Rudy, Rudy, Rudy, Rudy
Ross Dellenger
A few weeks into this year's college football season and it's pretty wild how different it feels with the latest conference re-alignments. The Big Ten, in particular, is just bonkers with the likes of Oregon and USC disrupting midwest football and vice-versa on the west coast. My gut reaction is not to love it, but I recognize this is a bit "get off my lawn" and the game morphing into these super leagues was always inevitable, given that the sport is now the second most-important from a television perspective – which is to say, a money-perspective – after just the big daddy: NFL. With that in mind, the next logical step:
As SEC and Big Ten leaders prepare to meet Wednesday and Thursday in Nashville for a historic summit of the industry’s two powers, there is an unreported undercurrent driving the discussion: Project Rudy.
Spearheaded by former Disney executives-turned-investment professionals, Project Rudy is a super league-esque concept — separate and more simplified than the one made public last week — that incorporates football programs of the four power conferences in a 70-team structure. The model preserves the four power conferences, expands the postseason, overhauls scheduling, tiers revenue distribution and, most importantly, infuses as much as $9 billion of private capital cash into the system.
The immediate word coming out of that meeting was that this wasn't going to happen. Or if it was, why wouldn't the conferences just do it themselves – why do they need private equity? Which all sounds a lot like, this isn't going to happen... yet. And private equity will be a part of it... at the right price.
On the latter bit, Dellenger doesn't get to it until later down in the piece, but the VC/PE firm pushing this is Smash Capital. Who are they?
The architects of Project Rudy — Evan Richter, that bespectacled man; Kevin Mayer and Tom Staggs — spent years working for the Walt Disney Company, much of it together, according to their biographies posted on the Smash Capital website.
Richter specialized in Disney’s investment and innovation side; Mayer was chairman of Disney’s direct-to-consumer business; and Staggs spent 27 years there, most recently as its chief operating officer. Not unimportant, Staggs and Mayer founded Candle Media, a premium content company that launched in 2021 with backing of private equity giant Blackstone.
This also skirts over the fact that both Staggs and later Mayer were not just key Bob Iger lieutenants, but at different points, the two men viewed most likely to succeed him as the next CEO of Disney. In fact, Mayer likely left Disney when Iger anointed Bob Chapek, in what turned out to be perhaps Iger's worst decision ever at Disney (and, of course, led to him coming back as CEO to course correct). So, in a way, this is a project being spearheaded by two would-have-been CEOs of Disney and thus, ESPN, in a different but very feasible life.
To be clear and fair, the ball does seem to be most in Richter's court here – especially since Staggs and Mayer are busy with a few other projects as well, including, um, advising Disney on matters like which partners should be brought in to invest in ESPN! – but the point is that this is not some group of nameless and faceless private equity investors.
Project Rudy is built on two somewhat simple concepts to increase revenue from television networks and corporate sponsors.
(1) Arrange more games between power conference programs by eliminating all games against Group of Five and FCS opponents; expanding the playoffs; and pitting blue-blood powers more often against one another.
(2) Consolidate the media rights of the 70 schools under one agreement, instead of the current structure of five different packages (one for each power league and Notre Dame).
The first one is something traditionalists really won't like. But again, feels inevitable in the new ratings-driven world of college football. If anything, those non-powerhouse matchups are just a sort of "pre-season" which helps team get ramped up for the "real" games (yes, I know there are upsets from time to time – like this year!). The second point is something the media networks won't like because the league will have an even stronger position from which to negotiate. But, well, too bad.
The plan’s other concepts — tiered distribution with relegation, for instance — hinge on the cash boon from those two ideas. According to the slide presentation, the proposed changes will result in an increase of media and sponsorship revenue of about $15 billion over a 12-year period.
The growth is derived from holding 1.5 times more “marquee” games (playoffs, top bowls) and three times more “quality” games (rivalries and blue-blood matchups); while eliminating games against non-power opponents (currently 18% of FBS scheduling).
I've long been a fan of relegation – even before I was a fan of the English Premier League! It just adds such and interesting, and meaningful, dynamic to a season. I wish it could happen in American sports, but there's no way that team owners in the US of the "major" leagues would agree to it after-the-fact. There's too much money involved and too much riding on the valuations of the teams. College football though, with the potential of so much more money flowing in...
An upfront infusion of $5.3 billion in private capital — borrowed from future media revenues — would provide schools immediate cash during a three-year transition period, helping them buy out non-power opponents and supplementing their annual television distribution. Television distribution, normally split evenly across conference members, provides schools their main source of revenue to fund athletic department expenses. It is the driving force for the most recent wave of conference realignment, as schools eschew historic rivalries and geographic footprints to shift to leagues with TV deals that pay out more money.
Under the Smash plan, once current conference media deals end in seven to 10 years, a consolidated, centrally negotiated media deal is struck with Smash and the networks, themselves owning equity in the new “league.” The centralized, for-profit “league,” as it is described in the slide deck, keeps 5-12.5% of new revenues after distributing guaranteed payments to schools (no school will see a decrease in its distribution from what it receives or is projected to receive under its current media contracts).
This all sounds decidedly and surprisingly straightforward. Again, it's essentially making the case for college football to become more of a true "league" and for the conferences to essentially just be like those in the NFL – important mainly for rivalries in-season and seeding in a post-season.
Also note that it couldn't happen for at least the mentioned 7-10 years as they'll need to wait for current TV deals to expire. But best to get this framework in place now to work out the details – including, yes, the various cuts of the pie.
According to the proposal, school-by-school distributions would skyrocket, cash that presumably would be used to help sustain Olympic sports — something that administrators contend is threatened by the advent of revenue sharing. However, the revenues will be allotted unequally. Project Rudy separates the 70 programs into three tiers.
- Tier 1: the top 16 schools earn per-school revenue projections from $130 million in Year 4, escalating to $250 million in Year 12 (double the SEC and Big Ten’s current distribution rate).
- Tier 2: the next 22 schools earn revenue of $60-$110 million (similar to the SEC and Big Ten current rates).
- Tier 3: the last 32 schools earn projections of $30-$60 million (similar to the Big 12 and ACC rates).
The model offers a variety of ways to determine how to tier schools: the previous season’s results, perhaps, or an aggregate of results over a stretch of seasons. The model also features a relegation and promotion system to pave a way for schools to move up and down the tiers. However, one proposed model suggests having eight “permanent” members of Tier 1, a move presumably to placate the biggest brands in the sport.
It all reads like an "everyone wins" situation. But the biggest brands – which, full disclosure, would included my beloved alma mater and current defending national champions, Michigan – would win a bit more. It also gives some tiering/relegation powers to the commissioners of the leagues, which gives them continued power in this new world order.
The real question here is just if this proposal is better than a couple other ones floating about – including what seems like the obvious tie-up of the Big Ten and SEC, by far the two biggest/most important leagues. This one could spread the wealth more, as it were. Including, yes, to the players.
And it also has other, big hitters lining up behind it:
In a recent acquisition, the architects of Project Rudy successfully recruited to join their team one of the most respected people within the college space: former Notre Dame athletic director Jack Swarbrick. It is a stunning move for someone who just six months ago sat on the College Football Playoff governing committee as one of the most powerful decision-makers in the industry.
Speaking of, yes, "Project Rudy" is named after Rudy Ruettiger, the famed Notre Dame walk-on, who got his own movie starring Samwise Gamgee.