Exit fees are pure folly....

[WhartonHusky]

I've read and listened to all the arguments made on this board about keeping the BE together, or what is the best scenario/outcome for UConn, but the one thing I cannot seem to wrap my head around is the idea of exit fees providing any sense of commitment.

The only schools potentially considering the exit fee are the ones with another option - a better option. I think it's safe to assume that any team truly contemplating an exit is going to the SEC, ACC, Big 12, Big 10 or Pac whatever. Correct me if I am wrong, but all those leagues presumably pay the schools MORE money. So if you are analyzing the pros and cons of leaving the BE, either today or some time in the future, it's in order to secure a larger annual pay day into perpetuity.

If you run the math, it really shouldn't matter whether the exit fee is $5m, $10m or $20m -- if you stand to make an extra $2m/yr - then the payback for any exit fee is really rather low.

 

[metsfan2323]

The 10 million fee is a joke. It should be 50.

 

[UConnJim]

Which is why the 27 month notice was agreed upon.

 

[WhartonHusky]

Which is why the 27 month notice was agreed upon.

Even 27mos shouldn't matter. It's only a hurdle, not a deterrent. You wait it out, then collect the dough.

 

[WhartonHusky]

Of course, a verbal commitment is comical, but that still doesn't explain the rationale behind exit fees. It's sorta just a going away present to the league.

 

[nelsonmuntz]

I've read and listened to all the arguments made on this board about keeping the BE together, or what is the best scenario/outcome for UConn, but the one thing I cannot seem to wrap my head around is the idea of exit fees providing any sense of commitment.

The only schools potentially considering the exit fee are the ones with another option - a better option. I think it's safe to assume that any team truly contemplating an exit is going to the SEC, ACC, Big 12, Big 10 or Pac whatever. Correct me if I am wrong, but all those leagues presumably pay the schools MORE money. So if you are analyzing the pros and cons of leaving the BE, either today or some time in the future, it's in order to secure a larger annual pay day into perpetuity.

If you run the math, it really shouldn't matter whether the exit fee is $5m, $10m or $20m -- if you stand to make an extra $2m/yr - then the payback for any exit fee is really rather low.

Well, if you really went to Wharton you would know that uncertain cash flows out in the future should be discounted back to the present at high rates. A $20 million exit fee would likely have kept Syracuse and Pitt, because they would not have been able to project they future incremental revenues of the ACC over the Big East with any amount of certainty.

Or maybe, because you went to Wharton, you believe that life can be solved with a financial model.

 

[FfldCntyFan]

.

Or maybe, because you went to Wharton, you believe that life can be solved with a financial model.

I'm pretty sure that merely a couple of months ago you believed this.

 

[nelsonmuntz]

I'm pretty sure that merely a couple of months ago you believed this.

Good point. But my financial models can tell the difference between present value and future value.

 

[zls44]

The grant of rights model is a much more ironclad idea.

 

[WhartonHusky]

Well, if you really went to Wharton you would know that uncertain cash flows out in the future should be discounted back to the present at high rates. A $20 million exit fee would likely have kept Syracuse and Pitt, because they would not have been able to project they future incremental revenues of the ACC over the Big East with any amount of certainty.

Or maybe, because you went to Wharton, you believe that life can be solved with a financial model.

o did go to Wharton, thanks for noticing. So your argument is that because future cash flows are not guaranteed, these schools can do any scenario analysis? These are universities, they have access to plenty of people who are adept at doing reaearch and using Excel.

Oh and I dont believe that life can be solved with financial models, but i do believe that data and analysis can help make smart and informed decusions

 

[ZooCougar]

I agree completely. It's not a meaningful enough deterrent.

I've read and listened to all the arguments made on this board about keeping the BE together, or what is the best scenario/outcome for UConn, but the one thing I cannot seem to wrap my head around is the idea of exit fees providing any sense of commitment.

The only schools potentially considering the exit fee are the ones with another option - a better option. I think it's safe to assume that any team truly contemplating an exit is going to the SEC, ACC, Big 12, Big 10 or Pac whatever. Correct me if I am wrong, but all those leagues presumably pay the schools MORE money. So if you are analyzing the pros and cons of leaving the BE, either today or some time in the future, it's in order to secure a larger annual pay day into perpetuity.

If you run the math, it really shouldn't matter whether the exit fee is $5m, $10m or $20m -- if you stand to make an extra $2m/yr - then the payback for any exit fee is really rather low.