The Big East’s Lawsuit Against TCU

Today in the United States District Court for the District of Columbia, the Big East filed a lawsuit against TCU.  The lawsuit alleges a cause of action for breach of contract based upon TCU’s decision to not join the Big East, as it agreed to in 2010, and rather, move to the Big 12 by way of the Mountain West Conference.

The brief lawsuit filed by the Big East (the pleading is only six-pages long) notes that on November 29, 2010, the Big East and TCU entered into a membership expansion agreement, whereby TCU was invited to become a full-conference Big East member with all fourteen of its sports beginning on July 1, 2012.  According to the Big East, per the membership expansion agreement, the parties agreed that if TCU did not join the conference on July 1, 2012, the Big East would be damaged.  According to the pleadings, the parties could not specify the exact amount by which the Big East would be damaged if TCU did not join the conference.  However, in the membership expansion agreement, the parties apparently agreed that the Big East would be damaged by a reasonable estimate of $5 million if TCU did not join the conference on July 1, 2012.  Additionally, the Big East claims that in the membership expansion agreement, TCU agreed to pay the Big East this estimated damage amount of $5 million if it failed to join the conference by July 1, 2012.

In the complaint, the Big East alleges that on October 6, 2011, TCU “reneged” on the membership expansion agreement by announcing that it would instead join the Big 12 Conference on July 1, 2012.  Subsequent to this announcement, the Big East asked TCU to pay it the $5 million estimated damages amount per the membership expansion agreement.  According to the Big East’s lawsuit, “. . . TCU has refused to make that payment or acknowledge its obligation to do so.”  As such, the Big East alleges that TCU has breached the membership expansion agreement and the Big East is seeking monetary damages in the amount of $5 million, attorney’s fees, costs and other relief as the court deems appropriate.

It is to be seen whether the Big East’s lawsuit will stand up in court.  However, from the outset, there appears to be several issues with it.  First, TCU will likely argue that a claim is not ripe at this point.  In the legal world, a case must be “ripe” in order for a court to hear it, meaning that an actual controversy exists.  Here, it is arguable that this case is not ripe, as it was filed on June 11, 2012–which is before TCU was set to join the Big East and before it joined the Big 12.  Thus, albeit unlikely, TCU could still join the Big East, which would mean that it did not breach its contract with the Big East.  As such, TCU will likely argue that this lawsuit should be dismissed because it is not ripe.

The Big East has plausible arguments against the dismissal of the case for ripeness.  The Big East can argue that TCU’s actions, such as announcing its intention to join the Big 12 and its athletic director’s acknowledgement that TCU would have to pay the Big East a sum of money for not joining the conference, constitute an anticipatory breach of contract.  While the breach of contract technically has not occurred, since July 1, 2012 has not passed, the Big East can nonetheless assert that it believes TCU will fail to perform its part of the contract.  Under the legal theory of anticipatory breach, the Big East can terminate the contract and sue TCU for damages.  This would counteract TCU’s ripeness argument.

The other glaring issue with the Big East’s lawsuit is its calculation of damages.  In the lawsuit, the Big East first noted that both parties “. . . acknowledged and agreed that. . . damages would be difficult to determine if TCU did not follow through on its agreement to join the Big East on the Effective Date. . . ”  Damages based upon an event that may occur in the future which are “difficult to determine” are called “speculative damages.”  TCU will likely argue that the damages are speculative, because in contract cases like the one at hand here, speculative damages cannot be recovered by a plaintiff.  However, one exception to this rule exists.  That exception provides that plaintiffs can recover damages up to an amount that is reasonably likely to occur if the occurrence causing the speculative damages is reasonably likely to occur.  In this instance, because it appears that the parties agreed upon the $5 million damage amount in the agreement, it is arguable that the reason causing the speculative damages (i.e. TCU not joining the Big East) was reasonably likely to occur and that $5 million was the amount by which the Big East would be reasonably damaged.  Given this, it appears that the Big East can also successfully argue against a defense raised by TCU that the $5 million prayer for relief amounts to speculative damages.

Overall, it is likely that a jury will find in favor of the Big East.  However, the question remains as to whether a jury will award the full $5 million in damages the Big East has requested.  This lawsuit should serve as guidance for other universities testing the conference realignment waters.  Universities seeking to move to a new conference should fully investigate their options, so they do no agree to join one conference only to join another and face the risk of a lawsuit later.

Should the ACC and Big East Create Their Own Bowl Game?

With the current BCS contract set to expire at the end of the 2013 season, the landscape of college football is set to change in the coming months.  In the last few weeks, the SEC and Big 12 announced that they will be creating their own bowl game, in which each conference’s champion will play, beginning in 2014.  While it is unclear what this new bowl game means to the Fiesta Bowl (in which the Big 12 champion currently plays) and the Sugar Bowl (in which the SEC champion currently plays), it is possible that both of those bowls could continue to exist after 2014.  Additionally, the bowl would likely be joining the Rose Bowl (played by the Big Ten and Pac-12 champions) and the Orange Bowl (played by the ACC champion). 

Furthermore, it is expected that in coming months, BCS commissioners will vote to approve a four-team playoff system as a modification to the current BCS system.  This four-team playoff will pit the number-one and number-four seeds and the number-two and the number-three seeds in two playoff games before contending for the National Championship game.

Given that beginning in 2014, the SEC and Big 12 champions will meet in a bowl game as will the Pac-12 and Big champions, while four teams compete for the opportunity to play in the National Championship game, should the Big East and ACC join forces to create their own bowl game?

There are two real reasons for the ACC and Big East to adopt their own bowl game:  1.  To ensure that their teams have a national stage to play a bowl game on and 2.  To earn revenue.

In considering whether creating a new bowl game is necessary for the ACC and Big East to ensure that their teams play a bowl game on a national stage, one factor to consider is the likelihood of either team’s conference playing in the four-team playoff.  A brief overview of the teams ranked number-one through number-four since the founding of the BCS in 1998 provides some guidance as to the likelihood of ACC or Big East teams competing in the four-team playoff set to begin in 2014.

Year	#1	#2	#3	#4
1998-99	Tennessee	FSU	Kansas State	Ohio State
1999-00	FSU	VA Tech	Nebraska	Alabama
2000-01	Oklahoma	FSU	Miami	Washington
2001-02	Miami	Nebraska	Colorado	Oregon
2002-03	Miami	Ohio State	Georgia	USC
2003-04	Oklahoma	LSU	USC	Michigan
2004-05	USC	Oklahoma	Auburn	Texas
2005-06	USC	Texas	Penn State	Ohio State
2006-07	Ohio State	Florida	Michigan	LSU
2007-08	Ohio State	LSU	VA Tech	Oklahoma
2008-09	Oklahoma	Florida	Texas	Alabama
2009-10	Alabama	Texas	Cincinnati	TCU
2010-11	Auburn	Oregon	TCU	Stanford
2011-12	LSU	Alabama	Oklahoma State	Stanford

The only current Big East member to have been ranked in the top-four in the college football regular season standings since the founding of the BCS is Cincinnati.  Granted, Miami and Virginia Tech were both ranked in the top-four several times during their Big East tenure, however, those teams both play in the ACC now.  Thus, when looking at the entirety of teams ranked in the top-four during the BCS’ history, it would appear that the Big East needs a partnership with the ACC, much more than the ACC needs a partnership with the Big East.

However, the fact of the matter remains, that in the last three years, Cincinnati was the only school out of either conference to be ranked in the top-four at the end of the college football regular season.  Thus, by creating their own bowl game, the conferences would ensure that their respective champions would be on a national stage during a bowl game after 2014.

Thus, the next question to address, is can the ACC and Big East draw a positive amount of revenue from a bowl game?  This question, unfortunately, is not as easy to answer.  The ACC and Big East in recent years have been known more so for the talented basketball teams they field than their football prowess.  That is not to say, that each team does not have football teams which fans would travel to watch.  However, could the conferences find enough fans to travel to a bowl game to ensure its profitability?

Perhaps UConn’s appearance in the Fiesta Bowl in Tempe, AZ is an indicator as to if, and how far, fans are willing to travel for bowl games in which their teams appear.  UConn was required to sell 17,500 tickets for the event.  Six days before the bowl game, it had only sold 4,600.  Reports indicated that the school would incur the cost of the unsold tickets.  Would Big East fans be more inclined to travel to bowls closer to home?  If so, could such an endeavor be a revenue generator for the Big East and ACC?

While the ACC and Big East could benefit from joining forces to create a new bowl game, they should only do so if it is held at a location in close proximity to the bulk of each conference’s largest fan base.  Additionally, the conferences should only enter into a bowl agreement after surveys are completed determining each conference’s fan base’s commitment to paying for and attending the bowl game.  If the interest is not strong and definite, then each conference would be better off attempting to compete for one of four-team playoff seeds.

Boston College Hockey’s National Championship Victory and Development Fundraising

In the last five years, Boston College has secured its spot as home of one of the most dominant Division I hockey programs.  In the last five years, the Eagles have won the Division I hockey championship three times.  Their most recent win came last weekend, when Boston College defeated Ferris State 4-1.

How has this surge in the hockey team’s prowess benefited fundraising for development?  Steve Novak is Boston College’s Assistant Athletics Director for Athletic Development.  When asked whether the recent Division I hockey championship would boost donations, Novak provided the following insight:

“Our hockey program has achieved such heights over the years that one year or one championship does not necessarily influence overall giving in a noticeable way.  However, I can certainly attest to the fact that the consistent performance and leadership under Jerry York has influenced any number of donors and/or gifts to BC Athletics.  We have seen several gifts directed to hockey over the years to support scholarships or other expenses.  Often, these donors cite the great pride they have when they root for BC Hockey.”

In an age in which football and basketball dominate the college athletics headlines–two sports which are present on Boston College’s campus–it speaks loudly to the talent of Boston College’s hockey team that a number of donors specifically direct funds to the hockey team’s development.

Given the hockey team’s frequent presence in the Frozen Four and national championship game in recent years, the question arises as to whether Boston College capitalizes upon the appearances as opportunities to fundraise.  Novak indicated that Boston College, “do[es] a lot of stewardship around special events like Frozen Fours or bowl games.  We have not chosen to do specific fundraisers.  It is more of an opportunity to say ‘thank you’ to those who helped us get to this point through their ongoing and past support.”

Along with funding scholarships for student-athletes, Novak and members of his athletics development staff fundraise to build new facilities or improve existing facilities.  In 2007, Boston College opened the doors to the $27 million Yawkey Athletics Center.  According to Novak, “This was the first building on campus to be 100% privately funded.”  Going forward, Boston College will break ground soon on a baseball and softball complex on its Brighton Campus.  Additionally, according to Novak, the athletics department “. . . also make[s] several facility improvements each year throughout our athletics facilities.  These otherwise ‘small’ items add up to be significant expenses.  However, it is extremely important to put our best foot forward.  The aesthetic improvement over the last several years is noticeable.  Athletics is certainly not the most important aspect of the University, but it often is the most visible.” 

The success of its hockey team and the work of its athletics department and development staff in recent years gives Boston College fans much to cheer about.

Highest Net Income Amongst Athletics Departments

To conclude this week’s series, BusinessofCollegeSports.com will list in order the athletics departments earning the highest net income  in 2010-11.

Issue has been raised by some over the classification of revenue minus expenses in this series as “profit,” since athletics departments are nonprofit organizations.  It should be noted, that in the disclosures to the Department of Education, the athletics departments do not report either profit or net income.  Rather, they report their revenues and expenses.  For this series, profit/net income was calculated by subtracting the total expenses reported from the total revenues reported.

As noted above, the data was obtained from the Department of Education and is for 2010-11.  The data from the Department of Education is by no means perfect.  Throughout this series, net income was calculated by subtracting the “grand total expenses” from the “grand total revenues” that the athletic department reported to the Department of Education.  Expenses in this instance included:  head and assistant coach salaries, athletically related student aid, recruiting expenses, operating (game-day expenses) and “not allocated” expenses.  The expenses faced by athletic departments, however, may be greater than those reported in this snapshot provided by the Department of Education.  For example, an athletic department may have capital expenses outside of those expenses included in the report.  This all being said, this data is the only data publicly available for both public and private institutions.  Thus, it at least provides some insight into athletic department revenues, expenses, and net income before taking into consideration additional expenses, like capital projects.

In 2010-11, 48 athletics departments in BCS AQ conferences generated a positive net income.

School	Athletic Department Net Income	Conference
Alabama	$31,684,872.00	SEC
Penn State	$31,619,687.00	Big Ten
Michigan	$26,649,499.00	Big Ten
Texas	$24,317,815.00	Big 12
Kansas State	$23,395,408.00	Big 12
Notre Dame	$19,147,710.00	Big East
Ohio State	$18,630,964.00	Big Ten
Oregon	$16,433,642.00	Pac-12
Oklahoma State	$14,365,376.00	Big 12
Michigan State	$13,512,269.00	Big Ten
Arkansas	$11,285,623.00	SEC
LSU	$10,401,982.00	SEC
Florida	$10,056,601.00	SEC
Georgia	$9,575,569.00	SEC
Oregon State	$954,682.00	Pac-12
Oklahoma	$8,064,477.00	Big 12
Purdue	$6,773,110.00	Big Ten
Mississippi State	$6,306,583.00	SEC
Virginia	$6,038,664.00	ACC
Vanderbilt	$5,767,543.00	SEC
Iowa	$5,296,068.00	Big Ten
Indiana	$5,293,816.00	Big Ten
Nebraska	$5,170,608.00	Big Ten
Virginia Tech	$4,314,760.00	ACC
Louisville	$3,952,601.00	Big East
Auburn	$3,484,657.00	SEC
Texas A&M	$3,224,429.00	Big 12
Texas Tech	$3,124,246.00	Big 12
Kentucky	$3,122,674.00	SEC
Miami	$2,763,826.00	ACC
Washington	$2,330,501.00	Pac-12
Illinois	$1,815,596.00	Big Ten
Colorado	$1,763,633.00	Pac-12
Arizona	$1,524,374.00	Pac-12
Utah	$1,147,160.00	Pac-12
South Carolina	$762,726.00	SEC
Syracuse	$717,817.00	Big East
North Carolina	$660,231.00	ACC
Wisconsin	$655,421.00	Big Ten
Duke	$567,207.00	ACC
Maryland	$263,711.00	ACC
Clemson	$216,318.00	ACC
North Carolina State	$192,151.00	ACC
California	$181,167.00	Pac-12
Missouri	$143,588.00	Big 12
Iowa State	$121,686.00	Big 12
Connecticut	$94,522.00	Big East
Tennessee	$14,447.00	SEC

In previous posts from this series, you’ll remember that every Big Ten athletics department ranked in the top-50 for revenues and expenses.  However, neither Minnesota nor Northwestern achieved a net income above zero.

The conference with the highest percentage of members having a positive net income was the SEC.  All but one SEC member (Ole Miss) generated a positive net income in 2010-11.  The SEC was also home to the athletics department with the highest net income of any BCS AQ school, Alabama.  However, the ten schools generating the greatest net income in 2010-11 are from a mix of conferences.  The only conference not represented in the top-10 is the ACC.

Conference	# of Athletics Departments	% of Conference
ACC	8	50%
Big 12	8	80%
Big East	4	25%
Big Ten	10	83.33%
Pac-12	7	58.33%
SEC	11	91.60%

Top-50 Largest Athletics Department Spenders

This week, BusinessofCollegeSports.com showed you the revenues, expenses and net income of athletics departments in the BCS AQ conferences.  To conclude this series, BusinessofCollegeSports.com is ranking the top-50 athletics departments with the highest revenues, expenses and net income.  In this installment, we will show you which athletics departments spend the most.

The data was obtained from the Department of Education and is from 2010-11.  While this data is not perfect, it is the only data publicly available for both public and private institutions.

School	Athletic Department Expenses	Conference
Texas	$125,978,117.00	Big 12
Ohio State	$113,184,855.00	Big Ten
Florida	$112,951,656.00	SEC
Tennessee	$102,480,757.00	SEC
Auburn	$100,497,784.00	SEC
Oklahoma	$96,274,366.00	Big 12
LSU	$96,019,689.00	SEC
Michigan	$95,836,991.00	Big Ten
Wisconsin	$92,939,345.00	Big Ten
Alabama	$92,225,560.00	SEC
Iowa	$87,607,487.00	Big Ten
Florida State	$86,946,503.00	ACC
Penn State	$84,498,339.00	Big Ten
Louisville	$83,783,719.00	Big East
South Carolina	$82,941,941.00	SEC
Georgia	$82,765,498.00	SEC
Kentucky	$81,755,641.00	SEC
Stanford	$81,125,476.00	Pac-12
Arkansas	$80,482,490.00	SEC
Minnesota	$78,924,683.00	Big Ten
Nebraska	$78,509,148.00	Big Ten
USC	$75,707,273.00	Pac-12
Notre Dame	$75,360,209.00	Big East
Virginia	$72,400,342.00	ACC
Texas A&M	$71,719,872.00	Big 12
North Carolina	$70,709,553.00	ACC
Kansas	$70,028,683.00	Big 12
Washington	$69,306,426.00	Pac-12
Oregon	$67,900,835.00	Pac-12
Michigan State	$67,450,913.00	Big Ten
Duke	$67,418,981.00	ACC
UCLA	$66,003,893.00	Pac-12
Indiana	$64,878,825.00	Big Ten
California	$64,825,171.00	Pac-12
Boston College	$64,078,272.00	ACC
Connecticut	$62,948,800.00	Big East
Clemson	$60,958,659.00	ACC
Baylor	$59,859,235.00	Big 12
Purdue	$59,293,193.00	Big Ten
Missouri	$58,862,366.00	Big 12
WVU	$58,003,719.00	Big East
Miami	$57,561,177.00	ACC
Maryland	$57,501,307.00	ACC
Virginia Tech	$56,762,362.00	ACC
Arizona	$56,750,057.00	Pac-12
Northwestern	$56,214,293.00	Big Ten
Pittsburgh	$56,044,309.00	Big East
Oklahoma State	$55,757,830.00	Big 12
Illinois	$55,723,771.00	Big Ten
Arizona State	$55,378,783.00	Pac-12

While 80 percent of the Big 12’s members ranked in the top-50 in terms of revenue generated, only 70 percent ranked in the top-50 for expenditures.  Thus, it is expected that at least several Big 12 members should generate a net income in the black.  Only four Big East members ranked in the top-50 for revenue generated.  However, five Big East members ranked in the top-5o for expenditures (Pittsburgh did not generate enough revenue to make the top-50 list, but is on the top-50 list for expenditures).  Again, every Big Ten athletics department made the top-50 list for expenditures.

The chart below depicts how many places each conference held in the list and the percentage of the conference which made the list.

Conference	# of Athletics Departments	% of Conference
ACC	9	75%
Big 12	7	70%
Big East	5	31%
Big Ten	12	100%
Pac-12	8	67%
SEC	9	75%

Top-50 Highest Athletics Department Revenues

This week, BusinessofCollegeSports.com has shown you the revenues, expenses and net income (profit) of athletics departments in the BCS AQ conferences.  To conclude this series, BusinessofCollegeSports.com will rank the top-5o athletics departments with the highest revenues, expenses and net income.  First up is athletics department revenues.

The data was obtained from the Department of Education and is from 2010-11.  While this data is not perfect, it is the only data publicly available for both public and private institutions.

School	Athletic Department Revenue	Conference
Texas	$150,295,932.00	Big 12
Ohio State	$131,815,819.00	Big Ten
Alabama	$123,910,432.00	SEC
Florida	$123,008,257.00	SEC
Michigan	$122,486,490.00	Big Ten
Penn State	$116,118,026.00	Big Ten
LSU	$106,421,671.00	SEC
Oklahoma	$104,338,843.00	Big 12
Auburn	$103,982,441.00	SEC
Tennessee	$102,495,204.00	SEC
Notre Dame	$94,507,919.00	Big East
Wisconsin	$93,594,766.00	Big Ten
Iowa	$92,903,555.00	Big Ten
Georgia	$92,341,067.00	SEC
Arkansas	$91,768,113.00	SEC
Louisville	$87,736,320.00	Big East
Florida State	$86,946,503.00	ACC
Oregon	$85,740,068.00	Pac-12
Kentucky	$84,878,315.00	SEC
South Carolina	$83,704,667.00	SEC
Nebraska	$83,679,756.00	Big Ten
Stanford	$81,125,476.00	Pac-12
Michigan State	$80,963,182.00	Big Ten
Minnesota	$78,924,683.00	Big Ten
Virginia	$78,439,006.00	ACC
USC	$75,707,273.00	Pac-12
Texas A&M	$74,944,301.00	Big 12
North Carolina	$71,369,784.00	ACC
Washington	$70,231,336.00	Pac-12
Indiana	$70,172,641.00	Big Ten
Oklahoma State	$70,123,206.00	Big 12
Kansas	$70,028,683.00	Big 12
Kansas State	$68,875,266.00	Big 12
Duke	$67,986,188.00	ACC
Purdue	$66,066,303.00	Big Ten
UCLA	$66,003,893.00	Pac-12
California	$65,006,338.00	Pac-12
Boston College	$64,078,272.00	ACC
Connecticut	$63,043,322.00	Big East
Clemson	$61,174,977.00	ACC
Virginia Tech	$61,077,122.00	ACC
Colorado	$60,923,253.00	Pac-12
Miami	$60,325,003.00	ACC
Baylor	$59,859,235.00	Big 12
Missouri	$59,005,954.00	Big 12
Arizona	$58,274,431.00	Pac-12
WVU	$58,003,719.00	Big East
Maryland	$57,765,018.00	ACC
Illinois	$57,539,367.00	Big Ten
Northwestern	$56,214,293.00	Big Ten

Several things stand out in this list.  First, every Big Ten team made the list.  This is notable, as the SEC is typically viewed as the “power conference” when it comes to all things finance.  The SEC had a great showing in the top-50, but only nine of its twelve athletics departments made the list.  The conference with the least athletics departments on the list was the Big East, which only placed four of its members on the list.

The chart below depicts how many places each conference held in the list.

Conference	# of Athletics Departments on List	% of Conference
ACC	9	75%
Big 12	8	80%
Big East	4	25%
Big Ten	12	100%
Pac-12	8	67%
SEC	9	75%

Highest Athletic Department Net Income: Big East

Next up in BusinessofCollegeSports.com’s look into the most profitable athletic departments is the Big East.  Yesterday, BusinessofCollegeSports.com showed you the net income of athletic departments in the ACC, Big 12 and Big Ten conferences.  Today, we’ll wrap up the conferences.  Tomorrow, we will show you the top-50 most athletic departments with the highest net income.

The data was obtained from the Department of Education and is for 2010-11.  The data from the Department of Education is by no means perfect.  Throughout this series, net income was calculated by subtracting the “grand total expenses” from the “grand total revenues” that the athletic department reported to the Department of Education.  Expenses in this instance included:  head and assistant coach salaries, athletically related student aid, recruiting expenses, operating (game-day expenses) and “not allocated” expenses.  The expenses faced by athletic departments, however, may be greater than those reported in this snapshot provided by the Department of Education.  For example, an athletic department may have capital expenses outside of those expenses included in the report.  This all being said, this data is the only data publicly available for both public and private institutions.  Thus, it at least provides some insight into athletic department revenues, expenses, and net income before taking into consideration additional expenses, like capital projects.

 

School	Total Athletic Department Revenues	Total Athletic Department Expenses	Net Income
Cincinnati	$37,367,392.00	$37,367,392.00	$0.00
Uconn	$63,043,322.00	$62,948,800.00	$94,522.00
DePaul	$23,795,916.00	$23,795,916.00	$0.00
Georgetown	$31,671,020.00	$31,671,020.00	$0.00
Louisville	$87,736,320.00	$83,783,719.00	$3,952,601.00
Marquette	$24,797,869.00	$24,797,869.00	$0.00
Notre Dame	$94,507,919.00	$75,360,209.00	$19,147,710.00
Pittsburgh	$56,044,309.00	$56,044,309.00	$0.00
Providence	$20,650,327.00	$20,650,327.00	$0.00
Rutgers	$53,436,027.00	$53,436,027.00	$0.00
St. John’s	$32,289,136.00	$32,289,136.00	$0.00
Seton Hall	$21,785,714.00	$21,785,714.00	$0.00
USF	$43,494,246.00	$43,494,246.00	$0.00
Syracuse	$51,433,840.00	$50,716,023.00	$717,817.00
Villanova	$29,523,919.00	$29,523,919.00	$0.00
WVU	$58,003,719.00	$58,003,719.00	$0.00

Out of all of the BCS AQ conferences, in 2010-11, the Big East had the greatest number of athletic departments which turned a net income of zero.  Twelve of the Big East’s sixteen athletic departments turned zero net income in 2010-11.

The four Big East athletic departments which turned a positive net income in 2010-11 were:  UConn, Louisville, Notre Dame and Syracuse.

Of these four schools, the largest net income was enjoyed by Notre Dame, which it should be noted, is independent in football.  Notre Dame enjoyed net income of $19,147,710.00 in 2010-11.

While Notre Dame’s revenues exceeded those of Louisville, Louisville had greater expenses.  Louisville generated $87,736,320.00 in revenue and had expenditures of $83,783,719.00 in 2010-11.  This allowed Louisville’s athletic department to enjoy a net income of $3,952,601.00.

Is Temple Moving to the Big East?

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?

Recent Success

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.

Football Expenditures

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:

WVU:  $13,230,226.00

Cincinnati:  $11,148,347.00

Louisville:  $15,582,161.00

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.

Recruiting Expenses

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.

Which Schools and Conferences Support Multi-Year Scholarships?

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

Arizona State

Atlantic Coast Conference

Auburn

Big East Conference

Big Ten Conference

UCLA

Connecticut DePaul

Duke

Florida

Georgetown

Georgia

Illinois

Indiana

Iowa

Kentucky

Maryland

Miami

Michigan

Michigan State

Minnesota

Mississippi

Mississippi State

Missouri

Nebraska

North Carolina State

Northwestern

Notre Dame

Ohio State

Oregon

Oregon State

Pac-12

Penn State

Pittsburgh

Purdue

South Carolina

Southeastern Conference

Stanford UCLA USF

Utah

Vanderbilt

Villanova

Wake Forest

Washington

Washington 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

Alabama Arizona Arkansas Baylor

Big 12

Boston College California-Berkeley

Cincinnati

Clemson

Colorado

Florida State

Georgia Tech

Iowa State

Kansas

Kansas State

LSU

Louisville

Marquette

Oklahoma

Oklahoma State Providence Rutgers

USC

St. John’s

Tennessee

Texas A&M

Texas Tech

Texas

Virginia Virginia Tech

WVU

Wisconsin

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.

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.