College Athletics’ Slimmed Down Future?

“The athletic department of tomorrow could go through what Bristol is going through today,” writes Frank Hawkins, principal of Scalar Media Partners, a Manhattan sports and media consulting firm, in a May 9, 2017 article in Hawkins was referring to the recent severe downsizing at the Bristol, CT based cable sports network ESPN.

As a result of a major drop in subscribers, ESPN released roughly 100 on air journalists.  This, after a previous round of dismissals of several hundred behind the scenes jobs two years ago. The reduced revenue is largely a result of customers switching to an “a la carte” model where they can pick and choose which channels they pay for. As a result, by some estimates, television rights fees will drop by at least 30% in the coming years. While many college network deals have several years remaining, the prospect of such decline has college officials considering what heretofore has been unthinkable – downsizing athletic departments.

It’s about time. 

For too long, athletic department spending, particularly the top 60 or so programs has been out of control. Head coaches regularly earn millions and even position coaches receive salaries in the mid-six figure range.  In almost every state in Union, the highest paid public employee is the football or basketball coach. A facilities arms race has been raging for years. Clemson University’s athletic complex includes a bowling alley and nap rooms. Auburn added a $14 million video board to its stadium.  At Texas, new lockers were installed in the football complex at a cost of $10,500 apiece.  According to public records, athletic departments at 13 schools have long-term debt obligations of more than $150 million as of 2014. 

According to The Washington Post, between 2004 and ’14 revenues at 48 of the biggest athletic programs grew from $2.7 billion to 4.5 billion, but spending moved in lockstep from $2.6 billion to$4.4 billion. And still most athletic departments operate at a deficit.

In an era of rising educational expectations and standards, decreasing academic resources, rising student athletic fees and rising student debt, such lavish, unchecked spending on athletics is obscene.

Despite widespread belief to the contrary, as information relating to finances becomes more transparent, it is clear that athletics has not been as fiscally sound an investment as long believed. Virtually every financial trend, throughout every NCAA division, points to athletics expenses increasing not only at a faster rate than generated revenues, but also far outstripping overall institutional spending.  Further, the total athletic expenditures as a percentage of total institutional expenses continues to increase. The fact is, there are no Division II or III institutions and only a small handful of Division I institutions where generated revenues exceed expenses. According to the NCAA, in 2013, the median negative net generated revenue, representing expenses in excess of generated revenues at the Division I Football Bowl Subdivision (FBS) schools was over $11.5 million and almost $11 million for both the Football Championship Subdivision (FCS) as well as Division I schools without football. In 2014, at the Division II level, those numbers are $4.1 million for schools without football and $5.2 million for schools with football at the Division II level. And in 2014 at the division III level, those numbers are $2.2 million without football and $2.3 million with football. And by all indications, institutional deficit spending on athletics, already significant, will continue to grow. 

So while Division I athletic programs are clearly generating a substantial amount of revenue, the fact is, except for approximately 20 programs, they spend far more money than they generate. That being the case, it is critical that university leaders consider whether such deficit spending is appropriate and commensurate with the academic benefits generated. 

But that is only part of the story.

While many return on investment analyses start and end with the hard numbers, to truly understand the cost of athletics, it is imperative to consider the educational opportunity costs associated with such deficit spending, Specifically, could the general institutional resources that are currently spent to underwrite the athletic program be spent on other academic programs or services that contribute more directly to institutional educational mission?

For example, would those resources be better spend on improving science labs or offering additional sections in majors where students often can not enroll in required courses due to lack of course offerings? Or, perhaps various student services could be expanded or the library or institutional wi-fi service improved. Or, in an age of rising student debt, reduce the school’s activity fee, which in part, helps pay for the athletic department deficit.

In short, institutions that are not willing to take a hard ROI look at their athletic departments in an era of rising educational expectations and tightening resources may be in for a rude financial awakening. Students and their parents are increasingly skeptical about the real value of a traditional college degree and thus are taking a closer look to determine which schools are best equipped and most committed to delivering on a quality education as opposed to sponsoring lavish athletic facilities and spectacle.  In such an environment, schools would be well served to consider whether their athletic programs can be restructured or rescaled in a way that makes more sense fiscally and fits more comfortably into institutional mission. 

While the usual knee jerk reaction to the prospect of downsizing or restructuring the athletic department is for the athletic “lobby” to scream bloody murder and claim that downsizing athletics will result in the demise of the institution, there is another way to look at the situation.

Specifically, could there be an educational opportunity in pursuing such a path?

Perhaps there is a branding opportunity for a school to position itself as one that is truly committed to academics and increasing the value of their degree and the academic quality of the experience for the general student body rather than spending significant time, energy, emotion and resources on an athletic department that serves a small slice of elite athletes and entertainment for the masses. In other words, if I am a student who cares first and foremost about the quality of academic experience my college offers, I would be attracted to a school that is committed enough to that principle to seriously consider whether money spent on athletics would be better spent on academic resources. In an age of rapidly rising student debt that thought is not so far fetched.  After all, when it’s all said and done, athletics remains an “extracurricular” activity, which means it is not a central component of the educational mission of the institution.

The question is this. Are lavishly funded athletic programs truly important enough to the long-term success and effectiveness of the institution to continue to compromise academic integrity, abandon fiscal prudence and jeopardize institutional mission in the name of entertainment and championship banners? When an increasing number of trend lines point to a future of declining revenue streams and rapidly rising expenses, institutions that do not honestly, carefully and seriously consider recalibrating their financial commitment to athletics may, in the not so distant future, be forced to go through what ESPN is going through today.