Category Archives: Finance

Ask SportsBizMiss (1)

Ask SportsBizMiss: volleyball profit, licensing naming rights, ticket revenue and government subsidies

Ask SportsBizMiss (1)Until now, we haven’t had a mailbag feature here at BusinessofCollegeSports.com, but I do check the search terms people use to find our site almost every day. So many times I wish I could reach out to the person and see if they found what they were looking for, but I don’t actually know who searched the term or how to get in touch with them…so, I’m going to pretend they emailed me and answer a few I’ve seen over the past week.

If you want to submit a question for a future edition of “Ask SportsBizMiss,” instructions are at the bottom of this post.

Here’s a sampling of searches I’ve seen over the past week….

“volleyball program turns profit”

If you were searching for a college volleyball program that turns a profit, you probably didn’t find one. It’s extremely rare for a sport outside of football or men’s basketball to end the year with net revenue (it’s not technically correct to call it “profit” since athletic departments are nonprofit entities). I’m asked about baseball and ice hockey most often, and you can find a program here or there that has a small amount of net revenue, but I’ve never seen a volleyball program with net revenue at the end of the year.

I decided to take a look at a couple of women’s programs first. Penn State and Texas finished last season ranked #1 and #2, so I checked out their financials for women’s volleyball:

School Revenue Expense Net Revenue
Penn State $850,993 $1,395,721 -$544,728
Texas $1,387,377 $3,177,635 -$1,790,258

Unfortunately, I don’t have the time to do this for every school, but I think you get the picture.

Men’s volleyball isn’t doing any better. Penn State’s men’s team only generated $222,044 but spent $346,791.

The fact of the matter is that few (and by few, I mean a handful) of programs outside of football and men’s basketball generate any net revenue. Many don’t make enough to cover scholarships for the student athletes within that sport, much less coaching salaries, trainers, insurance, travel, etc. I wrote last year about how even the top women’s basketball programs don’t generate enough revenue to cover their expenses.

So, sorry whoever searched this, but I doubt you’ll find any volleyball programs generating net revenue.

“licensing naming rights”

If you were looking for naming rights on stadiums, I have an entire database of every deal I know of in college athletics here.

If you were looking for the more recent issue of student athletes licensing their naming rights, the O’Bannon ruling didn’t give student athletes the right to license their own name individually. I think I analyzed O’Bannon from just about every angle and on just about every platform possible:

“ticket revenue Florida State”

This one is easy: $20.3 million total, $17.6 million from football. The Seminoles also had another $15.3 million in contributions to football, and no doubt much of that came from ticket-related contributions (those donations you have to make in order to buy season tickets, get better seats, etc.).

Need tickets to a Florida State game?

“government subsidies for athletics”

There seems to be great concern that state and local governments are subsidizing athletic departments, because the NCAA financial disclosure happens to include a category by this name. Don’t fret. Many times I’ve found the amount reported by an athletic department as support from governmental entities is lottery revenue earmarked for Title IX purposes, meaning it goes to fund scholarships for female student athletes. State and local governments aren’t just cutting checks to athletic departments to fund losses or otherwise bail them out. I looked at a couple of examples in my book, Saturday Millionaires, if you’re interested in learning more about this subject. You can download Chapter 1 for free here.

Any financial numbers I share are from financial disclosures each university files with the NCAA annually. The latest figures are from 2012-2013.

Ask SportsBizMiss

CWS 2011 Opening Ceremony

How much money does Vanderbilt make for winning College World Series?

CWS 2011 Opening Ceremony
Photo credit: White & Blue Review via Flickr

Zero.

Outside of men’s basketball, participation in postseason NCAA competition is not rewarded with monetary compensation. Not even for the College World Series, where hundreds of thousands of fans pack the stands over the course of the series and the games air on national television.

This year, the College World Series drew an average of 21,734 fans per game, just edging out the 20,533 per session for the Division I Men’s Basketball Championship. Total attendance for the College World Series this year was 347,740. However, the television contract pales in comparison: the CWS is part of a $500 million television contract signed with ESPN in 2011 for 24 sports championships through 2023-2024, while the men’s basketball tournament averages $771 million annually.

According to a presentation I attended by NCAA CFO Kathleen McNeely at the CABMA convention in 2013, the NCAA banked approximately $9 million from the baseball tournament the previous year, which amounted to 12 percent of all NCAA championship revenue.

Before you think the NCAA is unfairly depriving baseball teams of the revenue generated by postseason tournaments, keep this in mind: McNeely also shared that only seven sports bring in revenue for the NCAA from championships. By my count, the NCAA hosts championships for 92 sports across Division I, II and III. McNeely’s presentation pegged the annual cost of championships at $74 million for programming costs, which does not include the cost to staff those championships.

Brighthouse Networks Stadium at UCF (photo credit: Breezy Baldwin via Flickr)

How much are college athletic facility naming rights worth?

Brighthouse Networks Stadium at UCF (photo credit: Breezy Baldwin via Flickr)
Brighthouse Networks Stadium at UCF (photo credit: Breezy Baldwin via Flickr)

UPDATE: Boise State’s new naming rights deal with Albertsons was unintentionally omitted. It has been added, which has changed the average annual values in the original post.

What’s the market value for naming rights deals on college athletic facilities? It’s much more difficult to estimate than if we were talking about professional athletics. Universities often complete these deals at less than market rate in order to acknowledge past gifts by major donors.

For example, naming right for Papa John’s Cardinal Stadium at University of Louisville is officially on the books as a $5 million donation for 52 years. In total, however, Papa John’s had donated approximately $22 million for the football stadium through 2011.  Would University of Louisville have agreed to a naming rights deal with a company it had never done business with previously for 52 years for $5 million? Not likely.

It’s not uncommon in these deals for past donations to be taken into account, causing the naming rights deal itself to be below market rate. That’s somewhat unique to college athletics thanks to its nonprofit status and history of relying upon donations.

We’ve recently updated our database for naming rights deals on college athletic facilities. Quite a few of the deals are for the life of the stadium or arena, and details of the deals aren’t always disclosed, especially when it involves a private university.

However, just for the sake of trying to pinpoint something approximating an average annual value, here are some average annual values based on what we do know: Continue reading

Men's wrestling at Rutgers has seen scholarships increase since sports were cut

Data: Cutting sports fuels more than football

Men's wrestling at Rutgers has seen scholarships increase since sports were cut
William Smith (Rutgers) and Nick Gwiazdowski (NC State) at the 2013 Cliff Keen Invitational (photo credit: Chris Hunkeler via Flikr)

From a public relations perspective, cutting sports is a nightmare for universities. There’s no avoiding the photographs of student athletes with tears streaming down their faces as they learn they’ll have to transfer if they want to continue competing in their sport. The raw, human element of it makes it tough to look at the situation from a business perspective, in the same way it’s tough to learn about a company laying off employees.

All that being said, it is a business decision. And lest you think it’s a business decision meant to further support fledgling football programs, I took a look at the aftermath of the cuts Rutgers made seven years ago in a recent piece I wrote for SportsBusiness Journal. The piece was inspired by the more recent cuts at Temple, but I think Rutgers is a good case study for Temple if they want to see where they could be in seven years.

You can read the full piece here (SportsBusiness Journal has made it available even if you aren’t a subscriber), but just to whet your appetite, here are a few interesting facts I uncovered:

  • With approximately $124 million more in revenue than Temple, University of Texas supported just 16 more student athletes than Temple in 2012-2013.
  • Temple ranked 74th in FBS in 2012-2013 for total athletic department revenue, but 30th in total number of student athletes supported.
  • Within its own conference, Temple ranked dead last in spending per student athlete but second only to UConn in number of student athletes supported.
  • Despite cutting six sports in 2007, Rutgers funded 30.73 more scholarships in 2012 – 26.59 of those scholarships were for women’s sports. Rising tuition costs increased athletic department expenses by $3.4 million over the same time period.
  • Thirteen sports at Rutgers have seen their expenses increase by a greater percentage than football since the cuts in 2007.
  • Interesting fact not included in the final article: from 2006 to 2012, the Scarlet Knights wrestling team saw its expenses increase by 120 percent from $304,000 to $670,000, despite decreasing donations to the program and only a small increase in ticket sales. The bulk of that increase in expenditures came from raising the scholarships awarded from 5.11 in 2007 to 9.44 in 2012, just shy of the 9.9 NCAA limit.

I encourage you to read the full article to learn more about the difficult decision schools face in cutting sports. In the end, it all comes down to this quote from Maryland President Wallace D. Loh from a letter he penned in response to a report of the President’s Commission on Intercollegiate Athletics on November 21, 2011 as his school was facing the decision to cut sports:

“In a time of constrained resources, we have to choose: should we have fewer programs so that they can be better supported and, hence, more likely to be successful at the highest level? Or, should we keep the large number of programs that are undersupported compared to their conference peers?”

Want to learn more about the finances of intercollegiate athletics? Check out my book, Saturday Millionaires!

Adidas - Texas A&M

Selling Jerseys with Current Players’ Numbers Isn’t Worth the Risk

“…it’s foreseeable they might get out of the business of selling jerseys with numbers corresponding to current student-athletes if push came to shove.”

No. 12 jerseys will be the only ones available at retail for Texas A&M this year (photo credit: Adidas)
No. 12 jerseys will be the only ones available at retail for Texas A&M this year (photo credit: Adidas)

I made that prediction last August, and now it seems push has come to shove.

ESPN’s Darren Rovell is reporting today that several schools – Texas A&M, Arizona and Northwestern – will discontinue the use of current player’s numbers on jerseys, sidestepping any future litigation or obligation to split proceeds with student athletes. A licensing director told me last year he thought this would happen before schools would divide the revenue with student athletes, and certainly last week’s EA Sports settlement renews the discussion about sharing revenue arguably driven by student athletes with those student athletes.

At the end of the day, the revenue simply isn’t worth the risk for schools. As I reported for ESPN last year, schools don’t really make that much from jersey sales in the grand scheme of things (similar to their situation with regards to video game revenue). Here’s a sampling of jersey sales numbers from the 2012-2013 school year, which include jerseys for all sports, not just football: Continue reading

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How Much Did Schools Really Make on EA Sports Video Games?

EA Sports NCAA Football 2014By now you’ve likely heard about the $40 million settlement between EA Sports/Collegiate Licensing Company and the current and former student athletes involved in three class action lawsuits. Estimates have those current and former student athletes receiving  $48-951 per year they appeared on a video game roster.

Have you ever wondered how much money the schools made off the games? I’ve got your answer in my latest piece for The Motley Fool:

NCAA Football2012-2013 NCAA Basketball2012-2013
Louisville $85,845 $26,594
UCLA $57,230 $26,593
Clemson $85,845 $18,616
Wisconsin $143,076 $26,593
Texas A&M $57,000 $18,616

To learn more about the settlement and about the revenue schools received from these video games, click here to go to my piece on The Motley Fool.

Book Cover for Featured Image on WordPress 2

Important Clarification on University Subsidies to Athletic Departments

saturday-millionaires-cover-279x300USA Today has released its annual report on college athletics finance. One category, “Total Subsidies,” always draws the most criticism. In USA Today’s explanation of its methodology, it defines this category as, “The sum of students fees, direct and indirect institutional support and state money. The NCAA and others consider such funds “allocated” or everything not generated by the department’s athletics functions.”

The definition provided by USA Today is 100 percent correct…however, it’s an area I’ve found to be misunderstood by other media members and fans alike. People generally understand the student fees portion. It’s the direct and indirect institutional support and state money portions that cause people to draw inaccurate conclusions. Generally speaking, those are not simply checks written by universities and state governments to cover shortages in the athletic department. In fact, with respect to direct institutional support, it’s almost always a reduction in expenses for the athletic department rather than incoming revenue.

I tackle this subject it in the very first chapter of my book on the business of college football, Saturday Millionaires. Since the entire chapter is available for free (here), it’s easiest to simply give you the relevant section here to educate you about direct institutional support. Continue reading

SEC Network

SEC Network Revenue Projections

Great interview by The Advocate with Justin Connolly, ESPN senior vice president for college networks, on SEC Network. Here are some quick facts from that article and what we know about SEC Network already:

SEC Network

  • SportsBusiness Journal‘s projections have subscriber fees at $1.30 per month/per subscriber in the 11-state SEC footprint, and $0.25 per month/per subscriber outside of the SEC footprint.
  • There are 30 million estimated subscribers within the SEC footprint, which could generate $468 million in revenue annually with a $1.30 subscriber fee. Factor in advertising revenue, and revenue from subscribers outside of the SEC footprint, and you’re looking at the possibility of $500 million annually if the network reaches full distribution according to The Advocate. The article from The Advocate goes on to say that breaks down to $35.7 million annually for each of the SEC’s 14 schools, however, my followers on Twitter like @TxAgLawGuy, @carnot3 and @JayAU92 correctly pointed out that doesn’t include ESPN’s cut (which hasn’t been made public) or the fact that the SEC office splits revenue 15 ways to give itself a cut for operating expenses.
  • Programming: in the first full year, more than 1,000 live events will be available on SEC Network, including 450 live games on television (and an additional 550 distributed digitally). Live games will include “approximately 45 football games, more than 100 men’s basketball games, 60 women’s basketball games and events from across all 21 SEC-sponsored sports.”
  • Commissioner Mike Slive on SEC spring meetings this week: “I think it’s unrealistic to think we’ll have full distribution at the time when we launch in August.” Keep in mind Big Ten Network launched to 17-18 million households initially. After Appalachian State beat No.5-ranked Michigan, Dish Network signed on to get the network to 30 million households. However, Big Ten Network remained in a stalemate with Comcast and Time Warner through most of its first season. It took two years for Big Ten Network to have full distribution in its footprint. Pac-12 Networks launched to 48 million homes thanks to deals with Comcast, Time Warner, Cox and BrightHouse. Eventually, AT&T U-verse and Dish Network, but it still hasn’t reached a deal with DirecTV.
  • All 14 SEC teams will have a game on SEC Network in the first four weeks of the 2014 football season.
  • Currently, SEC Network has distribution deals with AT&T U-verse, DISH, Google Fiber and NRTC. That covers about 25 percent of subscribers in the SEC’s footprint.
  • Launch date: August 14, 2014. First football games: August 28 (Texas A&M at South Carolina and Temple at Vanderbilt).