Is the NCAA in danger?

January 30, 2013

The NCAA attempted to have a court case filed by former players thrown out in court.  The former players led by Ed O’Bannon want to recoup some of the broadcast right fee revenue that has only been shared by the NCAA and member institutions.  This initially focused on re-broadcasts of games, but now a new ruling from Judge Claudia Wilken is signaling that players (former and current) can go ahead with their antitrust lawsuit against the NCAA.  So what does this mean exactly?  If, and that is still a big if, but if the NCAA loses this lawsuit, it could mean that the face of collegiate sport as we know it could change forever.  It would also mean that the NCAA could be held liable for hundreds of millions (or even billions) of dollars in revenue to be paid back to former student-athletes.  That would be in addition to having to potentially split some of the broadcast revenues from here on out with student-athletes in those events.  If such events were to transpire, this could mean that many programs which need their current level of revenue from broadcast right revenue would find themselves short of money, and that they would probably find themselves in the red.  I would anticipate athletic departments either going into the red, or making cuts to many programs on campus in an attempt to stay financially stable.

What would all of this mean?  It would be a major sweeping change in athletics, and the financial and economic structure of how the NCAA and member athletic departments do business.  It would also make things more interesting as it would push forward the discussion of whether a student-athlete is an employee or not.  Many argue both sides of this, with discussion of whether the National Letter of Intent which all student-athletes sign is a contract or not.

This is still in its early stages, and is sure to be battled in court for quite some time.  With that said, I’m sure many in the NCAA and athletics are probably sweating a bit after today’s ruling.


9-3 Louisiana Tech not going to a bowl game

December 4, 2012

A quick repost of a blog post I wrote up for my students today on the blog project they are working on.

Yesterday was bowl selection day for the NCAA College Football teams across the United States.  Teams who won half their games (or others who receive special exemptions despite losing records) are all eligible to play in bowl games.  While much of America was screaming at the Orange Bowl for having Northern Illinois University (NIU) playing in a Bowl Championship Series (BCS) game, a few individuals were very unhappy that Louisiana Tech was not going to a bowl game.  It was not a matter of record (the team went 9-3) or that they didn’t get an invite to a game (the Independence Bowl offered), but that the athletic department was indecisive when trying to figure out whether to accept the invite.

The bowl business is tricky stuff, and La Tech was thinking they were going to some specific bowl games coming into the weekend.  Then Northern Illinois finished 16th in the BCS rankings and won an automatic bid to the Rose Bowl, kicking Oklahoma out of the BCS.  This shift cause other bowls to shift who they were inviting, and soon La Tech found themselves with only an invite from the Independence Bowl.  It is not that the Independence Bowl is a bad game to play in, but that the payout the athletic department would receive would be around $1,100,000.  While that seems to be a good chunk of change, the bowls that La Tech thought they were in the running for had payouts around $100,000 to $200,000 higher.  While this seems like a small amount in the age of athletic departments spending tens of millions of dollars on football, I think La Tech had good reason to hesitate.

The bowl game system is one which invites teams from across the country to travel long distances and stay many days (teams travel, practice, have some fun events, play the game, then go home).  Most schools also bring donors, alumni, students, the marching band, athletic department staff, and university staff and administrators to the game.  Think about the bill for hundreds of people having to travel, stay in hotels, food, drinks, banquets, tailgates, events, and all of the sudden you are running a pretty high bill.  Couple this with the fact that some bowl games require schools to make a revenue guarantee in regards to the amount of revenue generated by fans purchasing tickets, and bowl games can quickly become a losing situation for many athletic departments.  In other words, bowl games are a “winners curse” for some.

So did La Tech do the right thing?  I think so.  It is better, in my opinion, for an athletic department to take their time and make the right decision, than make a poor one which would put them in the red.  La Tech’s most famous alumni Karl Malone, a former NBA superstar, was not happy.  Mr. Malone took to twitter and lambasted the school and its athletic department for not landing in a bowl game.  I can understand Malone’s anger as those who are punished by this are the student-athletes who earned the chance to a bowl game, but are now not going anywhere.  Malone suggested that not going to a bowl game is “exactly what is wrong with our university”.

I disagree Mr. Malone.  The athletic department was weighing their options carefully.  Is it a disappointment? Yes it is, but it does not hint at a bigger systematic issue with the university and the athletic department.

Is the $60 million fine too step for Penn State?

August 29, 2012

Amongst the many penalties passed along to Penn State for their lack of institutional control of a series of unfortunate and disturbing incidents at their university, the NCAA hit the athletic department with a $60 million fine.  This comes not just because of the sexual abuse of minors by former assistant coach Jerry Sandusky, but in the subsequent lack of action and failure to report these issues by many in athletics and the university.  Today 29 prior faculty senate chair signed a document noting that the penalty was unfair to the the athletic department and the university, and that it was putting Penn St. in a bad financial situation.  While it is true that this penalty, plus all the potential civil suits which are on their way are potentially going to hit the university for a lot of money.  In the document the faculty group notes:

“The shock of the crimes that occurred here clearly underlines the need for greater vigilance and stronger policies. However, the sweeping and unsupported generalizations by the Freeh Group … and the NCAA do not provide a satisfactory basis for productive change,”

I can understand their unhappiness that Penn State’s reputation and finances are taking a hit on the academic side of things for issues that they view as being in the realm of athletics.  The problem is that the lack of institutional control meant that not only was athletics not doing anything about these incidents, but that those in the administration who should have been overseeing some of these issues also failed in their jobs.  If you look at the organizational structure of almost any athletic department, you will find that coaches are below the athletic director, and that the athletic director is usually below the chancellor/president and/or the Board of Trustees.  In this case, while the faculty can be unhappy and blast the NCAA for potentially harming academics, it is not the case that the administrative side of the university was entire without fault.

This seems to be another great argument in the favor of removing athletics from a university.  If athletics can have such power that they can cause such damage to a school because of the action of a few individuals in power, are universities taking a financial risk by giving so much power to sport organizations?  I am a big fan of college athletics, but it would seem that there is need to reconsider the powers given to athletic departments, and whether these departments should be able to influence others in the university community so easily.  The faculty group that signed this letter should give thought to more of  the reasons as to why Penn St. got into such dire straits in the first place.

Where are the fans going in Minnesota?

August 16, 2012

The University of Minnesota once shared the Metrodome with the Minnesota Vikings of the National Football League (NFL).  As the stadium fell into disrepair, the University decided on a new stadium plan for their college football team, which lead the construction of TCF Bank Stadium, where the Golden Gophers now play their home games.  The stadium has just under 51,000 capacity, and was touted as a more friendly environment to watch college football than the Metrodome.

A new article in the Star Tribune notes that student season ticket sales for Minnesota football games have been on the decline.  In the first year in the stadium they were at 10,000 student ticket sales.  Year two was less than 8,000, year three was less than 6,000, and as it stands as of this moment, there is around 2,000 student season tickets which have been sold for games this year.  This drop has been very drastic, and people are starting to wonder what is going on.  Well team quality has not helped, as the Golden Gophers have been rather inept on the field in the past few years, and many are saying that this is driving people away.

There is also the novelty effect which should be considered.  In the sports economics research it is noted that new stadium often help boost attendance for about 5 years, after which attendance will return to the mean.  In this case, the stadium’s novelty really seems to be wearing off, and with poor performance of the team, it will be interesting to see how sales progress in the future.

Minnesota is in the opposite bag of the University of Missouri, which has sold out football student season tickets for the first time in their history.  The athletic department at Mizzou has said that around 46,500 season tickets have been sold, as the team and university prepare for their first year in the SEC.  People seem very excited about the great ticket sales numbers, but I would caution everyone to think that this will mean giant gains in attendance, as we could be dealing with a novelty effect of the team playing in the most dominant football conference in the country.  It also helps that Mizzou has a home game against Alabama, the defending national champions.

Hat-tip to Professor Tyler Hack in my department who alerted me to this article about Minnesota football attendance.

Is Athletics killing Academics?

April 23, 2012

Ferhat Guven over at Sports for Dorks alerted me to a Forbes article this morning discussing the University of Florida budget cuts to academics, and the increase in budget for athletics.  The title of the Forbes article plays right into the arena of debate focused on whether athletics is killing off academics in American universities.  Even as I listened to NPR this weekend, they were replaying an interview in which an individual went to visit the University of Florida, and decided not to go to college because they felt that the athletic facilities were bigger than the academics ones.

So this Forbes article entitled: “University of Florida Eliminates Computer Science Department, Increases Athletic Budgets. Hmm.” notes that the University of Florida announced it will save around $1.7 million a year by cutting its computer science department.  The author then mentions that athletics will increase their own budget by around $2 million to $99 million.  While the author is correct in noting the real “bad guys” in this story is the state government who have forced the University of Florida to make 30% cuts to their budget, it does still give that impression that athletics is really killing academics, and has people asking why not move the money from athletics to academics.

My response is that Florida athletics is already doing this.  In 2011, Florida increased ticket prices by 3%, and gained total revenue around $117 million.  What did they do with the surplus?  Well they reported a profit of around $6 million, but also gave $6 million back to the University which was being hit hard financially.

Athletic Director Jeremy Foley even stated:

“It’s not our money. It’s the university’s money. We’re part of the university, and we’re here to help.”

So in this case, Florida athletics is actually helping the University by pushing money from athletics back into academics.  Not all schools can afford to do this, though schools like LSU and Ohio State did give money back to their universities last year.  Ohio State athletics even gave $1 million for library improvements.

Maybe more big time athletic programs that are making profits should consider following the lead of these schools.

And the schools which made a profit this year in college athletics are…

December 2, 2011

Here: Table courtesy of USA Today:

Total revenue
Penn State
Oklahoma State
Kansas State
Texas A&M
Michigan State
West Virginia
Virginia Tech
Ohio State
$123,174, 176

That’s right 22 of 218 reporting schools did not lose money on athletics last year.  From the chart it is pretty clear that some schools were pretty big winners, with Oregon and Alabama really raking in the money for the 2009-2010 season.  What is very nice about the USA Today site, is that one can even go look at the breakdowns school-by-school for both revenues and expenses.  Curiously, many of the schools who are still making big profits are also taking extra money from their universities in the form of student fees.  Really, the students are helping to finance extra revenue for some of these programs.  This blog notes that some schools such as Ohio State and Florida do give back some of their revenues to help finance academics, libraries and other projects.

The question does exist about the other 196 schools on the list who did not make a profit and how they spent their money.  I know some schools like Missouri and Illinois are right on the borderline of the break even point.  Illinois notably made it to a bowl game for the first time in several years, and ended up going.  The cost of the trip surely exceeded a million dollars, and this amount would seem to make up the difference.  Additionally, the choice to give an extension to their football coach Ron Zook may have proved to be costly as they fired him last week.

In all, this shows that while money talks in college athletics, there isn’t necessarily a lot of athletic departments making money, and it would seem some poor decisions are keeping some schools from being profitable.  Of course many, such as the Knight Commission, would note that spending in college athletics is out of sync across the board, and really there is a real need for change and reform when you look at these numbers.

Mizzou has joined the SEC

November 7, 2011

Today, the University of Missouri (Mizzou) officially announced they were joining the Southeastern Conference (SEC).  The big move was made official at a press conference on the Mizzou campus in Columbia, Missouri, which happened to be open to the public, and literally right across the street from my office.  I drove in to check it out, and found that the student center where the press conference was held, with statements made by the Missouri chancellor, Mizzou athletic director, SEC commissioner, as well as the president of the University of Florida (an SEC member).

A couple of more notable things from the conference related to finance/economics.

1. Chancellor Deaton noted that the move to the SEC would have an economic impact on the entire state of Missouri.  Those familiar with my arguments, have noted that Mizzou athletics will wonderful, entertaining, and bringing great psychic benefits to the state, probably does not provide any economic impact or benefits to the entire state.  I’ve even argued before that they don’t even have an impact on Kansas City (thought the KC Sports Commission said they did) as they only play a few games in the city a year, and that this is only 2-3 days a year and does not bring in that many overnight visitors.  Missouri plays even fewer games in St. Louis (the other big city in Missouri), so I’m still not sure where all this economic impact is going to come from just by changing conferences.  That is my honest opinion on that matter.

2. The SEC said that Missouri was chosen partly because of their financial strength.  Though, if one looks at operating budgets, Missouri does not compete very well with schools like Florida and Alabama who pull in more revenue in football alone, that Missouri does for all combined revenues.  Of course, there are other schools equivalent to Missouri in terms of the operating budget and revenues in the SEC, so it is not like they will be a weak link in regards to finance.

3. The SEC has a pretty tough football schedule, but Mizzou should probably do decently in football and pretty well in basketball considering the competition as well as revenue spent on recruiting and coaching for teams.  It will be interesting to see how the team does.

4. It is being reported that Missouri will be in the SEC East, which means they will have to travel farther than if they were in the SEC West.  This could mean a lot more travel time for teams, student-athletes and fans for all involved.  I wonder how many of the notoriously well traveling SEC fans will make the long trek to Columbia, MO, especially from Florida, Georgia and South Carolina if Mizzou is in the SEC East.  Additionally, how many Mizzou fans will really make the long trips east?  Might this impact attendance at events (most likely football only)?  Quite possibly, another thing to pay attention to in future years.

Of course in all of this, Mizzou has left the Big 12.  Big 12 interim commissioner Chuck Neinas called Missouri’s move “disappointing” and “a mistake”.  Missouri’s long time rival Kansas was a little more taunting, they posted on the KUNews Twitter feed: “Missouri forfeits a century-old rivalry. We win“.

I just chuckle at that, as the SEC does look to be a bigger revenue pool, with larger media contracts and equal revenue sharing, all of which will most likely boost the revenues that Missouri will receive each year.  Though there is the looming question of whether Missouri will have to pay an exit fee, and if so, how much it will be.