Wednesday, September 26, 2012

The NCAA Crisis: Money, Money, Money


Where were we? Oh, yes, complaining about the U.S. economy.

Now, let's imagine for a moment–and this might be difficult to imagine... Let's imagine for a moment that we found an antidote for all of the U.S. economy's ailments and that we lived in a world where we never needed Title IX because gender equality was so engrained into our social woodwork.

Then, all of our problems would be solved. We would have TONS of money! And we could have a men's collegiate gymnastics program at EVERY university! 

We are geniuses... just like this guy:

This scene from the Michigan YouTube video was so good; it deserved its own animated gif.

But what about that little thing called a university budget? Most universities don't have a $16.5 billion endowment like Stanford does. They are more strapped for cash, and consequently, they rely heavily on a few sports to bring home the bacon: those being football and basketball, with football being the biggest potential winner.1

Why? Well, let's take a look at a simplified version of the last 30 years of Division I sports.2




In 1980, Robert H. Atwell, Bruce Grimes, and Donna A. Lopiano cautioned NCAA programs that they were participating in an unsustainable money game between the have's and the have-not's.

The have's were a select few programs that were making big bucks off their college football and basketball teams. In fact, the football and basketball programs were doing so well for themselves that they were able to produce profits large enough to support themselves and some (if not all) of their other collegiate teams.

The have-not's, on the other hand, tacitly were chasing the have's. They wanted to reap the monetary benefits of successful teams, and they thought that they had to have successful football and basketball teams in order to do so. But how were they going to catch up to the have's? By spending more money. Duh. If you've ever watched an episode of MTV's Made, you know that the secret to fitting in is spending more money.

But instead of buying new clothing and getting fabulous haircuts, universities had to spend more money on coaches' salaries. More money on scholarships. More money on recruiting. More money on facilities.

How else would you get a winning team? The best recruits don't want to play for a school with run-down training centers. They don't want to play for a coach with a losing record, and in order to have a winning coach on payroll, you have to pay him a sizable income.3

Spend to win. Spend to make more money. That's the gist of the money game.

It's an on-going game. There's always a new carrot being held out in front of college sports teams. For instance, in 1984, the Supreme Court ruled that individual schools and athletic conferences could negotiate their own TV contracts, which brought money to schools with big followings and winning records. Cha-Ching!

In the 90s, the level of corporate sponsorship rose to a whole new level. While companies have always supported college sports teams--tobacco companies at the beginning of the twentieth century, for instance--Nike started branding mania. The company was willing to sponsor the University of North Carolina to the tune of roughly $11 million dollars. All UNC had to do was slap the Nike swoosh on every uniform, shoe, and piece of merchandise in exchange for part of the royalties.

If you were alive in the 90s, you probably remember how little basketball players everywhere were wearing baby blue clothing with the Nike swoosh. Cha-Ching!

The have-not's, of course, wanted to cash in on these deals, but without a winning record, a big Nike sponsorship was simply a pipe dream. Nevetheless, they kept playing this foolish money game by spending money on their "revenue" sports teams. The results, however, were not what they expected. More and more football teams were falling behind in the game, and they were spending too much money.

  • In 1981, 21% of Division I-A football teams reported deficits
  • In 1989, 45% of Division I-A football teams reported deficits.
  • In 1981, 70% of Division I-AA football teams reported deficits.
  • In 1989, 94% of Division I-AA football teams reported deficits.
As more and more football teams were reporting deficits, more and more athletics departments were running short on cash to fund the non-revenue sports teams like men's gymnastics. One way to respond to budget shortfalls is to cut back. Womp. Womp. And I'm sure that universities never ever cut back on gymnastics during a time of monetary problems.


While hindsight is 20/20, researchers were noticing the same trends at the time. As Atwell and his crew monitored university spending on college sports in the 70s, they noted that universities were cutting sports teams, including gymnastics, in order to spend more money on football and basketball. And they warned universities about this, telling them that they needed to find a more sustainable model for college athletics, but the universities did not listen.

The athletics departments kept spending. In 1989, 9 years after Atwell's study came out, 88% of colleges reported that they needed to take "serious methods to control budgets," and maybe some of them did. Nevertheless, the system did not change. Universities continued to rely on football and basketball teams to provide for their other teams. In fact, while other sports have fallen by the wayside, Division I football has grown. During the 1981-82 season, there were only 187 teams, and today, there are 238 teams.

That statistic, however, is a bit misleading because the number of Division I institutions has also grown. So, here's a breakdown of the percentages.4

Note: Sports like soccer grew in terms of the number of teams. In 1981-2, there were 182 men's soccer teams, and in 2010-11, there were 201 teams. (Growth: 19 teams). The problem is that the number of Division I institutions grew at a faster rate--from 278 to 308 (Growth: 30 teams).

P.S. The NCAA's charts are prettier than mine.

Over time, universities have found a way to minimize (to a certain extent) Division I football debts. In 2009, *only* 43% of Division I football programs reported a deficit, but that does not mean that *only* 43% of college athletics programs (as a whole) were breaking even. I wish! 88% of Division I athletics departments reported that their expenses exceeded their revenue.

Clearly, your financial model is working when only 12% of Division I programs can break even in a given year. (This year being 2009.) Finding themselves in the red, many athletics departments rely on the university to subsidize their sports. (You know those pesky little fees that appear on your university bill? Yeah, that's where some of the money comes from.)

As you can imagine, university administrators do not really like forking over money to athletics programs. Why? Well, they know that other universities have self-sustaining athletics programs, so they want their university to emulate that model. (Will the money game ever stop?) Furthermore, it takes away money from other endeavors, and if it's a public school, there's this thing called the tuition trap. When a public university raises its tuition and fees, lawmakers and taxpayers think to themselves, "Well, they have more money coming in, so we don't need to give them as much public funding."5

Yet, even though universities do not really like subsidizing their sports teams, many Division I universities realize that part of their brand is tied to their athletics. So, they do not turn away their needy athletics directors. Instead, university administrators say, "We'll give you some money, but you need to manage your budget better." And what do the athletics departments do? Sometimes, they cut back rosters. Sometimes, they cut back on scholarships. And sometimes, they cut back on sports.

(And I'm sure that, in the entire history of college athletics, universities have NEVER EVER cut back on men's gymnastics because of money problems. Never. It's all because of Title IX, remember?)

But universities can only cut so many teams. In order to maintain one's Division I membership with the NCAA, colleges must offer at least 7 teams for men and 7 teams for women or 6 teams for men and 8 teams for women. As well, they must offer two sports for both men and women (e.g. men's basketball and women's basketball).

Tomorrow I'll talk a little more about the NCAA's very own quota system.


Notes

1. To give you an idea, let's look at the most profitable football team and the most profitable men's basketball team. While the University of Texas football team reported a profit of $71,242,332 during the 2010-2011 academic year, the University of Louisville men's basketball team reported a profit of $27,551,289.

Duke's men's basketball team is the second most profitable with a profit of $15,097,800. Compare that to Penn State's football program (the second most profitable), which reported a profit of $53,228,446.

2. Sorry, there's only so much data I can gather without doing original research. I recognize that there are holes in this history. For instance, I have yet to find a good study of NCAA athletics in the 90s. Also, most reports on NCAA athletics have not included statistics for gymnastics teams.

3. It should be noted that profits are not entirely contingent on a winning record. Other factors should be taken into consideration. For instance, the University of Nebraska attracts fans in part because the state does not have a professional football team. (Though, the team from time to time does have a winning record.)

4. I recognize that this history of NCAA athletics does not take into consideration women's athletics, but unfortunately, most collegiate women's sports teams do not produce a profit. So, when talking about how universities finance their athletics departments, one must focus mainly on football and a little bit on basketball.

Here's an interesting fact: In 1989, Division I universities dedicated 18% of their athletics budgets to women's sports. In 2009, that number did not change.

5. The tuition trap is not something I made up. I'm not that smart. It comes from Newfield's book Unmaking the Public University.

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