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Myth: College Sports Are a Cash Cow

 

David Welch Suggs, Jr.

 

Outside my office door, there it looms. Sanford Stadium, complete with its fabled privet hedges and 93,000 screaming fans on fall Saturdays, lies in the very center of the University of Georgia (UGA) campus, with the humanities and social sciences buildings on the hill to the north and Ag Hill to the south. It’s quiet this time of year, but the video advertising boards that flicker on periodically are an LED reminder of the South’s year-round love affair with college football.

This is the most visible symbol of the UGA Athletic Association, a not-for-profit organization that in fiscal 2011 recorded operating revenues just shy of $90 million. That money enables the association to send its golf teams to Puerto Rico, track teams to Washington State, and Gym Dogs to Utah. Here and there, the Athletic Association also endows professorships and funds a few campus-wide projects.

As munificent as this is, this kind of spending is typical of big-time college athletics programs at universities across the country. The Chronicle of Higher Education recently estimated that college athletics is a $10-billion marketplace. What sets UGA athletics apart is that it can pay for its expenses without turning to the university for help.
Only seven other athletics programs at public universities broke even or had net operating income on athletics each year from 2005-2009, according to data provided by USA Today to the Knight Commission on Intercollegiate Athletics (for which I consult). The others were Louisiana State University, The Pennsylvania State University, and the universities of Iowa, Michigan, Nebraska, Oklahoma, and Texas at Austin.

Like these peers, Georgia’s athletics department is flush because it can depend on donations, ticket sales, royalties from rights fees and sponsorships, and distributions from lucrative television contracts. It is no surprise that the other members of this elite fraternity belong to the Southeastern Conference, the Big Ten, and (at the time these data were collected) the Big 12.

For almost every other university, sports is a money-losing proposition. Only big-time college football has a chance of generating enough net revenue to cover not only its own costs but those of “Olympic” sports like field hockey, gymnastics, and swimming. Not even men’s basketball at places like Duke University or the University of Kansas can generate enough revenue to make programs profitable.

As a result, most colleges and universities rely on what the NCAA calls “allocated revenue.” This includes direct and indirect support from general funds, student fees, and government appropriations. In other words, most colleges subsidize their athletics programs, sometimes to startling degrees.

The six elite leagues in Division I are those that participate in the Bowl Championship Series: the Atlantic Coast, Big East, Big Ten, Big 12, Pacific-10, and Southeastern conferences. Even with bowl-game revenues and television contracts, however, public institutions in those conferences provided an average of $5.9 million to athletics in fiscal 2009, including $2.4 million in direct general-fund support and another $2.4 million in student fees.

In other Division I conferences, public institutions subsidized athletics programs with $9.6 million on average in 2009. In the Mid-American Conference, for example, average institutional subsidies rose from $12 million to $16 million between 2005 and 2009. Direct institutional support nearly doubled, from an average of $4 million to $7 million annually, while student fees contributed an average of approximately $7 million.

Why? Cornell economist Robert H. Frank applied his concept of the “winner-take-all” market to college sports in a 2004 white paper for the Knight Commission. “Suppose 1,000 universities must decide whether to launch an athletic program, the initial cost of which would be $1 million a year,” Frank wrote. “Those who launch a program then compete in an annual tournament in which finishers among the top 10 earn a prize of $10 million each… How many schools will decide to compete?”

In other words, 10 programs will have a net income of $9 million, and the remaining 990 will lose $1 million. Despite the almost certainty of substantial loss, in the past decade only two institutions have left this marketplace—Birmingham-Southern College and Centenary College of Louisiana. In fact, Division I has added 21 member institutions since 2000, bringing its total membership to 337.

Of course, athletics programs foster other, less-clearly defined but important benefits for their institutions. At liberal arts colleges like the one I attended, varsity sports drive enrollment. Should that count as profit? Any number of UGA students will tell you they came here because of the football team. What about goodwill generated among legislators and donors?

These are important considerations. Significant athletics investments may indeed be a good value proposition for building community, spirit, and support. However, no good measures exist for assessing these less-tangible achievements. Most studies find no link between winning teams and measures of institutional success like number and quality of applications, fundraising dollars, or state appropriations.

Justifying institutional spending on athletics is becoming a much more pressing issue for most programs, especially in Division I. Institutions with Football Bowl Subdivision programs have seen subsidies of athletics rise by 53 percent at the median from 2005-2009, according to the Knight Commission. Meanwhile, spending on education and related functions rose only 22 percent. There are similar gaps at other Division I institutions.

If such trends continue, athletics subsidies will continue to grow, both in real terms and as a percentage of institutional budgets. For college presidents and academic leaders, it will be necessary to assess such investments in athletics in terms of opportunity cost. How else could general funds and student fees be spent?

College sports can be a marvelous value experience and a focal point for community-building. But only a few colleges have programs that can provide such benefits without imposing significant costs on their institutions.

David Welch Suggs, Jr., Ph.D., is an associate professor of journalism at the University of Georgia.



 

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