I\’m an occasional part of the audience for college sports, both the big-time televised events like basketball\’s March Madness and college football bowl games, as well as sometimes going to baseball and women\’s volleyball and softball games here at the local University of Minnesota. I enjoy the athletes and the competition, but I try not to kid myself about the financial side.
Big-time colleges and universities do receive substantial sports-related revenues. But the typical school has sports-related expenses that eat up all of that revenue and more besides. For data, a useful starting point is the annual NCAA Research report called \”Revenues and Expenses, 2004-2016,\” prepared by Daniel Fulks. This issue was released in 2017; the 2018 version will presumably be out in a few months.
For the uninitiated, some terminology may be useful here. The focus here is on Division I athletics, which is made up of about 350 schools that tend to have large student attendance, large participation in intercollegiate athletics, and lots of scholarships. Division I is then divided into three groups. The Football Bowl Subdivision is the most prominent schools, in which the football teams participate in bowl games at the end of the season. In the FBS group, Alabama beat Georgia 26-23 for the championship in January. The Football Championship series is medium-level football programs. Last season, North Dakota State beat James Madison 17-13 in the championship game at this level. And the Division I schools without football programs include many well-known universities that have scholarship athletes and prominent programs in other sports: Gonzaga and Marquette are two examples.
Since 2014, the Football Bowl Division is further divided into two groups, the Autonomy Group and the Non-Autonomy Group. The Autonomy Group is the 65 schools that are most identified with big-time athletics. They are in the \”Power Five\” conferences: the Atlantic Coast Conference, Big Ten, Big 12, Pac 12 and Southeastern Conference. Under the 2014 agreement, they have autonomy to alter some rules for the group as a whole: for example, this group of schools offer scholarships that cover the \”full cost\” of attending the university, which pays the athletes a little more, and coaches are no longer (officially) allowed to take a scholarship away because a player isn\’t performing as hoped. The Non-Autonomy Schools are allowed to follow these rule changes, but are not required to do so.
With this in mind, here are some facts from the NCAA report about the big-time Football Bowl Division schools.
Net Generated Revenues. The median negative net generated revenue for the AG is $3,600,000 (i.e., the median loss for a program in the AG), which must be supplemented by the institution; for the NA is $19,900,000; and for all FBS is $14,400,000. …
Financial Haves and Have-nots. A total of 24 programs in the AG showed positive net generated revenues (profits), with a median of $10,000,000, while the remaining 41 of the AG lost a median of $10,000,000; the 64 NA programs lost a median of $20,000,000; the total FBS loss is a median of $18,000,000. Net losses for women\’s programs were $14,000,000 for AG, $6,500,000 for NA, and $9,000,000 for FBS.
For the Football Bowl Championship schools, the magnitude of the losses is smaller, but the pattern remains the same:
Net Generated Revenues. The result is a median net loss for the subdivision of $12,550,000; men\’s programs = $5,022,000 and women\’s programs = $4,089,000. These medians are up only slightly from 2015. …
Losses per Sport: Highest losses incurred were in gymnastics and basketball for women\’s programs and football and basketball for the men.
And for the non-football Division I schools, where the big-time revenue sport is usually basketball, the pattern of losses continues:
Median Losses. The median net loss for the 95 schools in this subdivision was $12,595,000 for the 2016 reporting year, compared with $11,764,000 in 2015, and $5,367,000 in the 2004 base year. …
Programmatic Results. Five men\’s basketball programs reported positive net generated revenues, with a median of $1,742,000, while the remaining 90 schools reported a median negative net generated revenue of $1,573,000. The median loss for women\’s basketball was $1,415,000. These losses are up slightly from 2015 and more than double from 2004.
There\’s an ongoing dispute about whether big-time colleges and universities should pay their players. When I listen to sports-talk radio, a usual comment is along these lines: \”These college athletes are making millions of dollars for their institutions. They deserve to be paid, and more than just a scholarship and some meal money.\” I\’m sympathetic. But the economist in me always rebels against the assumption that there is a Big Rock Candy Mountain made of money just waiting to be handed out. I want to know where the money is going to come from, and how the wages will be determined.
The median school is losing money on athletics. I know of no evidence that donations from alumni are sufficient to counterbalance these losses. So if the payment for athletes is going to come from schools, there will be a tradeoff. Should costs be cut by eliminating sports that don\’t generate revenue (and the scholarships for those athletes)? The NCAA Report notes that salaries are about one-third of total expenses for college sports programs, and maybe some of that money could be redistributed to student-athletes. It seems implausible that the median school is going to substantially increase its subsidies to the athletics department.
What if the money for paying students came from outside sponsors? Some decades ago, top college athletes sometimes were compensated via make-work or no-show jobs. It would be interesting to observe how a single rich alum or a group of local businesses, could collaborate with a coaching staff to raise money for paying athletes–and what the athletes might need to endorse in return.
It\’s easy to say that student-athletes should get \”more,\” but it\’s not obvious that they would or should all get the same. For example, would all student-athletes get the same pay, regardless of revenue generated by their sport? Even within a single sport, would the star players get the same play as the backups? Would the amount of pay be the same between first-years and seniors? Would the pay be adjusted year-to-year, depending on athletic performance? Would players get bonuses for championships or big wins?
I don\’t have a clear answer to the economic issues here, and so I will now turn off this portion of my brain and return to watching the games in peace. For those who want more, Allen R. Sanderson and John J. Siegfried wrote a thoughtful article,\” The Case for Paying College Athletes.\” which appeared in the Winter 2015 issue of the Journal of Economic Perspectives (where I work as Managing Editor).