Author Archives: bcsguestwriter

Television Contract Breakdown – Updated

One of the most popular posts in the history of BusinessofCollegeSports.com was Kristi Dosh’s post breaking down the television contracts in each AQ conference. She’s updated that post over on ESPN.com with the news of the ACC’s new deal. 

Who Really Pays to Play? The role of student fees

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. He’s also a frequent guest contributor to BusinessofCollegeSports.com.

A rather important benchmark for intercollegiate athletics was established recently, albeit a bit under the radar in lovely San Diego, CA.  The undergraduate student body at the University of California, San Diego (UCSD) was given the opportunity to vote on something called the Division I Student Scholarships Referendum, which would have increased student fees by $165 per quarter in order to fund a transition for the athletic program (ICA) from Division II to Division I (http://as.ucsd.edu/ica/).  The status quo ICA operating fee was already $119.78 per quarter and the referendum would have raised it to $284.78.  Almost a third of the increase was slated to be set aside for financial need programs, but the remaining $117.15 was all for support of athletics. Without any other visible means to support the transition, the undergrads were being asked if they would put up the millions of dollars necessary to step up and swim in the bigger pool of the NCAA.

The referendum came at a time when the state of California is in a deep financial hole and continuing to slash support for higher education.  Every school in the Cal State and University of California system has felt the impact and been forced to confront difficult new operating realities.  From 2010 to 2012, UCSD lost $70.5 million in state funding, which resulted in some pretty serious hardship for the school, including painful budget cuts to things like library funding and postponement of faculty recruitment.  Student fees in other areas have been raised on an annual basis and the amount of debt incurred by undergrads has jumped more than $3,000 over the last decade after inflation (http://as.ucsd.edu/docs/ICA_Election_Results_2012.pdf).

Asking the undergraduates to pay for expensive athletics has been a trend in the last decade in California and it has largely been viewed favorably by the students who vote.  One could argue that the undergrad who approves such a tax are often deciding to pass on a fee that will affect future students much more than themselves, but there has been a consistent majority urge from students to invest in having better athletics on their campuses.  Without their willingness to go further into debt, mid-tier NCAA institutions find themselves in an ever-greater bind as the cost of competing rises, just as state support for universities is declining.  And, perhaps more importantly, just as the wealth often associated with collegiate athletics is increasingly concentrated in the small number of schools that generate profits from athletic operations.

According to the NCAA (http://www.ncaapublications.com/productdownloads/2010RevExp.pdf), “a total of 22 athletics programs in the FBS [Football Bowl Subdivision] reported positive net revenues for the 2010 fiscal year, which represents an increase from the 14 reported in 2009”.  This refers to the 120 big-time, major conference programs that have the greatest opportunity to reap the rewards of corporate sponsorships and media contracts.  The largest such school generated $143.6 million, which was a staggering $108 million more than the median generated revenue for schools of that level at $35 million.  Granted, that number one contender also spent $130 million that year, but the median spending of those who were trying to keep up with the Joneses was $46.7 million.  The net of all that math is that the “median negative net generated revenue”–a nice euphemism for bleeding cash–for the 98 FBS schools that lost money was just under $10 million.  The authors of the report noted excitedly that in the previous year schools lost on average a little more than $10 million each, so that must be good news.  Unless you’re the AD who is trying to figure out where to come up with that $10 million.

The story is similar at the next level down in the NCAA, the Football Championship Subdivision (FCS).  For those schools the “median negative net generated revenue” was $9.2 million and was consistently rising across the country.  The scarier number is that the median generated revenue was only $3.3 million and there is little potential for those schools to find big paydays on the scale of their Pac 12, Big 10, or SEC brethren.  The annual losses are nearly as big as the FBS schools but there is even less opportunity for filling that gap without turning to the one pot that every administrator seems to think is infinitely refillable–student fees.

UC Davis (UCD) began planning for a transition from Division II to Division I for the same set of basic reasons that UCSD looked at the issue–surely such a large school better fits the profile of the big Division I institutions than little Division II schools with 25% as many students on average.  In the first stage of the Davis process students passed the Facilities and Campus Enhancement Initiative (FACE) in February 1999 that resulted in an $18 per quarter increase in student fees (http://daviswiki.org/move_to_division_i).  Next up was the 2002 Campus Expansion Initiative (CEI) that elevated student fees by $120 per quarter for undergrads and $22 for grads.  The bill was passed by 54% (http://daviswiki.org/Campus_Expansion_Initiative) with the funds from that bill dedicated to a variety of campus projects, but almost half of it in order to provide for $4 million per year in grants-in-aid for athletics.  In spite of those increases, by 2010 UCD announced it was eliminating four sports to save money and that another student fee increase had not been enough to fund the scale of a Division I program that the student body now found themselves effectively owning (at one point student fees accounted for 75% of the athletic department’s budget).

The same financial pinch motivated similar “asks” by administrations of other universities in California.  In May 1999, UC Irvine students approved a $33 hike per quarter to help fund athletic scholarships.  In April 1998, UC Santa Barbara students approved a $9 per quarter increase and in June 1998 UC Riverside students voted to pay an additional $35 per quarter.

On the surface, and given the trend with state schools in California, to many folks I’m sure the decision in San Diego appeared to be a no-brainer.  Like UC Davis, UCSD is by far larger than the average Division II university, has several teams that already compete at the Division I level (volleyball and water polo), and does fit the profile of the other large institutions in the UC system in California in many ways.

Nonetheless, what UCSD does not have (nor was it proposing to add) is the economic engine that pulls the athletic train in the form of a Division I football team.  It also does not have a local culture of rabidly supportive and passionate UCSD community-based fans.  But perhaps most importantly, the undergraduate student body appears to believe that they’re paying quite enough for their education and have no desire to pay an additional $1,980 over the course of their four years for the privilege of having higher profile and larger scale competitive sports teams.  In the final tally of voting on the Referendum, 11,407 students turned out and they voted a fairly resounding no, with 57% saying they did not want the referendum to pass (http://as.ucsd.edu/docs/ICA_Election_Results_2012.pdf).

It is difficult for many faculty and students to stomach the idea of increasing fees to pay for athletics at a time when the fit of intercollegiate athletics on campus is ever more tenuous.  Are student-athletes still students and is the function of athletics still well-integrated with the academic mission of higher ed institutions?  You can find plenty of critics who will say no.

But on the other side of the equation, there is the undeniable buzz and passion associated with March Madness. Students at Norfolk State University (NSU) pay $1,379 per year in athletic student fees, which fund 83% of the school’s $10 million athletic budget.  Do the NSU Spartan faithful feel like they got a good return on their investment when their men’s basketball team, a #15 seed, made history and knocked off mighty Mizzou, a #2 seed, in the first round of the NCAA Tournament?  How about when Florida crushed the Spartans in the game 48 hours later by 34 points to end the Norfolk State season?

Whatever they feel after such extraordinary wins and painful losses, the non-athlete student on campus is going to be asked to bear more of the burden of maintaining collegiate athletics.  Their willingness to do so will have a significant impact on the future of the intercollegiate athletic enterprise.

Moneyball Meets March Madness

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. He’s also a frequent guest contributor to BusinessofCollegeSports.com.

As we approach the most exciting and intense time of year for collegiate basketball, the amount of attention and financial stakes associated with March Madness should give collegiate athletic administrators an opportunity to reflect on the state of their programs.  Universities invest millions of dollars in basketball coaches and the dream of making it into the NCAA Tournament.  With 68 spots and 344 schools it seems as if there are many opportunities for schools to participate in the dance.

The financial challenges of maintaining basketball are not quite as frightening as football, given that teams carry a fifth of the players, have fewer coaches, and proportionately smaller scale needs for things like training facilities, equipment and recruiting.  Chartering airplanes multiple times per week can get pricey, but basketball doesn’t raise the same kind of red flags for administrators that the overwhelming price tag of big time football does.  It also holds out the promise of prominence and profit with Cinderella stories and quick turnarounds that are more difficult to find in football.

Nonetheless, there is real and substantial money involved and the coaching carousel will go into full swing as athletic directors evaluate what’s happening with the one program in their portfolio that has the potential to make money (at least for the 224 schools that don’t have Division I football).  As one athletic director recently asked me to start creating a potential candidate pool, I thought it might make sense to take an analytical swing at evaluating what kind of value various coaches bring to their schools.

Part of the genius of “Moneyball” was the application of well-considered statistics to a field of performance in a way that was very different than the norm practiced by insiders in the baseball world.  Billy Beane and others found ways to optimize their investment in players by considering tangible, quantifiable contributors to value that were nonetheless not the sorts of things that baseball people consider.

With college coaches, the metrics most people point to are win-loss records, post-season appearances, championship wins, and, to a lesser degree, academic performance.  In order to dig a little deeper, I pulled together some easily research-able measures that would indicate objectively the kind of value that coaches contribute.  I included number of wins, Sagarin rating, total compensation (including bonus), attendance, and program profitability (total revenues minus total expenses), all using data from the 2011 season.  I experimented with different weights and could easily be convinced to adjust them, but for the purposes of this analysis I used the following:

Wins               20%

Sagarin          10%

Attendance   15%

Profitability    55%

I made an effort to scale each measure up or down to create comparable ranges (e.g. wins are in the 20 range and salaries are in the millions), so wins were multiplied by 10,000 and Sagarin by 3,300.  That yielded what I’ll call a “performance value”, which was a number in the millions for most programs.

To evaluate the value that each coach brought, I then applied that performance value number to the compensation number, yielding a “performance value per dollar of compensation”.  All of that math ended up yielding numbers that ranged from a high of 4.97 (Jim Boeheim at Syracuse) to a low of .05 (Leonard Hamilton at Florida State) for the 68 teams that were in the 2011 Tournament and have publicly available salary data for their coaches (10 did not).

Granted that a snapshot from a single season is not statistically compelling compared to a trend over several years, but given the short time horizons under which coaches often operate the results still reveal some interesting conclusions.

The first slide, below, looks at some of the iconic coaches in the NCAA–all men who one might predict to deliver outstanding value given their records and salaries.

All had fairly successful seasons from a competitive, profitability, and attendance perspective and their value numbers give an idea of what “good” performance might look like.

Next up we have the top 10 performers, which tells a different story than that of the icons listed above.

The reason that all of these coaches have dramatically higher value ratings than their iconic colleagues is mostly that their salaries are substantially lower (with the exception of Sean Miller at Arizona).  They deliver significant value in terms of wins, attendance, and overall profitability of their programs but they take a much smaller piece of the upside for themselves.  If I’m an athletic administrator, my interpretation is that they are generating a very good return for my investment in them.

Finally, if I am an administrator at a small school with limited resources, I might look for coaches who are delivering good value in return for compensation that fits within my budgetary parameters.  Here is the list of the top 10 value coaches who made less than $250,000 in 2011:

Eddie Biedenbeck had a remarkable year and the administration at UNC-Asheville should be tickled with the overall value that he and his team delivered.  There is a nice grouping of coaches ranked #32 to #42, all of whom would cost a school less than $200,000 per year and still have the potential to deliver value.  It is worth noting that the scale of that value in terms of gross profits or attendance will not be comparable to what a Duke or Syracuse might seek.  However, if you’re representing a school with an overall budget that is a fifth or less of those universities, you might do well to focus on terrific value as a starting place for your coaching search.

C-USA/MWC Merger a Flawed Idea Doomed to Fail

Guest Author: Chadd Scott of ChuckOliver.net

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

Georgia Tech Fans Costing Athletic Department Millions

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…

Does Memphis to the Big East Make Sense? (Part 2)

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.

Does Memphis to the Big East make sense? (Part 1)

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.

ACC “Only” Adding Extra $1-2 Million Yearly in Expansion

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.

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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51-100 Most Profitable FBS Football and Basketball Programs

Over the past week, we’ve posted financials for every football and men’s basketball program in the FBS, with the exception of the military academies. Here are the links: ACCBig XIIBig EastC-USABig TenMACPac-12SECSun BeltMountain West and WAC. Yesterday we presented the Top 50 most profitable FBS football and men’s basketball programs.

Below you will find the 51-100 most profitable programs. The “% Invested” column shows how much of the specific sport’s revenue goes back into that specific sport.

Please read below before viewing the financials.

About the data: All of the data is from reports each school files with the US Department of Education. It is the only available data for both public and private universities. However, there can be variances in how each school chooses to report data. For example, each school can decide for itself whether to break out television revenue by sport or leave it in a generic revenue category, which causes variances. After speaking with dozens of schools the most common practice appears to be attributing the majority of television revenue to football and a portion to basketball. The most common split is 65/35.

There are also variances from year-to-year, so be careful when comparing this data to last year’s data. For example, Florida State’s football program showed a gain of approximately $14 million from ’09-’10 to ’10-’11. When contacted for comment FSU explained that in ’10-’11 they broke out contributions by sport, which they hadn’t done previously.

Although far from perfect, this data is the only available data for all Division I programs (with the exception of the military academies). We just want to make you aware of the possible variances and will let you draw your own conclusions.

Please note: we did not rank non-AQ schools last year, so those schools will not show a rank for ’09-’10.

10-11 Rank 09-10 Rank School 10-11 Revenue 10-11 Expenses  10-11 Profit  % Invested
51 62 Kansas State (Football) $19,731,620 $10,867,052 $8,864,568 55.07%
52 56 Northwestern Univ. (Football) $28,198,769 $19,430,675 $8,768,094 68.91%
53 60 University of Texas (Basketball) $16,437,705 $8,195,360 $8,242,345 49.86%
54 45 Indiana Univ. (Football) $24,230,741 $16,112,930 $8,117,811 66.50%
55 40 Univ of Arizona (Football) $25,448,212 $17,965,169 $7,483,043 70.60%
56 50 Michigan St. (Basketball) $16,479,208 $9,263,945 $7,215,263 56.22%
57 44 Georgia Tech (Football) $22,557,020 $15,463,243 $7,093,777 68.55%
58 66 Univ of California, Berkeley (Football) $24,328,784 $17,398,649 $6,930,135 71.51%
59 58 Univ. of Tennessee (Basketball) $13,785,893 $6,863,233 $6,922,660 49.78%
60 24 West Virginia University (Football) $19,960,732 $13,230,226 $6,730,506 66.28%
61 100 Oklahoma State (Basketball) $12,262,241 $5,658,993 $6,603,248 46.15%
62 52 North Carolina State (Basketball) $10,490,494 $3,947,120 $6,543,374 37.63%
63 67 Northwestern (Basketball) $11,018,639 $4,577,278 $6,441,361 41.54%
64 54 University of Pittsburgh  (Basketball) $13,574,317 $7,181,490 $6,392,827 52.90%
65   UNLV (Basketball) $10,123,168 $3,806,508 $6,316,660 37.60%
66 71 Univ. of Kentucky (Basketball) $18,557,243 $12,355,375 $6,201,868 66.58%
67 128 Vanderbilt Univ.  (Football) $22,455,110 $16,507,997 $5,947,113 73.52%
68 63 Purdue Univ. (Football) $18,359,413 $12,420,742 $5,938,671 67.65%
69 81 University of Missouri (Basketball) $11,084,210 $5,391,400 $5,692,810 48.64%
70 68 Marquette (Basketball) $15,568,569 $10,348,303 $5,220,266 66.47%
71   Boise State (Football) $12,950,605 $7,834,316 $5,116,289 60.49%
72 55 Univ of California, Los Angeles (Football) $23,017,910 $17,913,658 $5,104,252 77.82%
73 47 Univ. of Arkansas (Basketball) $14,608,513 $9,548,135 $5,060,378 65.36%
74 65 Univ of California, Los Angeles (Basketball) $11,621,364 $6,702,818 $4,918,546 57.68%
75 69 Maryland (Basketball) $10,965,638 $6,062,659 $4,902,979 55.29%
76   BYU (Football) $15,664,108 $10,764,814 $4,899,294 68.72%
77 64 Univ of Washington (Basketball) $10,474,040 $5,702,562 $4,771,478 54.44%
78 80 Penn St. (Basketball) $9,485,900 $4,851,361 $4,634,539 51.14%
79 78 University of South Florida (Football) $17,017,821 $12,657,523 $4,360,298 74.38%
80 79 Univ. of Alabama (Basketball) $11,016,184 $6,819,080 $4,197,104 61.90%
81 98 Purdue (Basketball) $9,396,189 $5,204,365 $4,191,824 55.39%
82 89 Michigan (Basketball) $9,154,689 $5,102,129 $4,052,560 55.73%
83 70 Georgia Tech (Basketball) $8,543,269 $4,625,109 $3,918,160 54.14%
84 35 University of Missouri (Football) $24,694,807 $20,806,778 $3,888,029 84.26%
85 82 Stanford University (Football) $19,521,092 $15,888,069 $3,633,023 81.39%
86 86 Washington State (Football) $12,741,698 $9,193,553 $3,548,145 72.15%
87 75 Wake Forest (Basketball) $8,261,666 $4,773,315 $3,488,351 57.78%
88 84 Univ. of Georgia (Basketball) $8,718,363 $5,253,434 $3,464,929 60.26%
89 94 Texas A&M (Basketball) $9,786,655 $6,340,072 $3,446,583 64.78%
90 111 Duke University (Football) $18,243,589 $14,837,825 $3,405,764 81.33%
91 95 Clemson (Basketball) $7,705,630 $4,417,665 $3,287,965 57.33%
92 72 Univ. of South Carolina (Basketball) $7,849,818 $4,618,566 $3,231,252 58.84%
93   Army (Football) $8,839,775 $5,620,774 $3,219,001 63.59%
94 77 Virginia Tech (Basketball) $7,858,609 $4,782,477 $3,076,132 60.86%
95   Cal State – Fresno (Football) $10,059,929 $7,040,523 $3,019,406 69.99%
96   Wyoming (Football) $8,677,505 $5,770,034 $2,907,471 66.49%
97 88 Univ. of Mississippi (Basketball) $7,175,223 $4,270,576 $2,904,647 59.52%
98 85 Mississippi State Univ. (Basketball) $6,914,565 $4,052,623 $2,861,942 58.61%
99   Utah (Basketball) $6,220,172 $3,516,570 $2,703,602 56.53%
100 57 West Virginia University  (Basketball) $7,968,819 $5,333,891 $2,634,928 66.93%

We’ve also created a comprehensive chart with comparisons to ’09-’10: Top 51-100 Most Profitable Programs 10-11 (.pdf)

Top 50 Most Profitable FBS Football and Men’s Basketball Programs

Over the past week, we’ve posted financials for every football and men’s basketball program in the FBS, with the exception of the military academies. Here are the links: ACCBig XIIBig EastC-USABig TenMACPac-12SEC, Sun Belt, Mountain West and WAC.

Below you will find the top 50 most profitable programs. We’ll post 51-100 later today. The “% Invested” column shows how much of the specific sport’s revenue goes back into that specific sport.

Please read below before viewing the financials.

About the data: All of the data is from reports each school files with the US Department of Education. It is the only available data for both public and private universities. However, there can be variances in how each school chooses to report data. For example, each school can decide for itself whether to break out television revenue by sport or leave it in a generic revenue category, which causes variances. After speaking with dozens of schools the most common practice appears to be attributing the majority of television revenue to football and a portion to basketball. The most common split is 65/35.

There are also variances from year-to-year, so be careful when comparing this data to last year’s data. For example, Florida State’s football program showed a gain of approximately $14 million from ’09-’10 to ’10-’11. When contacted for comment FSU explained that in ’10-’11 they broke out contributions by sport, which they hadn’t done previously.

Although far from perfect, this data is the only available data for all Division I programs (with the exception of the military academies). We just want to make you aware of the possible variances and will let you draw your own conclusions.

10-11 Rank 09-10 Rank School 10-11 Revenue 10-11 Expenses  10-11 Profit 
1 1 University of Texas (Football) $95,749,684 $24,507,352 $71,242,332
2 3 Penn State Univ. (Football) $72,747,734 $19,519,288 $53,228,446
3 2 Univ. of Georgia (Football) $74,888,175 $22,036,338 $52,851,837
4 6 Louisiana State Univ. (Football) $68,510,141 $21,492,741 $47,017,400
5 4 Univ. of Michigan (Football) $70,300,676 $23,552,233 $46,748,443
6 5 Univ. of Florida (Football) $72,807,236 $26,263,539 $46,543,697
7 7 Univ. of Alabama (Football) $76,801,800 $31,580,059 $45,221,741
8 12 Notre Dame (Football) $68,782,560 $25,164,887 $43,617,673
9 8 Univ. of Tennessee (Football) $56,831,514 $19,135,650 $37,695,864
10 9 Auburn Univ. (Football) $76,227,804 $39,069,676 $37,158,128
11 17 Univ. of Arkansas (Football) $61,131,707 $24,059,193 $37,072,514
12 10 University of Oklahoma (Football) $58,811,324 $23,191,402 $35,619,922
13 13 University of Nebraska (Football) $54,712,406 $20,147,302 $34,565,104
14 18 Texas A&M (Football) $45,414,074 $15,560,216 $29,853,858
15 16 Michigan State Univ. (Football) $45,040,778 $17,420,499 $27,620,279
16 21 University of Louisville (Basketball) $40,887,938 $13,336,649 $27,551,289
17 14 Ohio State Univ. (Football) $60,837,342 $34,373,844 $26,463,498
18 15 Univ. of Iowa (Football) $44,506,832 $20,510,807 $23,996,025
19 11 Univ. of South Carolina (Football) $45,464,058 $22,482,479 $22,981,579
20 19 Univ. of Kentucky (Football) $34,020,276 $14,352,110 $19,668,166
21 22 Univ. of Wisconsin (Football) $43,296,599 $23,662,925 $19,633,674
22 20 Oklahoma State (Football) $33,213,396 $13,787,271 $19,426,125
23 27 Univ of Washington (Football) $39,405,237 $21,306,380 $18,098,857
24 99 Florida State Univ. (Football) $35,870,789 $18,689,809 $17,180,980
25 30 Univ. of Illinois (Football) $28,079,694 $12,910,507 $15,169,187
26 29 Duke (Basketball) $28,917,329 $13,819,529 $15,097,800
27 26 Virginia Tech (Football) $35,083,799 $20,009,657 $15,074,142
28 33 Univ of Arizona (Basketball) $21,209,980 $6,918,239 $14,291,741
29 28 Clemson Univ. (Football) $31,730,042 $17,992,943 $13,737,099
30 25 Univ. of Minnesota (Football) $30,524,945 $16,985,182 $13,539,763
31 31 North Carolina (Basketball) $19,672,012 $6,510,942 $13,161,070
32 34 Ohio St. (Basketball) $17,020,807 $5,251,724 $11,769,083
33 48 Univ of Southern California (Football) $31,148,724 $19,423,723 $11,725,001
34 41 Syracuse University (Basketball)  $19,017,231 $7,532,455 $11,484,776
35 51 Univ. of North Carolina (Football) $26,385,760 $15,050,721 $11,335,039
36 37 Arizona State (Football) $27,842,879 $16,564,598 $11,278,281
37 76 Mississippi State Univ. (Football) $22,575,985 $11,766,024 $10,809,961
38 38 Texas Tech (Football) $26,569,287 $15,788,943 $10,780,344
39 23 Univ. of Mississippi (Football) $28,515,471 $17,764,174 $10,751,297
40 36 North Carolina State (Football) $21,856,742 $11,329,718 $10,527,024
41 90 University of Louisville (Football) $25,658,653 $15,582,161 $10,076,492
42 42 Wisconsin (Basketball) $16,353,313 $6,394,547 $9,958,766
43 46 Indiana (Basketball) $17,804,586 $7,945,102 $9,859,484
44   Utah (Football) $21,235,202 $11,426,280 $9,808,922
45 43 Illinois (Basketball) $15,408,818 $5,630,297 $9,778,521
46 32 University of Colorado (Football) $25,955,136 $16,308,544 $9,646,592
47 49 Minnesota (Basketball) $15,141,713 $5,549,650 $9,592,063
48 39 Univ of Oregon (Football) $27,713,278 $18,198,476 $9,514,802
49 53 Oregon State (Football) $21,690,794 $12,282,221 $9,408,573
50 61 Iowa State (Football) $21,862,535 $12,513,317 $9,349,218

We’ve also created a comprehensive chart with comparisons to ’09-’10: Top 50 Most Profitable Programs ’10-’11 (.pdf)