FBS Football--Can't Afford Not to Have It?

[NaturalStateReb]

Back in December, the University of Alabama at Birmingham announced that the Blazers were dropping football.  Amid accusations of political scheming and howls of protest from students, community members, and alumni, the president of UAB has been forced to walk back a bit from the decision, announcing recently that a new task force has been established to reevaluate the report that led to the decision.  Bills have even been filed in the Alabama legislature to restructure the University of Alabama Board of Trustees. 

The heavily-criticized study that the Alabama trustees relied upon concluded that UAB simply couldn't afford to continue playing football.  With a budget of nearly $2 billion, and only $18 million in subsidies from the university to UAB's $30 million athletic budget, the conclusion drew immediate skepticism and accusations of Tuscaloosa hijinks involving Paul Bryant, Jr.  Nevertheless, the question remains:  can schools like UAB afford to play FBS football?  Can they afford not to?

UAB is only the second football program to shutdown in FBS, and the first since Pacific closed its program in 1995.  Since 1987, only 2 programs--UAB and Pacific--have exited FBS, while 23 schools made the move to FBS.  The Chronicle of Higher Education recently estimated that college athletics is a $10 billion marketplace.  Universities have, by and large, concluded that being a part of that marketplace is more advantageous than not being a part of it.  But why?

One study, soon to be published in the Journal of Sports Management, looked at the gains, if any, that new entrants to FBS made in comparison with schools that remained at the FCS level.  For all of the FBS movers, the average gain in ticket sales was about 3,000; but for the most recent movers, the gain was 8,000.  A 4,000 gain at a $50 ticket price would represent about $1 million in new revenue over the course of a season.  Add in the bigger guarantees for playing major FBS programs on the road, and a significant revenue gain is likely, whereas most of the infrastructure for football is already in place.

The question though, is not merely one of accounting--it's an economic question.  If the impact of FBS football could be derived just from toting up debits and credits--and not merely dubious claims of "profitability"--the question might be easier.  However, major college football impacts universities in off-balance sheet ways that ultimately affect the bottom line.

One study performed by the University of Maryland found that schools with Division I-A football programs (the study evaluated years from 1976-1996) receive about 6% more in appropriations than schools without them.  Institutions with successful football teams receive between 3% and 8% increases in state appropriations the following year.  Defeating an in-state rival in a prominent game was also associated with an increase in appropriations in the following year--a nearly 7% increase.

The results of another study, coauthored by economics professors at Virginia Tech and Penn's Wharton School of Economics, found that football and basketball success significantly increases the quantity of applications to a school--between 2% and 8%.  Private schools see increases that are about 3 times higher than public schools.  The applications received are composed of both low and high scoring SAT students, providing the potential for improving graduation rates.  More students means more money; more graduates means more alumni support.

Other factors are less studied--how FBS football improves campus life, how it affects alumni engagement, and how licensing has the ability to turn people wearing university paraphernalia into walking, profitable advertisements.  Criticism of FBS football will no doubt increase, considering that FBS schools spend more than $91,000 per athlete as compared to just $13,000 per student while at the same time steeply hiking both tuition and fees.  The numbers suggest, however, that FBS football is economically a good decision for the vast majority of FBS members. 

[DeltaBoy]

I believe they must have it our come down and join the Sunbelt.

[NaturalStateReb]

One thing I found interesting:  the most heavily subsidized athletics program is a Power 5 program. Rutgers receives the most university assistance--a staggering $47 million.

Hope those tv ratings really pay off for the Big Ten.

[Inhogswetrust]

Back in December, the University of Alabama at Birmingham announced that the Blazers were dropping football.  Amid accusations of political scheming and howls of protest from students, community members, and alumni, the president of UAB has been forced to walk back a bit from the decision, announcing recently that a new task force has been established to reevaluate the report that led to the decision.  Bills have even been filed in the Alabama legislature to restructure the University of Alabama Board of Trustees. 

The heavily-criticized study that the Alabama trustees relied upon concluded that UAB simply couldn't afford to continue playing football.  With a budget of nearly $2 billion, and only $18 million in subsidies from the university to UAB's $30 million athletic budget, the conclusion drew immediate skepticism and accusations of Tuscaloosa hijinks involving Paul Bryant, Jr.  Nevertheless, the question remains:  can schools like UAB afford to play FBS football?  Can they afford not to?

UAB is only the second football program to shutdown in FBS, and the first since Pacific closed its program in 1995.  Since 1987, only 2 programs--UAB and Pacific--have exited FBS, while 23 schools made the move to FBS.  The Chronicle of Higher Education recently estimated that college athletics is a $10 billion marketplace.  Universities have, by and large, concluded that being a part of that marketplace is more advantageous than not being a part of it.  But why?

One study, soon to be published in the Journal of Sports Management, looked at the gains, if any, that new entrants to FBS made in comparison with schools that remained at the FCS level.  For all of the FBS movers, the average gain in ticket sales was about 3,000; but for the most recent movers, the gain was 8,000.  A 4,000 gain at a $50 ticket price would represent about $1 million in new revenue over the course of a season.  Add in the bigger guarantees for playing major FBS programs on the road, and a significant revenue gain is likely, whereas most of the infrastructure for football is already in place.

The question though, is not merely one of accounting--it's an economic question.  If the impact of FBS football could be derived just from toting up debits and credits--and not merely dubious claims of "profitability"--the question might be easier.  However, major college football impacts universities in off-balance sheet ways that ultimately affect the bottom line.

One study performed by the University of Maryland found that schools with Division I-A football programs (the study evaluated years from 1976-1996) receive about 6% more in appropriations than schools without them.  Institutions with successful football teams receive between 3% and 8% increases in state appropriations the following year.  Defeating an in-state rival in a prominent game was also associated with an increase in appropriations in the following year--a nearly 7% increase.

The results of another study, coauthored by economics professors at Virginia Tech and Penn's Wharton School of Economics, found that football and basketball success significantly increases the quantity of applications to a school--between 2% and 8%.  Private schools see increases that are about 3 times higher than public schools.  The applications received are composed of both low and high scoring SAT students, providing the potential for improving graduation rates.  More students means more money; more graduates means more alumni support.

Other factors are less studied--how FBS football improves campus life, how it affects alumni engagement, and how licensing has the ability to turn people wearing university paraphernalia into walking, profitable advertisements.  Criticism of FBS football will no doubt increase, considering that FBS schools spend more than $91,000 per athlete as compared to just $13,000 per student while at the same time steeply hiking both tuition and fees.  The numbers suggest, however, that FBS football is economically a good decision for the vast majority of FBS members. 

I have always found this debate to be fascinating. Sure for a lot of schools it is economically a good decision BUT not ALL of them. Some of the accounting numbers cannot be absolutely quantified since they come from decisions based on spending and sometimes subsidies versus income directly generated by sports. Some of the economic numbers also cannot be quantified since they come from studies and others from economics in a macro sense versus micro. I've yet to see an all encompassing study or concrete evidence for those that LOSE money most of the time should still have sports. There are way too many variables involved for such.   

[Svrdhd]

I really feel for the coach, Bill Clark. He just left a very successful tenure at Jacksonville State to take over at UAB, made them bowl eligible in his first year for their first time in forever, and lost his job.

[NaturalStateReb]

I really feel for the coach, Bill Clark. He just left a very successful tenure at Jacksonville State to take over at UAB, made them bowl eligible in his first year for their first time in forever, and lost his job.

That guy's won everywhere he's went.  Someone would be smart to snap him up on the cheap.

[NaturalStateReb]

I find it interesting NSR, how deep in the article the above snippet is buried. 

If honest accounting is applied, the students are fleeced so the few can play football.  That reality just does not belong on a college campus.

Read another way, your points make an excellent justification for removing scholarships from intercollegiate sports and forcing the NFL (and other sports) to form developmental leagues for those who really enter college just to play sports. 

We're bastardizing our colleges the more we let athletics determine what the college environment will look like and what it will cost.   

My intention was not to bury it, but to close with that thought.  That figure comes from The System:  The Glory and Scandal of College Football by Armen Keteyian and Larry James.

The extent to which students pay for college athletics differs from school to school, and it's not like non-athlete students receive nothing in the exchange.  Campus life definitely is improved by major college athletics, and those events help support other campus organizations, such as band, cheerleading, drill team, etc. 

I don't think athletics are the main driver behind tuition hikes.  I think the major cause of tuition hikes are two fold.  The primary reason why tuition is going up is the loss of state funding that used to support higher education.  State funding for institutions of higher education declined nationally over 40% from 1980 to 2011.  As state dollars shrank, universities passed those costs along to students.  What was once paid for by state dollars is now paid for by students with often crippling student loan debt.  That cycle has profound implications for universities, consumers, and the national economy.

The second, and smaller, reason in my opinion is spiraling administrative salaries at universities.  The number of vice-presidents, vice-chancellors, chairs, and other such positions has expanded, and many of them command 6-figure salaries.  These salaries--both in number and in dollars--are running wildly out of control.  For instance, the chancellor of ASU-Mountain Home is authorized to make more money ($154,578) than the director of the Arkansas Department of Parks and Tourism ($130,000) or the Arkansas Department of Corrections ($149,017). 

I think the $91,000/$13,000 really just goes to show how good of a deal student-athletes get at major universities.  I hesitate to go much into it lest this thread derail and become a "let's pay/not pay the players" thread, but I think that number helps show that student-athletes at major universities are increasingly living in taxpayer funded resorts for 4 or 5 years.

[NaturalStateReb]

After some additional thought on this point:

The institution previously referred to continues to be that same suitcase college it always was.  In this case, I'd have to say their move to a higher level of play has been a failure for all involved (students, athletes, taxpayers).

I can probably guess which campus you're talking about, and if it's the one I'm thinking of, then I can take your point.  Division I athletics isn't for every school, and not every sport makes sense at every school. 

The rise in tuition is pretty inexcusable across the board.  Not knowing more than I do about higher education finance, I'm not exactly sure where all of a university's overhead goes, but there does seem to have to be a better way.

[NaturalStateReb]

To shift this just a bit if I could, I wonder how Hendrix is doing with their athletic program after the reinstatement of American football.  I have to admit I was shocked to see a Division III school bring back football especially since they cannot offer athletic scholarships (although I know they can enhance aid packages for athletes with good to outstanding academic backgrounds). 

I doubt we will ever see a true cost of what this endeavor set Hendrix back (especially since they are private) but I'd be curious to see the reflections on this a few years after the fact.

I don't know about financially, but it's created a fall buzz for their alumni. Pretty nice little stadium.

[Seminole Indian]

I don't know about financially, but it's created a fall buzz for their alumni. Pretty nice little stadium.

Yep!

Think most athletics, like most every thing considered 'extra curricular'  in the good ole USA are money losers that are only supported because enough people think they are 'value added'.

I'm sure the people that view the world as a giant hedge fund, or want the masses to focus on acquiring the job skills they need to land one of those 60-80 hour week jobs that don't allow for 'extra curricular' activities don't see the world that way.

[Cinco de Hogo]

If only people worried about the national debt as much!

Lots of problems in this country that are systematic to the same problems incurred by college athletics.

When a straight A student can no longer afford to attend college and we begin to pay athletes to play a game we have lost all sense of direction.

And that is said by a diehard sports fan.

[Seminole Indian]

If only people worried about the national debt as much!

Lots of problems in this country that are systematic to the same problems incurred by college athletics.

When a straight A student can no longer afford to attend college and we begin to pay athletes to play a game we have lost all sense of direction.

And that is said by a diehard sports fan.

Not many straight A students cannot attend college if they want to,and the vast majority of colleges and universities do not play at the FBS level.

There is not an area in Arkansas where a non-fbs school is not available and accessible for most residents.

I have no problem with FBS schools covering the cost of attending college for the student athletes in the sports that don't have off seasons. Most FBS football players are expected to attend summer school, so they don't even have that opportunity to earn pocket money.

[atekido]

another reason America is falling behind in academics.  more and more college are directing there money to help out athletes pay for college vs future scientists, engineers, doctors ect 

[Seminole Indian]

another reason America is falling behind in academics.  more and more college are directing there money to help out athletes pay for college vs future scientists, engineers, doctors ect

Actually many student athletes go on and become scientists, engineers, doctors ect.

Not sure about the other Arkansas schools but I think the athletes at the two FBS schools in the state out perform their student body in the class room.

[Seminole Indian]

You do realize that a student's high school grades mean nothing these days don't you?

It's all about what you score on the ACT or SAT that matters and if you don't get a high enough score, you pretty much mortgage your adult life for a college degree. 

And all the while, we want to pay college athletes even more than we already do.

Ridiculous.

I still thought grades mattered but do understand the need for a 'standard candle'.

As long as people realize that the blame for the direction college athletics is going lies more with the 'fans', especially the fans of SEC schools, than the schools, administrators or athletes I'm fine with the criticism.

My suggestion is for the fans to reduce the 'demands' they place on all those involved, if not pay the price.

If they chose not to then the schools and those involved are forced to engage in the 'given the people what the people want business', like it or not, or the fans will be after all their heads.

It is also my experience that the motivation for criticizing the cost of athletics at most colleges in Arkansas is really just to insure that one school maintains it's monopoly on big-time athletics in the state, that's all.

[NaturalStateReb]

Actually many student athletes go on and become scientists, engineers, doctors ect.

Not sure about the other Arkansas schools but I think the athletes at the two FBS schools in the state out perform their student body in the class room.

Considering the level of investment made in them, shouldn't they?

[NaturalStateReb]

I still thought grades mattered but do understand the need for a 'standard candle'.

As long as people realize that the blame for the direction college athletics is going lies more with the 'fans', especially the fans of SEC schools, than the schools, administrators or athletes I'm fine with the criticism.

My suggestion is for the fans to reduce the 'demands' they place on all those involved, if not pay the price.

If they chose not to then the schools and those involved are forced to engage in the 'given the people what the people want business', like it or not, or the fans will be after all their heads.

It is also my experience that the motivation for criticizing the cost of athletics at most colleges in Arkansas is really just to insure that one school maintains it's monopoly on big-time athletics in the state, that's all.

I think this is a fair point, and one that's hard to untie with college sports (and college, in general):  how much is this market driven?  Is there really a market in any meaningful sense, since the lines between prices, donations, and public subsidies are so blurred and intertwined?

Clearly the public's demand has something to do with it.  So does the demand of wealthy donors.  How much are these changes driven by the universities internally, in a search for dollars and more students (which ultimately represent dollars)?