Everyone knows college athletics mean big money. Everyone knows major football programs especially clean up with huge bowl game payouts.
Well, turns out everyone is wrong. As a matter of fact, not only do most sports at each school operate at a loss, but as a whole most athletic departments lose money every year.
This summer I interned at the NCAA in Indianapolis, and I am writing a paper dealing with the finances of intercollegiate athletics for a sports law class. Based on what I’ve learned and discussions with friends in and out of law school, I’ve noticed many — perhaps most — people have some fundamental misunderstandings about the economics of college athletics.
In short, intercollegiate athletics bears little resemblance to the gold mine many people assume it is. Making the NCAA men’s basketball tournament nets a school little more than travel expenses, while most bowl games cost the participating schools money.
To be clear, this column refers to schools with football programs that compete in Division I Football Bowl Subdivision, formerly known as Division I-A. This is important because at the majority of schools, football and men’s basketball are the only programs that actually pay for themselves.
There are exceptions where a particular program has a strong following such as wrestling at Iowa and women’s basketball at Tennessee (I’m told this was also the case at Texas Tech in 1990’s), but generally football and men’s basketball are the only programs that regularly generate more money than they consume.
Please note that’s not a commentary on the value of so-called “non-revenue” programs. I competed in wrestling and track and field myself. However, to begin to understand the financing of major college athletics, this mathematical reality has to be recognized.
With two programs turning a profit and a dozen or so losing money, only a few athletic departments are financially self-sufficient on a consistent basis. These are schools like USC and Florida that not only rack up a lot of wins but also make millions of dollars from merchandising (which unlike money from bowls and tournaments isn’t split with fellow conference schools).
But most athletic departments will only be profitable intermittently. For example, in the 2007-2008 football and basketball seasons Kansas won a national championship in men’s basketball and the football team won the Orange Bowl.
But even great success is less lucrative than most would imagine. When Kansas went to the Orange Bowl, according to the Lawrence Journal World, they took 500 people in the “official traveling party,” including the team, coaches, athletic trainers and university dignitaries and that number doesn’t include the band, which Kansas also paid to send. In all, the Jayhawks spent about $2 million on airfare, hotels and per diems.
Plus, Kansas didn’t receive anything close to the bowl’s total payout. Instead the Big 12 uses a formula and distributes the money amongst conference teams. Kansas made money off going to the bowl, but nothing like the bonanza many people imagine. And most bowls are nowhere as good a financial deal for schools.
Last December for example, Florida Atlantic was paid for its appearance in the Motor City Bowl entirely with tickets. No money at all. Just 16,000 tickets. After selling what they could — you try getting Floridians psyched for a trip to Detroit in December — the school took a significant financial loss in playing the game. This is an extreme case, but most bowls are financially closer to the Motor City Bowl than the Orange Bowl.
Finally, soon to be professional athletes are overwhelmingly in the minority. Most student-athletes put in all the work and time required and receive relatively little recognition and are compensated with nothing more than a scholarship (and many not even that).
True, collegiate athletics make a lot of money. In the end, almost as much as they cost. Contrary to what many believe, very few schools are laughing all the way to the bank.
2 comments
Link: http://www.othersidesports.com/1/post/2009/11/how-a-profit-generating-athletics-program-really-operates.htmlKentucky is not alone with this, USC and Florida, as you mention, do the same thing. They claim profits, or at least self-sustainability, when they receive all sorts of benefits from the university, the students, and taxpayers. On the other hand, Brian Goff, Distinguished University Professor of Economics at Western Kentucky University and a noted sports economist, noted that it seems silly that mega athletics departments (like Florida or Texas) can claim losses or small gains when they have the revenue sources of pro sports without the biggest cost (athlete salaries). He thinks profits may be hidden because of accounting tradition and because outrageous profits would spur on discussion of paying players.
Link: http://thesportseconomist.com/2005/12/college-athletic-finances-untold-story.htmThe Congressional Budget Office released a report this year stating that it is hard to gauge the economics of college athletics because it is so easy for colleges to shift money around discretely. Thus, it is hard to say what the truth really is, but almost all the research does indicate that the claimed benefits of athletics, tangible or nontangible, don’t exist or are blown WAY out of proportion.