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/

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Comments

  1. 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. 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.

    • Christopher Lee says:

      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 says:

    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.

    • Christopher Lee says:

      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.

  4. 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).

  5. 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.

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