This week I joined Campus Insiders to discuss the likelihood of Big 12 expansion and why adding programs is not the right move for the conference. You can watch the video here:
For a more detailed explanation, check out my blog on Campus Insiders.
This week I joined Campus Insiders to discuss the likelihood of Big 12 expansion and why adding programs is not the right move for the conference. You can watch the video here:
For a more detailed explanation, check out my blog on Campus Insiders.
By: Victoria Baldwin
In 2012, Louisville’s basketball program brought in more than $42.4 million in revenue.
Kristi Dosh, founder of BusinessofCollegeSports.com and author of a book on the business of college football, Saturday Millionaires, attributes the high revenue to luxury suites at Louisville’s KFC Yum! Center.
Louisville is just one school taking advantage of revenue from luxury suites. Syracuse’s Carrier Dome brings in millions to the program, and Kentucky, Duke and North Carolina are making arrangements to add suites to their historic arenas.
The KFC Yum! Center is home to 72 luxury suites at $85,000 to $92,000 a piece. They generate more than $6 million in revenue. That’s just for rent. Tickets, donations, fees, food and drinks come with an additional cost.
Louisville attaches donations ranging from $250 to $2,500 to the rights of season tickets and that’s not including the price of the actual ticket.
“Adding those suites gives them the ability to tack on the annual fee that is the right to purchase fee on the suite and that is where you make the money,” Dosh said.
The basketball program isn’t the only benefactor. The revenue from luxury suites goes into the general athletic fund that benefits other Louisville sports.
“In the last 14 to 15 years under (athletics director) Tom Zurich, every single sport, with the exception of football, got a brand new facility,” Dosh said. “They’re using that money to prop up the other sports that aren’t making any.”
While Louisville is leading the pack, basketball-rich Kentucky, Duke and North Carolina are in different stages of adding suites to their historic arenas.
Kentucky released renovation plans during the summer to add suites to Rupp Arena, while Duke is raising money to add bunker suites in place of old basketball offices. Cameron Indoor doesn’t have the space newer facilities have, and they’re planning the bunker suites so they don’t lose thousands of seats in the bowl area that bring in high donations.
Suites are not suitable
The University of Kansas’ Allen Fieldhouse has been home to five national championship teams and dozens of conference titles.
Although Kansas basketball has a 200-game sellout streak dating back to the 2001-02 season, the Jayhawks’ revenues are ranked No. 13 in the country at $16.4 million. Allen Fieldhouse holds 16,300 fans with little room for luxury suites.
“For a school that has a history of sellouts like that, I think they are leaving money on the table,” Dosh said. “Based on what I’ve seen at schools who do have suites and who do have that sort of demand, there are definitely millions of dollars.”
Greg Gurley, director of development for KU’s Williams Fund, a fundraising arm of the athletics department, said Kansas has the high demand to fill the suites but the renovations could ruin the history of Allen Fieldhouse.
“If we had basketball suites, there would be a line out the door to get them,” Gurley said. “The question is how do we do it? More importantly, do you want to change the integrity of the building by adding suites? That’s the question to ask.”
Kansas is in a struggle between reaping the rewards of the luxury suite boom and losing valuable, reasonably-priced tickets for the average fan. Gurley said at this time there haven’t been any serious discussions to add luxury suites to Allen Fieldhouse.
Martin Haynes, an architect at 360 Architecture in Kansas City, was the designer who proposed the bunker suite plan for Duke based on a study he did years ago.
Haynes said Kansas could only add suites to the upper bowl area on the North side of Allen Fieldhouse between the parking garage and the arena.
“At the very top of the bowl, you could blow out the wall and create suites at that level,” Haynes said. “It’s something you could do. Anywhere else it really would just destroy the integrity of Allen Fieldhouse.”
Allen Fieldhouse is home to one of the best home court advantages in the country because of how close students are to the court. Gurley, who also played at Kansas from 1992-95, said adding suites would ruin this atmosphere.
“That’s why all of the media people that come to Lawrence, it would be hard pressed to find anybody, even if they were a fan of another school, to not feel like Allen Fieldhouse is the coolest or one of the coolest places in the country to watch a basketball game,” Gurley said.
While the rest of the basketball “Blue Bloods” renovate their stadiums to bring in millions of dollars, Kansas fans will have historic Allen Fieldhouse to enjoy for quite a bit longer.
“I hope Allen Fieldhouse is there for 100 more years, but that’s just me,” Gurley said.
Victoria is a senior at the University of Kansas majoring in journalism with a focus on broadcasting. To see more of her recent work, visit her website: www.victoriabaldwin.wordpress.com.
Former acting commissioner of the Big 12 Chuck Neinas says, “it’s like going to the University of Heaven.”
Apparently Neinas’ version of heaven is a giant cash box in the sky. Neinas says the most important part of an athletic director’s job revolves around money, which is why the Texas job should attract the nation’s very best.
When I was researching for my book, Saturday Millionaires: How Winning Football Builds Winning Colleges, I spoke to search firms across the country about what makes a good athletic director. The two responses I received most frequently were someone who is a good fund raiser and someone who has the ability to hire the next football coach.
Texas’ next athletic director won’t have to worry about money. Texas annually has the highest revenue in intercollegiate athletics. For fiscal year 2012 (which encompasses the 2011-2012 school year), Texas reported revenue of $163 million on it’s NCAA disclosure, 15 percent higher than the second-highest earning athletic department, Ohio State University. And no, it’s not just the cash from Longhorn Network that sets the Longhorns apart. It’s the fans, and more particularly the donors.
Total revenue from ticket sales and contributions to Longhorn athletics totaled $100.0 million in fiscal year 2012. The average amongst all public FBS programs was just $26 million. For further comparison, the rest of the top five were Texas A&M ($88.4 million), Michigan ($80.9 million), Florida ($69.7 million), and Oklahoma ($68.9 million).
If there’s anywhere money isn’t an issue, it’s Texas.
What remains to be seen is whether the new athletic director will have replacing Mack Brown at the top of his to-do list. Will Brown outlast outgoing athletic director DeLoss Dodds who’s set to step down in late 2014?
After a 1-2 start, including losses to BYU and Ole Miss, the Longhorns have rebounded to 3-2 with a win at home against Kansas State and a win squeaked out in Ames last weekend. This weekend, however, marks perhaps the most important game of the season: the Red River Rivalry. Oklahoma has taken the last three games, but Dodds isn’t willing to commit to this year’s matchup being a make-or-break game for Brown.
“It’s an important game. It’s always an important game. … How that impacts the rest of our lives or the rest of the world, I don’t know the answer to that,” Dodds told the Dallas Morning News.
Even if Brown survives Dodds’ remaining tenure, the next athletic director could one day be called upon to replace him (Brown’s current contract runs through 2020). Given the current climate in Austin, expect the athletic director search to focus on someone who has made successful coaching hires elsewhere.
The only question left is who will hire that athletic director. There’s currently a power struggle between Bill Powers, president of University of Texas, and the Board of Regents, several of whom would love to add Powers to the list of folks to be replaced in Austin. For the time being, he’ll conduct the search for a new athletic director, but don’t be surprised if the Board of Regents finds a way into the conversation.
Kristi A. Dosh is an attorney and founder of BusinessofCollegeSports.com. Her latest book on the business of college football, Saturday Millionaires, is available now. Visit SaturdayMillionaires.com for retailers and a sneak peak at the first chapter! Follow her on Twitter: @SportsBizMiss.
The Mountain West appears to have won a large victory with the recent additions (or not losses if that’s how you choose to look at it) of Boise State and San Diego State. That may in fact be the case. However, there is also the possibility that in its quest for stabilization and increased stature, the Mountain West endangered itself by giving away crucial member equality in order to re-acquire Boise State.
Reports indicate the Mountain West has or will (among other things): 1) re-negotiate its television contract with CBS Sports Network which will allow teams on national television (i.e. Boise State) to make more money through bonuses, 2) sell Boise State’s home games in a separate package, and 3) allocate half of BCS (and future equivalent) bowl game revenue to the participating team (i.e. Boise State) before splitting it among the remaining conference members.
From the quotes of Big East commissioner Mike Aresco, it sounds as if Boise State wanted to stay in the Big East if it would match the Mountain West’s offer. Smartly, Mr. Aresco and the remaining Big East schools’ (bonus points if you can name them) presidents said thanks, but no thanks. In a time when it must feel like everything is crashing down around them, the Big East brass found a line they wouldn’t cross. Good for them. Let’s face it, Boise State to the Big East wasn’t exactly the perfect mix of chocolate and peanut butter. So for the Big East to grant unprecedented perks to a school 2,600 miles removed from the conference office didn’t make a whole lot of sense. Navy Athletic Director Chet Gladchuck even went public with his disdain for the proposed deal, saying:
“What Boise State wanted was outrageous and unprecedented. It was not palatable to any of the other Big East institutions,” Gladchuk said. “In the final analysis, Boise wasn’t worth it. There is zero television interest in Boise along the Eastern seaboard. What it tells me is the Mountain West was desperate. Clearly, the Mountain West was willing to make whatever concessions necessary to keep Boise in the fold.”
But surely it made sense for the Mountain West to do whatever was necessary to bring Boise State back under its tent, right? Maybe, maybe not. The money grab that is conference realignment also has an undercurrent of trying to create and/or maintain stability and long-term viability. As mentioned earlier, the Mountain West seems to have stabilized at 12 members. But when gross member inequality is part of a league’s structure, there can be problems.
Example: When the Big 12 was formed in the mid-90s, its structure was similar to how the Mountain West is currently proceeding. Most notably, it did not share bowl and television revenue monies equally among the members. Rather, the participating teams were first entitled to a larger share. This obviously funneled most of the revenue toward the traditionally successful programs, and smaller amounts to everyone else. (Berry Tramel of The Oklahoman wrote about this structure in 2010.) As time passed the Big 12 and its membership experienced the difficulties of operating a conference successfully when there’s a sense that a few schools are driving the bus and collecting the checks, and the rest are just passengers along for the ride. Ultimately, that and other issues led to the departure of 1/3rd of the Big 12’s schools (Nebraska, Colorado, Missouri, Texas A&M), and a near collapse of the conference entirely.
Whether the Big 12 leadership decided the original structure was a mistake, or that times had changed and therefore the structure needed to change with it, the powers that be agreed to a more (though not completely) equal distribution of revenue in the summer of 2011. It also put a stake in the ground on stability by having each member grant its television rights to the conference for a long period of time (initially six years, but recently extended to 13), essentially removing the largest incentive to other conferences who may wish to come poaching in the future (the importance of this “grant of rights” was well articulated by Mat Winter in a BusinessofCollegeSports.com post last month). I have not read or heard anything along the lines of Boise State or the other Mountain West schools making similar commitments.
So while the Big 12 (barely) escaped the inequality trap and the Big East has avoided it for now, the Mountain West may have fallen right in it. Sure, Utah State and San Jose State are excited to be new members in a league which just got considerably stronger. And the other Mountain West schools no doubt see the tremendous value Boise State brings to all of them. But give those non-Boise State presidents and athletic directors a few years of conference meetings looking over financials, and watching the revenue flow into the conference and out to Boise State. Give them a few years of conference meetings observing how decisions are made.
The camaraderie that exists today may not continue very long. And without a grant-of-rights or similar level of commitment, Boise State is for all intents and purposes a perpetual free agent, available to accept the next best conference offer that comes along. The Mountain West’s current and future members no doubt wanted to make decisions which ensured stability over the long-term. And while the league certainly got immediately stronger with the addition of Boise State, it may be that the deal they made guarantees the long-term will be anything but stable.
Follow Daniel on Twitter: @DanielHare
A number of Division I conferences have recently increased the fees a member school must pay when it withdraws from the conference. These fees are commonly referred to as exit fees. The ACC is one of the conferences that recently increased its exit fees. And its exit fee provision has been receiving a lot of attention lately because of Maryland’s departure to the Big Ten.
The ACC actually increased its exit fees twice in the span of a year. The ACC first upped the fees from around $12-14 million to $20 million in September 2011 when it announced it would add Syracuse and Pittsburgh. The fees were then upped again this September after the conference added Notre Dame (in all sports except football and hockeyl).
The ACC’s current exit fee calls for a withdrawing member to pay an amount equal to three times the conference’s total operating budget at the time of withdrawal. Based on the ACC’s 2012-13 operating budget, this equates to an exit fee of more than $52 million. It is this amount that the ACC is seeking in its lawsuit against Maryland for the school’s move to the Big Ten.
When the ACC and other conferences increase their exit fees, the general thinking is that it further discourages members from leaving the conference. But, because of how courts analyze the legality of these exit fee provisions, increasing the amount of the fee can actually increase the chances of the exit fee provision being deemed unenforceable. So, instead of discouraging schools from leaving, it can actually embolden them to do so.
In legal terms, conference exit fees are known as liquidated damages. Liquidated damages provisions are commonly added to contracts. They set the amount a party to the contract must pay in the event it breaches the contract. Liquidated damages provisions are useful because they theoretically save the parties the time and expense of litigating the amount of damages caused by the breach.
But, the amount of liquidated damages specified in a contract cannot be randomly selected. Courts will generally only enforce liquidated damages provisions if (1) the anticipated damages in the event of a breach are difficult to ascertain at the time of contracting, and (2) the amount of liquidated damages is a reasonable estimate of the actual damages that would likely be caused by a breach. If a liquidated damages provision does not meet this test it is deemed a penalty and is unenforceable.
Assuming that the ACC’s liquidated damages provision fulfills the first element of the test, it is questionable whether it would meet the second element. The requirement to pay three times the conference’s operating budget does not appear to be related in any way to the actual amount of damages the ACC would suffer if a member withdraws. It just seems like an easy way to ensure that the exit fee continues to grow without having to continually vote on it. This makes it look like a penalty.
And the actual number that results from this provision, $52 million, is not a reasonable estimate of the ACC’s actual damages. For example, Maryland’s departure will not result in the ACC’s tv deal being reduced by $52 million. A good argument can be made that the ACC actually suffered no damage when Maryland left. Maryland’s departure allowed the conference to add Louisville. And the general consensus is that the ACC is now stronger athletically as a result (at least in the two sports that matter for tv revenue purposes, football and men’s basketball).
This is consistent with recent realignment history. Over the past two years the Big 12 lost Nebraska, Colorado, Texas A&M, and Missouri. Yet, after adding TCU and West Virginina, the Big 12 signed the most lucrative tv deal in the conference’s history this year. (The one exception to the no damage upon withdrawal argument would be the Big East. The defections in that conference have definitely hurt the value of its tv rights).
When a liquidated damages provision is determined to be invalid, the party attempting to enforce the provision is allowed to instead seek its actual damages from the breaching party. But, as discussed above, conferences often suffer minimal damage when a member withdraws, either because the member added little value to the conference or because the conference quickly replaces it with a new member of equal value (at least in tv executives’ eyes).
As a result, exit fees often leave conferences in a tough position. They have to be high enough to discourage a member from leaving the conference. But, if they are too high they could be declared an invalid penalty. And, if the exit fees are invalid, the conference would then have to prove its actual damages, which are usually much less than the amount of the exit fee. As a result, exit fee disputes have always settled without a court deciding the validity of the liquidated damages provision. Recent examples include the Big 12 settling with Nebraska, Colorado, Texas A&M, and Missouri for less than the mandated amount of exit fees.
So, what is the solution to the problems with exit fees? Grants of television broadcast rights. In these agreements, all of the conference members grant their television broadcast rights to their athletic contests to the conference for a certain period of time. If a member leaves the conference during that time, the conference retains the member’s television rights. Because the value of a school to a conference is the television revenue it can help generate, a grant of rights agreement makes the members essentially worthless to another conference that is looking for new members.
While grant of rights agreements do have potential issues (sovereign immunity issues being the biggest), they are not subject to a subjective test like liquidated damages provisions. Thus, they are much more likely to hold up in court as valid contracts.
Currently, only the members of the Big Ten, the Pac-12, and the Big 12 have executed grant of rights agreements. Other conferences that want to ensure stable membership would be wise to insist on their members signing similar agreements. (Yes, even the mighty SEC should have its members sign grants of rights). If the ACC had one in place, Maryland likely would not be joining the Big Ten.
Rewards programs are not new. Whether for pumping gas, swiping your credit card or booking a flight, companies have long sought to incentivize consumer loyalty. Think about it: between commercials, people in booths at the airport and internet pop-up ads, rewards programs are becoming ubiquitous.
College athletics fan rewards programs, where athletics departments give out prizes based on attendance at various sporting events, are also nothing new. Recently, a new trend has developed in this arena, one that seeks to combine the rewards concept with social media. Social media fan rewards programs have been popping up around the country, including schools like Oregon, Florida State, Duke and Penn State, among many others.
The premise is simple: fans are already interacting via social media outlets like Facebook, Twitter, Foursquare and Instagram, often immediately before, during and immediately after athletic contests. Schools utilizing this technology are now providing a platform for fans that makes it easy for them to interact and engage (and spread the good word of the athletics department), while also garnering points to be used for free swag (and who doesn’t like free swag?).
One of the earliest adopters of these programs was Baylor, whose Baylor Bold Rewards program kicked off at the beginning of the 2011 academic year. At the time Associate AD John Garrison stated that, “With so much of our communication moving to social media, we felt this rewards program would be the way to get beyond our ‘friends’ to our friends’ friends.” The program has generated over 22 million social media impressions over the course of a year. That ability to expand a fan base is a big reason these programs have themselves gone “viral”. It’s about rewarding fans for spreading your message about your brand to their friends. Now, not only are more and more schools getting into the act, but conferences are as well, with the Big Ten Network, Horizon League and SWAC all launching their own iterations recently.
Two of the leaders in this burgeoning industry are Row 27 and Lodestone Social. Row 27 was responsible for Baylor’s groundbreaking program and also offers a number of other social marketing tools through their Fanmaker App Suite. Each company boasts long lists of clients from major programs, and each promises to galvanize a fan base through social media while dangling the carrot of the potential monetization of those social media initiatives. Lodestone Social’s pitch is to, “unite the void between social media efforts and revenue, connecting the passion of the crowd to the power of your team.”
One recent example of this “unity” is when Ole Miss and Mississippi State jointly announced in September that C Spire Wireless had signed on to become the official wireless partner of the universities’ social media rewards programs. The sponsorship will allow fans who participate in the Ole Miss Social Rebels and Hail State Social Rewards programs to interact with C Spire Wireless and earn additional rewards and giveaways, and also allow both universities to better engage their fans during games through their smart phones. It is believed to be the first program of its kind in the country, but is not the only way to make money from social media efforts. For example, in 2011 the University of Michigan made $376,478 in revenue from Facebook referrals alone.
Not everyone is impressed with social media fan rewards programs, however. A recent post on the digital and social media blog Digital Hoops Blast questioned if social media rewards programs are necessary at all. The three arguments made to support this notion are: 1) that these programs cause schools to lose focus on creating and sharing amazing content by focusing instead on points, 2) these programs dictate what social networks are better for fans to engage in by skewing the point scheme (more for a like on Facebook than a retweet on Twitter for example), and 3) the automation that totals up points to decide who your best fans is impersonal, which is counterintuitive to how you would want to connect with your best fans.
Those are great points but ultimately these programs are not going to go away. If Michigan, Ole Miss and Mississippi State were able to monetize their social media efforts, you can bet others across the nation with similar or even larger social media footprints are in the process of forming similar partnerships. Rather than the latest tech trend these programs appear to be an extension of what athletics departments have been doing with “traditional” fan rewards programs for years. For this reason look for companies like Lodestone Social, Row27 and others to continue to saturate the market, and for a social rewards program to come to a university near you (if it hasn’t already happened).
Guest author: Tyler Jamieson (BusinessofCollegeSports.com Intern)
When it comes to cash the SEC is king…
…but just barely. NCAA disclosures (and EADA reports for private schools) from the 2010-2011 school year (the most recent available) reveal that the SEC is top dog when it comes to revenue. In 2011, schools from the SEC and Big Ten conferences both posted revenues of over $1 billion. The SEC earned top billing with earnings of $1,080,219,133, with the Big Ten right behind at $1,078,727,312.
The SEC also led the nation with a staggering 5 schools posting revenues of over $100 million. Leading the way was Alabama ($124,498,616), followed by Florida ($123,514,257), LSU ($107,259,352), Tennessee ($104,368,992), and Auburn ($103,982,441). The Big Ten was second with 3 schools over $100 million: Ohio State ($131,815,821), Michigan ($122,739,052), and Penn State ($116,118,025). The Big 12 had two schools over $100 million: Texas, with the highest overall net revenue in the country ($150,295,926), and Oklahoma ($104,338,844).
What’s even more impressive about the SEC’s revenue numbers is how far they have climbed since 2004-2005. Since 2004-2005 the conference as a whole has almost doubled their revenue, skyrocketing from approximately $600 million to over $1 billion. Over that time the average SEC school’s revenue has jumped from approximately $55 million to a little over $91 million, which is a robust 71% increase.
Once again amongst the notables is Alabama who doubled their revenue from $62 million to $124 million, no doubt due to recent success on the football field with the hiring of Nick Saban and 2 National Championships in the past 3 years. Also among the big movers was Mississippi State who back in 2004-2005 had a very paltry (by SEC standards) revenue of $26 million. In 2010-2011 the Bulldogs took the SEC crown for highest percentage climb in revenue since 2004-2005 with a 131% increase up to $59 million, but that still leaves them at less than half of Alabama and Florida are earning.
With a $3 billion television deal set to kick off in 2012, the PAC-12 is in position for some serious growth. In 2010-2011, the conference had the 2 lowest net revenue earners for all automatic-qualifier conferences. Utah, still transitioning from its move from the Mountain West Conference, had a revenue of $38 million, and Washington State came in at just under $40 million. Those numbers will no doubt see hugely significant increases in the coming years with each school in the conference estimated to receive over $20 million a year from the new TV deal.
Today, the Big 12 and SEC announced that they have entered into a five-year contract which will allow champion of each conference to play each other in a New Year’s Day bowl game beginning in 2014. The contract is tailored to fit in with the new four-team playoff model, in that if the respective Big 12 and SEC champions are set to play in that game, different schools from each conference will play in the Big 12 and SEC match-up.
In making this announcement, the Big 12 and SEC have kept themselves ahead of the game when it comes to the reorganization of the college football playoff structure resulting from the expiration of the BCS’ current deal. This should come as no surprise to college football fans, as SEC commissioner Mike Slive has been at the forefront of proposing captivating alternatives to the current BCS system. It was Slive who first suggested the four-team playoff system, which will likely be adopted as the new BCS alternative. Today, Slive has once again protected the football notoriety of his conference, and the Big 12 has done the same, by ensuring that one team from each conference is present in a major, New Year’s Day bowl game.
The possibilities for this match-up are nearly endless, and quite fascinating. When considering the conference realignment landscape that took Big 12 programs Missouri and Texas A&M to the SEC, this proposal raises the possibility that those two teams could someday face off against former rivals on national television on New Year’s Day. For fans mourning the end of the Texas-Texas A&M rivalry, this agreement presents the opportunity for the rivalry to flourish on a large-scale stage. Understandably, that would require both teams to become the champion of their football-competitive conference–but, at least it’s a possibility.
Questions remain about how the bowl will be orchestrated. For instance, it is unknown whether it will be held in a set location annually, like the Pac-12 and Big Ten’s Rose Bowl, or if it will travel to a new location each year. Given that SEC and Big 12 fans travel more than fans from other conferences, it may be worth each conference’s time to investigate the possibility of rotating the bowl game throughout various sites. This would open up the possibility of attending the game to more of the fans who are diehard supporters of SEC and Big 12 football. Additionally, it would raise the possibility of introducing each conference’s respective teams to new markets.
In the future, issues that will need to be addressed as a result of this bowl marriage relate to the bowls that each conference is currently aligned with. For instance, the Big 12 champion plays in the Fiesta Bowl each year. Will that continue? Is it possible that the agreement will result in the Fiesta Bowl being one of the sites that the bowl rotates through? Furthermore, what will happen to the current Big 12 No. 2-SEC No. 4 or 5 matchup, better known as the Cotton Bowl? Like the possibility just noted about the Fiesta Bowl, could this new bowl also rotate through the Cotton Bowl location? What will become of the SEC champion hosting Sugar Bowl?
My hunch is that the bowls will not agree to a game which rotates amongst them. Such would not be lucrative to the bowls. Thus, what the Big 12 and SEC have done with this move, is to strip the respective bowls of their power and transfer it to themselves. In doing so, they’ve opened up a bidding war of sorts, where the bowls will be expected to woo them with options. If none is suitable to the conferences, my guess is that they will launch a new bowl which will rotate throughout Big 12 and SEC locations.
Overall, this is a great move by the Big 12 and SEC. It is so, because it is a move that keeps them on top of the bowl shuffling/college football playoff landscape.
Last week, the ACC and ESPN reached an agreement which extended the network’s television contract with the conference for 15 years. News of the agreement caused many to speculate that FSU would leave the ACC for the Big 12, under the assumption that the amount of money the school would earn under the ACC’s extended media contract was not sufficient and that FSU would be able to earn more under the Big 12’s yet-to-be-negotiated media contract.
However, in a memorandum released today, FSU president Eric Barron all but squashed any rumors of FSU leaving the ACC for the Big 12.
In the memorandum, Barron provided four reasons why alumni believe FSU should consider joining the Big 12: the Big 12 is more football-oriented than the ACC, the Big 12 would give FSU greater football competition, the ACC provides advantages to North Carolina schools, and FSU would earn more media revenue under the Big 12’s media contract.
In response, Barron nearly doubled the reasons why FSU should not join the Big 12, providing seven explanations. These explanations included his notations that the ACC is an equal share media revenue conference while the Big 12 is not, any additional money FSU would receive under a more lucrative Big 12 media rights deal would in turn be spent by FSU on further travel to play Big 12 schools, ticket revenue would decline as Big 12 fans would be less inclined to travel to FSU games, the sellout FSU-Miami rivalry would be lost, FSU would have to pay $20-$25 million to leave the ACC and the Big 12 is an “academically weaker” conference.
While many FSU fans may be disappointed in Barron’s response, his reaction is perhaps the most level-headed of any made during the past 18 months in which conference realignment has changed the collegiate athletics landscape. Barron’s response provided analysis of three of the key factors driving conference realignment: media contract revenues, travel and academics. However, it appears that for once, the lure of media contract revenues did not outweigh the costs posed by travel and academics resulting from conference realignment.
Over the past 18 months, fans of college athletics have watched as teams have realigned themselves with conferences in far away lands, under the auspices of joining the ranks of more prestigious academic institutions, better competition, and ultimately, earning higher revenues. However, in his memorandum, Barron indirectly called out many of these institutions on their bluff: How can you promote academics and earn more revenue, when you are requiring your student-athletes to travel further distances and expending more money to meet a growing travel budget?
In recent months, I have been given great access into top Division-I athletic department’s budgets. Across the board, the highest expense any athletic department incurs is for travel. Athletic departments that compete in localized geographic areas already shell out millions of dollars per year to pay for travel. Imagine how much the amount spent on travel will increase when schools join conferences with geographic reaches across the nation? Will it double? Triple? Will the possibility of earning $2 million more per year under a media rights agreement balance the additional travel costs incurred by the athletic department, while also negating the time lost to study by student-athletes required to travel further distances for competition? Only time will tell.
Today, many may be chastising Barron for his memorandum and apparent disinterest in moving FSU to the Big 12. However, ten years from now, it will be interesting to see what FSU has gained (and likewise, what it may have lost) by remaining in the ACC.
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|