Monthly Archives: February 2012
Recently, the New York Times broke a story that Temple University officials were discussing a conference move to the Big East. In the midst of the conference realignment landscape, Temple’s name has been thrown about as a potential incoming member of a variety of conferences, including the upcoming Mountain West-Conference USA merger.
Currently the member of three conferences–the Atlantic Ten Conference, the Mid-American Conference (football only) and the Eastern College Athletics Conference (gymnastics)–Temple was previously a Big East football member for thirteen seasons. However, in 2004, Big East members voted Temple out of the conference due to what was described as the football program’s inability to compete and the athletic department’s unwillingness to spend the amount of funds necessary to bring the program up to competitive levels.
Given Temple’s history with the Big East, it is clear as to why the school is not rushing to join the conference. However, should the Big East be quick to jump at the bait?
Since being ousted from the Big East in 2004, the Owls’ football program has achieved a steady level of success. The football team has experienced winning seasons since 2009 and has participated in two bowl games since 2004.
Undoubtedly, the Big East is known largely for its basketball prowess. Temple will fit into the conference’s basketball landscape. In the history of the NCAA Division I Men’s Basketball Tournament, Temple has reached the tournament 29 times and has made the Final Four twice. In the Associated Press’s most recent basketball rankings, Temple ranked 23rd. Thus, the Owls are on their way to their 30th NCAA Tournament appearance.
As noted above, part of Temple’s ouster from the Big East in 2004 came as a result of the conference finding that the school was not spending enough to develop its football program. Arguably, in the years since 2004, Temple has devoted greater resources to its teams in order to advance their success on the field.
In 2010-11, Temple’s football team had expenses of $10,099,156.00 and revenues of $10,099,156.00. Thus, although Temple’s football program did not turn a profit in 2010-11, it appears that the university is investing a large amount of money into the football program.
However, it is to be seen whether this amount of expenditures is enough to compete in the Big East. In 2010-11, the top-three ranked Big East football programs incurred the following expenses:
While Temple’s football expenses are clearly less than the top-three ranked 2011 Big East football programs, what should be noted, is that Temple’s expenditures are within the range of these programs’. If Temple can expend at least $1 million more on its football programs in the coming years, it should remain competitive in the Big East.
If Temple joins the Big East, one area in which the Owls will need to expand their budget in is recruiting. In 2010-11, Temple spent $289,671.00 on recruiting for its men’s sports teams. It spent $100,877.00 on recruiting for its women’s sports teams.
Temple’s total recruiting expenses of $390,548.00 do not even break into the top-100 recruiting spenders. In terms of recruiting expenses for Big East teams, Temple’s expenditures are not so dire when it comes to men’s sports. While big recruiting spenders Marquette ($1,289,560.00) and Notre Dame ($1,612,608.00) blow Temple’s recruiting expenses out of the water, Temple still falls short of other Big East Members. Consider the top-three ranked Big East football teams from the 2011 season and winner of the NCAA Division I Men’s Basketball Championship:
WVU: Spent $462,785.00 on recruiting for its men’s teams
Cincinnati: Spent $392,288.00 on recruiting for its men’s teams
Louisville: Spent $786,574.00 on recruiting for its men’s teams
Connecticut: Spent $515,666.00 on recruiting for its men’s teams
Thus, given these numbers, it would be in Temple’s best interest to increase its recruiting budget should it join the Big East.
4. Media Market
Arguably, the biggest draw for the Big East in inviting Temple to join as an all-sports member, is the school’s location in Philadelphia. In 2010-11, Philadelphia’s television market was ranked fourth in the nation. This ranking only fell behind New York, Los Angeles and Chicago.
The Big East is set to renegotiate its television rights contract with ABC and ESPN after the 2013 season. Given that Pittsburgh is leaving the conference for the ACC, adding Temple and tapping into another school with a presence in the Philadelphia television market would benefit the conference in negotiations. Having both Villanova and Temple as members, would arguably allow the Big East to raise the price it’s willing to agree to for terms of a television contract. As such, the television contract payout to Big East members would subsequently increase.
While there are clear benefits to Temple joining the Big East, if the school is fully committed to becoming a conference member, it must further bolster its team and recruiting expenditures. Given the Owls’ previous attempt at Big East membership, should Temple not fully demonstrate its commitment to spending a significant dollars to gain on-the-field success, the school can plan on waiting a bit longer for the Big East to come fully calling.
Recently, NCAA Division I institutions and their conferences voted on whether to overturn a measure enacted by the NCAA Board of Directors in October 2011 which allowed Division I institutions to offer student-athletes multi-year scholarships. The effort to overturn the measure was narrowly defeated. Of those eligible to vote, 125 voted to uphold the measure, 205 voted to overturn it, 2 abstained and 35 did not cast votes. To overturn the measure, 5/8 of those voting (or, 62.5 percent) were required to vote in favor of overturning the measure. Thus, the vote to overturn the measure was short by 0.38 percent of votes.
Given how close Division I institutions came to overturning the right to offer multi-year scholarships, one may wonder how votes were split on the issue. First, consider those BCS automatic qualifying conferences and schools which voted to continue to allow Division I institutions to offer multi-year scholarships:
|BCS AQ Conferences & Schools Voting to Allow Multi-Year Scholarships|
|Atlantic Coast Conference|
|Big East Conference|
|Big Ten Conference|
|North Carolina State|
Most notably, the only BCS AQ Conference which voted to overturn the multi-year scholarship measure was the Big 12. The ACC, Big Ten, Big East, Pac-12 and SEC conferences, on the other hand, all voted in favor to continue allowing schools to offer multi-year scholarships. The only Big 12 member to vote to uphold the multi-year scholarship measure was Missouri. However, it should be noted that Missouri will join the SEC later this year. Many of the SEC’s member institutions voted similarly to continue to allow multi-year scholarships.
Of those 125 conferences and schools voting to allow schools to offer multi-year scholarships, 36.8 percent were BCS automatic qualifying conferences or schools. This is a significant number, especially when considering that the majority of schools casting a vote on the issue were non-BCS AQ schools. It further demonstrates that a majority of BCS AQ institutions are in favor of granting multi-year scholarships. This is important, as whether a school offers multi-year scholarships may greatly affect recruiting and athletic department budgets going forward.
Next, consider which BCS AQ conferences and schools voted to overturn the NCAA’s measure allowing multi-year scholarships:
|BCS Conferences and Schools Voting to Disallow Multi-Year Scholarships|
Of the 205 conferences and schools which voted to override the NCAA’s measure allowing schools to offer multi-year scholarships, only 25 were BCS AQ conferences and schools. Thus, BCS AQ conferences and schools only accounted for 15.6 percent of those wishing to disallow multi-year scholarships. Most interesting, however, is that the Big 12 and its member institutions accounted for 31.25 percent of the BCS AQ schools and conferences voting to disallow multi-year scholarships.
The question to be raised given these numbers is, what competitive disadvantage does the Big 12 believe it faces if multi-year scholarships are allowed to be granted? Opponents of the multi-year scholarship measure have made the reasons as to why they do not support the measure clear. First, granting multi-year scholarships binds schools and athletic departments to student-athletes who may not be able to perform up to required standards either on the field or in the classroom. Additionally, granting multi-year scholarships may impose a greater financial burden on athletic department budgets and may provide those schools offering multi-year scholarships with a recruiting advantage over those which do not offer multi-year scholarships.
These factors may have been relevant in the Big 12 voting in large measure to not support multi-year scholarships. In 2010-11, the Big 12 only had one school (Texas) which broke into the top-10 in terms of its recruitment expenses. Likewise, in terms of the top-50 most profitable NCAA programs, the Big 12 once again only placed one of its teams (Texas football) into the top-10. Given these factors, it is likely that the Big 12’s largest concern with offering multi-year scholarships rested upon a cost-benefit analysis of the measure, and what its teams would be able to offer budgetary-wise in terms of multi-year scholarships.
One thing is certain: because NCAA Division I institutions and conferences voted to uphold allowing multi-year scholarships, it will be interesting to see the recruiting advantages those schools offering them receive going forward.
I love big ideas. I love creative solutions, collaboration and the power of thinking with a futures mindset. I am passionate enough about these topics to write a book about them and their role in business innovation, Saving Innovation: How to Harness the Incredible Promise of Innovation. As an expert on innovation I can tell you that the coming merger of C-USA and the MWC into a new, hemispheric athletic league is not innovative, it is a copycat strategy doomed to fail.
There is nothing new in the leagues’ proposal aside from the possibility of a conference semi-final and championship football game which I doubt will pass NCAA muster. C-USA and the MWC are simply copying what we’ve seen the Big 10, SEC, ACC, Big 12 and Pac-12 do: expand their geographic footprint to raise their attractiveness to potential media partners.
Here’s the problem. Click to continue reading
With the detailed information on the finances of college sports you receive here at businessofcollegesports.com, it should come as no surprise that BCS football programs are not “fun and games” or “just sports” to administrators and athletic departments. The difference between a winning and a losing football program on a school’s budget is pronounced. Thus, the difference between making the right or wrong coaching hire is as well.
The SEC is one conference, by and large, that has hired the right coaches and those coaches have succeeded. Among 2011 coaching salaries, six SEC coaches rank among the top 11 in the country in compensation (Saban, Miles, Petrino, Richt, Chizik, Muschamp, with Urban Meyer preceding him in high compensation rank). Those coaches have not only led SEC teams to six straight national titles, but those crystal balls, the television contracts, and national reputation of the conference have in turn led to six SEC mens athletic programs with recruiting budgets in excess of one million dollars annually for the 2010-2011 academic years. Success begets success begets even more success.
Yes, one can easily argue the SEC’s unprecedented run of success began with great hires. Hiring the right man is the challenge that faced 13 BCS conference schools this offseason. The coaching climate today is a harsh one. Patience is a word lost in among an administration’s vernacular. The days of the five-year plan are long gone. Turner Gill lost his desk nameplate after just two seasons in Lawrence, Kansas, and 27 out of 120 FBS schools (22.5%) made coaching changes this offseason.
Therefore, it’s only natural I provide you with my hit and miss predictions for each of the 13 BCS schools who have hired a new coach for 2012. A second opinion is provided by friend and fellow sports media colleague, Brent Beaird.
13. Todd Graham – Arizona State
Analysis: Where or where have our principles ventured off to? Used to be that we valued honor and commitment. Yet when a man (term used loosely) like Todd Graham is able to climb the collegiate ranks, one wonders what has happened to “The Golden Rule.” Yes, I’m fully aware that Graham led Rice, a perennial doormat, Rice, to a 7-6 record in 2006. That his 36-17 mark at Tulsa was a marginal uptick over Steve Kragthorpe’s 29-22 in the four years prior there, and finally that his 6-6 standing at Pitt this past season did little to under or overwhelm. Yet I must wonder aloud about the quality of the message we’re sending the very young people that Graham is supposed to be mentoring. What’s being conveyed is that in life, you win at all costs, that you may break protocol if it suits you, that one can show not an ounce of gratitude and/or loyalty yet still find promotion around every corner. Here’s a coach who left Rice only a few days after being rewarded with an extension and a significant raise, who left Pitt after but one season via a text to an assistant coach, who then had to relay the impersonal communication method to the players. I struggle not to stoop to name calling when discussing Graham. I’ve often been told, “You get what you give.” That said, perhaps the nation’s most notorious party school and Todd Graham are a perfect fit. Grade: F Rank: 13/13.
Brent’s Second Opinion: Todd Graham of Arizona State-Graham has a lot of trust to build after leaving two schools in a six-year period after only one year Grade: (D+) Rank: 13/13
12. Bill O’Brien – Penn State University
Analysis: A hearty congratulations is in order to Bill O’Brien, former offensive coordinator of the New England Patriots, for he has managed to significantly out kick his coverage. To use an all-too common analogy, O’Brien represents the “average joe” who just landed a supermodel. Upon witnessing a couple such as this walk into an establishment, everyone in the place is thinking the same thing – “There goes a guy who owns a plane.” But I’m not here to hate. It could work out for the “We Are Penn State-ers” in Happy Valley. I’m just not sure that it will. Penn State managed to find itself in the tenuous position of a “grass is always greener dumper,” failing to realize what it had until it was gone, then in total desperation, accepting the first smiling face that took a flier. This past season, O’Brien was seen throwing a sideline temper tantrum at “The Franchise,” Tom Brady, one in which Brady took the high road but O’Brien’s reputation never fully recovered from. And while his 14 years as an assistant and an offensive coordinator in the college ranks don’t leave his resume bare, of all offensive coordinators either active or inactive with four plus years of experience dating back to 2001, only three have engineered offenses that averaged fewer than 30 points per game. Grade: D+ Rank: 13/14
Brent’s Second Opinion: Bill O’Brien of Penn State-Don’t forget he had 14 years of experience at Georgia Tech, Maryland and Duke. Grade:(C) Rank: 10/13.
11. Tim Beckman – Illinois
Analysis: In the landscape of college football today, seemingly every “have not” football program treks across the desert looking for the next Urban Meyer. And without fail, at introductory press conferences, athletic and PR departments do a yeoman’s job convincing you they’ve found him. For me to offer the full-fledged “Beckman Buy-In,” however, I need a more thorough body of work than what presently appears on Beckman’s resume:
- All of three years of head coaching experience at Toledo.
- A record of 21-16, leaving before the bowl game in ’11.
- Offenses that averaged 33ppg, defenses that gave up 32.
It is the opinion of the author that the MAC and their intra-conference competition provides a level playing field among the 13 member institutions. Therefore, an average coach should win as many as he loses in this league. Beckman’s three-year mark does little to move the proverbial needle, although if one can look past the small sample size, 16-9 in the final two campaigns does offer some hope. Whether Beckman can achieve success in a conference with the history and prestige of the Big 10 is an entirely different and unanswered question. Grade: C Rank: 11/14
Brent’s Second Opinion: Tim Beckman of Illinois-Beckman has valuable coaching experience as the head man at Toledo and from working with Meyer at Bowling Green Grade: (B-) Rank:8/13.
Marc Ryan is a sports talk radio personality in the Florida Panhandle. You can follow him on Twitter: @marcryanonair.
Guest Author: Taylor King of ChuckOliver.net
Dan Radakovich and Paul Johnson must sit in their respective offices at 150 Bobby Dodd Way and shake their heads in disbelief. They look out at Bobby Dodd Stadium and must wonder how they are going to fill the seats next season. Not only does it look bad for recruiting and player morale, The Institute is losing millions of dollars. And with the “Big 3” games-Clemson, Virginia Tech and UGA-on the road this year, the revenue loss for the upcoming seasons has to be a hot topic for the Athletic Director and Head Football Coach with no solution in sight.
If you look at the 2011 football season, Tech lost just over $2.3 million in tickets sales at home football games alone. How did I come up with such a figure? Tech sold 337,622 of the potential 385,000 seats for its 2011 home games (87%.) With an average ticket price of $50 multiplied to the difference of 47,378 empty seats, a figure of around $2,368,900 in revenue lost can be attributed to seats that were not purchased during the season.
That is astronomical if you think that the number does not include any monies lost in concessions or merchandise sales. The ticket office even ran a few deals during the year which include the three for $99 for select ACC home games and the four tickets, four drinks, four hotdogs and a media guide for $100 for the Family Weekend game against UNC.
So what is it going to take for fans to start showing up? Click to keep reading…
Guest author: Dr. Michael Lorenzen
Dr. Michael Lorenzen is the principal owner of Collegiate Athletics Strategy Advising, a firm that provides advisement services to collegiate athletics administrators.
This is the second part of a two-part series on Memphis’ move to the Big East. You can read Part 1 here.
The Big East is one of the older and more established conferences, though it does not have the weighty history of some of its more senior BCS brethren. It is also distinguished by the nature of its origin–it was founded primarily to be a gathering of basketball affiliated schools.
However, much of the last thirty year history of the conference has been characterized by a nearly annual ritual of wrestling with a vision for how to be successful in football as a complimentary activity to its primary mission. There has always been an inherent tension within the conference as a result of its diversity, with the much smaller, largely private institutions that have long since given up on football at odds with the needs of the larger, all-sport schools that aspire to financial freedom through football.
The result of the football dilemma has been a regular acquisition of schools from lesser conferences that have become virtual farm teams for the power conferences seeking expansion. For example, nine current members of the Big East have moved over from C-USA, which is also the victim of Memphis’ departure. With consolidation and stability seemingly having arrived for the Big Ten, the Pac 12, the Big 12, the SEC and the ACC, it is left to the remaining conferences to find a path to financial sustainability with a model that does not rely upon 100,000 seat stadiums, monolithic regional fan bases, 100 year old rivalries, and geographic isolation from professional sport competitors.
While Conference USA and the Mountain West appear to be on the verge of a full merger for all sports that would span the nation, perhaps the Big East has stumbled into a strategic evolution that will create a unique and sustainable competitive position for the future, albeit with a model that is distinct from the traditional power conferences. “Stumbled” because it is hard to look at the Big East’s rejection of the $1 billion offer from ESPN prior to the loss of valuable football properties like Syracuse, Pitt, and West Virginia as a brilliant tactical move in retrospect, but it may yet work out.
If we let go of all preconceived notions of what an intercollegiate athletic conference should be, and accept the premise that they are really the ultimate expression of college sports as a fully commercial entertainment enterprise, then it may be possible to define this new position that the Big East will occupy. As an example, there was a day when media outlets were largely independent or collected into groupings of common geography, size, vision, editorial bent, etc. Technology, economics and culture dictated that at some point consolidation entered the picture and the geographic footprint expanded as media conglomerates bought up smaller players, diversified their offerings, and gobbled up greater share of more markets.
It is not inconceivable that a similar transition will work for athletic conferences. The power conferences have tremendous share in local markets, and they have tremendous fan and alumni bases across the country that boost ratings in even the largest media markets. But they don’t have much of an actual, local presence in those media markets. The SEC has Atlanta, Orlando, New Orleans…and not much else. The Big 12 has Dallas…and not much else. The Big 10? Chicago. The Pac 12? Los Angeles, San Francisco, Phoenix…and not much else.
Those conferences are largely comprised of schools located in small college towns that benefit from their isolation and the lack of competition for attention with professional sports franchises. They are attractive in a regional and sometimes national sense to big media players and sponsors because of their national fan bases, the highest level of performance (great recruits follow big budgets and media glory) great marketing and branding, and a love of big-stage tradition among sports followers. But they don’t have significant local representation in any of the major media markets.
At the other end of the media spectrum, the 2015 iteration of the Big East will have access to more than 30 million television households and a presence in major media markets unmatched by any other conference. It will also have the advantage of national representation that creates some interesting possibilities on the programming front. Picture a Saturday football lineup of four sequential games, no overlaps, running from morning into the wee hours.
While no one will argue that teams ranked in the 40s and 50s will generate the kind of buzz that the Red River Shootout or Ohio State vs. Michigan do every year, perhaps there is a cumulative benefit to having a number of competitive teams in a variety of large markets that advertisers and sponsors will find compelling. If football almost becomes a loss leader that attracts media customers who are interested in being a part of the nation’s most powerful basketball conference, with the biggest basketball attendance, most of which is happening in major urban centers, maybe the Big East will have carved out a unique and interesting niche in the market place.
The new conference will have remarkable diversity in size of institutions, public and private status, cultural norms, levels of spending, and academic standards. The majority of them have no historic rivalries within the conference and may have non-conference matches that have greater appeal to fans than brand new rivalries. The non-revenue sports are surely to face economic challenges with increased travel expenses and the football and basketball players will almost certainly have more missed class days as they traverse the country during conference play.
The uncertainty of the future of the BCS automatic berth could present a major hit in both prestige and financial terms. The loss of the automatic $22 million payout and the potential of another $6 million for a second team would be painful.
But Memphis has the opportunity to contribute to this new conference model in some meaningful ways that might help explain why they are a good acquisition. The Tigers did qualify to five bowl games from 2003-08 and have enough of a foundation and history that they could be competitive in football. The Tiger basketball program lends significant prestige and instant rivalry possibilities within the region. It also places the Big East on the doorstep of both SEC and Big 12 country, which may open some recruiting doors for northeastern and midwestern schools.
If the Big East can package all of the diversity and unique features of their membership and sell it well to an oversaturated college basketball market, then there could be additional upside that might eventually match the $15 – 20 million annual upside realized by the other conferences. Added on to a $40 million current budget for Memphis and you’re in the range where schools seem to have the ability to suddenly turn their athletic entertainment business into a serious generator of profits that could ultimately be self-sustaining. That is the pot of gold for which every athletic director pines and if it all works out, RC Johnson and the Big East Commissioner will look like geniuses.
Today, NCAA Division I institutions will begin voting to decide whether Division I schools can offer student-athletes multi-year scholarships. In October, the NCAA’s Division I board of directors voted to allow schools the option to grant their student-athletes multi-year scholarships. Previously, coaches and athletic departments could only offer student-athletes one-year renewable scholarships. This practice was criticized by student-athletes and some members of the general public, after some student-athletes’ scholarships were not renewed for the course of their entire education. However, the NCAA has frequently defended the practice, arguing that athletic scholarships are merit-based scholarships, and If a student-athlete doesn’t perform at the level expected, then the school should have the option to not renew the scholarship.
Numerous schools voiced disapproval of the multi-year scholarship measure. Largely, this disapproval was based upon these schools’ findings that the measure would provide athletics departments with bigger budgets with an additional bargaining chip to sway recruits’ commitments. Essentially, dissenters argue that the measure would create an unfair balance of power, since some schools would be able to offer multi-year scholarship offers, whereas schools with smaller budgets would be unable to present the same multi-year scholarship offer. Opponents argue that this would create a recruiting windfall for wealthier athletic departments, as a recruit would be more likely to sign a National Letter of Intent with a school offering a multi-year scholarship, as opposed to a school offering a renewable one-year scholarship. The strong opposition to the measure ultimately led to this week’s vote. If 5/8 of Division I members vote to overturn the proposal, Division I schools will return to the single-year scholarship rule and will not be allowed to offer multi-year scholarships.
The NCAA board of director’s initial approval of the multi-year scholarship plan arguably was put into motion by a 2010 Department of Justice antitrust investigation into the single-year scholarship rule. However, neither substantial legal movement nor recommendations were made by the Department of Justice is this regard.
Also in 2010, the NCAA faced an antitrust lawsuit filed by former Rice football player, Joseph Agnew, after his football scholarship was not renewed. The lawsuit filed by Agnew against the NCAA was ultimately dismissed with prejudice (meaning that he cannot refile it) in September 2011 by the United States District Court for the Southern District of Indiana. The court granted the NCAA’s motion to dismiss the case, because Agnew’s amended complaint “. . . failed to allege anti-competitive effects on a discernable market.”
Given the court’s rationale for dismissing Agnew’s amended complaint, proponents of multi-year scholarships may say that the lawsuit only failed because of pleading errors on the part of Agnew’s attorney. Thus, they would argue that single-year scholarships in fact violate antitrust law, and a properly plead complaint would demonstrate such.
While that argument may be raised by future plaintiffs seeking to prove that single-year scholarships violate antitrust law, future plaintiffs were arguably given another tool when the NCAA granted Division I institutions the right to offer multi-year scholarships. Previously, the NCAA dictated that schools could only offer single-year scholarships. Thus, even though it had the resources to, School A’s top football program could not offer a student-athlete a multi-year scholarship. Similarly, School B, a regional school with lesser resources, only offered a renewable single-year scholarships during the recruiting process. Thus, because the former rule was applied equally across the board, it was arguably more difficult for student-athletes to assert their opportunities for receiving the most competitive scholarship offer were thwarted by the single-year scholarship rule. This is due to the fact, that under the rule, the only “compensation” available to student-athletes was single-year, renewable scholarships.
With the adoption of the multi-year scholarship plan by the NCAA board of directors last fall, that argument likely flew out of the window. This is due to the fact, that some Division I football coaches made multi-year scholarships part of their recruiting package this year. Reports indicate that top football programs, including, Auburn and Ohio State, offered recruits from the class of 2012 multi-year scholarships. In offering multi-year scholarships, the point has been proven that there is competition for student-athletes’ on-field performance outside of single-year, renewable scholarships. Namely, student-athletes this year found that they could also receive multi-year scholarships in exchange for signing a National Letter of Intent with a given school.
Should Division I members vote to rescind the NCAA’s multi-year scholarship plan, the multi-year scholarship offerings which have transpired may be used by future plaintiffs to argue that a single-year scholarship rule violates federal antitrust law. Because multi-year scholarships have now been rewarded, if the NCAA membership revokes the multi-year scholarship plan, potential plaintiffs have a factual basis to argue that their ability to compete for the best scholarships available to them has been harmed. Now, future plaintiffs can point to instances where certain schools were willing to offer multi-year scholarships over single-year scholarships. Clearly, a multi-year scholarship is of greater benefit to a student-athlete. As such, if a school is willing to offer multi-year scholarships, but is not allowed to because NCAA membership decides to revoke the multi-year scholarship plan, future plaintiffs may potentially assert successful antitrust claims.
When determining whether to rescind the NCAA’s multi-year scholarship plan, voting Division I members should consider how the legal nature of the conversation has changed as a result of some member institutions offering multi-year scholarships this year, with the approval of an NCAA measure. These schools must consider if this factual basis is such that in the future, plaintiffs may be able to successfully assert antitrust claims against the NCAA for a single-year scholarship rule. If they find that it is, Division I membership should think twice before voting to overturn the NCAA board of director’s measure.
Guest author: Dr. Michael Lorenzen
Dr. Michael Lorenzen is the principal owner of Collegiate Athletics Strategy Advising, a firm that provides advisement services to collegiate athletics administrators.
Let me take a devil’s advocate approach and put forward the hypothesis that the Big East’s acquisition of Memphis is exactly that–another transaction in the merger & acquisition activity of a major corporate entity (the Big East) whose primary mission is to maximize returns to its shareholders (member schools) and develop a sustainable, defendable competitive position in the marketplace.
From a strictly analytical and benchmarking basis, Memphis fits right in with the Big East in a variety of ways. The graphic below includes four different pieces of data that support the case the Memphis is a good fit:
(Click on the graphic to enlarge)
The Y axis represents the 2011 annual budget for each athletic department that will be in the 2015 Big East (all data from the EADA cutting tool: http://ope.ed.gov/athletics/). One inch of width represents $78 million and the schools are aligned from the smallest on the left to the largest budget on the right. Basketball-only schools are blue, football-only schools are green, and all-sport schools are red, except for Memphis which is pinkish to stand out.
The X axis on the left (and the height of the bars) represents annual spending per student-athlete, which is a reasonable reflection of how well a department is able to support the number of teams and athletes they have. The X axis on the right (the placement of the black dots) represents the number of television households in the relevant media market for each school.
By all of these measures, Memphis more or less hits the middle of the road for the Big East and should fit right in. The only notable outlier is Memphis’ spending per student-athlete–at $101,518 that puts makes them third in the conference, behind only Marquette and Louisville and significantly ahead of the median of $79,369. This would appear to be driven by the relatively small size of teams at Memphis compared to the rest of the conference.
Some other benchmarks of note further support the Tigers’ fit with their new home. The median undergraduate enrollment for Big East institutions is 12,674 and Memphis has 12,833 students. The median Big East school has 492 student-athletes and 15 teams, while Memphis has 411 student-athletes and 16 teams, so the school apparently has smaller teams on average . The Tigers are right at or near the median in terms of number of total teams (16), total department revenues ($41.7MM), and total department profit ($0).
The same holds true if you look at measures that indicate the relative role of athletics on campus, including the number of enrolled students per student-athlete (Memphis is exactly at the Big East median at 31.2) and the money the department spends per enrolled students on campus ($3,251 for Memphis and $3,223 for their new conference).
In terms of the sports that drive the economic engine, Memphis also fits the Big East mold in a general sense. The Tigers are underachievers in football, ranked near the bottom of Division I both in competitive record (116th) and average attendance (93rd). The Big East is not known for outstanding football, but the median school still performs at a higher level on the field (median ranking of 53rd) and at the ticket office (213,905 tickets sold in 2011 versus Memphis’ anemic 120,470). Big East schools tend to spend in the $15 – 20 million range on football and generate some surplus or at least break even, but they’re far from the powerhouses who create surpluses that are in some cases larger than the entire budget for many Big East schools.
While the conference would certainly like all members to perform like Houston and Boise State did in the 2011 season, they appear willing to accept very average performance that is enough to meet the bare minimum of Division I standards for success. To move into the middle of the pack in the conference, Memphis will likely need to invest an additional $4 million or so, which would likely generate at least a neutral/break even return. Cincinnati, for example, spends a little more than $11 million and showed a profit of over $2 million last year.
In the world of men’s basketball, however, Memphis enters the nation’s most powerful conference in a leadership position and brings a great deal to the table. Only Louisville drew more fans (458K vs. Memphis at 318K) and finished the year ranked higher (3rd vs. Memphis at 8th) in the 2011 season. Memphis spends and generates more than $1 million more per year on basketball than the median Big East school and should start their tenure as a legitimate threat for a conference title with no additional investment. Given the intense and vocal lobbying by coaches like Rick Pitino for Memphis, it is likely that Memphis basketball will only improve in terms of its ability to attract investment and top flight recruits.
The financial attraction of the move for Memphis is largely driven by the incremental revenue they will realize from the next projected Big East media rights deal. Several months ago the conference turned down a $1 billion offer from ESPN that would have generated roughly $100 million per year for the conference. There is no imminent deal to replace the $200 million 6 year contract that will be up soon and the loss of regional football powers like Pitt, Syracuse, and West Virginia is probably not going to be balanced by the addition of San Diego State, Boise State, Memphis, and Navy. Nonetheless, even a low-ball new arrangement that is not on the same scale as the Pac 12, SEC, or Big 10 will still be a considerable improvement over the alternative that Memphis would have had by staying in Conference USA.
Here are the gory financial details for Memphis. There is an entry fee to Big East of $2.5 million that is to be taken out of revenues from the future TV deal over a five year period, so that’s money that Memphis won’t see but doesn’t have right now anyway. There is also an exit fee from Conference-USA that includes a $500K flat fee and $6.1 million in TV rights.
Memphis AD RC Johnson points out that all sport programs in Big East received $8.6 million last year, more than $5 million greater than the C-USA equivalent payout. Assuming that margin is maintained as both conferences negotiate newer and inevitably larger contracts, Memphis will gain at least $5 million per year from from the media rights deal alone. Over five years that nets out to $9.1 million in entry and exit fees (assuming none of that gets negotiated down) compared to $25 million in increased revenue. Even if Memphis increases their annual football budget by $4 million per year, they’re still significantly ahead of the game after 5 years without considering any other potential financial windfalls.
Another critical resource will be the NCAA men’s basketball tournament payout. The Big East earned $26.1 million in 2011, which yielded $1.6 million for each of the 16 schools. By comparison, C-USA only garnered $5.5 million for their performance. While you would not want to make an investment on an assumption of the Big East teams performing at the same historic level every year, it is safe to say that Memphis will likely net an additional $1 million per year from the tournament even after dividing the spoils a bit more with a slightly larger membership.
Check back tomorrow for Part 2, where Dr. Lorenzen takes a look at whether this addition makes sense for the Big East.
Author: Chadd Scott of ChuckOliver.net
I have long been a proponent of expansion for the ACC. I feel the league’s addition of Pittsburgh and Syracuse position it for long-term strength and growth while maintaining and building upon its on and off-field culture and excellence. I understand this opinion is not shared by most, perhaps even many, particularly those who view college sports only in the prism of present-day football success. I am willing to listen to these arguments when well-made.
The level of absurdity in opposition to ACC expansion reached a new high on February 6th with this tweet from the usually outstanding college football reporter Bryan Fischer of CBSSports.com:
If the ACC only gets $1-2 million per school, then expansion definitely wasn’t worth it.
Fischer’s figure comes from reporting done by the Sports Business Journal in an article you can read here. I’m not debating the figure, although my educated guess would be that spread is on the low side; what I take huge exception with is Fischer’s use of the word “only” in connection with that sum and his belief ACC expansion was a bust because of it.
Fischer has worked hard to build a reputation as a valued contributor to the national college football conversation and his ignorant choice of the word “only” followed by an equally ignorant opinion – and I like this guy – poisoned conversation on social media as fans picked up this opinion and parroted it widely.
Fact: in college athletics an additional $1-2 million per year for any school, especially any ACC school, is a princely sum. If this figure turns out to be accurate it will 100% validate ACC Commissioner John Swofford in his choice both to expand and who to invite. This figure stands as a game-changer for every athletic department in the ACC.
In all of college sports there are only 22 self-sustaining athletic departments. These athletic departments support themselves financially with no outside state funding, student fees (of which ACC schools are a major offender), or university subsidies. Of those 22 schools only one is an ACC member: Virginia Tech. The most current data available shows the Hokies clearing $968,000 in one fiscal year from athletics.
That should be all the evidence I need to present in making my case. That 11 out of 12 current ACC members either lose money or rely on handouts to run their athletic departments proves conclusively what a huge difference an extra $1-2 million per year to them would mean. For a complete look at the financial picture in the ACC follow this link for team-by-team football revenues, expenses, profits and athletic department profits. Athletic departments in the ACC exist on surprisingly narrow margins.
- Look at the fiscal year 2011-’12 budget for North Carolina, one of the most successful, popular and well-known athletic departments in the country. For this school year the Tar Heels expect to have a $200,001 net revenue from athletics – and that includes receiving more than $7,000,000 million in fees!
- In fiscal year 2008, Georgia Tech posted a $3.4 million operating loss in the athletic department. In fiscal year 2009 and 2010, respectively, the athletic department saw profits of $306,508 and $284,117 (source www.businessofcollegesports.com).
- From the Orlando Sentinel, “the administration at Florida State University formally approved on Friday an athletic department budget of slightly less than $55 million for the 2010-11 academic year…Florida State’s 2010-11 athletic department budget calls for total revenues of $44.3 million…To balance the budget, FSU will rely on a $10.7 million contribution from Seminole Boosters, Inc.”
- In the case of the Maryland Terrapins, it’s financial picture in athletics was so bleak theUniversity eliminated eight varsity sports this fall. For a detailed look at how grim the Terps’ financial picture is, read this report commissioned by the school’s president. Again, this revenue shortcoming exists despite almost $14 million in university or government support and student fees.
Do you think the Heels, Jackets, Noles or Terps view 1-2 million additional dollars per year as an “only” figure? If your boss gave you a raise that multiplied your take home pay by five times, would you say the raise was “only” quintupling your salary?
A report in the Washington Post regarding Maryland and linked above states, “According to the report, it will cost $11.6 million to fund eight years of men’s and women’s swimming, $9.5 million to fund men’s track and acrobatics and tumbling, and $8 million to fund water polo and men’s tennis.” Eleven-point-six million dollars to fund eight years of men’s and women’s swimming means combined both programs cost roughly $1.45 million to fund annually. Hmm. That figure sounds familiar. Oh yea, it’s smack dab in the middle of the “only” amount Maryland stands to benefit from ACC expansion.
That is how this discussion needs to be framed. What does $1-2 million per year, per institution mean to the ACC schools? It means being able to fully fund three non-revenue sports. And perhaps here is where most college sports fans take a wrong turn. College athletics includes more than football and men’s basketball, the profitable sports. It also includes women’s basketball, baseball, softball, men’s and women’s tennis, track, soccer, volleyball, golf, swimming and diving, lacrosse, field hockey and a handful of other sports, all of which make no money and spend considerably. Football and men’s basketball pay for all the other sports which drag down the bottom line profitability for athletic departments.
Fans always think about money colleges bring in from TV rights deals for football and the NCAA men’s basketball tournament, but never consider the huge amount of money going out. And remember, the astronomical billion dollar figures reached in those deals with ESPN or CBS or Fox are contracted out over 10 or 20 years and must be split evenly among all conference member institutions. Those pie pieces become small in a hurry.
The reality in college athletics is university presidents and athletic directors hustling every day to find new revenue streams and pump-up those which already exist. As the competition for top student-athletes and coaches becomes more fierce, as the facilities arms race escalates, as the cost of winning increases, every dollar, let alone every million, is valuable. The university presidents know this and it was the university presidents who voted on Swofford’s plan for expansion, their vote – unanimously in favor.
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It seems like almost weekly that a story arises about a coach banning players’ use of social media websites or about student-athletes making controversial remarks on websites like Twitter. Given the commonality of these stories in this social media age, BusinessofCollegeSports.com reached out to numerous Division I athletics departments to learn what type of social media policies their departments have adopted. The following demonstrates how some of the top athletic departments in the nation are allowing their student-athletes to utilize social media.
Athletics Department Allows Use of Social Media
Teams Restricting Social Media Use
|Arizona’s Director of Athletics Greg Byrne said, “Student-athletes must register their accounts with our compliance department. We talk with them regularly about what they post.”|
|Football student-athletes are not allowed to use Twitter and are told to make their Facebook accounts private.||Boise State’s Assistant Athletic Director of Media Relations Max Corbet said, “There is not a department policy. It is pretty much left up to each individual head coach.”|
|FSU’s Assistant Athletic Director/Sports Information Director Elliott Finebloom said, “We try to educate [student-athletes] on the positives and negatives of engaging in various social media platforms.|
|Georgia’s Assistant Sports Communication Director Kate Burkholder said, “Our feeling on this is that we make it as clear as possible that they are accountable for what they share, and they shouldn’t make any comments they wouldn’t make if they were getting interviewed on SportsCenter. This year our media training team (outside company) incorporated a lot of social media etiquette into their lesson. Every team goes through this training regardless of the level of exposure the team receives. Any further policies are left up to the coaches, but generally speaking, our policy is to educate and monitor rather than to ban.|
|While individual coaches are allowed to determine whether their student-athletes can use social media, none have prevented their student-athletes from using social media.||Kansas’ Associate Athletics Director for Communications and Media Relations Jim Marchiony said, “Kansas Athletics has a general student-athlete policy regarding how individuals are expected to present the university. . . Student-athletes’ use of social media falls under our general student-athlete conduct policies.”|
|While the athletics department adopted a “Use of Social Networking Policy” last year, it encourages the use of social media by its student-athletes.||In 2010, football coach Butch Davis banned the use of Twitter when UNC was under NCAA investigation. However, new football coach Larry Fedora is not banning the use of Twitter.As of two weeks ago, women’s basketball coach Sylvia Hatchell banned the use of Twitter so that her team can focus on basketball.||UNC’s Associate Athletic Director for Communications said, “We have a policy that was put into place last year, the Use of Social Networking Policy. There are guidelines and a monitoring component. Each sport has a designated coach or administrator who monitors social media. Each student-athlete who wishes to participate in social media, which we encourage, has to accept the monitor as a friend on Facebook, or the monitor must follow them on Twitter.|
|Each sport sets its own social media guidelines.||Ohio States’ Associate Athletics Director for Communications Dan Wallenberg said, “Our student-athletes are not restricted from using social media, however each team has the discretion to establish rules and penalties as they see fit.”|
|Oklahoma’s Assistant Director for Communications said, “We allow our student-athletes to participate in social media. Our coaches do not have a ban on them.”|
|Each sport sets its own social media guidelines.||One Oklahoma State coach (unidentified by the university) doesn’t allow student-athletes to use social media.||Oklahoma State’s Associate Athletic Director for Media Relations Kevin Klintworth said, “Our policies vary between programs. We have one coach that doesn’t allow social media at all. Most of them do as long as coaches are “friends” or “followers.”|
|Certain teams restrict student-athletes’ use of social media. Last season, Coach Spurrier didn’t allow the football team to use Twitter during the season so they could focus on football. Players were allowed to resume use after the season.||South Carolina’s Media Relations Director Steve Fink said, “We aim to educate [student-athletes] with guidelines and tips for using these sites wisely.”|
|TCU’s Assistant Athletics Director for Media Relations Mark Cohen said, “TCU student-athletes are permitted to use Facebook and Twitter. Each sport at TCU sets its own social media guidelines. No sports at TCU have banned the use of Facebook or Twitter.”|
|USC’s Sports Information Director Tim Tessalone said, “We work hard to educate [student-athletes and coaches] on the proper use of social media.”|
|Each sport sets its own social media guidelines. However, no coach has banned the use of social media by student-athletes.||Wisconsin’s Director of Athletic Communications Brian Lucas said, “I know that Coach Bielema [football] deals with his players on a case-by-case basis. If he has an issue with something a student-athlete has posted, he deals with the student-athlete one-on-one as opposed to imposing limitations on the team.|