College football fans were devastated by the news this week that many of the nation’s top teams will not be playing this fall. The budgets of their schools’ athletic departments could also be decimated.
College budgets face a potential $1.6 billion hit as two of the most powerful athletic conferences, the Big Ten and the Pac-12, announced they would postpone their football schedules.
Another $2.4 billion is at risk if the three other major conferences — the ACC, the Big 12 and the SEC, follow suit.
And that could mean trouble for the far less profitable non-revenue sports at those schools, which depend on the dollars generated from football and men’s basketball for funding.
“Every other sport is a money loser,” said Professor Patrick Rishe, director of the Sports Business Program at Washington University in St. Louis, Missouri. “We’ve already been seeing some programs cut even before this. Now, with the loss of football profits, it’s going to have an impact.”
Bracing for cuts
Stanford University recently announced it would eliminate 11 of the 36 varsity sports it offers, including fencing, rowing, volleyball and wrestling in the 2021-2022 school year. Twenty staff members will lose their jobs.
Stanford won’t be the last school to drop sports in the face of lost football revenue, predicted Dan Fulks, a professor emeritus at University of Kentucky and an expert on the economics of college sports.
“I think lots of schools have been wanting to drop some sports and this is the perfect excuse for it,” he said.
For now the Big Ten and Pac-12 say they’re planning to play their games in the spring. But it’s not clear whether delaying solves the health risks posed by the Covid-19 pandemic, or what kind of revenue will be available if the games are played later.
Show me the money
Most of the football revenue at the “Power 5” conferences comes from broadcast rights and ticket sales. The television rights deals were expected to bring in $639 million to the Big Ten and Pac-12 schools alone, according to an analysis by Wells Fargo. Another $608 million would go to the SEC, Big 12 and ACC. And that doesn’t count ESPN’s 12-year rights deal to air college football championship playoffs, worth $5.6 billion.
“The revenue may not go all the way down to zero, but you’re only looking to alumni donations likely continuing,” said Rishe. There could be some savings from not playing games, including reduced travel and game day expenses such as stadium staff. But most of the expenses of the football programs — coaches’ salaries and scholarships — will remain in place, quickly turning profits into deep losses.
Rishe said that he doesn’t think academic departments will face cutbacks from the loss of football profits, because most schools keep those profits within the athletic departments.
But schools are seeing huge drops in revenue from the pandemic, as some students take time off off from their schools rather than pay full tuition to take online classes. Millions more will be lost from students who are no longer paying room and board as theystay home to take online classes. So the economic pain won’t be just in the athletic department.
“Absolutely there are cuts happening at universities,” he said. “I know at my own university staff furloughed, some of whom are not going to return.”
How smaller schools fare
While the major football programs are huge profit generators, football profits are actually rare outside of the powerhouse schools.
More than 660 colleges and universities play football. But the big dollars, and big profits, typically associated with the sport are pretty much limited to the 64 schools in the Power 5 conferences, plus independent Notre Dame.
Collectively, those top 65 football programs brought in $4 billion in revenue 2018, the most recent year for which data is available from the Department of Education. Most of that money came from broadcast rights, ticket sales and alumni donations.
After expenses the schools were left with a combined profit of $1.8 billion, a 44% percent profit margin. Professional sports teams don’t have anywhere near that kind of return, because they have to pay their players.
The reported profits for those 65 schools range from $113 million at the University of Texas to $2.4 million at West Virginia. Only three schools — Rutgers, Miami and Florida State — did not report a profit. The average profit for the 62 profitable schools was $28.8 million.
But profits outside of those big dollar conferences are rare, even for football.
Only 10 of the 62 schools in the other five conferences that compete for college bowls reported football revenue greater than expenses in 2018. The average football revenue at those schools came to $12 million, with much of that money coming from the school itself to prop up the program. That’s about 80% less than the average dollars at the Power 5 schools.
Two of those conferences, the Mountain West and Mid-American Conference, have also suspended football this fall.
And outside the 10 conferences that compete for football bowl games, the economics of football are much different, with virtually no television money, limited ticket revenue and widespread losses, not profits.
The hundreds of other schools with football get an average of only $1.7 million in football revenue, with most of that money coming in the way of support from their schools. It will be much easier call, financially, for those smaller schools to suspend football this year. In fact some schools may need to as they tighten overall budgets in the face of a broad decline in revenue.
“It’s safe to say no one beyond Division I makes money,” said Fulks.
