Category Archives: Finance
Yesterday, the NCAA levied what many consider to be unprecedented penalties upon Penn State. Including within the NCAA’s sanctions, was the imposing of a $60 million fine to be paid by Penn State over the next five years. This $60 million figure is clearly large, leading some to believe that while the NCAA did not impose the “death penalty” upon the football program, it nonetheless intended to decimate it.
How though, will the $60 million fine actually impact the operations of Penn State’s football program and the Penn State athletics department? In the grand scheme of Division I athletics, Penn State has posted impressive revenues in recent years. For 2010-11, the most recent year for which Department of Education data is available, Penn State’s athletics department reported total revenues of $116,118,026.00. The athletics department also reported expenses of $84,498,339.00. While many athletics directors will note that the numbers reported to the Department of Education are not inclusive of every cost incurred by an athletics department, these figures at least give some idea as to the type of budget Penn State’s athletics department is operating under.
That being said, it is arguable that at least when considering the Department of Education data, having to shell out on average $12 million per year over the next five years to comply with the NCAA’s sanctions is not going to destroy Penn State athletics. However, the story is not that simple. One has to take into consideration the multitude of budgetary factors Penn State’s athletics department is likely now facing as a result of the NCAA sanctions. Along with losing sponsors like State Farm and facing a possible credit downgrade by Moody’s, Penn State athletics likely now has to rework its budget to determine where the $60 million is going to come from.
Frank Hardymon is the Associate Athletic Director – CFO at Georgia Tech. While he can only explain the budget planning process engaged in at Georgia Tech, he notes, “I would guess our methods of planning and budgeting are similar to those utilized by other institutions.” This planning begins the spring prior to the July 1 start of the fiscal year, when the upcoming year’s budget is completed. “In our case, nearly every dollar which we project receiving is accounted for in the budget,” Hardymon noted.
Likely, a similar circumstance exists at Penn State. While the Department of Education arguably demonstrates that the athletics department is operating with a surplus, many athletics directors are quick to note that is not the case, as not every expense an athletics department incurs is reported to the Department of Education. As such, Penn State is likely looking towards contingency provisions in its budget to gather the money by which to pay the $60 million fine. “We build in as much contingency as we can every year; some years we may have close to $5,000,000.00 in contingency factors into the budget, other years that amount is quite a bit less,” Hardymon said.
It is unknown whether Penn State’s athletics department had any contingencies built into its budget. If so, it is highly unlikely that the contingency amount would allow for the payment of a $60 million fine. As such, Penn State will likely have to scrape from other areas of its budget to pay the imposed fine. Areas in which Penn State could cut from its budget would likely be from recruiting expenses, travel costs and future coaching salaries. However, the most likely area in which Penn State could draw from is facility improvements. While the department will have to continue paying under the loan terms for already existing improvements, it is unlikely that the athletics department will undertake any new building during the time period in which the fine is being paid. Hardymon noted, “We also maintain a detailed five-year income projection which we update frequently. That analysis factors in projected facility improvements needed during those five years.”
Overall, the financial sanction imposed upon Penn State by the NCAA is indeed a blow to the athletics department. However, given Penn State’s apparent athletics revenue along with proper budgeting moving forward during the next five years, it is likely that the athletics department will be able to continue to function financially.
Yesterday, the Atlantic 10 Conference announced that Butler University would join the conference on July 1, 2012–one year earlier than anticipated. Gaining Butler a year ahead of schedule grants the Atlantic 10 Conference the benefit of competing with 16 member institutions during the 2012-13 school year, before Temple and Charlotte depart the conference. While this is definitely a perk for the conference, perhaps the biggest benefit the conference gains in Butler’s expedited admission is the chance to become a basketball powerhouse.
Although the Atlantic 10 Conference does not receive the same media recognition as BCS AQ conferences, in recent years, the Atlantic 10 has made its name as a conference which is consistently competitive in basketball. Thus, it is no surprise that in selecting new institution members during the course of conference realignment, that the Atlantic 10 has aligned itself with some of the best-performing basketball schools in recent years: Butler and VCU.
Much has been said about the roles that football and television contracts played and continue to play in conference realignment decisions. However, one cannot turn a blind eye to the power of a strong basketball program when it comes to attracting conferences. Although basketball does not have the monstrously large viewership numbers that football does, it does have a wide enough following to garner billion dollar contracts for the television rights to March Madness. On top of the television contract negotiation potential strong basketball programs present, there is also the fact that the greatest portion of the revenue distributed by the NCAA is distributed to conferences based upon their team’s March Madness performance. Given these factors, it is apparent why the Atlantic Ten Conference has based its stake in conference realignment not upon football prowess, but upon basketball.
As noted above, of the revenue distributed by the NCAA to conferences and member institutions, the greatest percentage goes towards something called the “Basketball Distribution Fund.” Conferences receive payouts from the fund based upon their member institution’s performance in the Division I Men’s Basketball Championship over a six-year rolling period. A basketball program earns one unit for each March Madness game they compete in, save for the National Championship game. For the most recent year in which data is available, 2010-11, the NCAA distributed $479 million to conferences and member institutions through the Basketball Distribution Fund. This amounted to 40.5 percent of all revenue distributed by the NCAA in 2010-11.
The follow chart shows the number of Basketball Distribution Fund units that the Atlantic 10 Conference has earned over the last three years. The chart depicts what the conference earned through its actual members’ performances in a given year, and also notes how many additional units that the conference could have earned if Butler and VCU were conference members in a particular year.
|2010||Units Earned||2011||Units Earned||2012||Units Earned|
|Butler||5 + NC||Butler||5 + NC||Xavier||3|
|2010 Total: 3||2011 Total: 6||2012 Total: 7|
|With Butler and VCU: 8 + NC||With Butler and VCU: 16 + NC||With Butler and VCU: 9|
When considering the chart above, the presence of Butler and VCU in the Atlantic 10 clearly generates additional revenue for the conference. In 2010, three Atlantic 10 schools participated in March Madness: Richmond, Temple and Xavier. These schools accumulated three units for the conference. Had Butler been an Atlantic 10 member in 2010, the conference would have nearly tripled its Basketball Distribution Fund units, while also receiving a payout for Butler’s National Championship game appearance. If Butler and VCU were Atlantic 10 Conference members in 2011, the conference would have earned an additional ten Basketball Distribution Fund units and again, received a payout for Butler’s National Championship game appearance. Similarly, in 2012, the Atlantic 10 Conference could have received an additional two Basketball Distribution Fund units had VCU been a member of the conference.
While the amount of revenue generated from basketball contracts and the Basketball Distribution Fund is meager compared to the amount of money football generates, not every conference can woo college football powerhouses to their stables through conference realignment. Thus, what the Atlantic 10 Conference has accomplished through conference realignment is noteworthy. Although it will lose a historically sound basketball program in 2014 when Temple leaves for the Big East, it has replaced that leaving member with two noteworthy programs. Additionally, the Atlantic 10 has attracted two members which in recent years, the general public nationally has been interested in watching. With young, charismatic coaches that also boast successful track records in Brad Stevens and Shaka Smart, Butler and VCU respectively have garnered Cinderella story followings across the country. One can expect the Atlantic 10 to capitalize upon this should either team have similarly successful March Madness runs in the future.
Overall, while the Atlantic 10’s conference realignment path was not driven by football, it appears that the conference has been successful in laying a new foundation for its future.
Yesterday, BusinessofCollegeSports.com gave you an exclusive, in-depth look into Wisconsin’s athletic department revenues. Previously, BusinessofCollegeSports.com reported that per data obtained from the Department of Education, Wisconsin had the 9th highest expenses of all Division I schools. Randy Marnocha, Wisconsin’s Associate AD for Business Operations graciously provided BusinessofCollegeSports.com with in-depth information about Wisconsin’s expenses for 2010-11.
In 2010-11, Wisconsin had operating expenses of $80,855,012.00 and capital expenses of $3,010,174.00.
The chart below depicts the items making up Wisconsin’s $80,855,012.00 worth of operating expenses.
|Salaries & Fringes||$32,919,613.00|
The following account for the $28,519,000.00 Wisconsin spent on “operating expenses” last year: Business travel, team travel, recruiting travel, interview/relocation costs, advertising, concessions/catering resales, team meals/catering/housing, guarantees, equipment maitenance and repairs, building/grounds maintenance and repairs, membership dues (Big Ten Conference, etc.), officials, postage/freight, printing, prizes and awards, equipment rentals, space rentals, medical services, police services, professional services, subscriptions, athletic equipment, building and grounds supplies, medical supplies, office supplies, telephone service, and insurance/property tax.
With respect to debt services, the figure shown above includes the total paid off by Wisconsin on various capital projects. In particular, in 2010-11, Wisconsin paid off $6,723,150.00 on its football stadium, Camp Randall, and $2,571,736 on its basketball and hockey facility, the Kohl Center.
The financial aid amount reflected is composed of the following: Scholarships, tuition remissions, NCAA Opportunity Fund, NCAA Special Assistance and a continuing education fund. The largest expenditure in the financial aid section went toward scholarships, for which Wisconsin spent $9,595,562.00 in 2010-11. Notably, this amount was lower than that which Wisconsin expended on scholarships in 2009-10. In 2009-10, Wisconsin spent $9,389,828.00 on scholarships.
The following chart depicts Wisconsin’s 2010-11 post season revenues and expenses. The revenues and expenses are calculated for all of Wisconsin’s teams which participated in their respective 2010-11 post seasons. Those teams included: Football, men’s and women’s basketball, men’s and women’s hockey, men’s and women’s soccer, softball, men’s and women’s swimming, men’s and women’s tennis, volleyball and wrestling.
|Post Season Revenue||$2,579,248.00|
|Post Season Expenses||$3,738,568.00|
Notably, Wisconsin suffered a loss overall when it came to post season participation in 2010-11. It should be noted, however, that in 2010-11, Wisconsin received a bowl payout of$2,493,258.00 from the Big Ten Conference.
BusinessofCollegeSports.com would like to extend a gracious “thank you” to Randy Marnocha for his assistance with this series and his generosity with his time.
Recently, BusinessofCollegeSports.com wrote that per data obtained via the Department of Education, Wisconsin’s athletic department had revenues of $93,594,766.00 and expenses of $92,939,345.00 in 2010-11. Comparing these numbers to those that other athletic departments submitted to the Department of Education demonstrated that in 2010-11, Wisconsin had the 9th highest expenses and the 12th highest revenues of all Division I athletic departments.
Given the idiosyncracies of the Department of Education data for athletic departments, BusinessofCollegeSports.com followed up with Wisconsin’s athletic department to delve deeper into their budget. Randy Marnocha, Wisconsin’s Associate AD for Business Operations graciously opened up the athletic department budget to BusinessofCollegeSports.com. What follows is an exclusive, in-depth look into Wisconsin’s revenues and expenses.
Today, Wisconsin’s revenues will be examined. Tomorrow, BusinessofCollegeSports.com will post Wisconsin’s athletic department expenses for 2010-11.
The chart below depicts the revenues that Wisconsin reported to both the NCAA and the Department of Education. As BusinessofCollegeSports.com has previously explained, there are differences in these two reports which account for the different revenues that a school reports to each. For instance, Wisconsin does not report utilities to the Department of Education, while that number is reported to the NCAA.
|Revenue||Revenue Reported to the NCAA||Revenue Reported to the DOE|
|Big Ten Media (Campus)||$2,772,546.00||$2,772,546.00|
|Coaches Camps & Clinics||$1,707,848.00||$1,707,848.00|
|UWF Gifts in Kind||$332,597.00||$332,597.00|
|UWF Special Account||$1,119,638.00||$1,119,638.00|
|UWF Other Expenses||$286,925.00||$286,925.00|
As depicted above, the largest source of Wisconsin’s athletic department revenue came from operating revenue. The following items make-up Wisconsin’s operating revenue: Ticket sales, revenue received from the Big Ten Conference, gifts in kind, concessions and catering, media revenue, events, post season revenue and “other” (which will be described below). Below is a snapshot of how much each of these revenue streams contributed to Wisconsin’s overall operating revenue.
|Revenue Stream||Amount Generated|
The chart below depicts the amount that Wisconsin teams were able to generate through ticket revenue. Unsurprisingly, football leads the way. Perhaps, the most interesting thing to note in this chart, is the great disparity between men’s sports and women’s sports ticket sales.
In 2010-11, Wisconsin received $19,664,188.00 in revenue from the Big Ten Conference. The chart below depicts the amount of revenue Wisconsin received from the Big Ten Conference.
|Big Ten Media||$13,903,475.00|
|NCAA Broad Based||$3,286,099.00|
|Big Ten MBK Tournament||$385,574.00|
The “NCAA Broad Based” payout noted above includes payments made by the conference for the NCAA basketball fund distribution (teams earn one unit for each NCAA March Madness game they play in, except for the National Championship; conferences distribute the money derived from these units), sports sponsorship and grants in aid, and any supplemental distributions, if approved. Additionally, negative numbers are shown for football tickets and basketball tickets. This is because Big Ten Conference members pay into a ticket pool. If a school makes over a certain amount in ticket revenue, they pay into the pool. Schools falling below the ticket revenue amount receive a payout from the Big Ten Conference.
Next, is a chart depicting the revenue generated by Wisconsin’s advertising ventures.
Wisconsin has an advertising contract with Learfield/BSP. According to Marnocha, “They do most of the signage around the facilities, radio spots, television spots, etc. They sell the rights to advertise in our media guides and programs. They sell the advertising for the big, LED signage that we have in the stadium.” With respect to the adidas and Coca-Cola amounts, Marnocha notes, “These amounts are part of adidas and Coca-Cola’s contracts with us and they give us a certain amount of money to advertise their products.” CR Chairbacks refers to Camp Randall Chairbacks, sold for the football stadium.
With respect to the post season, the chart below highlights Wisconsin’s overall post season revenues. This amount is for all Wisconsin teams that participated in the post season in 2010-11. Those teams included: Football, men’s and women’s basketball, men’s and women’s hockey, men’s and women’s soccer, softball, men’s and women’s swimming, men’s and women’s tennis, volleyball and wrestling.
|Post Season Revenue||$2,579,248.00|
As for catering and concessions, the following chart breaks down how much revenue was generated through catering, events and at specific team’s games:
|Concessions and Catering||Amount|
The next chart depicts the revenue that Wisconsin receives from the Big Ten’s media contracts. One thing to note, is that a significant portion of the amount of money Wisconsin receives from the Big Ten Network is returned to the Wisconsin campus and not used by the athletic department. Additionally, according to Marnocha, each Big Ten Conference school receives the same Big Ten Network payout each year.
|Big Ten Media Revenue||Amount|
|Big Ten Network||$7,894,078.00|
|Athletic Department Portion from BTN||$5,193,765.00|
|Campus Portion from BTN||$2,772,546.00|
The portion of “other” revenue depicted in Wisconsin’s operating revenues is composed of the following:
Visit BusinessofColllegeSports.com tomorrow to get an inside look into Wisconsin’s athletic department expenses.
One thing is certain to happen this evening at Radio City Music Hall: The first name to be called in the 2012 NFL Draft will be that of former Stanford quarterback Andrew Luck.
In his four years at Stanford, Luck threw for 31 wins, led Stanford to three bowl appearances and was a runner-up for the Heisman Trophy twice, all while completing an engineering degree in architectural design. Luck’s impressive resume at Stanford left the university with not only a stronger football program, but with a great marketing opportunity.
Joe Karlgaard has served as Stanford’s Senior Associate Athletic Director for Development since February 2011. Prior to that, he was the athletic director at Oberlin College for six years and as a Stanford student, worked in Stanford’s track and field office. When asked whether a Stanford student-athlete has captivated donors like Luck, Karlgaard says the school has never seen a current student-athlete as celebrated as Luck.
“I think that Andrew certainly has a profile in college athletics that we haven’t seen at Stanford in a long time. Tiger Woods may have a similar profile, but his profile grew after he left Stanford and won the Masters. Luck is a two-time Heisman finalist, who helped us turn around our football program and performed well in the classroom,” Karlgaard explained.
The profile Luck developed during his four-year tenure at Stanford has assisted the Stanford athletics department in fundraising. In particular, the athletics department has received two anonymous donations totaling $15 million dollars from donors who said they were inspired by Luck. While these large donations were definitely given as a result of Luck’s presence at Stanford, Karlgaard believes that Luck has motivated others to donate money to the Stanford athletics department.
The $15 million which the Stanford athletics department received from donors who were inspired by Luck will only further propel Luck’s positive presence on the campus. According to Karlgaard, the $15 million will be used to fund endowment and capital projects. One capital project that will be funded in part by the $15 million donation, is Stanford’s renovations to its Arrillaga Family Sports Center. Stanford will break ground this summer on the 18 month renovation process to the facility. Renovations will include an expanded weight room, new football locker room, two new auditoriums, new football coaches offices and new film rooms. The total cost of the renovations to the Arrillaga Family Sports Center is expected to be $18 million, of which Karlgaard indicates has all been raised by Stanford.
Luck’s presence as Stanford has been used by the athletics department to generate annual giving donations. Stanford athletics utilizes the website BuckCardinal.com for annual giving purposes. As of this Tuesday, the front page of the website features a nine-and-a-half minute video featuring Luck discussing his experience at Stanford. Karlgaard said that the email was pushed out to donors who have not given this year to the annual find with invitation for them to donate to the athletics department. Within 24 hours of the video being uploaded, it had received over 2,000 page views.
As for whether Luck’s being drafted number-one will further motivate donors to give money to Stanford athletics, Karlgaard said, “I don’t think his going number-one necessarily changes the minds of our donors regarding how they feel about Luck or Stanford football. He’s the whole package. He’s the consummate student-athlete as Stanford envisions it. His success on the football field and his commitment to finishing his degree in a rigorous subject, like architecture, have inspired our donors at a variety of levels. I don’t think his going number-one has any real impact. If the Colts decided to take Robert Griffin III, I don’t think we would see any real downturn to our donations for development.”
Today, there is an air of excitement on the Stanford campus, as the school’s quarterback is expected to be the first name called in the NFL Draft. However, given the profile Andrew Luck built-in his four years at Stanford, his name will certainly continue to ring out on Stanford’s campus.
Previously, BusinessofCollegeSports.com showed you which schools spent the most on recruiting per data obtained from the Department of Education. In reporting this data, BusinessofCollegeSports.com noted that imperfections exist within the data, but that the Department of Education data was the only publicly available source listing recruiting expenses for public and private institutions.
After that report was published, BusinessofCollegeSports.com followed up with several schools in an effort to obtain more accurate records of their recruiting expenses. Georgia Tech Athletics’ Chief Financial Officer, Frank Hardymon, graciously detailed Georgia Tech’s recruiting expenses for BusinessofCollegeSports.com
Per data obtained from the Department of Education, Georgia Tech’s recruiting expenses were the 7th highest of all BCS schools in 2010-11. In that year, Georgia Tech had total recruiting expenditures of $1,489,599.00, spending $1,173,904.00 on recruiting for its men’s sports and $315,695.00 on its women’s sports. Georgia Tech’s total recruiting expenditures put it only behind those of Tennessee, Auburn, Notre Dame, Alabama, Georgia and Florida, when comparing data submitted to the Department of Education.
Hardymon was able to provide logical explanations as to why Georgia Tech’s recruiting expenses appeared higher than most other BCS schools. In simplest terms, every school reports things differently. Hardymon explained, “Everybody reports things differently. Every school has different ways of doing accounting, so they show expenses under different categories.”
Additionally, Hardymon explained that the items the Department of Education asks to be reported are not the same as what is required to be reported to the NCAA. Thus, it is possible that a school’s revenues and expenses may appear to be different on each report. “You can end up with two completely different bottom lines, which can lead people to question the quality of your accounting if you have two different totals,” said Hardymon.
Furthermore, according to Hardymon, the Department of Education does not want athletics departments to report losses. Thus, while the Department of Education report depicts many athletics departments having zero net income in 2010-11, it is possible that many of these athletics departments actually suffered a loss in 2010-11. “Their theory is, if you had a loss, you’re still an operating entity, so somebody must have covered it for you. They have us report the loss as if the school floated us the difference,” said Hardymon. For athletics departments like Georgia Tech, which are a separate corporation from their university counterpart, this presents an issue, as the athletics department is solely responsible for any losses it incurs.
Hardymon noted that Georgia Tech is “very inclusive on recruiting” in terms of what the athletics department shows as a recruiting expense on its reports to the Department of Education and NCAA. Part of Georgia Tech’s ability to inclusively report its recruiting expenses, is the result of the accounting system Georgia Tech uses. Hardymon explained, “We are able to code a lot of things as recruiting. So anything—even if it isn’t an immediate recruiting expense, but is going to turn into one, like buying envelopes, stationary and postage to be sent to recruits—is going to be listed as a recruiting expense.”
Georgia Tech’s inclusiveness in reporting its recruiting expenses is likely what made its expenses the seventh-highest of all BCS schools in the Department of Education report. While the Department of Education report only reports recruiting expenses as lump sum numbers, Hardymon provided BusinessofCollegeSports.com with an inside look of what some of the $1,489,599.00 spent by Georgia Tech on recruiting went toward.
First, the football program undertook an initiative to update the materials it distributes externally. “Football makes a pretty strong commitment to communicate in writing with potential recruits,” said Hardymon. According to Hardymon, “this initiative created $300,000.00 in expenses for the Athletic Association, which were categorized in football recruiting.” It is important to note that the entire $300,000.00 was expensed towards recruiting in 2010-11, although some of the materials will be used for years beyond 2010-11. Hardymon asserted that when “office-type expenses,” like the football program mailers were removed from Georgia Tech’s recruiting expenses, Georgia Tech’s recruiting expense total fell below $1 million. Hardymon believes that this number is a more accurate representation of Georgia Tech’s recruiting expenses when compared to those of other programs.
The bulk of Georgia Tech’s recruiting expenses went towards travel costs. In 2010-11, Georgia Tech spent $1,007,897.00 total on airfare, meals, hotels, entertainment, transportation, and development for on and off-campus recruiting. The big-ticket item in Georgia Tech’s travel expenses for recruiting, though, is airfare expenses incurred by both basketball programs and the football program. Hardymon said that while Georgia Tech does use a charter airline company, the company is relatively inexpensive and that the coaches also largely use commercial airlines to travel.
The numbers provided by Hardymon related to Georgia Tech’s recruiting expenses, along with his explanations as to why different athletics department’s expenses may seem vastly different, provided great insight into the budgetary concerns of a top athletics department.
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.
As the Men’s Final Four is set to tip-off in New Orleans this weekend, while the Women’s Final Four will be played in Denver, along with great basketball games, fans should keep their eyes peeled for something else: Swooshes.
Since as long as 1985, when Nike introduced The Dunk shoe and entered into sponsorship agreements with colleges whose basketball programs would wear The Dunk in the school’s colors, Nike has forged strong bonds with some of the top college basketball programs in the nation. Some 27 years later, that bond continues to be strengthened. In January, Nike unveiled its most recent piece of college basketball apparel: the Hyper Elite Platinum series. The focal marketing point of the Hyper Elite Platinum series was an innovatively designed uniform created largely from recycled polyester. However, from a fan perspective, the highlight of the new series was that Nike designed the uniforms for the nine teams which have won national championships while wearing its apparel: Arizona, Baylor (women), Connecticut (men and women), Duke, Florida, Kentucky, North Carolina and Syracuse.
It is no coincidence that some of the most prestigious college basketball programs have won national championships while donning Nike apparel. In developing products specifically designed for college basketball players and creating a proactive sponsorship and marketing approach, Nike has set itself apart as the leader in college basketball apparel.
This fact is demonstrated when one considers how many Division I basketball programs Nike currently has sponsorship agreements in place with. According to Mary Remuzzi, Director of Global Communications for Nike, Inc., 54 teams that competed in this year’s NCAA Division I Men’s Basketball tournament are sponsored by Nike, with 50 being “Nike schools” and four being “Jordan schools.” Additionally, all four of this year’s number-one seeds are sponsored by Nike, while ten of the top-16 seeds are sponsored by Nike (seven being “Nike schools” and three being “Jordan schools”). Of the teams participating in the Men’s Final Four, two are sponsored by Nike: Ohio State and Kentucky.
Nike also has a stronghold when it comes to sponsorships for women’s basketball programs. According to Remuzzi, 50 of the teams that competed in this year’s NCAA Division Women’s Basketball tournament are sponsored by Nike. Of this year’s number one seeds for the women’s tournament, three of the four are sponsored by Nike.
When asked what the business benefit is to Nike in outfitting college athletes with Nike apparel, Remuzzi provided great insight into Nike’s longstanding history of working with college athletes. Remuzzi said,
“Nike is a youth brand committed to developing young athletes. We design our products by working with athletes to gain their insights. By supporting college athletics, it helps us create and then showcase our most innovative products.
Nike actually has a long history of supporting college athletics stretching back to when Steve Prefontaine ran for the University of Oregon in the 1970s under the Coach Bill Bowerman, one of Nike’s co-founders. Ever since, Nike has been about bringing the best athletes at the collegiate level (and beyond) our most innovative products to help inspire them and help them perform at their best. A good example is the University of Oregon (co-founder Phil Knight’s undergraduate alma mater) and the uniforms we developed for the school’s football team that debuted in last year’s Rose Bowl (http://www.nikeinc.com/news/oregon-ducks-will-wear-most-innovative-football-uniform-to-date-for-rose-bowl). This was the most advanced uniform system ever assembled.”
With respect to college basketball, Nike re-committed itself to providing student-athletes with innovative products by debuting its Style of Dress uniforms in 2007. System of Dress revolved around the idea of giving players a “more tailored look on-court,” while also providing them with a design compatible with high-performance play. The Style of Dress line was originally introduced to only four programs in 2007 (Arizona, Floria Ohio State, and Syracuse). The fact that the line’s most recent release (the Hyper Elite Platinum series) was introduced to nine schools, demonstrates Nike’s continued commitment and interest in outfitting college basketball programs with its innovative apparel.
In coming years, one can only expect Nike’s sponsorships of college basketball programs to increase. For the time being, though, all one needs to do to spot a Nike sponsored program, is be on the lookout for the Nike Swoosh on a player’s jersey or shorts.
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.
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
|Penn State||$31,619,687.00||Big Ten|
|Kansas State||$23,395,408.00||Big 12|
|Notre Dame||$19,147,710.00||Big East|
|Ohio State||$18,630,964.00||Big Ten|
|Oklahoma State||$14,365,376.00||Big 12|
|Michigan State||$13,512,269.00||Big Ten|
|Texas A&M||$3,224,429.00||Big 12|
|Texas Tech||$3,124,246.00||Big 12|
|North Carolina State||$192,151.00||ACC|
|Iowa State||$121,686.00||Big 12|
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|