Sponsored by Energy Trust

Money Ball: Oregon colleges follow the cash to football

| Print |  Email
Articles - September 2010
Friday, August 20, 2010
0910_Sports04
Pacific University’s director of athletics, Ken Schumann, says bringing back football after 18 years has already boosted the Forest Grove school’s bottom line. More than 120 newly recruited athletes will play for the Boxers this year. Pacific completed its football locker room and installed a goal post on its field just a month prior to the season opener. // PHOTO BY LEAH NASH
For better or worse, many athletic departments operate as aggressive growth businesses. But unlike tech companies that measure growth by revenues and income earned, athletic departments measure growth by budget, or amount spent. And the amount spent in this industry tends to grow faster than the amount made. Earned revenues from ticket sales, television contracts, corporate sponsorships, advertising and licensing rarely keep pace with expenditures from coach’s salaries, scholarships, travel, recruiting, equipment and supplies, insurance, marketing, maintenance and debt service for construction projects. So departments buttress earned revenue with voluntary or hidden student fees, tax-exempt philanthropy in the form of booster club donations and subsidies from the university and/or the state.

The biggest exception to all of this bleeding of red ink can be football, which generates about two-thirds of the revenues of college sports along with a hard-to-measure blast of marketing hype that boosts everything from beer sales to ticket scalping (which is legal in Oregon) to university admissions.

Still, even with revenues from football, if these sports programs were real businesses, many of them would have been forced into bankruptcy by a steep drop-off in sponsorships and donations during the recession. Practically every program operates at a loss, with the exception of Oregon’s largest and most complex amateur sports business, the Oregon Ducks.

The Ducks have received more than $200 million in donations from Nike founder Phil Knight. As a result, UO is one of just 20 or so Division I schools running “self-supporting” sports programs, operating without subsidies from the state or the university. In 2008 the university’s athletic department earned $17.4 million from ticket sales, $10.6 million from the governing body of the NCAA and the PAC 10 Conference, and $2.7 million for TV, radio and Internet rights. But the largest revenue category for sports was donations, which totaled $18.3 million of the department’s $60 million budget that year.

On the expense side, UO athletics spent $7.6 million on coaches, $6.9 million on athletic scholarships, $4.5 million on travel, $3.7 million on game days, $2.9 million on fund-raising and marketing and $1.1 million on recruiting. All of those expenses continued to grow during the recession.

In addition, the Ducks have taken on millions of dollars in new debt to pay for their basketball stadium, for which they will have to pay $15 million this season and $18 million per year starting in 2011-2012.

In spite of the escalating costs, the UO sports program breaks even, due to the largesse of Knight and other donors and strong ticket sales, especially in football. UO’s track program is legendary and its basketball team is on the cusp of becoming a national contender. But most importantly from a business perspective, the football team has sold out 68 consecutive home games and last year made it to the Rose Bowl.

For all that success, the Ducks have been hounded by embarrassing antics by players on and off the turf and questionable deals by administrators. Following a season-opening loss to Boise State a year ago, star running back LeGarrette Blount punched an opponent in the face on national TV. Star quarterback Jeremiah Masoli damaged the Duck brand further by pleading guilty to burglary and pot possession. Punctuating those debacles was the $3.2 million golden parachute paid to departing athletic director Mike Bellotti.

In recruiting a replacement for Bellotti, university president Richard Lariviere made it abundantly clear that the institution would follow standard academic procedures. “The AD search was a straight-up process with a very carefully composed committee representing students, athletics, faculty, coaches and administrators,” he says. “It was a textbook search.”

Ultimately Lariviere chose Rob Mullens, a straight-laced, soft-spoken man from West Virginia who worked in  accounting for Ernst & Young prior to joining, in order, the universities of Miami, Maryland and Kentucky, where he served as associate director of a $79 million program that grew by 70% over his eight-year tenure.

“Rob had experience with a high-visibility athletics program that is the object of intense scrutiny,” says Lariviere. “He also had great business credentials, which is very important for the athletics program at this stage of its evolution.”

A Eugene Register-Guard editorial called Mullens “an inspired hire” for “an athletic department that for too long operated with disturbing independence from the school’s administration and an absence of public accountability.”

At the press conference announcing the hire, Mullens told reporters, “Sound fiscal integrity is a very important component of college athletics and I’ve been very fortunate to work for a self-supporting program.”

As for the donors who enable UO to be “self-supporting,” Mullens said he had not spoken with Phil Knight prior to getting the job. He spoke with Knight by phone for the first time the morning the announcement went out that he had been hired. So much for the misconception that boosters had co-opted control of the department.

Asked about expectations regarding Knight and Nike, Mullens said emphatically and then later repeated, “Nike is the strongest brand in sports.”

It’s certainly the most ubiquitous brand in sports. If the critics are correct and the industry of college athletics is an out-of-control arms race, then Nike is the biggest defense contractor of all. But some critics are giving up in frustration after concluding there is no stopping the college sports money train. UO English professor James W. Earl campaigned energetically against the overblown hype of college athletics throughout the 1990s and early 2000s but he says he “gave up that Quixotic campaign several years ago… when the new UO arena was approved, which is to say, when sanity flew out the window.”

UO’s new $200 million basketball stadium, scheduled to open in early 2011, will be the most expensive college basketball arena in the nation by the time it is completed. The Oregonian has reported that the new academic center for athletes will cost an additional $41.7 million.

“With the new arena coming online and additional expenses of hiring personnel, we’ve got a couple of tight years coming up,” says Lariviere. “I don’t think we’ll be in any financial trouble but we’re going to have to manage our pennies carefully. But we should probably manage our pennies carefully in any year.”



 

Comments   

 
Nick McRee
0 #1 Football is a financial drainNick McRee 2010-08-25 15:00:00
There may be losts of reasons a person could be stoked about the re-emergence of Boxer football, but the "it's a moneymaker" argument doesn't wash. Accodring to a 2009 NCAA report, there are only 14 out of 300 Division I schools that showed a positive balance sheet last year. There is no program below Div. I that does not lose money. Accounting slight-of-hand that relies on budget size, instead of net revenue as a measure of solvency is absurd. So too is the notion that football pays for itself through increased enrollment. If Pacific wanted more (male) students, why not open an Engineering School? Why not just admit more students who applied?
Quote | Report to administrator
 
 
Dan Neef #23 Pacific Boxer Football Letterman, Class of 1993
0 #2 Dear Nick,Dan Neef #23 Pacific Boxer Football Letterman, Class of 1993 2010-08-25 21:23:56
Name an academic program on any college campus that results in a net gain? Pacific cancelled Football in 1991 and lost students. Not only lost students but lost male students. So now they are bringing it back and increasing gross revenue by 2 million. The bugdet for football is probably well under 400,000. (have your priced an engineering school?) I think it is absurd that athletics need to show a profit in order to be considered useful. How many english departments are profitable?

Your ignoring the forest because of all you see are the trees. Pacific gained at least a million, balanced there gender equity for very little cost. The offer a product and over a hundred students are willing to pay. Not sure where the big deception is.
Quote | Report to administrator
 
 
Nick McRee
0 #3 Dear Dan,Nick McRee 2010-08-25 22:32:14
Nice to hear from a fellow alum.
1) Pacific's enrollments grew significantly during the years in which football was exiled. I think you "miss this forest for the trees" to focus on the year following football cancellation in which disgruntled students departed. 2) The gender imbalance experienced at PU is not unique. It has little to do with whether a school has football. 3) Enrollments can be increased by simply admitting more of the applicant pool. The *only* way to make a case that football "pays" is to assert that enrollments would not have gone up *but for* football. That is balderdash. 4) According to the NCAA, there are only 14 universities in the entire country with football programs--all Div I--that report a net revenue gain for their athletic programs.

As I said, there are lots of reasons for people to celebrate football's return to PU. But the athletic director should justify the program for reasons other than the specious argument that it makes sense financially.
Quote | Report to administrator
 
 
Dan
0 #4 Hey NickDan 2010-08-26 08:21:09
So I guess I was wondering how many english departments make money nation wide?
I hope that you understand that my point is that Colleges rarely make money from any program. However most people agree that the various programs are useful in terms of providing an education. To conclude that because a program does not make money therefore it is deceptive or fiscally absurd, misses the point that the choice to have a football team is not neutral choice. It is a positive net gain. As for *only*, *but for* and balderdash, the bottom line is Pacific reduced gender imbalance, and increased net revenue.

Now if you say it is better to lower standards vs. adding a program that is a value judgment. How low do you go?
Quote | Report to administrator
 
 
Paul Blanchard PU Football 1984
0 #5 Hey NickPaul Blanchard PU Football 1984 2010-09-16 11:12:38
You are missing an important "revenue stream". The way in which Boxer football was cancelled was so unfair and distateful that a huge number of Alumni simply quit giving money to Pacific. I am one of those. This fall I will write out a check to the school for the first time in 20 years. Myself and several of my teamates have done fairly well professionally (even though we were lowly "student athletes") and I do not think this income source should be underestimated. The English department was instrumental in killing Boxer football last time - its a little uncomfortable to see similar attitudes remain.
Quote | Report to administrator
 
 
DB PU Football 85
0 #6 Hey Nick and PaulDB PU Football 85 2010-09-16 11:44:27
I will step foot on campus for the first time since attending a football game in 1991. I have purchased season tickets even though I live 500 miles away and will not be able to go to many games. I am a professional and donate a great deal of my time to coaching HS football. Over the last 20 years, I have helped a number of high achieving student-athlete s with choosing schools where they are able to continue to play football. These kids are not D-I type kids, they are student first, football is a bonus. My school, Pacific was not an option. Now it is. This story is about money, and the administration of PU has made some excellent decisions of late with program expansions, and this football decision is a great one. An expensive, small, private college adding those numbers to their enrollment in this economy is remarkable!
Quote | Report to administrator
 
 
Duff - Pacific alum and football player
0 #7 Nick - English departments have a negative NPVDuff - Pacific alum and football player 2010-09-16 11:48:33
Football done corrrectly is a positive for a university. The Ivy league plays football - why, if it is such a detractor from their academic mission? Calculate the NPV of a new engineering building and see how many years it takes to break-even on the project. Lowering standards to raise revenue is the quickest path to mediocrity for a university and academic ranking versus its peers.

Welcome back football.

Quote | Report to administrator
 
 
TD
0 #8 Gents:TD 2010-09-16 15:04:06
Harvard and Yale have continuously played football since 1875. Pacific, had it not dropped its program in 1991, would have completed its "100th" year in 1992 (16 years after "the game" was adopted and formally integrated into the "university experience" of two of world's leading universities (e.g., Harvard undergrad ranked #1; Yale is ranked #3 (see U.S. World & News Report and QS World University Rankings) (among others, I'll add). Notably, none of the Ivy League universities, like Pacific, offer athletic scholarships, merit admission only (with some assistance based on financial need)!

Let's not forget that educational programs, as a whole "almost never" generate revunue to pay for themselves ( by the way, the football program at larger universities are expected to fund (directly and indirectly, through donations) the other "non revenue" programs (i.e., soccer, track, et al) - as pointed out, just a few are successful enough to pay for "all" programs.

The reality is that, wether public or private, all colleges and universities are dependent on federal, state, and local tax based revenues. Private contributors and endowments, as well as federal and corporate grants, typically pick the remainder of an education institution's operating expenses.

Ever been to the Univ. of Notre Dame on game day? Does anyone seriously think that the english or engineering departments (sans the many student athletes from "all" sports (although football typcially provides the largest segment) that are enrolled in these fine curriculums) could create and establish the strong "academic" and "athletic" traditions that fine American institution has established in the middle of Indiana's northern cornfields?

Academics is the priority of the mission, but the strategy for getting that mission fulfilled should include the opportunity to have the full college and university student-athlete experience, which optimally includes fall saturdays filled with football and other college sporting activies. Isn't that, after all, the full liberal arts and science education philosophy?

Two of my all time favorite football quotes seem appropro here. First, "It's kind of hard to rally around a math class." - Bear Bryant Alabama); and, "A school without football is in danger of deteriorating into a medieval study hall" - Frank Leahy (Notre Dame).

When Fordham University dropped its FB program (which it later wisely reinstated after a significant drop in enrollment - endowment), Vince Lombardi (who, by the way taught Latin, physics and chemistry before becoming a full time coach) reportedly said, "Fordham is is a school without a soul."

I wouldn't go that far in describing Pacific that way these past 19 years, but I can tell you that a significant segment of successful alumni felt the school lost touch with it's "99 year" history of providing PU students with the full college experience when faculty seized the opportunity to make fall Saturday's at Pacific U. match the rest of Forest Grove's sleepy Saturday downtown demeanor.

So, instead of casting criticims at one of any university's rare "revenue generating" activities, I propose that we just say "Congrats" to Pacific and hope that the University community and those associated with the team enjoy having "another" competitive function to draw folks back to the PU campus this fall after all these many years!

Go Boxers!!!

TD
Quote | Report to administrator
 

More Articles

See How They Run

January-Powerbook 2015
Friday, December 12, 2014
BY LINDA BAKER

Studying ground-running birds, a group that ranks among nature's speediest and most agile bipedal runners, to build a faster robot.


Read more...

The 100 Best Companies survey is open

News
Friday, October 24, 2014

100-best-logo-2015 500pxw-1How does your workplace stack up against competitors? How can you improve workplace practices to help recruit and retain employees? Find out by taking our 100 Best Companies to Work for in Oregon survey!


Read more...

Crowdfunding 2.0

News
Tuesday, December 02, 2014
120214-crowdfund-thumbBY LINDA BAKER

A conversation with attorney Erich Merrill about the latest way to raise money from large groups of people.


Read more...

Editor's Letter: Power Play

January-Powerbook 2015
Thursday, December 11, 2014

There’s a fascinating article in the December issue of the Harvard Business Review about a profound power shift taking place in business and society. It’s a long read, but the gist revolves around the tension between “old power” and “new power” as a driver of transformation. Here’s an excerpt:

Old power works like a currency. It is held by few. Once gained, it is jealously guarded, and the powerful have a substantial store of it to spend. It is closed, inaccessible, and leader-driven. It downloads, and it captures.

New power operates differently, like a current. It is made by many. It is open, participatory, and peer-driven. It uploads, and it distributes. Like water or electricity, it’s most forceful when it surges. The goal with new power is not to hoard it but to channel it.

The authors, Henry Timms and Jeremy Heimans, don’t necessarily favor one form of power over another but merely outline how power is transitioning, and how companies can take advantage of these changes to strengthen their positions in the marketplace. 

Our Powerbook issue might be viewed as a case study in the new-power transition. This annual book of lists provides information on leading businesses, nonprofits and universities in the state. Most of the featured companies are entrenched power players now pursuing more flexible and less hierarchical approaches to doing business. Law firms, for example, are adopting new technologies and fee structures to make legal services more accessible and affordable.

This month we also take a look at a controversial new U.S. Securities and Exchange Commission rule requiring public companies to disclose the median pay of workers, as well as the ratio between CEO and median-worker pay. 

Part of the 2010 Dodd-Frank financial reform law, the rule will compel public companies to be more open about employee compensation, with the assumption that greater transparency will improve corporate performance and, perhaps, help address one of the major challenges of our time: income inequality.

New power is not only about strategy and tactics, the Harvard Business Review authors say. “The ultimate questions are ethical. The big question is whether new power can genuinely serve the common good and confront society’s most intractable problems.”

That sounds like a call to arms. Or a New Year’s resolution. Old power or new, the goals are the same: to be a force for positive change in the world. Happy 2015!

— Linda


Read more...

Tackling the CEO-worker pay gap

January-Powerbook 2015
Thursday, December 11, 2014
BY OREGON BUSINESS STAFF

An SEC rule targets the disparity between executive and employee compensation, reigniting a long-standing debate about corporate social responsibility.


Read more...

Healthcare pullback

News
Thursday, November 20, 2014
112014-boehnercare-thumbBY JASON NORRIS | OB CONTRIBUTOR

Each month for Oregon Business, we assess factors that are shaping current capital market activity—and what they mean to investors. Here we take a look at two major developments regarding possible rollbacks of the Affordable Care Act (ACA).


Read more...

Reimagining education to solve Oregon's student debt and underemployment problems

News
Thursday, November 13, 2014
carsonstudentdept-thumbBY RYAN CARSON | OP-ED CONTRIBUTOR

How do we skill up our future technology workforce in a smart way to take advantage of these high-paying jobs? The answer shouldn’t focus only on helping people get a bachelor’s degree.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS