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S2 E18. Beyond NIL: The $2.8 Billion House v. NCAA & Universities Settlement Opens the Flood Gates of Pay to Play, Part II.

• Jay McMahon, Ron Dalgliesh, & Steve Gresalfi/Drew Fox • Season 2 • Episode 17

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Join Ron 'Big Dawg' Dalgliesh and Jay 'Jaybird' McMahon for another episode of Get the Lax Scoop, a lacrosse-centric podcast featuring insights and interviews with top figures in the game. This episode delves into the implications of the recent landmark case House vs. NCAA, which stipulated substantial financial settlements and scholarships for college athletes. Special guest Drew Fox, a University of Virginia alumnus and founder of the Virginia Lacrosse Alumni Association, offers his perspective on how this new economic model will reshape college sports, with a focus on private equity investments in athletics. The conversation also explores the potential benefits for Ivy League institutions and the evolving landscape of NIL (Name, Image, and Likeness) agreements. With their signature mix of seriousness and humor, the hosts and their guest provide a deep dive into the transformative changes in college athletics. Don't miss part two of this compelling interview series.

00:00 Introduction to Lax Scoop Podcast

00:23 Meet the Hosts: Big Dog and Jaybird

00:42 Special Guest: Steve Gfi

00:59 Transition to JML Mindset

01:11 Landmark Case: House vs NCAA

01:56 Drew Fox on College Athletics

02:47 Private Equity in College Sports

09:05 The Ivy League's Competitive Edge

14:20 The Future of College Athletics

19:05 Drew Fox's Passion for College Sports

22:35 Conclusion and Sign-Off


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Jay:

It's time for get the La Scoop, a podcast bringing you all the people and stuff you should know. In the game of lacrosse, we take LAX seriously, but ourselves, not so much. Join hosts, big Dog and Jaybird, and the biggest names in the game. Brought to you by Jay McMahon lacrosse. That's J M L Skills, mindset, and LAX IQ training. Ron Doish, the big dog, was a collegiate football and lacrosse player at Brown. He was also an assistant lacrosse coach and the executive director of the sports found. and Jay McMahon, the Jaybird, a three time All-American Midfielder Brown. He was a captain of the US Junior National team and is the founder of J M L. And joining us in the studio, Steve gfi, who's collegiate lacrosse career statistics equals one goal against Dartmouth. Brought to you by Jay McMahon lacrosse. That's J M L Skills, mindset, and LAX IQ training. Helping the next generation cross players. Get to the next level.

Hello everyone. And welcome back to the show. This is the second installment of our two part interview series discussing the landmark case house versus NCAA, which settled just a few weeks ago on May 23rd. In this case, the NCAA and members of the power, five conferences. Agreed to pay out$2.8 billion to approximately 15,000 college athletes. Dating back to 2016, these athletes were involved in revenue, generating sports and going forward. Each school will pay college athletes 20 to$22 million each and every season at each school's discretion. Part of his agreement is that the number of scholarships a school is allowed to give out is no longer limited opening the door for far more opportunities for college lacrosse players. Our guest who is helping us hash out. This complex situation is drew Fox. University of Virginia alumnus with a successful career in the world of finance. He is a founder of the Virginia lacrosse alumni association and is actively involved with Kat futures, the collective that funds Virginia's and I L initiative. If you've not heard the first part of his interview. We highly recommend you go back and do so as it is a fascinating conversation. You will find this interview in progress.

Speaker 3:

I mean, Drew, I think the reason this is like this, every question leads to another question, right? So, I mean, I think this is really such a fascinating conversation. Jay, I want to come back to Drew's sense of the Ivy League because I'm really intrigued by his sense of the, how he, you know, how you think the Ivy League is going to be competitive. But, but. Drew, let's talk about another dimension of this that you know, college athletics has long been big business, right? You've never really thought about it in the sense of a, of a PE, of a private equity investment, or an investor that would somehow get return on that investment. So I, I read in some of the articles that there's some sense that this new economic model could Make that a possibility. Can you, can you talk through sort of some of the thinking there or, or how that's being talked about or thought about?

Speaker 2:

Yeah, look in pro sports pro sports franchises are selling minority stakes.

Speaker 5:

Yeah.

Speaker 2:

The NBA being, being the most prominent one that you know, is out raising their profile for being able to provide investors in certain funds, slices of NBA franchises. Because of the recurring revenue of TV contracts and because of stadium gates and the branding of these athletic programs, This is a very attractive area for investors that want diversified recurring revenue stream. These are cash flowing businesses. Now, the interesting thing about college athletics is certain areas are cash flowing investments. Other areas are just known loss leaders that are part of the wider ecosystem of ethics. But because the the revenue sports are the the profit centers Allowing the sale and scale up of those revenue pieces into a diversified pool is, is a very attractive proposition. Private equity has long sought to get away from just generating profits through buying and selling, companies after enhancing the underlying fundamentals and structures of these companies. And so what, what has become a modern twist on buyout private equity has become where Successful fund managers themselves sell a minority interest in their own business and what we call the waterfall of cash flows is very attractive. And so if you can get 20 percent of that waterfall recurring over time. It's a very powerful cash machine. The same way with college athletics. If you can get a 20% Slice of the recurring revenue on the profit side of the balance sheet in college athletics. That's a very interesting proposition. And so there are dedicated general partners in private equity who have sports practices and franchises, and there are others looking, looking to get into this area, knowing that. that universities will need to likely diffuse the amount of revenue they're paying out in this new sharing proposition brought forth by house and have further partnerships to help them meet the financial obligations of these, of these settlements.

Speaker 3:

Now, Drew, these PE companies always like to take a role in management. So, you know, and so, you know, all of a sudden they on some board within the athletic, you know what I mean? Like, what's, what's that part of the relationship? Because obviously,

Speaker:

they'll be coming out to practice

Speaker 3:

in the weight room. They believe they're going to bring value right by, as you said, enhancing those underlying fundamentals of the business because they want to maximize their value over the long haul. Absolutely. Absolutely. So, how the heck does that, how do, you know, are there, I mean, I understand it for an NBA franchise. It's just, it's just hard to imagine, and maybe this is my own sort of old school mentality of that being a part of an athletic department.

Speaker 2:

When you say that, Ronnie, what I hear is Larkin Kemp would not have been allowed to take as many shots as he took.

Speaker 3:

That, well, if he did the other things he did, we were okay with it, I gotta tell you.

Speaker 2:

Hey, I'm just kidding. I'm sure I'll get a tweet. from Larkin. Terrific ballplayer, and we loved his style of play and we installed it ourselves at UVA with our own big tall guys in the middle there. You know, it is an interesting proposition. In some of these franchise models where general partners are selling minority pieces of themselves. It's kind of their own ecosystem. So getting involved or having ways to provide recommendations, that's, that's kind of their own business. When you start talking about entertainment or sports or other areas, there's a difference between providing capital to your partner and providing your advice and day to day involvement. I think in the case of like the NBA franchising that's occurring the fund managers aren't showing up at practice and, you know, making recommendations on the press that the coach is,, is looking to put on in the next game or the, you know, set offense. They're really just trying to make the capital structure more efficient. In college athletics because of the heavy revenue demand and then the sharing that's going to, you know prospectively occur here, they're going to be basically providing a lot of insight and advice on financial maneuvering to make the, the system more efficient. Many times that's great. Sometimes with the incursion of additional debt, And other structuring, it can create some challenges for the underlying business, that being the athletic administration and then the university. So certainly caution in in those programs needs to be undertaken.

Speaker 3:

Jay, do you want to bring us back to the Ivy League?

Speaker:

Sure. So Drew, you did, you're kind of considering when you look at this big picture that the Ivy League really has an upside when you look at, at this whole landscape. So would you like to share that with us?

Speaker 2:

Yeah. You know I think Look, I've been a fan. My parents are Ivy League, grew up around it in Philly with Penn right there. I used to go to Brown practices because I went to school up in New England. I used to watch that Brown 85 team. What a team

Speaker 5:

six

Speaker 2:

and O in the Ivies had an unbelievable attack unit, had a tremendous goalie, great face off great D you know, so fun to watch. I think this is really all hugely beneficial to the Ivy league. Here's why they don't have to do any of these things and they have these giant endowments. And all these specialized students who all do these incredible things at a very high level, some are in the lab, some are in the orchestra, some are on the, on the stage, some are running downfield with a long pole. They all benefit from the healthy financial status of the institution. And I think if the world becomes a world where some programs in power five lacrosse programs are taken care of by their athletic administration and others are kind of left to privatize and self fund themselves. All of a sudden you look at the Ivy League and with the endowment. And the model they've got, you figure they're going to continue to take care of all these different programs in the Ivies, like Stanford have some of the largest athletic footprints of of any schools in the country. You know, I think it becomes a very appetizing proposition. Obviously, you don't have the scholarship piece there, but with. The finding on house, who's to say that someone doesn't raise their hand and say, Hey, we're the Ivy League. We want to, you know, we want to have the ability to provide some sort of athletic scholarship of some type. So, to me, really, the athletic the athletic opportunity presented by the Ivy League in a, in a house settlement post house settlement environment. Is very attractive.

Speaker:

So with the settlement, then the Ivy League is free to have a private donor step in and provide a scholarship. Is that what you're saying?

Speaker 2:

Well, it reads that way. You know, and certainly some of the programs have already had tremendous input from from You know, donors and and have have, you know, funded various things within programs. So who's not to say someone could show up and say, Look, this isn't any money off the balance sheet of the endowment of the school. This isn't any money off the balance sheet of the athletic program. We're just gonna privately fund all the coaches positions, and we'd like to privately fund 44 scholarship. Physicians on the team. So

Speaker:

that would change that.

Speaker 2:

That's something to keep an eye on. So fast forward from late June 2021, there have been all types of behaviors around NIL because literally the road has no guardrails, has no guardrails,

Jay:

How about if we transition to. J m l and let's do that.

Speaking of no guardrails that so many of our listeners describe the college lacrosse recruiting trail. So we've responded by putting excerpts of our 10 best interviews with legendary coaches, such as bill Tierney, Lars, Tiffany and Andy towers. Into a book that you can access for free on our JML app. Simply download the J McMahon lacrosse app at the apple app store or at Google play for Android and check it out. And for those. Who would like a book in their hands? Or on their Kindle, it is available on Amazon, under the title inside the recruiting game insights from college lacrosse coaches. So with that, you will see the description of these items also in the show notes. And due to popular demand, we have put together a Patrion page for the show. This will allow those interested in supporting our efforts to do just that and to get exclusive access to unedited interviews. Big discounts on the JML online courses and merchandise from our new online store. Big additions to the JML course catalog. Now we have a defenseman's course taught by none other than UVA head coach, Lars, Tiffany, and a goalie course taught by former two-time All-American and UVA assistant coach kept Turner. And as the summer is just starting. We are offering for a limited time only. 70% off. That's right. 70% off of our four week online courses that help young players take their skills, mindset, and max IQ from good to great. That means you can get access to these highly rated trainings for only$90. That's right. For$90 offensive players defensemen and goalies can take their game to the next level. The summer is the best time of year to improve your game. And that's why we are making this special offer. So jump on it now because it won't last for long. Simply download the free version of the Jane McMahon lacrosse app. Or just follow the link that's listed in the show notes. And you will see the coupon code noted for each different course. We're excited to get back to our interview and you will find that interview in progress.

Speaker:

And then, you know, on the other hand of it, certain schools just don't have the endowment, you know, certain perhaps other leagues, what have you, don't want to point any fingers, but they're, you know, as you said, these Ivy League schools do have these huge endowments and you look at some of these other schools and they just don't. So over time, you know, some of these articles were kind of surmising war talking about it. Talk about basketball and talking about football was that smaller schools probably will get squeezed as time goes by What are your thoughts on That? You look at maybe the mid atlantic conference which is a good lacrosse conference you look at the patriot league, you look at some of these other places. What are your thoughts on that?

Speaker 2:

It's hard to say anyone that makes those types of predictions needs to know donor behavior because If someone says this or this is going away. Don't doubt the love and effort and action of, you know, incentivized donors who will step right up and say, Oh, you want to cancel water polo at my school? That's my program. Here's a check. That program is now self funded. So I think, you know, widely saying the smaller schools might be at a disadvantage out of the gate that that seems to be a fair initial assessment. But if the pro, the athletic departments at those smaller schools, then say, look, folks, we got to self fund these programs, or we're gonna have to do away with X, X and X. Those folks could raise up and privately fund, and they continue on.

Speaker:

Interesting.

Speaker 3:

And Drew, how, you know, how do you well, I guess I'll just share my own sort of high level perspective and ask how you've kind of continued to come to terms with the reality of the landscape now, which is, you know, it seemed like we got to this place because the NCAA was just so rigid about making all this money for them and their schools and not In some way sharing that with athletes, you know, and, and now the pendulum has swung to where, again, we don't even know what the guardrails are and how all this money is going to get distributed and there's multiple pots. And so, and you know, you got recruits not having a conversation like you were having with Dom about where's the best place for me. You know, this is, and like what you're doing, the Virginia lacrosse alumni network, trying to position young people for success in life because as we know, The vast, vast majority of even power five conference student athletes are not going to professional league. And so it just feels like things have gotten flipped upside down now. And I, you know, it's like, you can't put the genie back in the bottle, but. So how have you come to terms with all those different human elements of it for this, if we put the student athlete back at the center.

Speaker 2:

Yeah, I think, look, we struggle with this a little bit on the Virginia side, where some of our alums, men's and women's. You know, just weighed in and said, look you know, we're being asked to, you know, contribute on the NIL side. I didn't get any NIL. You know, I would have liked to have got NIL. I was starving every night after dinner. I had no money for food. I had no extra money. I was an amateur athlete. And now you're asking, you know, To provide essentially an economic allowance for those that qualify through and I our through our charitable side with our foundation. I think the, the thing about college athletics now that the is basically let go, they let go because. To not let go meant they could go all the way through these trials and potentially lose the entire franchise. The N. C. A. A. Could have been sued into oblivion ultimately. And so they look to settle and to live another day. And they put the onus on the state and federal. And so far, state has been active. Federal has been rather inactive. There's been all kinds of behaviors. And I think, you know, we've heard about one school, a prominent football school that pays 50, 000. If you're an enrolled lineman at that school, you don't have to do anything. You just have to be enrolled and on the team. 50, 000. We've heard other stories about recruits being incentivized while they're still in high school, and they phone 11 famous phone call, the recruit got on the phone and said, I want 300, 000 and I want to escalate pickup trucks. And the head coach is there. The head of the collective is there and mom is there. And the coach is like, do they even make those anymore? And they scrambled and Googled and realized, Nope, Cadillac doesn't make those anymore. So we can get you two Silverados. And how about 200, 000? And famously, the calls winding up and mom says, Okay, coach, I think we're coming to your town that I'll not mention. But we just need that in writing. And coach hung up. This is all in the fringe out there happening, right? Transfers. You know, getting millions of dollars to transfer into schools. And then famous point guard got multimillion to transfer into an ACC school. And then the starting point guard says, well, if you're paying him that I need to get paid this. So I just think Our idea, the three of us, our idea of college athletics, that is gone. It is never coming back. You know, the genie is out of the bottle. The toothpaste is out of the bottle. Everything's out of the bottle. So the future, there is no

Speaker 3:

bottle.

Speaker 2:

There is no bottle.

Speaker 3:

The bottle

Speaker 2:

got sold. You know, I think, I think where it is, is just the, the modern landscape is just so different. And to me, the thing about the modern landscape is not just how different it is. But how rapidly every day, every week, it's still evolving. So where we are today is very likely not where we're going to be when house starts paying out in 2025.

Speaker:

Crazy.

Speaker 3:

So, so true. What keeps you, you know, I, I, we were all down at the final four and it was a disappointing result for Virginia, but you know, I could see how passionate, I can see how passionate you still are, you know, about college athletics. And UVA lacrosse and, and as this world keeps evolving and, you know, there is this sense of pay to play. How do you remain sort of energized about it? There's a, there's a cynicism about it that, that I don't know, I haven't come to the terms with yet, you know, and and again, maybe I'm just becoming a cranky old bastard, but, but I don't want a kid to go hungry. I don't want a kid to not have books. I don't want a kid to not have their computer. And by the way, they sh. They own their own name, image, and likeness, but it seems like the world's just gone upside down on this stuff. So how do you remain? I can see you're still in it, right? You still love it. You still want to support your program. What's the why for you?

Y. Why on earth? Do we get involved in this topsy turvy world of college sports, particularly in a game that doesn't garner$10 million for the quarterback of any offense in college lacrosse. Tune in next week to find out what drew Fox is, why is, and as you are free to ponder your own, why in the meantime.

Ron:

until we meet again, here to, hoping you find the twine. We're signing off here at the Get the LAX coop. Thanks again so much. We will see you the next time.