Friday, February 20, 2015

All is not well (financially) in the world of college football

See Time for a Presidential Panel to Investigate College Sports by Andrew Zimbalist in The Chronicle of Higher Education. He is a professor of economics at Smith College who specializes in the economics of sports. Excerpts:
"The median revenue of athletic programs within the Football Bowl Subdivision (FBS) of Division I grew to $61.9-million in 2012-13 from 28.2-million in 2003-4—an inflation-adjusted increase of 76 percent. And it continues to grow. College football’s new playoff system, which held its national championship game last night, yielded a 12-year contract with ESPN worth $7.3-billion."

"only a couple dozen universities that are pulling in the big bucks. According to the NCAA’s most recent figures, out of 128 schools in FBS, only 20 athletic programs have an operating surplus."

"Overall, the median operating deficit in FBS athletic departments is approximately $12-million."

"So, what’s going on—how can losses be piling up as revenues soar? First, costs are growing faster than revenues. There are no stockholders in Division I athletics. That is, athletic departments do not have to answer to a board of directors or company owners who are looking for profits to go up each quarter so the company’s stock price will rise.

Athletic departments are not profit maximizers. They are win maximizers."

"Without pressure to maximize profits, when revenues rise, the athletic directors find ways to spend it in pursuit of winning."

"the top athletes at FBS schools produce a value well in excess of $1-million. The surplus produced by these players goes in part to the coaches who recruit them and in part to support the "nonrevenue" sports at the school."

"The NCAA now allows colleges to provide four-year scholarships to players, to increase the value of a full-ride scholarship by several thousand dollars to cover the full cost of attendance, and to provide better benefits."

"these additional costs of $1-million-plus will (a) make it more difficult for the vast majority of colleges—unable to afford the financial burden—to compete effectively on the playing field, (b) force these colleges into larger athletic deficits, robbing funds from the academic budget, or (c) impel some colleges to follow the lead of the University of Alabama at Birmingham and end their football program."

"college sports is faced with increased inequality and greater insolvency. Every extra dollar going to intercollegiate athletics is a dollar lost to academic programming. At the top 24 spenders in college sports between 2005 and 2012, football coaches’ salaries calculated on a per-player basis rose more than 60 percent (several now exceed $5-million and in 41 of 50 states a head coach is the highest-paid public official in the state), while academic spending per student dropped 2 percent."

"The NCAA functions as a trade association of the athletic directors, conference commissioners, and coaches, especially those from the big five conferences, and has proven time after time that it is incapable of constructively reforming itself."

"Congress can stand idly by, as it is wont to do, and refuse to get involved in the business of college sports. Or, it can recognize that it is already involved in that business—via an elaborate network of tax preferences and subsidies"


Anonymous said...

the coaches normally boast about all the revenue that the football programs bring. Is that some how a fallacy or something?

Cyril Morong said...

It seems like Zimbalist is saying it is a fallacy. That is what the numbers seem so say. Thanks for reading and commenting