Christopher Lee

College Athletics By The Numbers: A Deeper Look at Profitability

A recent NCAA report stated that only 14 of the 120 athletic programs in the Football Bowl Subdivision made money. The Football Bowl Subdivision (FBS) includes all BCS conferences (PAC 10, SEC, Big 10, Big 12, etc) so odds are your favorite athletic program is losing money.

12% of college athletic programs are profitable.

Which college athletic sports are profitable?

According to the NCAA study, only two sports were reported by any university as being profitable:

  • Football
  • Men’s Basketball

Let’s take a closer look…

  • Football
    • There is a lot of discussion about football keeping athletic departments alive. Yes, football is one of only two sports (men’s basketball being the other) that ANY university reported as being profitable. At the same time, however, only 57% of football programs reported being profitable.  Thus the other 43% of football programs are still part of the problem.
  • Men’s Basketball
    • As the only other profitable sport that any university reported, men’s basketball is also considered an important aspect of keeping college athletics alive. Once again, however, keep in mind that roughly 57% of men’s basketball programs reported being profitable, so there is a large percentage of men’s basketball programs losing money.

How do college athletic departments MAKE money?

Three items account for over 50% of revenues:

  • Ticket Sales (17%)
  • Alumni/booster donations (27%)
  • NCAA/conference distribution (14%)

How do college athletic departments SPEND money?

Two items account for over 50% of expenses:

  • Salaries and benefits (32%)
  • Scholarships (Grants In Aid) (25%)

In case you are curious, here are a few other items as a percentage of total expenses:

  • Facilities maintenance and rental (13%)
  • Team travel (7%)
  • Recruiting (2%)
  • Equipment/uniforms/supplies (3%)
  • Game expenses (4%)

The median expense per student athlete in 2009 was $76,000.

How much does a college athletic program cost each university?

Average assistance that each university gave to the athletic department was $10.2 million.

How do we improve college athletics moving forward?

There isn’t an easy answer although simple math tells us that a start would be to reduce costs and increase revenue. As witnessed by Cal’s initial decision to cut five sports, universities are less willing to keep athletic programs alive so it’s time for college athletic programs to be self sustaining.

Decrease Spending

While salaries and scholarships aren’t necessarily easy to reduce as they are driven by outside factors (salaries of competing positions, tuition costs, etc), the data indicates its the first place to look in terms of reducing costs. This could come in the form of fewer staff members per department/team, lower salaries for staff members within college athletics, or cutting athletic programs. As someone who has worked in sports business, I recognize sports already has low salaries (particularly lower level positions) but I recognize that in order for college athletics as we know it to continue changes need to be made. In my experience, there are opportunities for college athletics to become more efficient. What if conferences became responsible for marketing individual teams instead of the universities athletic departments? Or media rights were handled at the conference or NCAA level instead of the individual institution? I recognize a large percentage of expenses for salaries are on the field in the form of coaches so perhaps there need to be guidelines for coaching salaries in college athletics? Is it time to re-evaluate the scholarship model? Reduce scholarships? Offer various levels of scholarship based on academic standing, performance on team, etc? .  Cutting expenses is always a tough task full of difficult decisions (see Cal), so I welcome any ideas in the comments.

Increase Revenue

The report doesn’t explicitly state what “NCAA and conference distributions” are but presumably its an athletic programs cut of any revenues generated by the NCAA or conference on their behalf (TV, radio, etc). What are some other ways to increase revenue? There is talk that a football playoff would generate significantly more revenue but is that the answer? What about individual conferences forming their own network (similar to Big 10 network)?  Will that generate enough revenue for athletic departments? Can other sports generate significant fan interest? I think the15,896 people who showed up to UC Santa Barbara to watch a college soccer game say yes.

What do you think? I’ve really enjoyed reading the debates regarding college athletics and cutting sports programs so I welcome any ideas, or comments you have. What are some solutions for college athletics? Is there even a problem?

Sources:

NCAA Study: http://www.ncaapublications.com/productdownloads/REV_EXP_2010.pdf

http://www.themaneater.com/stories/2010/8/31/mu-athletics-one-14-ncaa-programs-turn-profit/

Comments

21 responses to “College Athletics By The Numbers: A Deeper Look at Profitability”

  1. DanM Avatar
    DanM

    Interesting statistics. Initially I was surprised that facilities were a much smaller expense (as a percentage), but I suppose if you consider the cost of a stadium can be allocated over an approximate decade or more, it makes sense. I would love to see a NCAAF playoff – purely to have more football to watch, to continue the competitiveness amongst student athletes, and to see great match-ups that might not occur during the normal season. Thoughts to consider – if the sport is losing money, does extended the duration only cause more financial loss? Essentially will expenses stay the same regardless of length of season, and will revenue increase with a longer season? Also, does the timing of costs matter? For instance, can the costs associated with off-season (spring and summer) be justified? These costs compared to the costs of the fall, when the program is actually earning revenue. Of course there is recruiting, coaching, training – and I'm assuming most programs put on a Spring Game. Could this Spring Game be upgraded into an actual real game against another team, with revenue earning potential, and branded as a "pre-season" look into Fall?

  2. Jay Avatar
    Jay

    Just because a company isn't profitable doesn't mean it's employees (athletes) should work for free. ("Scholarships to get a degree" excuse? Please…)

    (Also, I wrote a long response below before I realized the above was much better haha. But it's there if you're interested.)

    Very interesting insight and study! I need to ask though (and this is purely after a cursory glance at some of the numbers above and no glance at the links near the end): can we talk about colleges and universities in terms of profitability? If they repurpose the money back into certain things (scholarships, stadiums, grants, university programs and facilities, etc.) does that mean that spend is considered 'overhead' and therefore that $ amount can't be factored into profitable?

    I guess where I'm going is a less analytical, more emotional conclusion: They're universities, they shouldn't be seeking profit as nonprofits, and they ARE making money off the specific athletes who receive nothing.

    1. Christopher Lee Avatar
      Christopher Lee

      Thanks for the comment, Jay. The point you bring up is a great one and as I wrote the above post, I had tentatively planned to write a follow up addressing that topic. I haven't gotten around to writing the second part of this post, but I agree that "profitability" isn't necessarily the goal. Some athletic expenditures could qualify as general marketing expenses for the university as they help raise awareness, increase applications, etc. That being said, given the economy, it appears universities are less willing to subsidize athletics and essentially want them to stand on their own.

  3. Steve Lyen Avatar
    Steve Lyen

    How about privatizing a minor league for football and basketball? Get the sports out of the schools. It drives up tuition for those that want to attend class. Athletes can get paid and pay to go to an affordable school if they choose to attend and get a degree, not just because they are forced to attend to play on Saturday. No one is talking about NCAA violations in baseball…..That’s because standout athletes go right into MLB teams minor leagues.

    1. Christopher Lee Avatar
      Christopher Lee

      Interesting idea, Steve. The reality is that schools help financially support sports at all levels (grade school, high school, etc). While I think a minor league system for basketball (closer to MLB than current NBADL) and football would be helpful it would add increased costs to those professional sports while still requiring financial assistance at the college level. Good point about baseball. My guess is that is a result of interest, media exposure, and the amount of revenue that the sport produces relative to bigger sports such as football and basketball.

  7. David B Avatar
    David B

    I also like Steve’s notion, but I don’t think school tuition is all that modified by the athletics department, as most funding comes from memorabilia and ticket sales (speaking football exclusively here).

  15. TMJ Avatar
    TMJ

    Good stuff. You mentioned the median cost per athlete is $76K. Just heard on NPR the mean (average) is more like $40K. Nonetheless, lots of money. My son will begin NCAA Div 1 soccer next year. His program doesn’t give freshman scholarships, reserved for a few outstanding sophomores, but mainly junior and seniors. Also, no redshirts (5 years of costs vs 4). Their conference is very regional, so few if any overnight stays. Contrast this with Univ of Maryland’s recent joining of the Big 10. All those expenses for trips alone to Iowa, Wisconsin, Michigan, Minnesota, etc….these states are all over 1000 miles away! Even smaller traditionally black schools spend huge dollars on their rivalry football games, boarding their teams at the Hyatt or Hilton with all the pomp and accommodations. I suspect the students ultimately get to pay for this through their tuition dollars and these schools never stop fund raising.

  18. Wayne King Avatar
    Wayne King

    I think the point that everyone should be incensed about is the fact that other 106 university athletic program spent close to a billion dollars of university money and still had the audacity to claim they didn’t break even. Lets go back to the Plato argument from earlier and agree that the motivators that drive our social systems problems are so much a part of our collective psyche that there may be no way to fix the problem short of scrapping the whole thing and starting with a truly clean slate. Acting in the best interests of ourselves and our family is human nature. All it takes is the willingness to justify wanting “a little more”. Greed.

  19. Tyler J. Slanovec Avatar
    Tyler J. Slanovec

    I would really like to see the NCAA put a limit or create guidelines for “Playoff Bonuses” or inventive packages per-se. Many coaches have Six-figure incentives for graduation rates, winning percentages, etc so many coaches will roster a few walk-on seniors every season to ensure their bonus at year end.

    I also disagree with the notion that full-scholarship students are eligible to receive room/board money if they elect to live in non-campus sanctioned housing. A lot of money could be saved by adding a clause to all scholarships that prohibit student from moving off campus on their own doing. Also gives more reason for student athletes to be more responsible with campus regulations and so forth. Can help create a positive image and culture around the athletic department.