schools most likely to create LLC structures and pursue PE partnerships by 2027:

Rank	School	Revenue (FY24)	Valuation	LLC Probability	Key Factors
1	Florida State	$180M	$1.01B	95%	ACC exit motivation, financial crisis from low media payout, aggressive leadership, Florida law permits
2	Clemson	$170M	$970M	90%	Joined FSU in ACC lawsuit, similar financial pressure, South Carolina law favorable
3	Texas A&M	$279M	$1.32B	85%	Massive revenue with aggressive growth, donor base comfortable with commercialization, Texas law permits
4	Michigan	$211M	$1.16B	80%	Huge revenue, just proved NIL willingness (Bryce Underwood), Michigan law permits public university LLCs
5	USC	$242M	$1.06B	80%	Private school (more flexibility), California location, Big Ten move shows commercial mindset
6	Penn State	$190M	$1.04B	75%	Massive revenue, Pennsylvania law allows, conservative culture may slow adoption
7	LSU	$200M	$1.02B	75%	Strong revenue, Louisiana law permits, SEC competitive pressure
8	Texas	$332M	$1.48B	70%	Highest revenue/valuation but less financial pressure; may not need PE immediately
9	Ohio State	$255M	$1.35B	70%	Massive resources, Ohio law permits, but less urgency due to strong current position
10	Tennessee	$210M	$1.05B	70%	Strong SEC position, Tennessee law allows, competitive pressure mounting
11	Auburn	$175M	$940M	65%	SEC arms race, Alabama law permits, needs edge over Alabama
12	Georgia	$242M	$1.16B	65%	Elite revenue but conservative leadership may hesitate; Georgia law uncertain
13	Alabama	$235M	$1.09B	65%	Post-Saban transition creates urgency, but strong traditional donor base may resist
14	Oklahoma	$200M	$1.00B	60%	SEC move expensive, Oklahoma law permits, needs resources to compete
15	Nebraska	$205M	$1.06B	60%	Surprising revenue strength, passionate fanbase, Big Ten competitive pressure
16	Florida	$200M	$980M	55%	Strong revenue but conservative administration, Florida law permits
17	Notre Dame	$220M	$1.04B	50%	Private (flexibility) but independent status and traditional culture create resistance
18	Oregon	$205M	$945M	50%	Nike backing provides alternative to PE, Oregon law unclear on public university LLCs
19	Wisconsin	$180M	$900M	45%	Strong academics-first culture, Wisconsin law restrictive for public universities
20	Arkansas	$165M	$870M	45%	SEC pressure but smaller revenue base, Arkansas law permits
21	South Carolina	$160M	$840M	40%	SEC arms race, but conservative state politics may complicate
22	Iowa	$175M	$880M	40%	Strong wrestling/Olympic programs create Title IX complexity, Iowa law unclear
23	Washington	$165M	$860M	35%	Big Ten move expensive, Washington law restrictive for public entities
24	Ole Miss	$150M	$810M	35%	SEC pressure, Mississippi law permits, but smaller revenue base limits PE interest
25	North Carolina	$155M	$830M	30%	Academic prestige creates resistance, North Carolina law uncertain, ACC instability

Tier Key:

• ■ High Probability (80%+): Likely to announce LLC formation by end of 2026
• ■ Medium Probability (50-75%): Likely by 2027-2028
• ■ Lower Probability (30-45%): May eventually follow but significant barriers

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What To Watch: The Signals

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Here are the specific developments that will tell you which scenario is unfolding:

Signals for Scenario 1 (Gradual Professionalization)

Green Lights:

• IRS issues cautious guidance that doesn't immediately revoke 501c3 status but sets conditions
• 3-5 schools announce LLCs within 6 months of Utah (shows pattern is replicable)
• More PE firms enter market (Sixth Street, RedBird, others announce deals)
• Big Ten/SEC officially endorse LLC structures for member schools
• Title IX lawsuits settle rather than going to trial (creates manageable precedent)
• Employment cases resolve incrementally over years, not months

Signals for Scenario 2 (Regulatory Collapse)

Red Flags:

• IRS announces investigation of Kentucky/Utah specifically targeting tax-exempt status
• Title IX lawsuit wins major preliminary ruling requiring 50/50 revenue split
• DOL issues broad employment classification ruling that applies to all revenue-sharing athletes
• Congressional hearings with hostile tone toward professionalization
• No additional schools announce LLCs within 6 months (shows Kentucky/Utah are isolated, not leading edge)
• PE firms pull back from announced deals due to regulatory uncertainty
• First school declares athletic bankruptcy or exits Division I

Signals for Scenario 3 (Super League Acceleration)

Purple Smoke:

• Leaked meetings between Big Ten/SEC ADs and major PE firms about "structural alternatives"
• Coordinated statements from multiple schools about "exploring all options" for sustainability
• Major PE firm announces $5B+ fund specifically for college athletics transformation
• Big Ten/SEC announce joint "working group" on governance reform
• Media reports of "Project [Codename]" - secret planning for breakaway league
• Sudden conference realignment freeze - schools stop moving, suggesting coordinated plan
• NFL/NBA owners publicly discuss investing in college football restructuring

The Quarterly Update Framework

This document will be updated quarterly with:

• New LLC formations: Which schools announced, deal terms if disclosed
• PE deals: Who invested, how much, structure details
• Regulatory developments: IRS guidance, court rulings, legislative action
• Scorecard revisions: Updated probabilities based on new evidence
• Scenario probability adjustments: Which scenario is looking more/less likely

Next scheduled update: March 31, 2026

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Timeline Predictions: Specific Dates

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Based on the patterns we've documented, here are specific, falsifiable predictions:

2026 Predictions:

By March 31, 2026:

• At least 2 additional schools announce LLC formation (prediction: Florida State + one other)
• First PE deal after Utah is either announced or reported as "in negotiations"
• IRS begins review of athletic LLC structures (may not be public immediately)

By June 30, 2026:

• Total of 5-7 schools with announced LLC structures
• Big Ten or SEC makes official statement on member school flexibility
• First Title IX lawsuit specifically targeting House settlement allocation filed

By September 30, 2026:

• At least one additional PE firm (beyond Otro) announces college athletics investment
• Revenue-sharing cap for 2026-27 announced (~$21.3M with 4% increase)
• First school announces Olympic sports cuts explicitly linked to revenue-sharing costs

By December 31, 2026:

• 10+ schools total with LLC structures or announced plans
• First employment case specifically involving LLC-employed athlete reaches court
• Congressional hearing scheduled for early 2027

2027 Major Events (Predicted):

• Q1 2027: IRS issues preliminary guidance on athletic LLC tax treatment
• Q2 2027: First Title IX case reaches summary judgment or settlement
• Q3 2027: 15-20 schools operating as LLCs; pattern undeniable
• Q4 2027: NCAA announces "Division I restructuring" to accommodate LLC vs. traditional models

2028-2030 Critical Junctures:

• 2028: First employment collective bargaining agreement OR first regulatory shutdown of LLC model (binary outcome)
• 2029: Conference structure finalizes into "Super Conference" + remnants OR fragmented chaos
• 2030: Either 35-40 schools operating professionally as LLCs (Scenario 1), OR complete collapse into breakaway league (Scenario 3), OR regulatory lockdown with scattered casualties (Scenario 2)

How To Track These Predictions

I will maintain accuracy by:

• Documenting each prediction with date made and specific claim
• Updating quarterly with hits, misses, and refinements
• Adjusting probabilities based on actual outcomes
• Acknowledging wrong predictions explicitly and analyzing why

This isn't fortune-telling. It's pattern completion based on documented historical parallels and current evidence. Some predictions will be wrong. But the framework should hold.

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For Athletic Directors, University Presidents, and Boards

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If you're in a position to influence your institution's response to this transformation, here's what you need to know:

Questions Your Board Should Be Asking Right Now

Financial Sustainability:

1. What is our plan to fund $20.5M+ in annual revenue sharing starting 2025-26?
2. Can we sustain this from operating revenue, or do we need new capital sources?
3. What happens when the cap increases 4% annually? Can we afford $32M by 2035?
4. Have we modeled a 10-year budget that includes revenue sharing + NIL + facilities?

Legal Exposure:

5. What is our liability exposure if athletes are deemed employees?
6. How are we protecting the university's endowment and academic assets from athletic department litigation?
7. Have we evaluated LLC structure for liability firewall purposes?
8. What is our Title IX compliance strategy given 90/10 revenue-sharing splits?

Competitive Position:

9. If our conference peers create LLCs with PE backing, can we compete without doing the same?
10. What happens to our recruiting if we can't match competitors' financial resources?
11. Is our current governance structure fast/flexible enough for this environment?

Strategic Options:

12. Have we explored LLC formation as Kentucky/Utah have done?
13. Have we had preliminary conversations with PE firms about potential partnerships?
14. What would transition to LLC structure require (legally, politically, operationally)?
15. What's our Plan B if revenue-sharing becomes unsustainable under current model?

The Adaptation Impossibility Reality

Remember the locomotive pattern: most incumbents can't adapt even when they see the threat.

If your institution:

• Has strong "amateur athletics" identity
• Has conservative board/administration
• Operates in state with restrictive laws
• Has faculty resistance to commercialization
• Lacks relationships with PE firms
• Has athletic department run by former coaches (not business operators)

...then you probably can't successfully execute the Kentucky/Utah transformation, no matter how necessary it is.

That doesn't mean you're doomed. But it means you need a different strategy:

Alternative Strategies for Schools That Can't Go LLC:

Option 1: Strategic Niche

• Accept you won't compete for national championships
• Focus on regional success and sustainable model
• Downsize to Group of 5 or FCS if necessary
• Emphasize Olympic sports and academic integration

Option 2: Conference Collective

• Pool resources at conference level (Big 12 exploring this)
• Conference-wide PE partnership rather than school-by-school
• Shared costs, shared benefits, reduced individual risk

Option 3: Early Exit

• Recognize the new model is unsustainable for your institution
• Exit Division I football before financial crisis forces it
• Preserve other sports programs and institutional finances
• Market as "return to educational mission" rather than failure

The locomotive pattern shows that denial is the most common response, followed by half-measures that don't address the fundamental problem. Don't be Baldwin building the Centipede.

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For Fans, Media, and Observers

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If you're watching this transformation from outside, here's how to understand what you're seeing:

What The "Chaos" Actually Is

Every confusing development isn't random. It's part of the pattern:

What You See	What It Actually Is
"Conference realignment makes no geographic sense"	Revenue optimization. Geography is irrelevant when it's a media product, not regional sports competition.
"NIL is out of control"	Capital flowing to talent. This is how professional sports work. It looks chaotic because rules pretend it's not professional.
"Schools are cutting Olympic sports"	Resource allocation to revenue-generating activities. Non-revenue sports are casualties of professionalization.
"The NCAA is powerless"	Trade association losing authority as industry transforms around it. Exactly what happened to locomotive industry associations.
"Players want to be employees"	Recognition that they already are. Legal fiction of amateurism collapsing under financial reality.
"Private equity in college sports"	Financialization. College athletics are becoming investment vehicles generating returns for capital.

The Questions To Ask

When reading coverage of college athletics developments, ask:

• "Who benefits financially from this?" Follow the money, not the rhetoric.
• "Is this about competition or capital?" Most decisions are now financial, not competitive.
• "Does this bring college athletics closer to professional sports?" The direction is one-way.
• "What's the business model rationale?" There's always one, even if not stated explicitly.

What You'll Lose (And Won't)

What's dying:

• The fiction of "student-athletes" playing for love of sport
• Geographic rivalries defining conference membership
• Amateur athletics as core university mission
• NCAA as meaningful governing body
• Broad-based Olympic sports programs
• Free access to athletes (NIL rules restrict media contact)

What's not dying:

• The games themselves (football will still be played)
• Fan passion (probably intensifies with higher stakes)
• University branding (schools still license names/logos)
• Regional loyalties (you'll still root for "your" team)
• The quality of play (likely improves with professionalization)

The product isn't disappearing. It's transforming. Whether that's better or worse depends on what you valued about college athletics in the first place.

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The Pattern Completes

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Let's bring it all back to where we started: the locomotive industry.

In 1963, Alco introduced the Century 636—3,600 horsepower, technically superior to anything EMD offered. Six years later, Alco was gone.

In 2025, traditional athletic departments are still focused on facilities, coaching, recruiting—the competition metrics. Kentucky and Utah restructured as LLCs with PE backing—the business model innovation.

The parallel is exact. The pattern is repeating.

"The Big Three had 30+ years to adapt and failed. College athletics has 5-7 years. The schools that understand they're playing the wrong game have a chance. The schools that think better facilities and coaching will save them are building the Centipede—technically impressive, commercially doomed."

What Comes After 2030?

By 2030, assuming Scenario 1 or 3 (not collapse), college football will be:

• Explicitly professional (employment, collective bargaining)
• PE-backed and managed by sports business operators
• University-affiliated but operationally independent
• Concentrated in 30-40 elite programs
• Generating massive returns for investors
• Completely separate from educational mission except branding

This is the MLS/European football club model applied to American college athletics. University connection becomes similar to how Manchester United represents Manchester—geographic/historical identity, not actual university integration.

The traditionalists will mourn. The investors will celebrate. The games will continue.

And somewhere, the ghost of EMD's success will look at Kentucky and Utah and say: "Yeah, that's how you do it. That's how you win."

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The Transformation Is Happening

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You've seen the pattern. You've seen the evidence. You've seen the predictions.

Kentucky and Utah are EMD. Traditional athletic departments are the Big Three.

The game has changed. Most schools don't realize it yet.

Excellence at the old game won't save you from losing the new one.

This analysis will be updated quarterly as the transformation unfolds.

Next update: March 31, 2026

Watch. Document. Remember you saw it here first.

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END OF SERIES
Total Analysis: ~33,000 words
Created through human-AI collaboration
December 2025

PART III The Evidence: Documents, Deals, and What's Actually Happening

PART III

The Evidence: Documents, Deals, and What's Actually Happening

Show Me The Receipts

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Up to this point, we've established the pattern (locomotives) and shown how it appears everywhere in college athletics (the lens). Now it's time to prove it with evidence.

This section presents the actual documents, financial structures, legal mechanisms, and concrete data that demonstrate the transformation is real, systematic, and accelerating.

No speculation. No theory. Just the receipts.

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1. The Forcing Function: House v. NCAA Settlement

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The entire LLC/PE transformation exists because of one legal reality: schools must now pay athletes directly, and most can't afford it under the old model.

What The Settlement Actually Says

House v. NCAA Settlement Terms (Approved June 7, 2025):

• Back Damages: $2.576 billion paid over 10 years to athletes who competed 2016-2025
• Revenue Sharing Cap: $20.5 million per school for 2025-26 academic year
• Cap Calculation: 22% of average athletic revenue across Power 4 conferences
• Annual Increase: 4% minimum per year (reaches ~$32.9M by 2034-35)
• Total New Spending: Estimated $19.4 billion over 10 years across all schools
• Opt-In: Schools choose whether to participate (virtually all Power 4 will max out)

Where The Money Actually Comes From

This is the critical question that reveals why LLCs and PE matter. The $20.5M isn't free money—it has to come from somewhere.

Revenue Source Reality Media Rights Already committed years in advance through conference deals. Can't just "redirect" this money—it's contractually obligated to conference distribution formulas. Ticket Sales Relatively flat or declining for most sports. Stadium debt service takes priority. Donations Already maxed out for most schools. Donors are now being asked to fund NIL collectives separately. Sponsorships Growing but not at $20M+ annual increases. Most valuable inventory already sold. NCAA/Conference Distributions NCAA is paying $2.8B in back damages by reducing distributions to schools. This is a net negative, not a source.

The gap is real. According to financial analyses, most Power 4 schools will need:

• $20.5M for revenue sharing
• Plus up to $2.5M for expanded scholarships
• Plus increased NIL collective funding (which continues separately)
• Plus legal/compliance costs for the new system
• Total new annual costs: $25-30M+

The Crisis Point:

Utah Athletics ran a $17 million deficit in fiscal 2024—before revenue sharing. Adding $20.5M in new athlete payments would have made that a $37.5M+ annual deficit.

This wasn't sustainable. Something had to change structurally.

Enter: Otro Capital with $500M.

The Compliance Infrastructure

The House settlement created a new enforcement body: the College Sports Commission (CSC). This isn't just bureaucracy—it's evidence of professionalization.

College Sports Commission Structure:

• CEO: Bryan Seeley (former MLB executive)
• Function: Monitor revenue sharing, investigate violations, enforce roster limits
• NIL Oversight: Every third-party NIL deal over $600 must be submitted for approval
• Clearinghouse: "NIL Go" portal tracks all deals
• Arbitration: Binding dispute resolution for compliance issues

This is professional sports infrastructure. Commissioner. Arbitration. Centralized compliance. The amateur model is dead in everything but name.

The Allocation Problem

The settlement doesn't mandate how schools split the $20.5M. This creates massive Title IX exposure.

According to early public allocations:

• North Carolina: $13M football, $7M men's basketball, $250K baseball, $250K women's basketball
• Notre Dame AD Pete Bevacqua: "Some schools allocate up to $16 million to football"
• Typical formula: ~75% football, ~15% men's basketball, ~5% women's basketball, ~5% other

This means 90% of revenue sharing goes to male athletes. Title IX requires equitable treatment. This will be litigated. Extensively.

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2. Kentucky's LLC Structure: The Legal Architecture

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Let's dissect exactly what Kentucky built and why it matters.

The Organizational Chart

Legal Structure (As of April 2025):

University of Kentucky (Public 501c3)
└── Beyond Blue Corporation ($1.3B nonprofit holding company)
     └── Champions Blue, LLC (Athletic Department)
          ├── Revenue Operations
          ├── Athletic Teams
          ├── Facilities
          └── Compliance

Key Legal Designation: "Disregarded entity for tax purposes"

What "Disregarded Entity" Actually Means

This is the tax innovation that makes the whole structure work.

IRS Disregarded Entity Status:

A single-member LLC that the IRS treats as if it doesn't exist separately from its owner for tax purposes. Income and expenses "pass through" to the parent organization.

For Champions Blue this means:

• LLC's revenues are taxed as part of Beyond Blue Corporation (nonprofit)
• Avoids separate corporate income tax
• Maintains connection to university's 501c3 status
• BUT: Creates legal separation for liability purposes

The magic: Tax treatment says "you're part of the university." Liability treatment says "you're a separate entity." Best of both worlds.

The UBIT Shield

Here's why this matters for tax-exempt status:

Unrelated Business Income Tax (UBIT) applies when nonprofits earn income from activities "not substantially related" to their exempt purpose (education). College athletics has historically avoided UBIT because sports were considered educational/recreational.

But paying athletes $20.5M annually? That looks commercial, not educational.

From CPA Katie Davis (university financial advisor):

"The significant commercial growth seen in recent years has led to discourse about whether UBIT should be applied to income derived from college sports. The creation of Champions Blue LLC shields the University of Kentucky from that potential taxation."

Translation: If the IRS decides college football is commercial business (which it obviously is), the LLC structure protects the university's overall tax-exempt status by quarantining the commercial activity.

The Private Benefit Problem

There's another tax risk: private benefit doctrine.

501c3 organizations can't provide substantial benefits to private individuals. But revenue sharing pays specific athletes millions of dollars. That's... a private benefit to individuals.

The LLC Solution:

By operating through Champions Blue LLC, Kentucky can argue:

1. The commercial entity (LLC) is paying for commercial services (athletics)
2. This is business expense, not private benefit
3. The nonprofit university isn't directly providing private benefit
4. The firewall protects the university's exempt status

Will the IRS buy this? Unknown. But it's a defensible structure that traditional athletic departments don't have.

The Liability Firewall

This is the other major benefit—and it's huge.

Scenario: Football players are deemed employees (NLRB Dartmouth ruling, pending appeals). They sue for back wages, benefits, workers' comp. Damages: hundreds of millions.

Traditional Structure	LLC Structure
Athletic department is university department. Lawsuit targets "University of Kentucky." All university assets at risk—endowment, research funds, academic buildings.	Athletic department is Champions Blue LLC, a separate legal entity. Lawsuit targets the LLC. Liability contained. University's academic assets protected.

This is what LLCs exist for: Limited Liability. The clue is in the name.

The Beyond Blue Model

Kentucky didn't invent this. They copied their own healthcare playbook.

Beyond Blue Corporation History:

• Created: 2014
• Purpose: Manage UK Healthcare acquisitions and ventures
• Structure: University-affiliated nonprofit holding company
• Portfolio: King's Daughters Medical Center ($100M investment), St. Claire HealthCare ($300M investment)
• Total Assets: ~$1.3 billion

Why this worked: Healthcare acquisitions require business flexibility that traditional university governance doesn't allow. Beyond Blue operates like a private company while remaining university-affiliated.

Champions Blue is the same model applied to athletics. It's not experimental—it's proven internal infrastructure.

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3. Utah's PE Deal: The Money Explained

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If Kentucky is the legal innovation, Utah is the financial innovation. Let's break down exactly how the Otro Capital deal works.

The Deal Structure

Utah Brands & Entertainment LLC Deal Terms:

• Formation: December 9, 2025
• Total Capital: $500M+ (Otro equity investment + donor equity purchases)
• Otro's Stake: Significant minority equity position (exact % undisclosed)
• University Control: Majority ownership maintained
• Governance: Board includes AD Mark Harlan (chair), Otro executives, Utah trustees
• Operations: External president manages day-to-day commercial operations
• Otro's Return: Percentage of annual revenue from Utah Brands & Entertainment
• Exit Strategy: 5-7 years; university has right to buy back Otro's shares

What Moved to the LLC vs. What Stayed

This is the clever part—surgical separation of commercial from competition.

Utah Brands & Entertainment LLC (Commercial Operations)	University Athletic Department (Competition Operations)
• Ticketing • Concessions • Corporate sales & sponsorships • Media production/broadcasting • Hospitality & premium seating • Brand partnerships • Licensing & merchandise • Content creation • Digital platforms • Finance operations • Revenue-sharing payments to athletes	• Fundraising (donations) • Coaching decisions • Player personnel/recruiting • Conference management • Scholarship administration • NCAA compliance • Academic support (Everything needed for NCAA eligibility stays with university)

See what they did? Everything that generates revenue moves to the LLC where PE has equity. Everything that maintains amateur status stays with the university for NCAA compliance.

Who Is Otro Capital?

Understanding who's actually running this matters.

Otro Capital Profile:

Founded: 2023 by former RedBird Capital Partners executives

Key Personnel:

• Alec Scheiner: Former Cleveland Browns president, Dallas Cowboys SVP. Deep NFL front office experience.
• Brent Stehlik: Former Browns executive. Sports business operations expertise.
• Niraj Shah: RedBird Capital veteran. Private equity structuring.

Philosophy: "Operator-led private equity firm" — not passive investors, active managers with hands-on approach

Existing Portfolio:

• Alpine Racing (Formula 1): $200M for 24% equity stake
• FlexWork Sports: Marketing and events
• Two Circles: Fan and data analytics platform

Pattern: Otro invests in sports properties with undermonetized commercial operations, brings professional management, optimizes revenue, exits at multiple of investment.

These aren't college administrators. They're NFL executives and PE professionals who run professional sports franchises. And now they're on Utah's board managing commercial operations.

The Return Calculation

How does Otro make money? Let's model it.

Otro Capital Return Model (Estimated):

Utah Athletics Current State:
• Annual operating revenue: $126.8M (FY 2024)
• Football revenue: $79.1M
• Annual deficit: $17M

Otro's Investment Thesis:
"With professional management, commercial optimization, and capital
for facility/brand improvements, we can grow revenue 15-20% annually
while improving margins."

5-Year Projection:
• Year 1 (2025-26): $127M revenue → improve to $145M (commercial optimization)
• Year 2: $145M → $167M (15% growth)
• Year 3: $167M → $192M
• Year 4: $192M → $221M
• Year 5: $221M → $254M

Otro's Take (assuming 12% of revenue per year):
• 5-year total distributions: ~$110M
• Exit valuation (if Utah buys back at 8x EBITDA improvement): $150-200M
• Total return on $300M investment: $260-310M over 5-7 years
• IRR: 15-18% (typical PE target)

This is how PE thinks. They're not donating. They're investing capital to generate returns. And Utah gave them equity in an asset (commercial athletics operations) that was dramatically undermonetized.

The Donor Equity Innovation

Here's the really clever part: Utah lets donors buy equity stakes in Utah Brands & Entertainment.

Traditional model:

• Donor gives $1M to athletic department
• Money is gone (it's a donation)
• Donor gets tax deduction + naming rights + priority seating

New model:

• Donor buys $1M equity stake in Utah Brands LLC
• Donor is now investor/shareholder
• Receives distributions based on LLC profitability
• Can potentially sell equity stake later
• No longer a donation—it's an investment

Tax Implication:

If donors are buying equity rather than making tax-deductible donations, they lose the charitable deduction. But they gain potential returns and equity value.

This fundamentally changes the donor relationship. You're not philanthropist supporting education—you're investor seeking returns from sports entertainment product.

This is EMD/GMAC thinking. Turn stakeholders into equity holders. Convert donations into capital.

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4. The Tax and Legal Minefield

```

Both Kentucky and Utah's models create enormous regulatory risk. Here's what's unresolved.

The 501c3 Question

Can athletic departments maintain tax-exempt status while operating as for-profit LLCs?

IRS Requirements for 501c3 Status:

1. Organized for exempt purpose: Charitable, educational, religious, etc.
2. Operated for exempt purpose: Activities must further that purpose
3. No private benefit: Can't substantially benefit private individuals
4. No private inurement: Earnings can't benefit insiders

The problem: Paying athletes millions looks like private benefit. Providing returns to PE investors looks like private inurement. Operating for-profit looks like commercial business.

Kentucky's "disregarded entity" status is an attempt to thread this needle. But it's untested. The IRS hasn't ruled on whether this works for athletic departments paying athletes $20M+ annually.

The UBIT Exposure

Even if 501c3 status survives, Unrelated Business Income Tax could apply to revenues not related to educational mission.

What could trigger UBIT:

• TV rights income (is broadcasting games "educational"?)
• Sponsorship revenue (commercial advertising)
• Licensing/merchandise (commercial sales)
• Premium seating/hospitality (luxury entertainment)

Historically, IRS hasn't applied UBIT to college athletics. But with $20.5M in athlete payments making the commercial nature obvious, that could change.

The Title IX Litigation

This is the big one. Multiple Title IX challenges to the House settlement are already filed.

Title IX Legal Issue:

Law: Educational institutions receiving federal funding must provide equal athletic opportunities regardless of sex.

Current allocation: ~90% of revenue sharing goes to male athletes (football + men's basketball)

The argument: This violates Title IX's requirement for equitable treatment

Schools' defense: Revenue sharing tracks revenue generation (football/men's basketball generate the money)

Plaintiff response: Title IX doesn't allow "market justification" for discrimination. Compensation must be equitable regardless of revenue generation.

If plaintiffs win, schools would need to split $20.5M more equitably. That might mean $10M+ to women's sports. Football coaches are already promising recruits $15-16M in roster spending. The math doesn't work.

The Employment Question

The House settlement explicitly didn't resolve whether athletes are employees. That fight continues.

Pending Employment Litigation:

• NLRB Dartmouth Decision (Feb 2024): Men's basketball players ruled employees. Under appeal.
• Johnson v. NCAA: Class action seeking employee status and back wages
• Numerous state cases: Various employment claims

If athletes become employees:

• Workers' compensation required
• Unemployment insurance
• Overtime rules apply
• Collective bargaining rights
• Back wage claims for years of unpaid labor
• Potential damages: billions

The LLC defense: If Champions Blue LLC employs athletes, not the university, maybe the university's liability is limited. Maybe.

The Open Records Question

Public universities are subject to state open records laws. Private LLCs generally aren't.

If Champions Blue or Utah Brands & Entertainment aren't subject to open records requests, that means:

• Athlete payment details: secret
• Coach contracts: secret
• PE deal terms: secret
• Financial performance: secret

This is already being challenged. Media organizations and transparency advocates are arguing that university-affiliated LLCs performing public functions must comply with open records laws.

Outcome uncertain. But the ability to operate in secrecy is a significant advantage for Kentucky/Utah vs. traditional athletic departments.

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5. Comparison to Professional Sports Models

```

What Kentucky and Utah built isn't unprecedented. It's the standard model in professional sports. Let's compare.

The NFL/NBA Ownership Structure

NFL/NBA Model	Kentucky/Utah Model	Traditional Athletic Dept
Legal Entity: Private corporation or LLC	Legal Entity: LLC (Champions Blue, Utah Brands & Entertainment)	Legal Entity: University department (no separate legal existence)
Ownership: Private investors/ownership groups	Ownership: University (majority) + PE/donors (minority equity)	Ownership: University (100%)
Revenue Model: Media rights, tickets, sponsorships, licensing	Revenue Model: Media rights, tickets, sponsorships, licensing (identical)	Revenue Model: Same sources but also donations (tax-deductible philanthropy)
Player Compensation: Salaries with collective bargaining, revenue sharing ~50%	Player Compensation: "Revenue sharing" (~15-20% of total revenue eventually)	Player Compensation: Scholarships only (until House settlement)
Management: Professional sports executives, GMs, business operators	Management: PE executives (Otro), professional operators, some university oversight	Management: Athletic directors (typically former coaches/athletes)
Tax Status: For-profit, pays corporate taxes	Tax Status: "Disregarded entity" (trying to maintain 501c3 connection)	Tax Status: 501c3 tax-exempt as part of university
Return to Investors: Franchise value appreciation, distributions from profits	Return to Investors: Revenue percentage to PE, equity value growth, exit at premium	Return to Investors: None (donors give philanthropically)

See the pattern? Kentucky/Utah are 80% of the way to professional sports franchise structure. The only differences:

1. University retains majority control (for now)
2. Attempting to maintain tax-exempt status (unclear if sustainable)
3. Still nominally "educational" (for NCAA compliance)

Everything else—ownership structure, PE investment, professional management, revenue focus, player compensation—is professional sports.

"Kentucky and Utah didn't innovate a new model. They imported the professional sports model into college athletics. The innovation was having the courage to do it first."

The MLS Model Precedent

There's actually a direct precedent for this: Major League Soccer.

MLS "Single-Entity" Structure:

When MLS launched in 1996, it created an unusual structure:

• MLS is single legal entity (LLC) that owns all teams
• Individual "teams" are actually regional operating units
• Investor-operators buy equity stakes in MLS (the league), not individual teams
• League controls player contracts centrally
• Revenue sharing is built-in structurally

Sound familiar? This is basically what college athletics is becoming:

• Big Ten/SEC becoming "leagues" that control member assets
• Individual schools as "operating units" within larger structure
• PE investing in leagues/conferences, not individual schools
• Centralized media rights (league-level, not school-level)

The Franchise Valuation Question

If college athletics are becoming professional franchises, what are they worth?

Estimated Franchise Values (Using NFL Multiples):

NFL franchises trade at ~7-10x annual revenue. Applying that to top college programs:

Program	Annual Revenue	Implied Value (7x)
Texas	$239M	$1.67 billion
Ohio State	$251M	$1.76 billion
Alabama	$214M	$1.50 billion
Michigan	$210M	$1.47 billion
Georgia	$203M	$1.42 billion

This is why PE is interested. These aren't "athletic departments." They're billion-dollar franchises with massive underexploited commercial value.

Kentucky's $202M in revenue suggests Champions Blue is worth ~$1.4 billion as a franchise. Utah's $127M suggests ~$900M valuation. Otro's investment at presumably lower valuations gives them significant upside if these entities are eventually valued like professional sports franchises.

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6. What The Documents Actually Say

```

Let's look at actual language from the public documents we have access to.

Kentucky's Board Resolution

From UK Board of Trustees Resolution (April 25, 2025):

"RESOLVED, that the Board of Trustees approves the establishment of
Champions Blue, a wholly-owned subsidiary LLC that will serve as the
entity to manage and operate UK Athletics...

"The new structure will allow UK Athletics to pursue public-private
partnerships, optimize asset utilization, and unlock additional revenue
streams while ensuring that all activities remain aligned with the
University's mission and values...

"Champions Blue will be structured as a disregarded entity for tax purposes,
ensuring that its financial activities are treated as part of the University
while providing operational flexibility and liability protection..."

Note the language: "optimize asset utilization," "unlock additional revenue streams," "operational flexibility," "liability protection." This is corporate restructuring language, not educational mission language.

Utah's Official Announcement

From University of Utah Press Release (December 9, 2025):

"The University of Utah today announced the formation of Utah Brands &
Entertainment, LLC, a new structure designed to maximize the commercial
potential of Utah Athletics...

"Through partnership with Otro Capital, a New York-based sports
investment firm, the LLC will access significant capital to invest in
facilities, technology, and brand development...

"The University will maintain majority ownership and control of Utah
Brands & Entertainment, with Otro Capital holding a significant minority
equity stake. This structure allows Utah to compete at the highest level
in the evolving landscape of college athletics..."

"Maximize commercial potential." "Access significant capital." "Equity stake." This is PE investment language. They're not hiding what this is—they're just not calling it what it is: the professionalization and financialization of college athletics.

The House Settlement Language

From House v. NCAA Settlement Agreement (Approved June 7, 2025):

"Schools may share athletics-related revenue with their student-athletes
up to a cap of approximately 22 percent of the average Power 5 revenue,
subject to annual adjustments...

"The revenue-sharing cap for the 2025-26 academic year is set at
$20,577,571...

"Schools are not required to share revenue with student-athletes but
may do so at their discretion, subject to the cap...

"Nothing in this Settlement shall be construed to establish an
employment relationship between student-athletes and educational
institutions..."

That last line is key: "Nothing in this Settlement shall be construed to establish an employment relationship." They're paying athletes $20.5M annually but explicitly saying it's not employment.

This is the legal fiction that the entire structure depends on. And it won't survive serious scrutiny.

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7. The Financial Reality: Where The Money Goes

```

Let's model what the new economics actually look like for a typical Power 4 athletic department.

Budget Model: Before vs. After House Settlement

Typical Power 4 Athletic Department (~$150M Revenue):

BEFORE HOUSE SETTLEMENT (FY 2024):
Revenue: $150M
Expenses:
  Coaching salaries: $35M
  Scholarships: $15M
  Facilities/operations: $30M
  Team travel: $12M
  Medical/training: $8M
  Admin/support: $25M
  Debt service: $15M
  Other: $10M
Total Expenses: $150M
Net: Break-even

AFTER HOUSE SETTLEMENT (FY 2026):
Revenue: $150M (unchanged immediately)
NEW Expenses:
  Revenue sharing: $20.5M
  Expanded scholarships: $2.5M
  Enhanced compliance: $2M
Previous Expenses: $150M
Total Expenses: $175M
Net: -$25M annual deficit

This is the crisis. And it's why LLCs and PE matter.

Where Can Traditional Departments Cut?

To close a $25M deficit without PE capital, schools can:

Option 1: Cut Olympic Sports

Eliminate 5-8 non-revenue sports. Saves maybe $10-15M. Creates:

• Title IX violations (cutting more men's than women's sports)
• Massive backlash from alumni, athletes, coaches
• Still doesn't close the gap

Option 2: Increase Fundraising

Ask donors for $25M more annually. Problem:

• Donors already funding NIL collectives separately
• Donor fatigue is real
• Not sustainable long-term

Option 3: University Subsidy

Ask university for $25M from general fund. Problem:

• Public universities face budget cuts already
• Faculty/academic programs competing for same money
• Politically untenable at most schools

Option 4: LLC + PE Capital

Kentucky/Utah solution:

• PE provides capital ($300-500M) immediately
• Professional management optimizes revenue (grow $150M → $175M+)
• Improved margins cover new expenses
• Liability protection as bonus
• Sustainable long-term

Only Option 4 actually solves the problem structurally. Everything else is short-term band-aids on a permanent gap.

```

The Evidence Speaks

```

Let's summarize what the documents, deals, and data actually prove:

What We Know For Certain:

1. The House settlement creates $20.5M+ annual new costs that most schools can't afford under traditional model
2. Kentucky created LLC structure explicitly for "liability protection" and "operational flexibility" — this is corporate separation, not administrative efficiency
3. Utah brought in PE partner (Otro Capital) for $500M+ in exchange for equity stake and revenue share — this is investment seeking returns, not philanthropy
4. Both models surgically separate commercial operations from competition operations — exactly what pro sports franchises do
5. Management now includes professional sports executives and PE professionals — not traditional athletic administrators
6. The tax structures ("disregarded entity") are attempts to maintain 501c3 connection while operating commercially — untested and legally fragile
7. Title IX, employment status, and tax-exempt status are all unresolved — massive litigation risk ahead
8. Traditional athletic departments face structural deficits they can't solve without transformation or crisis cuts

This isn't speculation. It's documented fact from public records, press releases, legal filings, and financial disclosures.

"The evidence doesn't suggest college athletics is being financialized. The evidence proves it's already happened for Kentucky and Utah, and the rest are watching to see if they survive the legal challenges before following."

```

The Documents Don't Lie

Kentucky and Utah built professional sports franchise structures.

They brought in PE capital expecting investment returns.

They separated commercial operations from educational missions.

They hired professional sports executives to run things.

This is what EMD did to the locomotive industry.

This is what's happening to college athletics.

Next: What Comes Next — Scenarios, Predictions, and The Divestment Scorecard

PART II Seeing College Athletics Through The Locomotive Lens

PART II

Seeing College Athletics Through The Locomotive Lens

The Pattern Recognition

```

Now that you understand the locomotive pattern, let's return to college athletics. But you're going to see it differently now.

Every confusing, chaotic, seemingly random development in college sports over the past five years suddenly reveals itself as part of a coherent pattern—the same pattern that killed the Big Three locomotive companies.

This isn't metaphor. This isn't loose analogy. This is structural pattern matching across industries experiencing the same type of disruption.

Let's go through it systematically.

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1. The Identity Trap: "We Are Amateur Athletics"

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The Locomotive Parallel

The Big Three's core identity was "we are locomotive builders"—craftsmen who engineer custom solutions. This identity was forged over a century of success. It wasn't just what they did; it was who they were.

Recognizing EMD's threat would have required admitting: "We need to stop being locomotive builders and become financial services companies that happen to make locomotives." This was psychologically impossible.

The College Athletics Reality

The NCAA's core identity is "we are amateur athletics"—educational institutions that happen to sponsor competitive sports. This identity has been defended legally, culturally, and institutionally for over a century.

The NCAA's Foundational Identity:

The entire regulatory structure is built on the premise that college athletes are students first, athletes second. The "student-athlete" term itself (invented by NCAA executive director Walter Byers in the 1950s) exists specifically to maintain this identity and avoid worker's compensation claims.

Everything flows from this identity:

• Scholarship limits (to maintain "amateurism")
• Practice time restrictions (to preserve "student" status)
• Transfer rules (to prevent "free agency")
• Eligibility requirements (academic progress)
• The entire compliance bureaucracy

Recognizing that college football is now professional sports would require destroying this entire identity.

Consider what NCAA leadership would have to accept to adapt to the Kentucky/Utah model:

• Football and basketball are professional entertainment products, not amateur sports
• Athletes are employees/partners generating commercial revenue, not students playing games
• The educational mission is a legacy branding asset, not the actual purpose
• Athletic departments need to become for-profit companies with PE backing
• The "student-athlete" concept is obsolete fiction
• Everything we've built our careers defending is wrong

This isn't just difficult to accept. For people whose professional identities are built on preserving amateur athletics, it's existentially impossible.

"You can't ask someone to destroy their identity and expect them to do it willingly. The NCAA can't become what it needs to become because doing so would require admitting it should stop existing as currently constituted."

Why This Matters Now

The House v. NCAA settlement (June 2024) requires schools to share revenue directly with athletes—$20.5 million per year by 2025. This is de facto payroll no matter what you call it.

But the NCAA can't call it payroll. That would make athletes employees. So they're calling it "revenue sharing" and maintaining the fiction of amateurism even while operating a professional compensation system.

Kentucky and Utah looked at this situation and asked: "Why are we pretending?" Their LLC structures don't solve the identity crisis—they abandon the identity entirely. They're saying: "We're a commercial sports entertainment company. Let's stop pretending we're anything else."

Most athletic departments can't do this. Their identity prevents them from seeing it as an option.

```

2. The Organizational Structure: Who Has Power

```

The Locomotive Parallel

In the Big Three, engineers held power. They rose to leadership. They controlled strategy. They measured success in technical terms. This made perfect sense when competing on engineering excellence.

But it created blindness: engineers couldn't see financial/business model disruption because their training and position didn't equip them to see it. The people who might have recognized EMD's threat (finance, sales, operations) lacked organizational power to be heard.

The College Athletics Reality

In traditional athletic departments, coaches and competition-focused administrators hold power. Athletic directors are almost always former coaches or competition administrators. They rose through the ranks by winning games, managing teams, navigating NCAA compliance.

The Typical AD Career Path:

1. College athlete or coach
2. Assistant AD for operations/compliance/sports administration
3. Senior Associate AD
4. Athletic Director

What's missing from this path? Business model innovation. Capital markets. Private equity. Financial restructuring. Corporate law.

These leaders are excellent at running athletic competitions. They're not equipped to recognize that athletic competitions have become secondary to financial engineering.

Here's the brutal parallel:

Big Three Locomotive Companies	Traditional Athletic Departments
Engineers controlled strategy	Coaches/ADs control strategy
Success = technical performance	Success = wins, championships, bowl games
Sold to railroad mechanical departments	"Sell" to fans, donors, conference commissioners
Finance people existed but lacked power	CFOs exist but report to ADs, don't drive strategy
Measured: horsepower, efficiency, tractive effort	Measure: wins, attendance, graduation rates
Couldn't see financial disruption	Can't see financialization disruption

The Kentucky/Utah Difference

Look at who's driving Kentucky and Utah's transformations:

Kentucky: Modeled after Beyond Blue Corporation—UK's healthcare holding company run by business executives and healthcare administrators, not doctors. Champions Blue brings in "outside business/sports experts" to advise, not just athletics administrators.

Utah: Otro Capital executives (Alec Scheiner: former Browns president, Cowboys SVP) are on the LLC board. They're not advising—they're co-managing. Professional sports business operators, not college athletics administrators.

The power structure changed. Business/finance expertise now drives strategy. Competition operations (coaching, recruiting, compliance) report to the commercial entity.

This is EMD's structure: business people running a business that happens to involve locomotives. Not locomotive engineers running a business.

```

3. The Customer Relationship: Selling to the Wrong People

```

The Locomotive Parallel

The Big Three sold to railroad mechanical departments—engineer-to-engineer relationships focused on technical specifications. EMD sold to railroad CFOs and presidents—business-to-business relationships focused on total cost of ownership and balance sheet impact.

The mechanical departments still evaluated locomotives, but they no longer controlled purchasing decisions. Financial officers did. The Big Three kept talking to the people who no longer had power to buy.

The College Athletics Reality

Traditional athletic departments "sell" to:

• Fans (season tickets, merchandise, donations)
• Donors (major gifts tied to facilities, scholarships)
• Conference commissioners (maintaining membership, media distribution)
• NCAA (compliance, maintaining eligibility)

But in the new model, the actual customers are:

• Private equity firms (seeking returns on investment)
• Media companies (buying content rights, not "games")
• Corporate sponsors (buying brand associations and data access)
• Capital markets (financing operations)

The Pitch Changes:

Old pitch (to donors): "Help us build a championship program. Your gift supports student-athletes pursuing degrees while competing."

New pitch (to PE firms): "We generate $126.8M in annual revenue with $79.1M from football alone. With proper commercial management, financing structure, and revenue optimization, we project 15-20% annual growth. Your equity stake returns X% annually with exit in 5-7 years."

These aren't the same conversation. They're not even the same language.

Utah's deal with Otro Capital explicitly allows donors to purchase equity stakes in Utah Brands & Entertainment LLC. This transforms donors from philanthropists into shareholders. They're not giving money away—they're investing capital expecting returns.

This is EMD's model: sell financial products that happen to involve athletics, not athletics that happen to need financing.

Why Traditional ADs Can't Make This Shift

An athletic director whose career was built on relationships with coaches, donors, and conference officials isn't equipped to pitch private equity firms on return-on-investment projections. It's not their language, not their expertise, not their world.

And even if individual ADs could make the shift, their universities can't. Public universities have boards of trustees who think of athletics as educational programs supporting university mission. Pitching them on "we should partner with PE firms to maximize commercial returns" contradicts everything they believe the athletic department exists to do.

Kentucky and Utah succeeded because they had leadership willing to reframe the entire relationship: athletics isn't an educational program that needs funding, it's a commercial asset that can generate investment returns.

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4. The Metrics: Measuring the Wrong Things

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The Locomotive Parallel

The Big Three measured horsepower, tractive effort, fuel efficiency, reliability—technical specifications. EMD measured market share, customer lifetime value, service revenue as percentage of total revenue, fleet penetration rates—business metrics.

You can't manage what you don't measure. More fundamentally: you can't even see what you don't measure.

The College Athletics Reality

Traditional athletic departments measure:

Competition Metrics Compliance Metrics Financial Metrics (Basic) • Win-loss records
• Conference standings
• Bowl/tournament appearances
• National rankings
• Recruiting class rankings • Graduation rates (GSR)
• Academic Progress Rate (APR)
• NCAA violations
• Title IX compliance
• Scholarship distribution • Annual revenue
• Annual expenses
• Deficit/surplus
• Donation levels
• Attendance

These are the numbers that appear in reports, the achievements that earn recognition, the goals departments are judged against.

What's missing?

Business Metrics Kentucky/Utah Track

• Customer lifetime value (CLV) per fan • Revenue per available seat (RevPAS) • Media rights value per game • Sponsorship revenue growth rate • Brand valuation • Licensing revenue per capita • Digital engagement conversion rates • Capital efficiency (revenue/invested capital) • Return on equity for investors • Market penetration vs. addressable market • Content consumption metrics (streaming, social) • Premium seating utilization and pricing power

Traditional athletic departments literally don't have systems to track most of these numbers. Customer lifetime value? They sell season tickets annually, not relationships over decades. Capital efficiency? They don't think in terms of capital deployment and returns.

"If your dashboard shows competition metrics, you'll see a competition. The financial and strategic dimensions of the battle simply don't appear on your instruments."

The Utah Example

When Otro Capital evaluated Utah, they didn't ask "How many games did you win?" They asked:

• What's your revenue per fan compared to market potential?
• What's the total addressable market for Utah football content?
• How much pricing power exists in premium seating that's undermonetized?
• What's the brand value in licensing that's not being captured?
• What's the return profile over 5-7 years given projected revenue growth?

These are private equity questions. Professional sports franchise questions. Not college athletics questions.

And Utah couldn't answer them—because they'd never measured those things. Otro's value isn't just capital. It's bringing the measurement systems that reveal where money is being left on the table.

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5. The Sunk Cost Trap: Conference Networks and Infrastructure

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The Locomotive Parallel

Baldwin's Eddystone plant represented massive capital investment optimized for custom steam locomotive production. Admitting it was obsolete meant writing off enormous sums and acknowledging catastrophic strategic error. So they didn't. They kept trying to make it work, even as it became increasingly clear the future required different infrastructure.

The College Athletics Reality

College athletics has its own Eddystone traps—massive investments in infrastructure optimized for the old model that are becoming obsolete in the new one.

The Conference Network Model (2007-2023):

The Big Ten Network launched in 2007. It was revolutionary—conferences could own media distribution, capture more value, build brands. SEC Network (2014), Pac-12 Network (2012), ACC Network (2019) all followed.

These networks represented massive investments in production facilities, distribution deals, staffing. They were the future of college sports media.

Until they weren't.

The Pac-12 Network never achieved profitability and was a major factor in the conference's collapse (2023-2024). Linear cable distribution is dying. Streaming fragmented the market. The infrastructure built for 2007's media landscape is increasingly obsolete in 2025's.

But conferences can't just abandon these networks. They have contracts, debt, employees, commitments. Admitting the conference network model was a dead-end means admitting strategic failure. So they keep operating them, keep investing in them, keep pretending the model still works.

The Stadium Infrastructure Trap

Schools have invested billions in stadium expansions and renovations over the past 20 years:

• Texas A&M: $450M Kyle Field renovation (2015)
• Notre Dame: $400M stadium renovation (2017)
• Penn State: $700M+ in Beaver Stadium renovations
• Countless others: luxury suites, premium clubs, video boards

These investments made sense when the revenue model was "pack stadiums, sell tickets, maximize game day experience." They're increasingly misaligned with the new model where the revenue is media rights, streaming content, and brand licensing—where stadium attendance is almost incidental.

But you can't just write off a $450 million stadium renovation. So schools keep focusing on attendance, keep selling season tickets, keep investing in game day experience—even as the financial center of gravity shifts elsewhere.

The Kentucky/Utah Model Avoids These Traps

By creating LLCs that can operate separately from university infrastructure and constraints, Kentucky and Utah can:

• Partner with external media companies without being locked into conference network obligations
• Optimize stadium operations for revenue per seat, not attendance maximization
• Invest in digital/streaming infrastructure without university procurement constraints
• Pivot quickly to new revenue models without seeking board approval

They're not trapped by yesterday's investments. They can build for tomorrow's reality.

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6. The Technical Superiority Delusion

```

The Locomotive Parallel

Alco's Century 636 produced 3,600 horsepower—more than any EMD locomotive. It was genuinely superior on technical specifications. They believed this mattered. It didn't. Railroads were no longer buying based on technical specs—they were buying based on total cost of ownership, financing packages, and service guarantees.

The College Athletics Reality

Traditional athletic departments keep competing on what they understand:

• Better facilities: State-of-the-art training complexes, nutrition centers, recovery facilities
• Better coaching: Hiring top coaches with massive salaries
• Better recruiting: Investing in recruiting infrastructure, player development
• Better "student-athlete experience": Academic support, life skills, wellness programs

These are the competition dimensions. Schools spend hundreds of millions trying to out-recruit and out-develop each other, believing that excellence in these areas will drive success.

And it does drive success—in the competition. But the battle is no longer primarily about winning games. It's about capital efficiency and revenue optimization.

THE PATTERN REVEALED:

Schools are competing to build better training facilities (higher horsepower locomotives) while Kentucky and Utah are restructuring how athletics is financed and operated (GMAC financing and service networks).

One is competing in the old game. The other is playing a new game.

Just like Alco kept building more powerful locomotives while EMD sold integrated transportation solutions, traditional athletic departments keep building better facilities while Kentucky/Utah sell investment returns.

The Illusion of Relevance

Here's what makes this delusion dangerous: facilities and coaching still matter. You can't compete without them. But they're no longer sufficient for survival.

It's like the Big Three's technical expertise—still necessary, no longer decisive. You need good locomotives to be in the market, but having good locomotives doesn't determine who wins the market.

Similarly, you need good coaching and facilities to be competitive in college football. But having good coaching and facilities doesn't determine which athletic departments survive the next decade. That will be determined by business model, capital structure, and commercial operations—dimensions where most athletic departments aren't even competing.

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7. The Actual Disruption: It's Financialization

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The Locomotive Parallel

EMD didn't disrupt the locomotive industry with better engines. They disrupted it by financializing locomotives—turning them from custom capital equipment into standardized assets with integrated financing, service guarantees, and fleet management.

GMAC financing was the revolution. Everything else (standardization, service networks, selling to CFOs) enabled and reinforced the financing model.

The College Athletics Reality

College athletics is being disrupted by financialization—the transformation of athletic departments from university educational programs into investment vehicles generating returns for capital providers.

This isn't about NIL or revenue sharing or conference realignment. Those are symptoms. The underlying disruption is that athletic departments are becoming financial products.

The Financialization Pattern:

Locomotives (1930s-1960s)	College Athletics (2020s)
GMAC financing Integrated capital for purchases	PE partnerships (Otro Capital) Integrated capital for operations
Lease arrangements Convert CapEx to OpEx	Revenue-sharing structures Convert donations to equity investments
Service contracts Ongoing revenue streams	Media rights bundling Ongoing revenue streams
Fleet standardization Predictable asset values	Brand standardization Predictable revenue streams
Sell to CFOs Balance sheet optimization	Sell to investors Return optimization

Let's be explicit about what Utah's Otro Capital deal actually is:

1. Otro invests capital (estimated $200-300M) for equity stake
2. They receive percentage of annual revenue generated by Utah Brands & Entertainment
3. Exit in 5-7 years, presumably at multiple of investment
4. Donors can buy equity stakes (converting from donors to shareholders)
5. Professional sports business operators manage commercial operations

This is a private equity acquisition with university retaining majority control for regulatory/political reasons. It's not "athletic department with some outside funding." It's "sports entertainment company with university as majority shareholder."

The product being sold isn't athletics. It's investment returns generated by commercial exploitation of athletic brand assets.

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8. Why Traditional Athletic Departments Can't Copy This

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The Locomotive Parallel

Could Baldwin have created a financing arm like GMAC? Technically yes. Practically no. It would have required:

• Massive capital they didn't have
• Financial expertise they didn't possess
• Relationships with capital markets they'd never developed
• Organizational transformation they couldn't execute
• Admission that their core business model was obsolete
• Becoming something fundamentally different than what they were

The Big Three couldn't copy EMD's tactics without copying EMD's strategy. And copying the strategy meant ceasing to be themselves.

The College Athletics Reality

Now watch what happens over the next 2-3 years. Other schools will see Kentucky and Utah's LLC models. Some will announce they're "exploring similar structures." Many will create LLCs.

Almost none of them will succeed the way Kentucky and Utah are succeeding.

Why? Because they'll copy the tactics without copying the strategy.

Creating an LLC is easy. You file paperwork. But the LLC is just a legal structure. The actual transformation requires:

What It Actually Requires Why Traditional ADs Can't Do It PE partnerships or capital markets access No relationships with PE firms. University boards won't approve "giving equity to investors." Legal/political constraints at public universities. Professional sports business management Current leadership are former coaches/athletes, not business operators. Would require firing/demoting successful people. Culture would revolt. Willingness to destroy "amateur" identity University presidents, boards, faculty won't accept "we're a professional sports company now." Contradicts institutional mission. Ability to pivot to investor-focused metrics Don't have systems to track ROI, capital efficiency, customer lifetime value. Would take years to build. Separation of commercial ops from competition Coaches won't report to "commercial operators." Power structure can't be inverted without mass resignations. Risk tolerance for radical transformation Boards are risk-averse. "We're doing fine with the old model" until suddenly they're not.

Most schools will do what Alco did: create the LLC structure (copy the visible tactic), maybe bring in some outside advisors, call it "innovation," and then continue operating basically as before.

They'll have the form without the function. The structure without the strategy. The LLC without the actual transformation.

And they'll wonder why it doesn't work the way it worked for Kentucky and Utah.

"You can't become EMD while remaining Baldwin. The transformation requires you to stop being yourself. Most organizations can't do that. They'd rather die as themselves than survive as something different."

The Exception: Who CAN Make This Work

A small number of schools have the conditions required for successful transformation:

• Massive revenue that makes them attractive to PE (top 15-20 programs)
• Leadership willing to destroy amateur identity (rare—requires special circumstances)
• Political/legal environment that allows it (some state laws prohibit this for public universities)
• Existing business sophistication (schools that already think commercially)
• Crisis forcing action (financial pressure, regulatory threats, conference instability)

Kentucky had Beyond Blue Corporation as template—they'd already done this with healthcare. Utah had financial crisis ($17M deficit) forcing innovation. Both had leadership willing to take reputational risk.

Most schools lack these conditions. They'll watch from the sidelines, create ceremonial LLCs, and continue operating traditionally—until it's too late.

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The Pattern Complete

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Let's bring it all together. Here's the complete parallel:

Locomotive Industry (1930-1970)	College Athletics (2020-2030)
The Big Three: Baldwin, Alco, Lima	Traditional ADs: 90% of FBS schools
Identity: "We are locomotive builders"	Identity: "We are amateur athletics"
Culture: Engineering excellence, custom craftsmanship	Culture: Competition excellence, student-athlete welfare
Power structure: Engineers control strategy	Power structure: Coaches/ADs control strategy
Customer relationship: Mechanical departments	Customer relationship: Fans, donors, conference
Metrics: Horsepower, tractive effort, efficiency	Metrics: Wins, attendance, graduation rates
Sunk costs: Eddystone plant, custom tooling	Sunk costs: Conference networks, stadium expansions
Delusion: "Our locomotives are more powerful"	Delusion: "Our facilities are better"
THE DISRUPTOR
EMD/GM: Entered market in 1930s	Kentucky/Utah LLC model: Entered 2024-2025
Innovation: GMAC financing, not better engines	Innovation: PE financing, not better athletics
Product: Transportation solutions with financing	Product: Investment returns from sports brands
Customer: Railroad CFOs and presidents	Customer: PE firms and investors
Strategy: Standardization + service + financing	Strategy: LLC structure + PE capital + commercial ops
Result: 70% market share by 1970	Prediction: Dominance by 2030
THE OUTCOME
Big Three: Extinct by 1969	Traditional ADs: Struggling by 2030?
Baldwin: Last locomotive 1956 (131 years)	?: First major AD failures 2027-2028?
Lima: Merged 1951 (too small, too late)	?: Conference realignment casualties?
Alco: Exited 1969 (technically superior, commercially obsolete)	?: Elite programs that can't adapt financially?

The pattern isn't metaphorical. It's structural.

College athletics is experiencing business model disruption disguised as regulatory chaos. Just like the locomotive industry experienced business model disruption disguised as technology transition.

The schools that understand this—that see Kentucky and Utah as EMD, not as peers doing something slightly different—have a chance to adapt.

The schools that think this is just about "getting creative with financing" are Baldwin watching the FT demonstrator tour and thinking "we can build diesel locomotives too."

They can. And it won't matter.

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What Every Confusing Development Now Explains

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With the locomotive lens, everything that's been confusing about college athletics over the past five years suddenly makes perfect sense:

Conference Realignment (2021-2024)

What it looked like: Chaos. USC/UCLA to Big Ten. Texas/Oklahoma to SEC. Pac-12 collapse. Geography meaningless.

What it actually was: Market consolidation before disruption. The valuable brands (those that can be financialized) moving to conferences with media leverage and capital access. The Big Ten and SEC aren't athletic conferences anymore—they're media companies with member institutions.

This is exactly what happened in locomotives: market consolidated to EMD and eventually GE. The entities with capital and business model advantages absorbed market share. Everyone else got squeezed out.

NIL Collectives (2021-present)

What it looked like: Boosters finding creative ways to pay players while maintaining fiction of amateurism.

What it actually was: Early financialization. Converting donor philanthropy into player compensation. Testing whether capital could flow directly to athletes outside university control. Proof of concept that investors would fund athletics for returns (even if returns were winning, not financial).

The NCAA fought this, just like railroad unions fought diesel. Didn't matter. Capital finds a way.

House Settlement Revenue Sharing (2024)

What it looked like: Legal settlement forcing schools to pay players.

What it actually was: The forcing function. The moment when pretending athletes aren't being paid became untenable. Schools need $20.5M annually to comply. Where does it come from?

Traditional answer: Cut Olympic sports, raise donations, increase ticket prices.

Kentucky/Utah answer: Bring in private equity, restructure as commercial entity, access capital markets.

This is the diesel viability moment—when the new technology/model proves it works and the old model can't match it without transforming.

The NCAA's Weakness (2020-present)

What it looked like: NCAA losing every court case, losing control of governance, becoming irrelevant.

What it actually was: Trade association trying to preserve old model while new model makes it obsolete. The NCAA is like the locomotive industry trade association trying to protect steam while diesel takes over.

They can't stop it. They can only pretend to regulate it while it transforms around them.

The "Playoff Expansion" (2024)

What it looked like: More teams in playoff, more games, more revenue.

What it actually was: Creating inventory for media rights. More games = more content = more value for streaming platforms. This isn't about competition fairness—it's about content production for commercial exploitation.

Professional sports lens, not amateur athletics lens.

The "Super League" Rumors (2024-2025)

What it looked like: Crazy speculation about top programs leaving NCAA.

What it actually is: Logical endpoint of financialization. If top programs can generate massive returns as standalone commercial entities, why share revenue with NCAA structure? Why maintain fiction of amateurism?

This is the Big Ten/SEC pulling away completely, just like EMD dominated the market. The "Super League" isn't a radical idea—it's the natural conclusion of the transformation already happening.

"Every piece that looked like chaos or randomness or 'crisis' was actually systematic transformation. The locomotive lens reveals the pattern hidden in plain sight."

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Now That You Can See The Pattern...

The question isn't whether this transformation will happen.

The question is: Which schools are EMD, and which schools are the Big Three?

And if you're working for one of the Big Three...

...what are you going to do about it?

Next: The Evidence — Documents, Deals, and What's Actually In The LLCs