Economic Impact of Texas A&M Moving to SEC

Last time I checked, the SEC doesn’t require schools to physically move when they join the conference. There are no plans for Texas A&M to relocate to Mississippi, Alabama or Georgia in order to join the SEC. You won’t be driving down the highway and see half a building on a semi trailer. Nope, Texas A&M will be staying in College Station.

Why then the cries of poverty in Texas should Texas A&M leave the Big 12? According to a report by the Perryman Group, even if the Big 12 stays intact, the economic impact of Texas A&M joining the SEC is a reduction of $217.2 million in gross product and 3,050 jobs on the Texas economy. Huh?

Unfortunately, Mr. Perryman dosen’t give us any indication as to how he arrived at his numbers. That makes it difficult for me to comment other than to say that I don’t see it.

Texas A&M will still be located in College Station, Texas. It will still play seven to eight home games in College Station. If anything, I think you will see an increase in economic impact in College Station as SEC fans, who are known to travel, descend upon the town. There are no SEC schools within reasonable same-day driving distance (which can’t be said for Baylor, Texas and maybe even Texas Tech), so that means more fans staying in local hotels, eating in local restaurants, and purchasing from local stores.

Most would agree a move to the SEC will benefit Texas A&M. In addition to what I’ve already mentioned, it will see a rise in conference distributions. In 2010, the Big 12 distributed $139 million between member institutions. As most of you are aware, the Big 12 does not distribute television money equally. According to Texas A&M financial documents, their portion of the conference distribution was $9.3 million, not including bowl game reimbursements. Meanwhile, over in the SEC $209 million was distributed equally between member institutions in 2010 for a total of $17.42 million each, not including bowl reimbursements.

That means Texas A&M would have nearly doubled its conference receipts if it had been in the SEC last year. That is, of course, not taking into account the SEC revenue pie being split into smaller slices with the addition of Texas A&M and presumably at least one other school. However, the SEC wouldn’t be adding members if it weren’t confident it was getting enough from a new television contract to keep conference distributions at or above current levels.

Travel expenses will obviously increase for the four conference games that the Aggies would play away from College Station. However, the number will be more than covered by the increase in conference distribution. I don’t have a number for Texas A&M, but in looking at Ohio State’s budget having an extra away game in 2011 only increased the football travel budget by $140,000.  Obviously, travel would increase across all sports, but I’m positive the nearly double conference distribution will take care of that.

What is the impact on the Big 12? The biggest concern would be the conference folding. However, I believe as long as Texas and Oklahoma stay put, the conference will remain. At least for now.

As I said in my post earlier this week, ESPN plays a key role as this unfolds. It has the power to walk away from its contract with the Big 12 if membership falls below ten. However, because of the legal issues I explained are in the background, I fully expect ESPN to honor the contract regardless. I also expect the Big 12 to attempt to add either one or three teams. If I had to guess, I’d say Houston, BYU and Louisville. This would allow the Big 12 to continue as a conference and be just as strong, or even stronger, than it is today. Again though, Texas and Oklahoma staying put are critical.

I’ve also seen some analysis suggesting a negative impact on the State of Texas. I am not an economist and do not claim to have expertise in measuring economic impact. Unfortunately, the reports and news stories aren’t explaining the numbers they’re throwing around. Here’s what I have been able to find.

Texas A&M would still play 7-8 home games, so the financial losses are not attributable to what goes on in College Station. University of Texas doesn’t need Texas A&M to come to Austin to improve its economic outlook. However, Waco (home of Baylor) does need Texas A&M to visit, and I’ve heard some argue Lubbock (Texas Tech) does as well. A&M fans travel to those away games and pump money into the local economy. It’s far less likely BYU or Louisville fans would travel to away games in Waco.

The question is why is Texas A&M responsible for the local economy in Waco? Any economy dependent on a football game that happens once every two years has bigger problems than A&M moving to the SEC. How much does that game really mean to Baylor?

I reviewed studies and contacted nearly a dozen Chambers of Commerce in college towns in the SEC, ACC and Big Ten. Based on that research, I found the direct economic impact of the average college football game ranged from $2.5-3.8 million. For example, the Athens Chamber of Commerce approximates it at $2.95 million per game for the 2011 season. The Florida State – Samford game in 2010 was reported to have a $2.5 million economic impact in Tallahassee. A study commissioned by Michigan’s University Research Corridor in 2007 shows a direct economic impact of $3.8 million per game for in-state attendees when Michigan (which boasts the largest stadium and is thus capable of having the most economic impact) and Michigan State data is combined.

Although $2.5-3.8 million is significant money for Waco, by no means would it all be lost without the Texas A&M game. Another opponent would come to town, and although likely not in the same droves as Aggie fans, the game would still have some economic impact on the city.

Another study I consulted was by Dr. Craig A. Depken, II at UNC-Charlotte on the economic impact of sporting events. Dr. Depken states that optimistic evidence estimates say college football games increase taxable activity by approximately $400,000. In 2005, aggregate taxable activity in Waco was $1.64 billion. That would make the taxable activity attributable to a football game, like Baylor-Texas A&M, approximately 0.024% of the Waco economy. Not exactly hysteria-inducing numbers.

Although Waco might incur some losses, the State of Texas would actually see a positive economic impact. Currently when schools from within the state play one another and residents of the State travel to the game there is no new economic activity. Residents are simply spending their money in a different Texas town. However, when an out-of-state school visits and brings in its team, coaches, band, cheerleaders and fans new money is being pumped into the state economy.

I spoke with potential SEC West opponents and asked how often their ticket allotment for away games go unused. Ole Miss, who wouldn’t be the first team I named for traveling well in the SEC, tells me it sells an average of 3,000 tickets to away games, with its entire allotment of 7,000 being sold each time it visits LSU or Alabama. Compare that to the sales Texas A&M had for conference opponents in 2009 and 2010 from the 3,850 allotment each school in the Big 12 reserves for visiting teams:

2010

2009

Big 12 schools reserve 3,850 tickets for visiting conference members and another 150 for the conference. In the SEC, schools reserve 7,000 tickets for visiting fans. Why? Because SEC fans travel. If every school Texas A&M faced in the SEC brought only Ole Miss’s average of 3,000 tickets per game to College Station, that would be 12,000 fans per year descending on College Station, compared to the 11,109 A&M saw in 2010 and just 6,362 in 2009. I have every reason to believe teams like LSU and Arkansas would buy out the full 7,000 allotment.

I’m told that the majority of hotels in College Station require a two-night stay. A conservative estimate of the average room in town is $200/night. That’s $600,000 in hotel revenue alone if you assume each of the 3,000 visiting attendees are staying two to a room. Add in gas, food and beverages and other purchases and each game featuring an out-of-state team in College Station could bring millions of dollars to the City and the State of Texas.

Based on my initial findings, I cannot even begin to find the origins of Mr. Perryman’s $217.2 million in losses. I do not bill myself as an economist, and this post is by no means a complete analysis. It’s a starting point. It’s cold hard numbers from real sources.

I will either update this post or add additional posts as more of the data I requested becomes available.

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