Wetzel: Beware, college sports, private equity has arrived

The University of Utah approved a groundbreaking private equity deal Tuesday that promised hundreds of millions of dollars for the school’s athletic department, which like nearly every athletic department in the country is running an annual deficit.

This was a historic vote. The Utes need money. Otro Capital of New York, a firm that seeks investments in sports, sees an opportunity. The company is offering more than $400 million to the school, a source told ESPN, plus Otro’s operational expertise, to generate new revenue streams for the department.

“I think we can go from surviving to thriving,” Utah trustee Bassam Salem said before the vote, echoing the optimism of the moment. He then expressed the shared concern: “Are there risks? Yes. Am I concerned? Yes.”

Everyone should be; not just at Utah but across college athletics, where deals like these are expected to become more common.

The core problem though, which the smart folks in private equity have certainly realized, is this:

College athletics doesn’t have a revenue problem.

It has a spending problem.

Even as revenue goes up and up from richer media deals, expanded playoffs and modernized operations, costs continue to soar because of revenue sharing with athletes, coaching salaries, increased travel and debt on ever-more opulent stadiums and locker rooms.

At some point, spending has to be addressed. Private equity firms, renowned for acquiring investments with an eye toward cutting costs, consolidating and reselling for a profit, are likely to do it with a different mindset than college administrators.

An Otro spokesman declined comment on this deal, which isn’t expected to close until 2026.

Typically, though, it would seem that private equity companies aren’t really interested in college athletics — which lose money at nearly every school — but rather…