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|Articles - September 2010|
|Friday, August 20, 2010|
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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.”
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