The University of Utah recently finalized a deal with Otro Capital, a private equity firm with a sports, media, and entertainment background. In a nutshell, the deal aims to give the university’s athletic department more cash to use in the new era of college sports, where student athletes are being paid for the services they provide to a school.
The U isn’t alone in looking at new ways to raise revenue in this money focused era of college sports. Many universities are scrambling to figure out how they, too, can compete at the highest levels, pay student-athletes, and still keep prices affordable for fans who attend games.
The fact is, not every school has a $21.2 billion endowment to support its efforts, as the University of Michigan does. Not every school earns $79 million per year in media rights, as Notre Dame does. And not every school has super-fan donors such as Texas Tech University’s Cody Campbell, who has donated tens of millions to the program, or Mark Cuban, who has given millions to Indiana University. So many schools are left to be creative and come up with new ideas to give themselves a fighting chance.
It shouldn’t be a surprise that Utah’s flagship university is embracing the ideals of the state and looking at an effort to essentially privatize the athletic department and run it more like a business. This is something that should be applauded by Utahns.
Taxpayers in the state help support education efforts. For higher education, that support is around $1.95 billion. Our economy thrives when we have a well-educated and properly trained workforce, but taxpayers do not need to be funding the state’s higher education institutions’ athletic departments. Athletic departments should be able to operate on the dollars they generate on their own. That is what the U is trying to do in this new agreement with Otro.
Privatization of government services is something the Utah Taxpayers Association will always advocate for. Yes, there are some areas of government that do not make sense to turn over to the private sector. But too often, we see government get into the business of doing business instead of staying in its lane and helping create an environment where citizens can capitalize and thrive. This is why it is refreshing to see what the Utah athletic department is attempting to do.
Privatization has multiple benefits. First, it will incentivize the athletic department to increase innovation and draw more dollars to the program. We should expect to see the U embrace new technology and new ideas to accomplish this. We should expect the organization to reduce waste and cut the fat that is often found in government departments. Hopefully, the new setup will also have more flexibility and will not be constrained by unnecessary government or university regulations.
Is it a guarantee that this will succeed? Of course not. But the incentive is there for both the university and Otro to pursue every avenue possible to make it work. For the university, a successful athletic department brings exposure and notoriety that can assist with fundraising for the school itself and student recruitment. For Otro, the incentive is to make Utah succeed so it can go to other athletic departments across the country and show them the success it had with the Utes.
I recognize I may be looking at this through my red colored glasses. I am a graduate of the University of Utah and a longtime football season-ticket holder. But as a taxpayer advocate who has encouraged governments throughout the state to let the private sector thrive, I can’t help but applaud University President Taylor Randall for his efforts to essentially privatize the athletic department.
Under this new structure, the department will thrive or struggle based on its success in the marketplace. It is a grand experiment, and there will likely be ups and downs as the deal plays out. But from my perspective, it is worth taking the chance. It should also inspire more government officials to look for additional ways we can use the private sector to achieve success in the state while reducing dependence on Utah taxpayers to provide services the private sector can and should provide.
Billy Hesterman is president of the Utah Taxpayers Association.
