Warning: long. Instead of bitching, just don't read it. Thx.

I'm posting this as a shorthand for myself so that I can easily link something whenever I get into these arguments. I'm also posting it because it is truly amazing how many people who are paid to know this stuff don't. Case in point:



Rick Reilly is reportedly paid about $50,000 per column from ESPN. That is $50,000 more than the NCAA will make on televised Miami games this season.

THE BASICS

There are four major sources of revenue for schools: ticket sales, donations, and contributions from the school, and broadcasting licenses.

Ticket sales are perhaps the most important, because that revenue (mostly) gets split one way: to the school. When Ohio State sells 100,000 tickets for $70 apiece, that's $7,000,000 for Ohio State. The Big Ten takes a low single-digit percentage of that. The NCAA takes nothing. This is why big programs have come to schedule more and more home games; it is the easiest and surest source of revenue.

Donations are quite similar--so similar, in fact, that it's often difficult to tell them apart. Here's an example: Texas and Oklahoma play a neutral site game every year in Dallas. The Cotton Bowl seats fewer people than either home stadiums, plus the teams have to split tickets each season. Since this is the marquee game on the schedule, demand is always high. Rather than charge $500 per ticket, Texas releases the tickets to people on the donor list. In other words, if you want a "complete" season ticket, you'd better make a sizable donation. Even more so than tickets, donations get split one way.

Contributions from the school can take several forms, but in the end the substance is the same. The most common is through student fees; every semester, students get an extra $500 tacked onto their tuition, and that's that. This is the source of revenue at many schools. To take an example not entirely at random, the VCU athletic department made 76% of its revenue from student fees. That is higher than usual, but not insanely so; former bracketbuster George Mason makes about 69% from student fees. Most major schools get nothing. For example, Indiana got $23.00.

As I said above, there are several forms of contribution. Sometimes the school just takes money out of the general school fund. Sometimes the state government provides a direct grant from the legislature. In the end, these all amount to the same thing. Once again, money only gets split one way.

There are some other minor sources of revenue as well that are once again tied to the team. Most schools run athletic camps in various sports. Jersey sales provides a little bit of revenue. Athletic departments get money directly from athletic companies for choosing, say, Nike over Adidas. These are pretty minor however.

WHERE IT GETS COMPLICATED: TELEVISION AND OTHER BROADCASTING

I'll start with the easy stuff: radio licences belong to the school, not the conference. They are surprisingly lucrative; Ohio State made about $2.5 million from radio licensing alone in 2009.

Television is the tricky one. For years, (specifically, 33 years), the NCAA controlled television contracts. The system was incredibly complicated and always changing, but only a small number of games could be televised each week, and teams could only appear on television so many times. There were very limited allowances where teams could be broadcast locally if no national games were being broadcast, with other requirements. The NCAA controlled the contract, and it then apportioned the money to the schools cased on a complicated formula. Everyone from D-I to D-III earned money under the contract, but the teams that performed on television earned the most.

This turned out to be kinda illegal, according to the Supreme Court. Major teams--specifically the SEC and SWC--were pissed that they could not make money from televising their games while The Citadel was making money under the NCAA television contract. They threatened secession and, when that fizzled, they sued the NCAA and won. Those schools tried to set up a cartel of their own after they won, but that fell apart almost as soon as it began; first Notre Dame left, then the SEC, and then it fell apart completely.

Today, it's the conferences (mostly) that control television revenue. Conferences are mini-cartels of a sort, but since nearly every game is televised and since all the mini-cartels compete against one another, it's not a big deal under antitrust law. The easiest thing for a conference to do is to go to a television network, offer the full set of games for a season, and take a fixed amount under the contract. The conferences then give money to the schools, after deducting operating expenses. They can either split the money evenly (Big Ten, Pac 10/12) or unevenly (Big Twelve, Big East). Nonconference games are usually controlled by the conference that hosts the game, though this is even trickier (and was a huge sticking point between the conferences for a long time).

Recently, schools have started to take equity positions in their broadcasting. That is, rather than taking a fixed amount from ESPN or NBC, they are broadcasting the games themselves and taking the profits, whatever they may be. This is the idea behind the BTN, and so far, it has proven wildly successful.

The important part of all this is that the NCAA can no longer legally have any say in television revenue, with one huge exception: the NCAA controls the television rights to the events it puts on. This only really matters for the NCAA Men's Basketball Tournament, but here it really matters. The NCAA makes almost all of its operating revenue from the tournament despite giving 90% or so back to the schools. I'll repeat that again: the NCAA takes 10% of the money and gives the rest to the athletic departments of the individual schools. This 10% is almost the entire budget of the NCAA, and the NCAA uses that money to pay salaries, conduct investigations, and put on championships in all the other sports.

There are a couple of other extremely minor sources of revenue for the NCAA. They will surprise you. The NCAA collects less than $2000 from each member school each year in membership dues (sometimes it even waives the fee, as it did in 2009). It makes a small amount from the bowl organizations: for example, the NCAA made around $50,000 from the Sugar Bowl last year. Remember that next time you hear "the NCAA didn't want those Ohio State players suspended because of all the money they'd lose!" Schools make their money from football. The NCAA makes its money from basketball, and only three weeks of basketball at that.

F'ING BOWLS, HOW DO THEY WORK?

I left out bowls because they are essentially an adjunct of television revenues, but since there is lots of confusion about how bowl economics work this probably deserves a separate section. Bowls are kind of like television networks; in return for a fixed payment, bowls promise to sell tickets, give some swag to the players, and televise the football game.

The lowest-level bowls are kind of sketchy, but sketchy in a co-dependency sort of way. To make their money, bowls have to sell tickets. But no one is going to a bowl game with NIU, so the bowls sell the tickets to the schools, which then in turn sell (or, usually, don't sell) those tickets to the public. The NIU's of the world aren't completely against this arrangement, because they actually want to make and maybe even win a postseason game every once and a while, even if it is called the Beef o'Brady's bowl. They are money pits for the schools, but they are also the cost of convincing recruits that you belong in the FBS. The high level bowls are mostly different (mostly; every once and a while a team that no one cares about like UConn makes one of these and you just have the sketchy bowl problem on a larger scale). Payouts are large enough to cover expenses, and Wisconsin or even TCU isn't going to have any problems selling tickets to the Rose Bowl.

Bowl tie-ins are with the conferences, not the teams, so the conferences collect the money and split it up amongst the schools. Like television contracts, some conferences split the money; others don't. As a total, payouts from the bowls come out to about three times the amount of bowl expenses; in other words, as a total, teams make about $3 for every dollar they spend.

That is just an average, and the accounting can be funny. This is the source of a lot of confusion. Just to use round numbers, imagine the Big Ten earned $20,000,000 from the Rose Bowl. Wisconsin would get about $2 million of that. But Wisconsin would also get 1/11th of the bowl payouts from every other Big Ten bowl. So if Wisconsin spends $2.1 million going to the bowl (which they might; hotel, food, and expenses for thousands of people is expensive if you want it to be), they will spend more than their section of the Rose Bowl allotment. Of course, their expenses on, say, the Sugar Bowl, is $0, and they get 1/11th of the revenue.

IF COLLEGE SPORTS ARE SO DAMN POPULAR, WHY CAN'T MOST SCHOOLS TURN A PROFIT?

Three reasons. First, college sports are popular; Virginia Commonwealth is not. Remember the example I provided above with VCU and student fees? That school sold under $750k in tickets in 2009. Virginia Commonwealth, broadly speaking, is most schools.

Second, Title IX. We can have a grand debate about whether Title IX and mandatory women's sports is a good idea, but it is unquestionably hella expensive. No women's sport--not even women's basketball--comes close to turning a profit (in fairness, most men's sports don't either). And for every man receiving an athletic scholarship, a woman athlete must as well. There have been lots of shady things done by schools to avoid this, but in the end, every female athlete is $20,000-$40,000 that comes out of the athletic department coffers. That adds up.

Third, to their credit, colleges haven't shaken down state and local governments for sweetheart stadium deals, unlike every major sports league. Because of this, colleges have been fully responsible for upkeep and renovations on their buildings. Without state money, many NFL teams and most teams in other sports leagues would not turn a profit.

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Fire Phil Emery

there are only 2 words you need to remember when arguing anything involving rick reilly:

he sucks.

well done, IB

Well done.

This post also accurately shows why the entire BCS would leave with an NCAA football playoff. It's at the point right now where the BCS schools get significantly less benefit from the NCAA than the NCAA gets from the BCS schools.

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You do not talk to me like that! I work too hard to deal with this stuff! I work too hard! I'm an important member of the CSFMB! I drive a Dodge Stratus!

This is interesting to me, because it touches on what BRick and I were discussing in another thread about Miami.

Unless I am understanding incorrectly, most major schools (like Miami) actually do turn a profit when they play well throughout the season. This profit is minimized by Title IX, for example, but the school still makes money.

Smaller schools, however, are the ones that are at risk for losing the most money due to lack of ticket sales, etc.

That was one of the best sports articles I've read in a while. Nice job.

Have you done research on this before for some other reason or do you just like to look into Virginia Commonwealth student fees for fun?

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You know me like that.

Most schools lose money on athletics. That's a fact or at least it was as of the article that I posted.

In regards to Miami, considering that undergraduates are charged $63.00 for athletic fees, I doubt they are turning a profit.

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You do not talk to me like that! I work too hard to deal with this stuff! I work too hard! I'm an important member of the CSFMB! I drive a Dodge Stratus!

But IB points out that these major schools still make a ton from ticket sales, radio deals, etc...

I don't get what you are arguing. BCS schools have a ton of revenue. They also have a ton of expenses. That's always been true. Can you clarify your point? It's not that some schools have lots of revenue is it?

Miami has to force it's students to pay into the athletic department, even if they never attend a single game. Even with the tv contracts and other stuff you are having the student body subsidize the swimming team.

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You do not talk to me like that! I work too hard to deal with this stuff! I work too hard! I'm an important member of the CSFMB! I drive a Dodge Stratus!

I'm not really trying to argue anything. Again, perhaps I am misunderstanding the message of IB's post, but to me it sounds like despite the high expenses for major athletic programs, some schools still turn a profit thanks to the large sources of revenue that come in as well. That's just what I took from the article, though.

My biggest issue was you saying that most major schools make money. They don't. Now, they could get really conservative financially and do it but it would hurt the athletic program. For instance, Illinois soccer could take a bus from Champaign to Minnesota instead of flying. That's a long drive and the players will be effected and recruiting is more difficult because players would rather go to other schools that they don't have to deal with that.

I also assume, though I'm not certain, that Title IX requires somewhat equal amount of transportation and other things. You can't have your basketball team flying on the jet while the women's swimming team has to ride the greyhound.

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You do not talk to me like that! I work too hard to deal with this stuff! I work too hard! I'm an important member of the CSFMB! I drive a Dodge Stratus!

Most major schools do make money on the football season in isolation, Ugueth, but Miami is one of the rare major schools that always struggles to draw an audience and doesn't have a major (legal) donor base. Unfortunately, because it's a private school, I don't know the exact numbers. After all the other expenses are taken into account (other sports, facilities fees, etc.) It probably turned a loss. The closest analogue to Miami--Florida State--ran at a loss during the 2009-10 season.

For anyone that is curious, I recommend you play around with the USA Today database on this stuff (http://www.usatoday.com/sports/college/ ... nances.htm). Once again, only public schools are included, but it does include all of D-I.

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Fire Phil Emery

While I see your points, BRick, I just find it hard to believe that the major schools don't make money on athletics. That doesn't make any sense to me; why else would they maintain an aspect of business if they lost money on it annually? Furthermore, after reading IB's well-written article, I have an even tougher time believing that the major universities don't make a profit.

Yes, I am sure that University A with a charter jet has an easier time recruiting than University B with a Greyhound. The money for that jet has to come from somewhere, and I doubt the school will keep such razzle dazzle if they didn't turn a profit in the long run.

I'm not afraid to admit that I don't have any idea about the specific financials of schools like Miami. However, it just doesn't make sense to me that larger schools don't pull in a profit. If it is true, then I'm wrong. But I don't see how that "works" from a business standpoint.

Fair enough. I guess the point, then, is that without football every major university would not be able to sustain athletics... period. Good article, regardless.

Yeah, pretty much. A couple of basketball only schools probably do OK, but they are by far the exception (they are also mostly private, so I can't say for sure).

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Fire Phil Emery

Fascinating stuff IB.

Looked up my alma mater Miami U for 09-10.

Revenue: 25.9m
Expenses:25.6m

With a crazy 53% of revenue coming from student fees.



The margins for a lot of bigger schools are pretty tight as well. Ohio State did a 123.1 to 122.7

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Team Cutler.

These economics show why basketball barely matters when people are considering conferences. And probably why Syracuse was never really an option for the B1G.

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O judgment! Thou art fled to brutish beasts,
And men have lost their reason.

seems to me you are missing another leg of the funding chair in merchandising

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O judgment! Thou art fled to brutish beasts,
And men have lost their reason.

Either I'm not sure what the point of the diatribe was, or I'm not buying what I think the point might be.

There a hundred+ schools that devote millions of $$$ toward their teams, especially in facilities, travel, and marketing - year in and year out. Mostly on football, but on all sports really. I think we can all agree on that part.

Each of these universities have teams of highly trained and highly paid people that decide to do this - and they obviously do it for some sort of huge benefit, or else they wouldn't do it at all. They aren't continually spending this $$$ and effort in order to weaken their program/school/bankroll. Otherwise, they wouldn't do it.

What is the point of this?

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I think many schools would be fine with having at least one big time team and operating the athletic department at a loss. Even top institutions with students who you wouldn't think are influenced by trivial things like sports, see an academic benefit from their athletic achievement. As a small example, I believe Duke's applications rose 10-20% after a championship year. That kind of result makes you a better school on many levels.

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O judgment! Thou art fled to brutish beasts,
And men have lost their reason.

That's pretty much the way I see it, but you put it quite nicely.

As I said above, it simply doesn't make sense to suggest that these schools don't make money.

The "donations" portion of the "basics" section is severly narrow in it's scope as well. Donations are far more than just a way to get tickets t big games. At least I think the people at schools such as Ok. St think so. It is tens of millions of $$ every year at a lot of schools (no, I don't have data on that. Just seems pretty obvious).

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ND requires you to donate to some club in order to even have the opportunity to purchase any tickets. I don't think it is an athletic related club so that is the accounting side of the athletic budget.

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O judgment! Thou art fled to brutish beasts,
And men have lost their reason.

I mentioned merchandizing. Even at the major schools it is low single digits in revenue percentage.

I wrote it narrower than it is. I figured I wouldn't have to describe what donations are to people. They are roughly equal to ticket sales at most schools per year in raw amounts, so yes, they are important.


Yes, schools pay people lots of money. That's part of why lots of programs don't turn a profit. Like IMU, I can only claim that I wrote this quite calmly, and I mainly wrote it so that I could just link it in the future when someone posts something incorrect about the topic. I'd rather write all of it once than bits of it dozens of times.

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Fire Phil Emery

Also tough to feel bad for an athletic program that chooses to pay a guy like Nick Saban $6M+ a year (is it more?), plus probably 1/2 that much more in travel, expenses, etc. Yes, it is technically an "expense" to the program, but only fat-cat types of companies even have the luxury of making choices like that.

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So the main point is simply "schools don't get to keep as much of the money as most people think - at least on the surface"?

Why (in your opinion) do they continue to do it then?

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This is true for season tickets and some individual game tickets. But they also have an individual game ticket sale that is open to the public and doesn't require a donation.

Those are linked to the athletic department and at public schools that's where the "donations" go. Notre Dame can do the accounting however they want though, but those funds mostly likely go to the athletic department and if there are any leftovers the university may get some.

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You do not talk to me like that! I work too hard to deal with this stuff! I work too hard! I'm an important member of the CSFMB! I drive a Dodge Stratus!

Where did I say you should feel bad for programs? At the top level, lots of expenses are expenses of choice. Many could turn profits if they absolutely needed to show one. I'd say that applies for the top 30-40 programs. It gets dicier towards the bottom. I don't feel in the slightest but bad for programs that can't end up in the black, whether they're at the top of the heap or further beneath.

I'd say some schools do it from nothing but tradition, most do it because of the academic uptick (more applications, etc.) and many do it because athletic performance and academic donations are probably correlated a bit.

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Fire Phil Emery