Source: USA TODAY
(Louisville and Rutgers are removed from the computations because they moved to Power Five conferences during the time frame. The analysis is based on documents acquired in conjunction with the Sports Capital Journalism Program at
Zimbalist says this kind of spending is not sustainable, and he thinks litigation of some stripe — courts deciding players can be paid beyond their scholarships, for instance — could cause the bubble to burst. Among the other potential wildcards are an ongoing lawsuit pertaining to athlete compensation limits that seeks hundreds of millions in damages, concussion lawsuits, or a change in the
“There are big-time things leading it to pop,” says Zimbalist, a professor of economics at Smith College and author of Unpaid Professionals:
Jeffrey Orleans, an attorney who specializes in higher education law with a focus on athletics governance and administration, says it’s a bit like the killer asteroid theory: Something could fall from the sky and blow up college sports’ economic model.
“There’s so much out there that it’s hard to feel comfortable,” he says. “On the other hand, it could be like the Cold War. For 50 years we had all kinds of ways the world could have blown to hell, and somehow we survived it.”
“A very small number of the 1,100 (NCAA members) have a positive cash flow on college sports, so those schools are making a decision that having a successful athletic program is valuable to them despite the fact they have to subsidize it with institutional money,” Emmert says. “The same thing is true for a lot of academic programs. So every school has to sit down and say, 'What is this worth to us?’ ”
Kansas State president
“I’ve heard that now for the last 20 years and I don’t want to be skeptical and say nothing like that could happen that would ever change the direction of intercollegiate sports,” Schulz says. But he compares it to predictions of a bubble in higher education where prospective students would one day decide that degrees for ever-higher tuition just aren’t worth it anymore.
COLLEGE BASKETBALL: Coaches' salaries
“And guess what? We all have record numbers of people who want to come and pay these tuition rates and get these degrees from our institutions,” Schulz says. “So I’m a little skeptical about the gloom and doom of a bubble that’s going to burst and everything is going to go south.”
Even so, Schulz agrees that athletics departments cannot continue to outspend revenue indefinitely. He blames the building of more and more buildings.
“I worry that we put ourselves in this mode where whatever we have right now is not good enough,” he says. “We’ve always got to build something bigger and better with more school colors and more logos. And I don’t think it is sustainable.”
Will TV revenue continue to rise?
Schools’ figures for the 2014-15 fiscal year were affected by changes in the methodology they are supposed to follow in compiling certain revenues and expenses for the NCAA. Among the Power Five conferences, the revenue increase was driven in part by an influx of bowl money from the inaugural
Meanwhile, the expanding expense side of the ledger will be under additional pressure from scholarships based on the cost of attendance, which didn’t begin hitting athletics department budgets until the beginning of fiscal 2016.
Still, A.J. Maestas thinks an elite portion of the Power Five schools will continue to do quite well because their revenues have room to rise even more. He is president and founder of
“If you take a look at affinity, passion, ratings and licensing — all the metrics that would be highly correlated with revenue — and you picture a bar chart that compares the NBA to college basketball and the NFL to college football, the college versions would be below the pro versions, but not by nearly as much as people might think,” Maestas says. “But if you look at revenue, it is radically below."
Matt Balvanz, Navigate’s vice president of analytics, says the firm is projecting the NCAA’s top 25 athletics programs can expect revenue to grow by 116% in the next 10 years. By contrast, the firm predicts revenue growth of 63% in the NFL and NBA, 55% in the NHL and 48% in Major League Baseball.
But how will TV revenue keep going up in a world where cord-cutters are leaving cable TV and cord-shavers are opting out of high-priced sports channels where they can?
“No matter how tough things are at ESPN right now, nobody ever cuts their way to greatness,” Maestas says. “We see signs that consumers are willing to pay … for premium content, and college football is premium content.”
“The (then) president of CBS Sports, to whom you are speaking, predicted rights fees would go down because there just wasn’t enough business to support the rights fees we were paying,” Pilson says. “He was wrong, obviously. Shortly after, he and his network paid $1 billion for the
The progression took another leap forward last week, when CBS Sports and Turner paid $8.8 billion for an additional eight years of the tournament, through 2032. “It tells us,” Pilson says, “that the appetite and interest in major sports properties is a fixed part of our TV sports culture.”
Pilson points out many of the conference TV rights packages are wrapped up for years, with a significant exception. The
Bearable for Bearcats
Navigate’s projections of high revenue growth are only for the top 25 programs. What about everybody else, particularly those schools outside the Power Five?
“It’s going to be a challenge, obviously, with costs increasing if you are not in that top tier,” Balvanz says. “It’s going to be really tough to find those trigger points to maximize revenue. It’s going to force them to be more and more creative.”
On a dollar basis, Cincinnati’s athletics program is one of the most heavily subsidized at a Division I public school, receiving nearly $23.2 million from the university in 2015. But it also is being creative in cutting costs. Omar Banks, the department’s chief financial officer, says revenues are expected to decline in future years for complicated reasons having to do with the breakup of the old Big East, UC’s tenure in the
Cincinnati has instituted rules banning plane travel for non-conference games, saving “a couple hundred thousand dollars,” and capped per diems at $45, saving upwards of $75,000, he says. The department’s operating expenses rose from $25.2 million in 2005 to $59.5 million in 2013, not adjusting for inflation. Its expenses have decreased since ($55.4 million in 2014 and $51.7 million in 2015).
In 2015, USA TODAY Sports found, there were 21 public-school athletics departments that spent at least $100 million – more than double the number at that level in 2012.
“Those schools, when they amass their surpluses, they’re creating this new demand for high-priced coaches,” says Banks, president of the
Cincinnati’s football team has made a bowl game nine times in the past 10 years, its men’s basketball team has played in the past six NCAA tournaments and its women’s soccer team won the 2015 AAC tournament. But Banks says that even with the cost cutting, if it doesn’t increase revenue from ticket sales and annual fundraising, “we could be looking at the percentage of subsidy that we receive becoming much higher.”
Orleans, a consultant to the reform-minded
Combined GDP of Serbia and Estonia
“There are a lot of challenges,” McMillen says. “The millions of dollars that the conferences and the NCAA are spending defending the model are eating away at dollars that could be put to more productive use. (The athlete-compensation litigation) in particular is existential. It blows up the model of college sports. If that would ever happen, there’d be a race to Congress to get some relief.”
Some members of Congress do not look kindly on the NCAA. Rep. Charles Dent (R-Pa.) is among five members who introduced a bill that would establish a
“The NCAA is simply incapable of reforming itself,” Dent says. “It’s important for us to have a serious conversation about how all these conferences are going to be able to survive in this new system” where the Power Five have more autonomy.
Over the past 11 years for which USA TODAY Sports has compiled their NCAA financial reports, public schools in Division I have spent $71.3 billion on athletics — roughly the combined GDP of
Zimbalist says athletics departments simply can’t keep spending so much. “
Zimbalist says he is working to try to get the
“I think that everybody realizes now” that change is coming, he says. “College presidents know they can’t continue financially” the way things are. “Individual presidents can’t do anything. They’ve tried in the past, and all they’ve ended up doing is getting themselves fired.”
Schulz is leaving Kansas State this year for
Schulz says he can’t say much about all that until he gets there and begins working on it. But he believes that college presidents are going to show more restraint on coaches’ salaries in coming years.
“I think many of us have reached the limit on what we can do on football salaries, for example,” he says. “Can a Kansas State pay a football coach $5 million a year? Probably could, but I’m not sure we’re willing to go that far. … Those are the types of constraint that are going to be there. But I see those as more of a gradual set of changes than this overnight, everybody is deciding to do something. I just don’t think that’s realistic.”
Contributing: Christopher Schnaars, Brent Schrotenboer