College athletics is facing its most consequential financial era in history, forcing universities into soaring costs and NIL compensation under business models that are often no longer sustainable.

Even powerhouse programs such as Ohio State and Colorado are operating at significant deficits, a trend that can’t continue without serious consequences.

In response, a recently announced partnership between a New York-based private equity firm and the University of Utah offers a ground-breaking approach to how schools are seeking new revenue streams and structural change to stabilize budgets and keep athletic departments from going into the red.

Utah’s board of trustees recently approved a first-of-its-kind equity partnership with Otro Capital, an operator-led private equity firm with experience in sports, entertainment and media. The board of trustees also announced the formation of a new for-profit entity called Utah Brands & Entertainment. Otro Capital will take a minority stake in Utah Brands & Entertainment in exchange for a significant capital infusion, which along with the donors could approach $500 million.

Under the agreement, the university maintains majority ownership of Utah Brands & Entertainment and decision-making authority. Utah athletic Director Mark Harlan will serve as the board chairman, and the university retains control over athletic decisions, including coaching hires, scheduling, and student-athlete welfare. The deal includes a clause allowing Utah to repurchase Otro’s stake after five to seven years.

“We’re extremely excited about the trajectory this puts both athletics on, but also our university,” Utah president Taylor Randall said while making the historic announcement. “It gives us the freedom to operate. It gives us the freedom to grow. It gives us the freedom to be excellent.”

Why This Happened Now

Utah might be the first major program partner with a private equity firm but it is unlikely to be the last. The timing of Utah’s announcement reflects the financial pressure facing college athletic departments in a world where traditional methods of donor contributions and ticket sales no longer keep pace with soaring expenses.

The House v. NCAA settlement allows schools to pay student-athletes up to $20.5 million annually with that figure increasing 4% each year over the next decade. Combined with Name, Image and Likeness compensation, the costs to attract top talent have reached unprecedented expenditures.

 Utah athletics reported a $17 million deficit in the fiscal year 2024, spending $126.8 million against $109.8 million in revenue. Other schools face similar shortfalls. Ohio State generated $254.9 million in revenue but still posted a $37.7 million deficit. Colorado is projecting a $27 million loss.

In recent years, universities and conferences have been exploring ways to increase funding to match the growing expenditures. Big 12 commissioner Brett Yormark considered a private equity investment that could have generated $800 million to $1 billion in funding in exchange for 20 percent of ownership before the deal was put on pause. The Big Ten came close to signing a $2.4 billion capital deal before Michigan and USC backed out.

Meanwhile, schools like Boise State, Michigan State and Clemson have created private entities outside of their athletic departments to generate additional revenue.

Utah, once resistant to outside investment, recognized the landscape of college sports and became intrigued. Mr. Randall said Utah vetted several private equity firms before settling on Otro Capital, which according to its website, “seeks to invest in strategic businesses with the sports ecosystem through a hands-on operational approach.”  

Otro’s portfolio includes the Formula 1 Alpine Racing Tea, FlexWork Sports marketing and event company, and Two Cities, a fan and data analysis platform. One of its co-founders, Alec Scheiner has a 25-year career in the sports industry and previously worked as president of the Cleveland Browns and senior vice president of the Dallas Cowboys. He also serves as an advisor to Fenway Sports Group and is an investor in PGA Tour Enterprises as part of the Strategic Sports Group.

Through access to the school’s trademark and licensing rights, Otro’s goal is to maximize Utah’s brand and revenue streams. Donors will also have the ability to purchase a stake in Utah Brands & Entertainment. The deal, approved by the NCAA, is expected to be finalized in 2026.

“It’s a new and innovative way to fund University of Utah athletics,” Mr. Randall said. “This will give our institution, particularly our athletic institution, the upside it needs to thrive in a new revenue-sharing and NIL era. It also allows the other missions of our university to thrive.”

The New Economic Model for College Athletics

Before the eruption in NIL compensation, college athletic departments operated as mission-driven enterprises, balancing competitive success with educational values and broad participation. Boosters donated to their programs; media revenue was shared and student athletes largely settled for a college scholarship in exchange for their labor within an amateur framework. Pay for play was illegal and universities were hit with severe sanctions for such infractions.

That model has gone the way of the VCR. Now a quarterback at a Power 4 school can command millions of dollars. For instance, Arch Manning is receiving $5.3 million at Texas. Heisman Trophy winner Fernando Mendoza has a NIL evaluation of $2.6 million. NIL collectives can’t keep up.

Enter private equity partnerships that seek to raise revenue with aggressive commercialization strategies for ticketing, concessions, and merchandise sales while optimizing media deals, naming rights, and corporate sponsorship opportunities.

Under this approach athletic departments will operate in a more professional manner by adopting sophisticated marketing techniques and business analytics.

“It’s always about winning the classroom, winning the community and winning the competition,” Utah athletic director Mark Harlan said. “I think this is another step forward to retain the best that we have and recruiting the best.”

Big 12 Conference Is Open for Big Business

Utah competes in the Big 12 Conference, which under Mr. Yormark, has pursued innovative ways to narrow its revenue gap with richer conferences in college sports, the SEC and the Big Ten.

The Big 12 said it is exploring partnerships with investment firms RedBird and Weatherford Capital to provide member schools with access to $500 million in capital. Conference officials stressed it was not a private equity deal, and the firms will not have an ownership stake in the conference, and participation would be optional for schools.

The Big 12 is taking an aggressive approach, looking to capitalize monetarily on their on-the-field success. Despite skepticism following Texas and Oklahoma’s departure to the SEC, the Big 12 has rebounded financially, distributing a record $558 million to its 16 schools in 2024-2024. Sponsorship revenue is up 185 percent.

“We’re a different league,” Mr. Yormark told the Dallas Morning News. “We’re willing to take calculated risks, break boundaries when appropriate and push the envelope a little bit, all in an effort to create value for our membership.”

What Are the Risks Involved

Partnering with a private equity firm can offer immediate capital and operational expertise, but it doesn’t come without risks. Equity firms are focused on increasing revenue and decisions in that regard could conflict with university priorities. Student welfare could be sacrificed for scheduling, branding and marketing opportunities.

Decisions are sometimes made seeking immediate cash flow over sustainable growth while losing seasons, conference realignment, declining attendance, and negative media attention could adversely impact revenue projections. Compliance standards are scrutinized.

Utah athletic officials insist they’ve built in safeguards by having “veto rights” in all matters and holding an option to end the partnership after five years.  “There’s always some fear of doing something new,” Mr. Randall said. “But that’s what this state is about. That’s what this university is about. That’s what an educational system does. It’s willing to try new things.”

Mr. Randall said, “a ton of stop gaps” have been included in case the partnership doesn’t work out and felt it was time to stop “kicking the can of debt down the line.”

Otro was chosen because, “we weren’t interested in capital, we were interested in a partner,” Mr. Randall said. “We both feel an obligation to make this thing successful.”

The deal has the backing of the Utah Board of Higher Education, which called the model, “a forward-looking way to stabilize its athletics budget, generate private investment, and strengthen long-term competitiveness while ensuring that costs are not shifted to students and taxpayers.”

Legislative Response and Questions

Utah’s partnership with Otro caught the attention of legislators on state and federal levels. Representative Michael Baumgartner of Washington vowed Congress would examine the tax-exempt status of universities entering private equity deals. 

“If you want to act like a non-public entity, you better be ready to be treated like on,” Mr. Baumgartner posted on X.

Last October, Mr. Baumgartner introduced the PROTECT Act aimed at blocking private equity deals with athletic departments or conferences. “College sports serve an educational mission-and they’re sustained by billions in annual public subsidies and tax advantages,” he said. “Assets under the control of universities should be managed in service of that public, educational mission, not carved up as a new asset class for private equity, hedge funds or foreign sovereign wealth funds.”

Closer to home, Utah senator Daniel McCay posted, he had “questions” about Utah’s partnership with Otro while Senator Nate Blouin posted, “This does not seem like a good idea.”

Congress has been trying to address NIL and portal issues with several bills in recent years, none of which have gained traction.

Will More Universities and Conferences Chase Private Equity Money

Whether Utah’s deal with Otro opens the floodgates to other deals remains to be seen. There have been more false starts in recent years than touchdowns as schools worry about ramifications from lawmakers and perceptions from their fanbase.

“Given how deliberate the schools and conferences have been to date, my instinct is that we’ll see more deals announced over the next 12-24 months, but it will be more of a trickle than a flood,” Chuck Baker, co-chair of Sidley Austin’s entertainment, sports and media practice, told Front Office Sports.

What’s clear is that universities can no longer rely on tradition, boosters, television deals and packed stadiums to sustain athletic programs at the elite level. Decisions being made now about funding, control and priorities will determine the fate of athletic programs for years to come.