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The Economics of College Sports

posted on December 21, 2007 at 5:29 PM

Legend has it a college president once implored his faculty to make the university into something of which the football team could be proud. The logic, if not the principle, is understandable. Athletics may be worth more financially to the university than its academic performance. They raise the school's public profile and help the university connect with alumni wallets.

College presidents are fully aware that, since winning teams tend to generate more donations, keeping the fans happy is critical. But each year's higher expectations result in universities whose worth is ever more tied to their team's performance on a handful of Saturday afternoons. College football is an expensive experience for the 70,000 fans that pack Iowa's Kinnick Stadium and for the thousands outside the stadium walls.

The recent addition of new skyboxes and state-of-the-art video boards came at an $89-million price tag. It's all paid for by ticket sales, sports merchandising, and by big donors who shell out millions of dollars on infrastructure and personnel.

Berta: One hundred percent of the University of Iowa's athletic budget is funded by the fans and by the supporters of the program, not by the taxpayers.

Yeager: Iowa Athletic Director Gary Barta is quick to advertise his department is economically self-sufficient. By raising roughly $60 million each year through donors, television contracts, endorsements, and event-related income, Iowa's athletic coffers are larger than both Northern Iowa and Iowa State combined.

Barta: Really when it comes down to it, we're a not-for-profit organization. We have 24 sports. If we were for profit, we would only have two because only two generate profit. But it takes football, men's basketball to generate the income we need to run all 24 sports for 700 student athletes and give all of them great opportunities to compete.

Yeager: While the sounds of heavy equipment rumble through Jack Trice Stadium in Ames, Iowa State Athletic Director Jamie Pollard is planning on investing in the future.

Pollard: You've got to find a way to feed the beast, and that's what we're all doing.

Yeager: In just over two years on the job, Pollard has fired and hired entire football and men's basketball coaching staffs. The coaching changes cost the Athletic Department millions of dollars in severance packages alone. Pollard argues Iowa State is simply driven by results and that high salaries are driven by market forces.

Pollard: The market changes every day. And we're going through another cycle right now with college football, and the market continues to change. It's no different in men's basketball. I mean we got a steal when we got Coach McDermott two years ago. A year later Iowa went ahead and paid $4- to $500,000 more than what we're paying Coach McDermott. So that's something now that, you know, we've got to deal with going forward.

Yeager: Taking the next step economically is part of Pollard's long- term plan. Iowa State has historically sat near the bottom of the Big 12 in overall athletic department spending, a statistic Pollard hopes to change. Hilton Coliseum has already been retrofitted with new video boards while future plans for luxury suites and an expanded concourse are in development. Over the next eight months, construction at Jack Trice Stadium will double the number of revenue-generating skyboxes and create new concessions and restroom facilities. Future plans to "bowl in" the entire south end zone are on hold pending donor contributions. In Cedar Falls, the University of Northern Iowa is in a starkly different economic situation than their fellow state universities.

Hartzell: We put 17,000 in here on a Saturday opposed to 70- or 50,000 that they put in there. Plus the revenue that they get from their conferences is different. So they have a little different ability to be able to fund their programs.

Yeager: UNI Athletic Director Rick Hartzell argues the Panthers have nearly maxed out their athletic potential for football and men's basketball. According to Hartzell, the economics of maintaining UNI's 1-AA, or FCS, athletic department does not allow the same type of revenue-sharing and television contracts that come from the BCS football conferences that both Iowa and Iowa State compete in.

Hartzell: Football certainly doesn't pay the bills here. Basketball is a profit maker for us, but not at a huge number, not enough to pay for this department. So we have to do it in a variety of ways: gate receipts, fund-raising, merchandise sales, concessions, some ticket sales obviously, some university support, and that's what makes us different, really, from Iowa and Iowa State.

Yeager: Hartzell says the Panthers recent success in 1-AA football has raised fan expectations considerably but he downplays the possibility of moving UNI up to the Division I level in all sports.

Hartzell: Sure, we could move competitively. We could go play Division I football right now. The national rankings of all schools have us 35th, and that's probably accurate, but that's a one-year snapshot. And to change this building to 30,000 and be able to play indoor football, which I think is important to us, would cost you a fortune. You couldn't afford to do it.

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