Monthly Archives: June 2011

Michigan’s 2011-2012 Budget: Facilities

I’ve shown you snippets of budgets from Georgia, Louisville and Ohio State. Today I’ve got Michigan’s 2011-2012 budget, and I want to focus on what athletic departments spend on facilities alone.

As you’ll remember if you read this site regularly (and if you don’t, why aren’t you?), Michigan is on of the 22 self-sustaining athletic departments. In fact, they’re projecting an operating surplus (that’s operating revenue minus operating expenses, which means it does not include capital expenditures) of $11.4 million for the upcoming fiscal year.

However, because of renovations to Crisler Arena (basketball) and Yost Arena (hockey), they will have a net loss of $18.5 million for the year. That’s, of course, not a loss that reflects the athletic department operating in the black. It’s just a depletion in their overall fund balance.

Michigan has taken on quite a few capital projects in the past decade. Here’s a look at the budget for each project and the gifts from donors for each project:

As you can see, gifts help make these capital projects possible, but they only make a small dent in the total amount needed. The athletic department has incurred debt for a number of the projects and has budgeted $13.2 million in expenses for this debt service for the coming year. This is up $2.2 million from last year due to debt incurred for the Michigan Stadium and Crisler Arena projects.

In addition to this debt service, Michigan has another $14.4 million budgeted for “Facilities Expenses” and a “Deferred Maintenance Fund Transfer”. I should point out that $4.5 million of the $14.4 million  mentioned is for the “Deferred Maintenance Fund Transfer”. This is a fund set up during the 2003 fiscal year that is being built up to fund future “major repair and rehabilitation projects” for athletic facilities. Because Michigan turns an operating profit each year, they’re able to put aside for future capital projects in ways I’m sure many other universities cannot.

The $14.4 million I just detailed on top of the $29.9 million set aside for renovations to Crisler and Yost and $13.2 million in debt service on facilities adds up to $57.5 million Michigan is spending next year on facilities alone.

Over time, however, the money may be well-spent. First, there’s a lot of keeping up with the Joneses that happens amongst athletic departments. You don’t want to lose a recruit because another school had nicer locker rooms or a better lounge for student-athletes. Better athletes hopefully translates into better success on the field. The national attention that comes with success can mean more applications for the university. It can also mean greater brand recognition, which translates into additional revenue from licensing and advertising.

For a school like Michigan who sells out football games, adding additional seating areas generally pays for itself over time. In the first season of having new club level and suite seating areas in Michigan Stadium last year, Michigan saw a $5 million increase in revenue attributed directly to those seating areas.

What do you think? Are expenditures on facilities getting out of hand? What can be done about it? If you simply stop renovating or upgrading, will the university fall in stature both on and off the field? Are naming rights the wave of the future in terms of funding renovations and upgrades?

So You Want to Work in Sports?

Kristi with Bob Neal on the set of SportsNite

By far, the number one thing I’m asked by email and on Twitter is how I got to where I am. So, I thought I’d tell my story, and also show you that my career may not be exactly what you think.

I grew up wanting to be the first female GM in Major League Baseball, but my second choice was being a corporate attorney. I learned early on that there were two ways to get into baseball: be a former player or start as an unpaid intern. I applied for an internship with the Braves every summer in college. I was an Atlanta native, a baseball enthusiast and attended a well-respected private liberal arts college. They never even interviewed me.

When I got the chance to work for the WTA Tour in law school, I was ecstatic. Finally, I could get me foot in the door. It wasn’t baseball, but it was sports. Once it was on my resume, I could apply again to baseball teams. And this time I’d apply to more than just the Braves. I’d learned you have to be willing to go anywhere you could get a job.

Then I learned you also had to be willing to start at the bottom – financially, that is. Turns out that when there is an abundance of interest in a position they don’t have to pay you much. I did get an offer from a baseball team other than the Braves. It paid exactly 1/4th of the amount a medium-sized firm in Atlanta had offered me. I had student loans and dreams of owning a home, so I took the law firm job.

Ever heard that things happen for a reason? It was at that law firm that I met someone who set me on a whole new course.

During my last year of law school, I write a paper for my Taxation class on internal taxation in baseball (i.e., revenue sharing and the luxury tax). I could always make any class relate to baseball. I finished law school with baseball-themed papers from Taxation, Sports Law and Historic Preservation. Anyway, my taxation professor was kind enough to help me pursue publication for my paper, and it appeared in the Spring of 2007 in the University of Denver Sports and Entertainment Law Journal.

Flash forward to the fall of 2007 when I was a first-year associate. A chance meeting with a client who was also a baseball fan led to my showing him my article. As it turned out, he knew the editor of a sports publication and forwarded it to him. That editor knew an editor at a publishing company and forwarded it to him. To make a long story short, I signed a contract to write a book based on that article in December 2009 with that same publishing company. That book, BALANCING BASEBALL: HOW COLLECTIVE BARGAINING HAS CHANGED THE MAJOR LEAGUES, is due out next year after the execution of a new collective bargaining agreement in Major League Baseball.

In April of 2010, I was watching a video clip of Forbes’ SportsMoney editor, Michael Ozanian. He was discussing an aspect of Major League Baseball’s collective bargaining agreement and I thought he said something misleading. I decided to email him and express my thoughts on the issue. I added in that I was working on the book and that I’d be happy to collaborate with him if he ever covered MLB’s collective bargaining agreement again. I pointed him to my journal article and other pieces I’d written online.

Much to my surprise, I received an email a few hours later asking if I’d like to write for SportsMoney on Forbes. I tried to wait more than 30 seconds to respond so they wouldn’t know just how excited I really was to write for Forbes. Who turns down Forbes?

By this time, I had moved to another law firm. This law firm hired an outside publicist to handle their work, and a colleague suggested I meet with her to see if she could help market my book when it was published. We had a lovely lunch and talked about my long-term goals. I told her one of my goals was to appear on a show called SportsNite that Comcast Sports Southeast tapes here in Atlanta. I had been a long-time viewer of the show and thought I could appear if they ever needed an expert on collective bargaining.

The publicist suggested I email the show. “Just email the address on their webpage?” I asked, doubting the effectiveness of this approach. 

“Yep,” she said. “You’d be surprised where that can get you.

Truth is, I shouldn’t have been surprised. After all, I’d gotten the offer to work for a baseball team after emailing the General Counsel and asking if there were any jobs available. I got my book deal because I emailed a client my journal article, hoping he might be interested. I got my position at Forbes because I emailed the founder and offered my expertise. Why wouldn’t Comcast be the same?

One interview and a bundle of nerves later, I was live on the set of SportsNite. That was almost exactly one year ago. I went on to get a segment named after me (“Miss SportsBiz”), a blog on the CSS website and a weekly appearance.

By the end of the summer, I was being asked to appear on podcasts to talk about baseball. I’m not sure any of them had much of an audience, but I did them for the experience, and because I like to hear myself talk (as I’m sure you’ve figured out from the length of my posts). Comcast had required me to branch out from baseball for my segment, and I soon began writing more and more for Forbes on other sports. By the fall of 2010, I was becoming more fluent on each of the four major professional sports leagues.

My first appearance on a real, live radio show was in October 2010 with the Milwaukee Sports Geeks. I’d met Chris Carter on Twitter through my various blogging efforts and he asked me to be on his show one Sunday morning. I was shaking through the whole thing.

By December of 2010, I was making appearances on The Pulse Network. By the first of the year, they’d created a weekly segment for me (which is live on Thursdays at 10:30 a.m. ET).

The more I wrote about the impending NFL lockout possibility during the 2010 season, the more radio interviews I was asked to do. I used my legal knowledge to bone up on the collective bargaining agreement and the law surrounding these types of negotiations and agreements. Before I knew it, I was on the radio in a dozen different cities.

Around the beginning of this year, I was shocked to find that the topic I wrote about most often wasn’t MLB or the NFL’s collective bargaining agreement – it was college football. I was doing a Conference Finance Series on Forbes and getting tens of thousands of hits. I’d finally found my perfect niche.

I started on April 18th, 2011. After consulting with the owners of several other amazing sports blogs, I decided to start my own. The decision was primarily based on the ability to post immediately (without oversight) and organize the categories how I pleased. I threw together a WordPress blog with a terrible header and sat back to see what happened.

I’m delighted to say that in two months this site has seen over 100,000 unique hits. It’s been linked to online by ESPN, CBS, NBC, the Seattle Times, the Atlanta Journal and dozens upon dozens of other networks, newspapers and blogs. I’ve done a remote interview for a television station in Tampa. I’m interviewed on the radio on an almost daily basis. I’ve done nationally-syndicated and satellite radio with guys I really admire like Tim Brando. I even picked up my own radio segment on Wednesdays at 5:30pm ET with Shawn and Wally on Arkansas Radio Network/Sports Animal 920.

And now I’m writing another book, this one on the business of college football. The amazing feedback I’ve received from this website has convinced me that there is a demand for analysis and news on the business surrounding college sports, particularly football. I’m passionate about this subject, and I love sharing with you all what I find.

Here’s what will shock you, however. I make virtually no money from any of this. So, when you ask me how I got to where I am, I always tell you this: “There are three keys to success in sports. You have to be willing to start at the bottom. You have to be willing to work harder than everyone else. And you have to be willing to work for free for awhile.”

Last year I made a grand total of $5,000 for all my writing and television appearances. That’s it. I didn’t make a living. I made a little spending money off a hobby.

I always say I’m lucky to be able to make a living as an attorney while I pursue my career as a sports business analyst. Truly, I’m lucky that I’m love my law job as well. My boyfriend always reminds me, however, that it’s not luck. It’s hard work.

I put at least three hours into this website every single day. Some days it’s far more. I’m emailing and calling athletic departments, reading through eighty-page budgets and writing a post for each weekday. I’m using my lunch break or getting up early to go on radio shows to do interviews. Before an appearance on SportsNite or The Pulse Network, I spend hours researching topics. I treat this site like a part-time job. There is no pay and no benefits, but I love it. My real luck is in having found someone who encourages me to continue to pursue this avenue, even if it means I spend less time with him or that our time together is filled with me debating the merits of issues like pay-for-play.

The only advice I can give you if you want to work in sports are the three keys I shared before: You have to be willing to start at the bottom. You have to be willing to work harder than everyone else. And you have to be willing to work for free for awhile. Oh, and it helps if you’re willing to email anyone, anytime and ask for anything!

Using Student Fees to Support Athletic Department Budget

Today over on USA Today they’ve got a piece on schools who use student fees and other institutional support to round out the athletic department budget. The piece focuses on Rutgers, but also lists the ten schools who rely the most on these funds in automatic qualifying conferences: 

Schools from BCS automatic qualifying conferences with the greatest amount of 2009-10 athletics revenue allocated from institutional or government support or student fees: 
School, conference Amount
Rutgers, Big East $26,867,679
Connecticut, Big East $14,578,029
South Florida, Big East $14,185,037
Maryland, ACC $13,749,781
Tennessee, SEC $13,552,020
Cincinnati, Big East $13,457,464
Virginia, ACC $12,160,103
California, Pac-10 $12,098,974
Oregon State, Pac-10 $10,960,616
Arizona State, Pac-10 $10,349,536
Note: Amounts not adjusted for inflation

Sources: Individual schools, USA TODAY research in conjunction with Indiana University’s National Sports Journalism Center

A couple of months ago, I did a series of pieces on schools who were relying on student fees to balance their athletic department budget. You can find the Top 25 in the BCS for the 2009-2010 school year here. If you’re curious about a specific school, I posted the numbers for every BCS school by conference. You can find the SEC, Big Ten and Big 12 here, the ACC, Pac-10 and Big East here, and the non-AQ conferences here.

A number of you have pointed out that these student fees often get students free admission to athletic events. Although that’s a nice perk, I wonder what percentage of the student body actually takes advantage of this offer. To me, this is not the best argument in favor of student fees going to subsidize the athletic department.

That being said, I don’t necessarily have an issue with universities subsidizing the athletic department. After all, it is a part of the university. Just as the university funds the English department, they fund the athletic department. When an athletic department is able to support itself, like these we looked at a couple of weeks ago, that’s fantastic. However, I’m not convinced that every athletic department should be expected to do so. Athletic departments should be expected to operate as efficiently and profitably as possible while meeting the goals of the department and the university. What I don’t like to see are universities who are self-sustaining and still receive student fees or institutional support.

Athletics do a number of things for a university. They often receive national attention, which strengthens their brand. This causes increases in applications and licensing revenue, amongst other benefits. I’ve been researching this in-depth for my new book on the business of college football, and I can tell you that there are a number of advantages to a university having an athletic department. I don’t honestly believe that any university would be so fiscally irresponsible as to assist in funding an athletic department if they weren’t receiving a return on their investment, at least not when you look at a broad spectrum of years.

Just some food for thought until my book is out and I can share more concrete examples.

Impermissible Benefits: Focus Should Be On Pros, Not NCAA

Reggie Bush

When historians look back on college football today they’ll likely dub it the “Age of Impermissible Benefits”. It seems like every day there’s a new story about an athlete who is accused of receiving money, a trip or even a car.

When I turn on the radio or open Twitter, the chatter is about what the schools or the NCAA are doing wrong. The compliance office wasn’t paying attention. The coach should have known. The coach knew and didn’t tell anyone. The NCAA takes too long to investigate. Players are tempted because the NCAA doesn’t allow them to be paid. The list goes on and on.

The focus is on the NCAA when it should be on the professional leagues.

There are three ways to curb the problem of agents, runners and boosters providing impermissible benefits to college athletes: state law, NCAA regulations and professional league regulations. Only one of those can make a difference, and here’s why.

First, let’s consider state laws. All but seven states have adopted laws regulating athlete agents. These laws often require agents to register in order to do business within the state. They also proscribe penalties for a variety of violations, including furnishing anything of value prior to the athlete signing a contract with the agent.

There are a number of problems with relying on state laws to solve the problem. First, a report last year showed that more than half the states with these laws have never revoked or suspended a license. You can bet that means they’re not enforcing any criminal penalties either.

Generally, these regulations are enforced by the Secretary of State’s office. They handle everything from elections to formation and registration of corporate entities to licensing for a number of industries. They simply don’t have the manpower to investigate or enforce these violations.

To date, the most comprehensive investigation I know of is that being conducted by the Secretary of State in North Carolina. My understanding is that investigators who normally work on white-collar crime cases were being used to investigate the allegations against University of North Carolina. Don’t expect to see this in many other states.

Many state laws also give the school the ability to sue the athlete or agent or both in order to recover any financial damages incurred because of penalties. However, this isn’t a route we see schools taking.

Now that we’ve determined that regulation by the states isn’t going to solve the problem, we turn to option number two: the NCAA. Most of the commentary I see revolves around what the NCAA is or isn’t doing to alleviate the temptation of impermissible benefits. From there, the outcry is that investigations aren’t quick enough or impose penalties that do not deter future rule-breaking.

The problem with the NCAA attempting to handle the problem is that it is largely the schools who suffer. By the time penalties are enforced, many players are either already in the pros or, as we just saw in the case of Terrelle Pryor, are able to leave for the pros instead of sticking around to face the music. So, instead the program is left to suffer the consequences, with players who weren’t even around for the mischief left to carry out the sentence.

I’m not saying that some programs don’t deserve punishment in their own right, outside of whatever the player should bear. What I’m saying is that the NCAA is often unable to punish the real criminal – the player. That’s why they’re so willing to take their chances when an agent, runner or booster offers them a little cash. The odds of getting caught are incredibly low and so often they’re able to escape without ever suffering the penalty. Aside from some sort of public shame, which I’ve not seen effect someone like Reggie Bush, the real wrongdoer escapes unscathed, with a heavier wallet.

The bottom line is that there is absolutely nothing the NCAA can do about this part of the problem. Sure, maybe they could add more staff and investigate more quickly, but most of the players who accept these sorts of benefits are far along enough in their college career to escape to the pros as soon as they smell smoke.

That leaves us with the professional sports leagues. The place where these rule-breakers escape for asylum. The entity formerly known as the NFL Players Association had the authority to suspend the license of any agent who represents players in the NFL (although with the association decertifying this is no longer the case). However, they seem to only have done so in the most egregious cases. Josh Luchs’ license was revoked after he admitted to paying dozens of college athletes over the years. Gary Wichard was suspended for nine months following information about his involvement with Marvin Austin and money that changed hands from him to UNC assistant coach John Blake. The revocations and suspensions are much fewer and far between than the number of incidents the NCAA has investigated.

The NBA Players Association has similar power and, again, exercises its power now and again. Calvin Anderson was suspended for one year following his alleged connection to USC player OJ Mayo.

My humble opinion is that the professional leagues step in only when the misconduct is so blatant their hand is forced. Then they simply slap the agent’s wrist and hand them a minimal sentence. The suspension only covers the individual agent, not the entire agency. I’m unconvinced these suspensions are any kind of real deterrent, or even that they are meant to be. Not to mention it takes two to tango and they’re only punishing one half of the offending partnership. Players walk right out of the mess they’ve left behind at their school and begin lining their wallet in the NFL or NBA.

What I am convinced, however, is that only the professional leagues and their Players Associations have the power to attack this problem by enforcing sanctions at their level on both the players and agents involved in these scandals. If a college player thought his future career in the NFL – his lifelong dream – was at risk, he might think twice. The problem is the professional leagues have no motivation to be the disciplinarians here. They’re not going to deny the next Tom Brady or Adrian Peterson entry into their league because he failed to obey rules about impermissible benefits. They’re looking out for their product first and foremost.

The professional leagues, especially the NFL and NBA, use colleges as minor leagues they don’t have to back financially. They also don’t have to back them up in any other way, including enforcing the NCAA’s rules.

Which is why I’m afraid that in the end there is no solution. Unless colleges and the NCAA are able to catch more rule-breakers and enforce penalties before these guys can make the jump to the pros, the professional leagues have little reason to get their hands dirty. Until the product they are receiving is somehow diminished, they’ll continue to do as little as possible, despite the fact that they alone hold the key to real reform.

Are African Americans Underrepresented in College Baseball?

If you’ve read this site for a while, you may have seen my post about a young man named Mendez Elder who plays in the inner-city baseball league I’m involved with. Mendez did attend The Perfect Game National Showcase and I hear he made the most of his opportunity. He was 2-for-4 with a standup triple, a single and two stolen bases. His arm was rated as above average Major League arm playing both Right Field and Catcher. He really made us all proud!

Without organizations like L.E.A.D., however, I fear the number of African-Americans playing baseball at the collegiate level will continue to dwindle. On the rosters of this year’s eight College World Series teams there were just 11 African-American players out of 275 – that’s only 4 percent of players. Why?

We hear a lot of debate about whether college scholarships are sufficient compensation to college athletes or if they should be paid for their performance on the field. What we fail to discuss is the blockade many young men face trying to earn one of these coveted scholarships.

Most of the guys I know who played college baseball spent years playing travel baseball and taking private pitching or hitting lessons. They have the latest gloves, bats, cleats, and custom baseball uniforms.Their parents will tell you they spent thousands and even tens of thousands of dollars over the years getting their son to a level where he could compete for a college scholarship. The last time I posted on this I received responses pointing out the fundraising that is done by most travel teams. However, these teams are not located close enough to the inner-city for most of the young men I work with. Many come from broken homes. Many live on very tight budgets. Their parents can’t drive them out to the suburbs where the travel teams are concentrated because they are working multiple jobs or don’t have a reliable vehicle. That’s not to say they are the only youth with disadvantages to overcome, I’m simply explaining why there was a need in this community for an organization like L.E.A.D.

Back to why the number of African-Americans playing collegiate baseball is dwindling….

Collegiate baseball scholarships are getting harder and harder to earn. The NCAA limits the  number of full scholarships in baseball to 11.7, however, the typical team roster is between 25-45 players.  In 2008, new rules were adopted that limited the number of players on aid to 30 for the 2008-2009 season and 27 for the 2009-2010 season.  Scholarships used to be split into amounts that allowed most, if not all, of the roster players to receive some sort of financial aid.  Unfortunately, there was some abuse that caused the new rules to be implemented.  Coaches were giving out “tryout scholarships” which lured the player to campus with a small scholarship.  The amount was small enough that the coach could cut the player during fall practices without if effecting his bottom line.

Sometimes rules aimed at one problem make way for a new kind of problem.  Under the new rules, only 27 players can be on scholarship and each scholarship must be for at least 25% of the tuition, room and board.  Compare that to football where 85 full scholarships are available for about 87 roster spots (active and inactive), or basketball where 13 full scholarships are available for 12-15 roster spots.  Which sport would you choose to play if you were a young African-American athlete who could only get a college education through an athletic scholarship?

Consider this: the champions of the 2009 College World Series, the LSU Tigers, had two African-American players, neither of whom were on baseball scholarships.  Instead, Chad Jones and Jared Mitchell were both on football scholarships.

African-American young men who, like Mendez, grow up in the inner-city simply cannot afford to play travel baseball or take private lessons. Without participation on travel teams or being part of top-notch high school programs, these young men do not develop on the baseball field and/or go unnoticed.

For the young men who participate in L.E.A.D., a revolutionary inner-city baseball organization, college isn’t just a fairytale. It’s something they’re taught they can achieve with dedication to their studies and fine-tuning of their skills on the diamond. These young men aren’t playing baseball to become the next major leaguer. They’re playing baseball to earn a college scholarship – the only way most of them will ever set foot on a college campus as a student.

L.E.A.D. has changed that for quite a few young men in Atlanta by creating the first-ever inner-city travel program that doesn’t cost the participants one dime. The L.E.A.D. Ambassadors play against elite travel teams like nearby East Cobb, a perennial contender in AAU and Baseball America’s “Most Outstanding Youth Baseball Program in the Nation” for the entire decade of the 1990s. In addition to the baseball opportunities, scholarship and community service are emphasized, with 100% of the L.E.A.D. Ambassador graduates being accepted to college since the program’s inception and over 2,000 hours of community service being performed. Since being formed in 2008, 87% of the participants in the program have gone on to earn college scholarships to play baseball while pursuing higher education.

I don’t know the best way to address the shrinking population of African American collegiate baseball players, but I do know I was shocked to learn that they made up just 4% of CWS team rosters. Certainly the story would be different if we looked at rosters for teams in BCS bowls or March Madness. What I do know is that L.E.A.D. is an amazing organization making progress in this area, so I encourage you to check out their website and support their efforts or similar efforts in your community.

Does American Needle Apply to Collegiate Licensing?

Last year one of the biggest legal decisions in sports was made in American Needle, Inc. v. National Football League. (You can read about the decision in these two pieces I wrote for Forbes: Why NFL’s Supreme Court Loss Isn’t Much of a Loss(5.24.10) and American Needle vs. NFL: Looking Forward (5.26.10))

Earlier this month, cease and desist letters were sent to Collegiate Licensing Company, the nation’s top collegiate marketing and licensing company, and 27 FBS schools demanding that they stop their so-called collective effort to limit the production of merchandise with collegiate logos.

Quite a few of you have asked me about the situation, so I’ve asked my friend Beth Hutchens (Twitter: @HutchensLaw) of Hutchens Law Offices, who specializes in Intellectual Property law, to help me explain.

The real question here is whether the decision from the American Needle case applies in this situation. So, Ms. Hutchens will start with an explanation of that case and move to the situation at hand. I’ll let her take it away:

About 10 years ago, the National Football League Players’ Association (“NFLPA”) decided that they wanted Reebok (and only Reebok) to make hats with the teams’ logos on them.  American Needle, Inc., a competitor of Reebok, had been making these types of hats for the National Football League (“NFL”) for some time and, as a result of the NFLPA’s deal with Reebok, lost its contract to make said hats.  American Needle, Inc. did not have much of a sense of humor about this and sued the NFL under antitrust principles.  Long story short, American Needle Inc. argued that the NFL violated antitrust law because all 32 NFL teams worked together to freeze it out of the NFL-licensed-brand-hat-making business when they gave that exclusive right to Reebok for ten years.  The NFL asked for broad antitrust protection and argued that it was a single entity comprised of 32 different teams united under a common umbrella, hence the license wasn’t anticompetitive.   American Needle Inc. disagreed and argued that since each team retained ownership and control of its trademarks they were independent entities acting in concert.  Hilarity ensued all the way to the United States Supreme Court.

The Needle Court had to decide if the NFL was a single entity as opposed to a collection of separate entities  because §1 of the Sherman Act (the antitrust law at issue here) forbids conspiracies to restrain trade.  One cannot conspire with oneself, such as a parent and a subsidiary (the NFL’s argument), but two separate entities can, such as two competitors (American Needle, Inc.’s argument).  The relevant question, then, is if the 32 teams agreeing to grant an exclusive license for use of their independently owned marks “join[ed] together independent centers of decision making”.  This is why the NFL argued that the teams were under a single umbrella and most definitely were not separate entities.  The Supreme Court didn’t buy it and said:

Although NFL teams have common interests such as promoting the NFL brand, they are still separate, profit-maximizing entities, and their interests in licensing team trademarks are not necessarily aligned.

Justice Stevens, writing for a unanimous Court, noted that even though there may be some cases where it is necessary for cooperation among (football) teams, in terms of their licensing agreements, they are not a single entity.  But the Court didn’t resolve the issue as to whether the agreement among the NFL teams actually did violate competition laws, which is important in our CLC analysis.  The Court kicked Needle back to the 7th Circuit to analyze American Needle Inc.’s claims under   the “rule of reason” and determine whether the NFL’s licensing practices actually do harm competition.  Under this rule, the actions of the NFL teams would be illegal only if they unreasonably restrain trade.    The 7th Circuit has not decided the case yet.

Dechert plainly thinks Needle should apply to collegiate athletics.  Its letter alleges that CLC is “promoting, organizing, and implementing a concerted effort…to restrict the number of licensees” and accuses CLC licensors of “acting in concert to suppress competition in markets for licensed goods (similar to American Needle, Inc.’s position).  CLC disagrees, calling the accusations “outrageous and unfounded” and “absolutely unsustainable”.  CLC’s position is that the restriction represents “good, sound business practices”.  We have no precedent to tell us which is the better argument, or if we can even analyze college sports licensing under Needle.   

 A glaring difference between the facts of Needle and the current issue is that, arguably, Needle only addressed a particular licensing scheme to one entity in one type of professional sport.  The CLC license merely restricts the number (which is presumably greater than one) and involves all college athletics, not just football.  Another important difference is that collegiate sports, by definition, are not professional.  Unlike professional athletes, college athletes are not compensated.  Yes, they receive scholarships and other sorts of aid that has some monetary value, but, technically, they are not paid to play the game.  It stands to reason, then, that even though college athletics is a huge revenue generator, the teams’ existence is incident to, not independent of, the affiliated university, thus any separate entity argument could fail. 

Speaking of money issues, and in furtherance of the single-entity argument, at least some of the revenues generated by college sports go toward the academic institution and not a professional payroll. This may have major implications in applying antitrust principles to colleges because, at least in theory, one could argue that collegiate sports teams are in fact, under the umbrella of the university system.  So one could say that, at least on some level, competing college teams cannot possibly be viewed as having separate interests where the goal is to improve the academic institution.   Will these issues be enough for a court to refuse to apply Needle to Dechert’s claims?  They might, but I honestly don’t know.   These are important issues that require a very lengthy and drawn out analysis that I can’t expand on today.  So, just for the sake of argument, let’s pretend that Needle does apply and Dechert can actually challenge the CLC’s activities under antitrust principles.

So what exactly is Dechert talking about?  The letter makes mention of a “Sideline + 1” initiative.  This initiative is apparently an endeavor to limit the number of manufacturers allowed to make collegiate branded apparel sold at certain types of retail outlets.  Dechert believes this limitation is an “anti-competitive restraint of trade”.  Dechert alleges that “[b]y severely reducing the number of licensees and eliminating competition from the excluded suppliers, the restraint will allow CLC and the universities to garner increased royalty revenues…both through higher royalty rates and through higher prices… which will rise as competition will fall”.  I remain unconvinced that limiting the number of licensees immediately triggers antitrust concerns, especially where trademarks are involved.  As IMG College spokesman Andrew Giangola points out “More sophisticated strategic brand management benefits schools, best-in-class licensees, and consumers.  We are confident each school can and should continue to make its own decision about how to best manage its brands.”  

Mr. Giangola makes a good point.   Each university should be able to “choose best-in-class licensees and to work with experts that can help evaluate the myriad of licensing alternatives that the school may wish to consider.”  This necessarily includes deciding who will be permitted to affix a school’s logo on merchandise.  Even if that “who” is a very small subset of manufacturers.  Further, CLC assists its members in managing, developing, and protecting their brands, and specifically provides that licensing assures only quality products are associated with member institutions.  There is a colorable argument that the licensing initiative Dechert is complaining about is actually a way to maintain brand integrity by only giving licenses to companies with a long history of providing top-notch products. Just because that list is limited to only a few companies does not mean the initiative is anticompetitive, especially where trademarks are concerned.  Here’s why. 

A trademark owner has a vested interest in saying who can and cannot use the brand of their merchandise.  This is because one of the first things a responsible trademark owner must do is see to it that their brand maintains its level of quality.  A way to accomplish and maintain this quality is to be highly selective about when, how, and if a company will be permitted to use the mark on its products.   The idea is that if a licensee puts a known mark on shoddy products, the consuming public will incorrectly attribute the poor quality to the brand, not the licensed product, and the brand’s value will be diminished.   CLC members have an interest in making sure that their logos are only affixed to high quality products and choosing to do business with only certain companies is a way to ensure that. 

As it appears on their website, CLC’s current licensing information provides that there are more than 2500 companies licensed to produce a variety of assorted sundries, including apparel.  I do not have a clue as to what number the alleged “Sideline plus 1” initiative proposes to limit that number to, but reports are  that  CLC members are being asked to restrict their licensing to either Adidas, Nike or Under Armour.  A drastic reduction, to be sure.  Is this a way to control the quality of the product bearing the team’s logo thereby maintaining the brand image or a dastardly ploy to squeeze smaller companies who cannot afford royalties out of the marketplace to charge astronomical prices?  Or both?   Make your own assumptions, but I do have a question mark above my head about the stakeholders’ motives as it appears that the end result of their endeavors would be to, at least in theory, require CLC members to contract with entities they otherwise would not negotiate with.  

Here’s the rub.  Needle was an argument about all of the NFL teams agreeing to allow one and only one manufacturer make their hats and the USSC wouldn’t decide if even that violated the rule of reason.  Even if we can say without a doubt Needle should apply to collegiate sports, the question here is whether granting a fewer number licenses to select manufacturers for a certain subset of merchandise amounts to an unreasonable restraint on trade.  I won’t speak for the 7th Circuit or the Supreme Court, but I am uneasy about the marked increase in antitrust allegations and am hesitant to slap an anticompetitive label on an agreement willy-nilly.  This one must be decided with caution. 

Remember this.  At the end of the day, antitrust laws are only meant to punish businesses that intentionally dominate the market through misconduct.  Intent is the pivotal question, not success, and intent is really really REALLY hard to prove.  Plus, Justice Stevens pointed out that “joint licensing activities…may be necessary to make the product of NFL Football available to the public.”  So a decision that is intended to maintain a competitive balance or maintain brand quality among the teams would probably be OK, at least as far as the Needle Court is concerned, and I’d be surprised if college athletics in general, or even CLC’s initiative, would be held to a different or stricter standard.  The Supreme Court also noted that NFL teams “share an interest in making the entire league successful and profitable,” and in pursuing that they may need to make “a host of collective decisions” that would be beyond antitrust challenge.  Arguably, colleges and universities share that same interest at least on some level, perhaps even more so.  So even though a group-granted exclusive license to a single manufacturer may be subject to antitrust scrutiny, such a license is not necessarily a violation of the Sherman Act.   

 Alas, this rant is pure conjecture and even if Needle does apply to college athletics, it doesn’t mean the initiative is toast.  Besides, we actually won’t know for some time if even the NFL licensing agreement violates the rule of reason, so the CLC issue is a looooong way off.  I think we can file this one in the “Hmmm, we’ll see” file.  For the record, though, my Magic 8 Ball says the NFL licensing scheme will violate antitrust laws “without a doubt.”    But then, my Magic 8 Ball is also 0-4 in the prediction department, so there that is for you.

This article offers the personal observations of Beth Hutchens, and does not represent the views of her law firm or its clients.  This article does not represent the views of Kristi Dosh, her law firm or its clients. Any information contained herein does not constitute legal advice. Consult your own attorney for legal advice on these matters.

Naming Rights on College Stadiums and Arenas

For awhile now I’ve been compiling data on universities that sell the naming rights to their facilities. Today, Rutgers announced a new deal worth $6.5 million over the next 10 years for the naming rights to its football stadium. I’ll give you the complete list of stadiums and arenas with naming rights deals (in no certain order) are below. The amount listed is the total amount for the deal (not a per year breakdown).

Arizona State University Wells Fargo Arena Basketball (M/W), Volleyball, Wrestling, Gymnastics N/A $5 Million
Boise State University Taco Bell Arena Basketball (M/W) 15 Years $4 Million
College of Charleston Carolina First Arena Basketball (M/W), Volleyball N/A $2 Million
Colorado University Coors Events Center Basketball (M/W) N/A $5 Million
Florida International University U.S. Century Bank Arena Basketball (M/W), Volleyball N/A N/AN/A
Fresno State University SaveMart Center at Fresno State Basketball (M/W) N/A $40 Million*
Quinnipiac University TD Bank Sports Center Basketball (M/W), Hockey N/A N/A
San Diego State University Viejas Arena Basketball (M/W) 10 Years $6.9 Million
Syracuse University Carrier Dome Football, Basketball (M/W), Lacrosse Perpetuity $2.75 Million
Texas Tech University Jones AT&T Stadium Football 25 Years $20 Million
The Ohio State University Value City Arena Basketball (M/W), Hockey N/A $12.5 Million
Troy University Movie Gallery Stadium Football 20 Years $5 Million
University of Akron InfoCision Stadium Summa Field Football 20 Years $10 Million
University of Albany SEFCU Arena Basketball (M/W), Others 10 Years $2.75 Million
University of Central Florida Bright House Networks Stadium Football 15 Years $15 Million
University of Cincinnati Fifth Third Arena Basketball (M/W), Volleyball N/A N/A
University of Louisville KFC Yum Center Basketball (M) 10 Years $13.5 Million
University of Louisville Papa John’s Cardinal Stadium Football N/A $5 Million**
Univesity of Maryland Capital One Field at Byrd Stadium Football 25 Years $20 Million
University of Maryland Comcast Center (Main and Pavilion) Basketball (M/W), Volleyball, Wrestling, Gymnastics 25 Years $20 Million***
University of Miami Bank United Center at the University of Miami Basketball (M/W) 10 Years N/A
University of Minnesota TCF Bank Stadium Football 25 Years $35 Million
University of Nevada Las Vegas Cox Pavilion Basketball (W) N/A $5 Million
University of South Carolina Colonial Life Arena Basketball (M/W) 12 Years $5.5 Million
University of Texas UFCU Disch-Falk Field Baseball 15 Years $13.1 Million
University of Virginia Klockner Stadium Soccer (M/W), Lacrosse (M/W) N/A $1.2 Million
University of Washington Alaska Airline Arena at Hec Edmundson Pavillion Basketball (M/W), Gymnastics, Volleyball 5 Years $3.5 Million
Wake Forest BB&T Field Football 10 Years N/A
Winona State University Verizon Wireless Stadium at Maxwell Field Football 10 Years $250,000
Xavier University Cintas Center at Xavier University Basketball (M/W) N/A N/A
Rutgers University High Point Solutions Football 10 Years $6.5 Million

*Pepsi is said to have paid a similar sum for exclusive pouring rights at the facility and across campus.

**The amount listed was for the initial deal between Louisville and Papa John’s. Louisville’s athletic department tells me that in total Papa John’s has donated approximately $22 million for the football stadium, including for recent expansion. Papa John’s now holds the naming rights through 2040.

***Comcast paid an additional $5 million for naming rights to the court.

My favorite story regarding naming rights comes from Louisville and is just another reason why I think Tom Jurich is so brilliant. The naming rights to the basketball arena were sold to Yum! Brands, which owns Pizza Hut. Guess what kind of pizza they sell in the concession stands inside the KFC Yum Center…Papa John’s! Jurich told me he needed to sell the naming rights, but he also needed to honor his partnership with Papa John’s, who holds the naming rights to the football stadium and is a long-time partner of the school. I’m not sure how Jurich got the deal done, but it’s a tribute to his business acumen. Could you imagine Coca-Cola paying to have their name on a facility and then allowing Pepsi to be sold inside?

If you’re able to fill in any of the holes above or know about deals I missed, please email me.

Thanks to my research assistant Andy Haugen for helping compile the data.

What’s Unique about Louisville’s Athletic Budget?

Those who have read my work or followed me on Twitter for any appreciable amount of time know that I’m a huge fan of the University of Louisville’s athletic department and Athletic Director Tom Jurich. You should know this comes from a sincere place, because I’m not a Louisville grad. In fact, they nabbed one of my alma mater’s most talented assistant coaches, Charlie Strong.

When Tom Jurich took over the Louisville post more than a decade ago, he inherited a program in danger of being out of Title IX compliance. Today he reigns over an athletic department that has built (or is building) a brand new facility for every single men’s and women’s sport, with the exception of football (which received an expansion). His basketball program is the 21st most profitable program in the country behind 20 college football programs. In fact, his basketball program ranks ahead of every football program in the Big East, ACC and Pac-10.

Each time I contact Tom Jurich’s office I learn something new about him and his athletic department that strengthens my admiration of the work he has done. Today, I’m looking at Louisville’s 2010-2011 athletic department budget.

The first thing that strikes me about this budget isn’t numbers, it’s a list of Athletic Department Goals. I’ve reviewed around a dozen budgets this spring and not one has included a section like this. It’s the very first page of Louisville’s budget after the cover page.

My boyfriend trains high school athletes, and in his spare time he trains me. When I complain about an exercise he asks me, “Why do we do this?” The correct answer from me is, “Because I have goals.” University of Louisville’s athletic department has goals. Before you get to the details of Louisville’s budget, you’re reminded of its goals. Eyes on the prize.

Here are the goals that preceded Louisville’s 2010-2011 budget:

1. To strive to maintain the highest level of ethics in the University’s athletic program to ensure the integrity of the program is not compromised.

2. To continue to support our Compliance Office and maintain our exemplary record in this area.

3. To continue to support our Academic Counseling office as we work toward constant improvement, excellence in the classroom.

4. To provide quality intercollegiate athletic programs for student-athletes, students, alumni, faculty-staff and the public.

5. To continue to support a comprehensive gender equity plan to assure the University’s ongoing compliance with Title IX. to meet annually with our Title IX consultant to assure compliance.

6. To continue marketing the Hickman Camp Fund as the Athletic Association’s source of endowment for funding future athletic scholarships.

7. To continue a funding model that allows all programs the opportunity to be successful in the Big East and NCAA.

8. To implement/monitor the agreement with the Louisville Arena Authority that allows University of Louisville to provide a new facility for its Men’s and Women’s basketball programs with priority dates and new revenue opportunities.

9. To finalize the marketing of the Arena and Stadium Expansion in preparing for openings in 2010.

10. To continue fundraising efforts for construction on: (a) the expansion of Papa Johns Cardinal Stadium and (b) a boathouse for the Rowing team on the riverfront.

11. To maintain a financial plan with balanced annual budgets, expenditures sufficient to support athletic programs at the national level, and to continue to pursue new sources of revenue.

12. To continue to grow the Merchandising and Licensing Program to become much more visible, both nationally and internationally.

13. To continue to work with the University’s Administration to assure the Athletic Department is an integral and vital part of the University. Staff will continue to participate on University-wide committees and participate in joint efforts when requested.

Maybe these all seem like common sense goals for an athletic department to have. Differences in business units (which is what athletic departments are) can be seemingly miniscule. So what if Tom Jurich inserts his goals for the athletic department in the budget? It’s not like every school doesn’t have similar goals, right?

I believe tiny nuances in leadership can make huge differences in any business unit . Tom Jurich is telling his department repeatedly what the goals are. Repetition breeds success. He’s put them before the numbers. To me, that says long-term goals are more important than the balance sheet of any one given year.

Before Coach X reviews the budget and sees that he’s not getting as much of an increase in expenditures as he requested for his sport, he’s seeing the department’s goals reiterated. Placing these goals the first page of the budget says, “Remember, these are our goals. Not making $X from football or $Y from basketball, but doing these things to improve our athletic department as a whole.”

And Louisville’s athletic department has improved since Tom Jurich’s arrival. Louisville only missed the self-sustaining athletic departments list for the 2009-2010 school year by approximately $1.8 million. I wouldn’t be surprised to see them make the list in coming years with increased revenue from the football stadium expansion and new basketball arena. The athletic department confirmed for me today that revenue from the new basketball arena exceeded projections for ticket sales, suite rentals and concessions, although final numbers are not yet available.

Which Football and Basketball Programs Produce the Largest Profits?

UPDATE: Top 100 programs for ’10-’11 available here: 1-50, 51-100 (updated 12/29/11)

I’ve told you before that Louisville basketball is the 21st most profitable program in college athletics. I’ve shown you the football profits for every school in my Conference Finance Series. Now it’s time to take a look at the 50 most profitable programs in college athletics for the 2009-2010 school year:

Rank School Revenue Expenses Profit
1 University of Texas (Football) $93,942,815 $25,112,331 $68,830,484
2 Univ. of Georgia (Football) $70,838,539 $18,308,654 $52,529,885
3 Penn State Univ. (Football) $70,208,584 $19,780,939 $50,427,645
4 Univ. of Michigan (Football) $63,189,417 $18,328,233 $44,861,184
5 Univ. of Florida (Football) $68,715,750 $24,457,557 $44,258,193
6 Louisiana State Univ. (Football) $68,819,806 $25,566,520 $43,253,286
7 Univ. of Alabama (Football) $71,884,525 $31,118,134 $40,766,391
8 Univ. of Tennessee (Football) $56,593,946 $17,357,345 $39,236,601
9 Auburn Univ. (Football) $66,162,720 $27,911,713 $38,251,007
10 University of Oklahoma (Football) $58,295,888 $20,150,769 $38,145,119
11 Univ. of South Carolina (Football) $58,266,159 $22,794,211 $35,471,948
12 Notre Dame (Football) $64,163,063 $29,490,788 $34,672,275
13 University of Nebraska (Football) $49,928,228 $17,843,849 $32,084,379
14 Ohio State Univ. (Football) $63,750,000 $31,763,036 $31,986,964
15 Univ. of Iowa (Football) $45,854,764 $18,468,732 $27,386,032
16 Michigan State Univ. (Football) $44,462,659 $17,468,458 $26,994,201
17 Univ. of Arkansas (Football) $48,524,244 $22,005,104 $26,519,140
18 Texas A&M (Football) $41,915,428 $16,599,798 $25,315,630
19 Univ. of Kentucky (Football) $31,890,572 $13,905,724 $17,984,848
20 Oklahoma State (Football) $32,787,498 $15,479,410 $17,308,088
21 University of Louisville (Basketball) $25,890,003 $9,089,769 $16,800,234
22 Univ. of Wisconsin (Football) $38,662,971 $22,041,491 $16,621,480
23 Univ. of Mississippi (Football) $28,409,774 $11,920,510 $16,489,264
24 West Virginia University (Football) $29,467,612 $14,330,236 $15,137,376
25 Univ. of Minnesota (Football) $32,322,688 $17,433,699 $14,888,989
26 Virginia Tech (Football) $31,155,870 $16,302,767 $14,853,103
27 Univ of Washington (Football) $33,919,639 $19,207,560 $14,712,079
28 Clemson Univ. (Football) $30,994,503 $16,305,528 $14,688,975
29 Duke (Basketball) $26,667,056 $12,286,475 $14,380,581
30 Univ. of Illinois (Football) $25,301,783 $11,092,122 $14,209,661
31 North Carolina (Basketball) $20,551,168 $6,647,459 $13,903,709
32 University of Colorado (Football) $26,233,929 $12,558,503 $13,675,426
33 Univ of Arizona (Basketball) $19,285,038 $5,806,535 $13,478,503
34 Ohio St. (Basketball) $16,190,723 $4,554,908 $11,635,815
35 University of Missouri (Football) $25,378,066 $13,759,649 $11,618,417
36 North Carolina State (Football) $22,018,738 $10,408,938 $11,609,800
37 Arizona State (Football) $29,587,236 $17,977,987 $11,609,249
38 Texas Tech (Football) $26,201,009 $14,688,382 $11,512,627
39 Univ of Oregon (Football) $29,505,906 $18,071,012 $11,434,894
40 Univ of Arizona (Football) $24,398,253 $13,685,931 $10,712,322
41 Syracuse University (Basketball) $18,309,470 $8,086,376 $10,223,094
42 Wisconsin (Basketball) $17,666,311 $7,539,418 $10,126,893
43 Illinois (Basketball) $14,413,222 $4,980,589 $9,432,633
44 Georgia Tech (Football) $24,870,064 $15,519,206 $9,350,858
45 Indiana Univ. (Football) $21,783,185 $12,822,779 $8,960,406
46 Indiana (Basketball) $16,570,158 $7,653,945 $8,916,213
47 Univ. of Arkansas (Basketball) $15,515,830 $6,839,213 $8,676,617
48 Univ of Southern California (Football) $29,080,117 $20,820,468 $8,259,649
49 Minnesota (Basketball) $13,733,316 $5,692,149 $8,041,167
50 Michigan St. (Basketball) $16,138,167 $8,250,450 $7,887,717

Not only is Louisville basketball the most profitable basketball program in the country, it’s more profitable than the football program at any Big East school. It’s also more profitable than any football program in the ACC or Pac-10! Keep in mind, these numbers were for the season before Louisville basketball began play in a new arena.

The top ten consists of 2 Big 12 football teams, 2 Big Ten football teams and 6 SEC football teams. The ACC doesn’t have a team until Virginia Tech football at #26. The Pac-10 follows closely with Washington football at #27.

Twelve of the top fifty are basketball programs. I was actually surprised to see the number so high.

Ten of the twelve SEC football programs are in the top fifty. Only Mississippi State (76) and Vanderbilt (T-132) fell lower.

Nine of the eleven Big Ten football programs fall in the top fifty. All of the Big Ten football programs fall in the top 70, with Northwestern at #56 and Purdue at #63.

University of Oregon falls at 39 for football but is at the bottom of the list, living in the red, at #138 for basketball. They must have been saving up for the new artwork on the basketball court.

You can follow the jump for the complete list, but the football programs in the bottom thirty are all ACC or Big East, with the exception of SEC competitor Vanderbilt. This highlights a point I’ve been trying to make for awhile about how the divide between haves and have nots is not simply drawn at the line between AQ and non-AQ schools. There is vast disparity between teams in AQ conferences as well.

Follow the jump for the complete list…. Read the rest of this entry

Self-Sustaining Athletic Departments: More Than What Meets the Eye

Yesterday the list of self-sustaining athletic departments came out. The good news is the number grew to eight more schools than last year. The bad news is the number is 22. That’s just shy of 10% of all public Division I institutions.

Here’s a look at the 22 schools who turned a profit in the athletic department without having to rely on student fees or other forms of support from the university (including government funds):

Total revenue
Generated revenue
Allocated revenue
Total expenses
Penn State
Oklahoma State
Kansas State
Texas A&M
Michigan State
West Virginia
Virginia Tech
Ohio State
$123,174, 176
$123,174, 176

The chart is courtesy of USA Today.

You know I like to give you more than what most media spoon-feeds you, so here are some thoughts and questions not covered in the USA Today article:

  • Why are some of these schools still taking in student fees when they’re turning a profit? I’ve detailed for you before which athletic departments take in student fees (SEC, Big Ten and Big 12; ACC, Big East, Pac-10). Offenders here: Georgia, Florida, Oregon, Iowa, Oklahoma State, Kansas State, Virginia Tech, and West Virginia. I’m not including Indiana who shows a negligible $23.00 in student fees.
  • This chart does not tell the whole story. It gives a very skewed view of what is going on at these schools. For example, both LSU and Ohio State write checks back to their universities. I recently showed you how Ohio State gave $1 million to library renovation last year, one of nine such payments over a nine-year period, amongst other funds given back to the university. This money is treated just like any other expenditure when it comes to the chart above. So, while Ohio State may appear to be at the bottom of this list, there are plenty of schools above it who have shown no evidence giving back to their university for anything other than required expenses. Also, props to my alma mater, Florida, for donating over $6 million back to the university last year to help cover cuts in its operating budget passed down from the state.
  • The focus of the USA Today piece and much of the commentary I’ve heard about it today is how many schools are out-spending their means. What I see is a clear case for why Division I football is too inclusive. Florida International will never be able to compete against Alabama in football. Period. There’s no reason for them to be in the same Division. 

What are your initial thoughts on seeing the chart above?