Academic journal article
By Alexander, Donald L.; Kern, William
International Journal of Sport Finance , Vol. 5, No. 4
State supported universities have been investing considerable sums in intercollegiate athletics in the hope that such investments will pay off in terms of increased enrollments, improved student quality, and economic benefits such as revenues from ticket sales and bowl and tournament appearances. Does athletic success also yield returns in the form of greater state appropriations? This paper finds that there is some evidence to support this contention though the impact on state appropriations appears to be concentrated more heavily on the members of Division I-A with winning football or basketball programs. There appears to be little impact for schools that are members of Divisions I-AA, II, or III or on DI-A schools that fail to attain on-field success. It also appears that conference affiliation has little impact on appropriations as well. These findings call into question the benefit of continued investment in intercollegiate athletics by schools in these divisions or by schools with little chance of athletic success at the Division I-A level.
Keywords: educational finance, state and federal aid
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Why do universities invest large sums of money in the provision of college sports? The reason most often cited is that participation in sports builds character and teaches participants other "life lessons" that are not learned in the classroom, as well as provides entertainment for the university community. Many college administrators now, however, acknowledge that college sports is a business venture, and universities are more and more likely to justify their investment in athletic programs by appealing to the economic benefits that those programs allegedly provide to the university (Zimbalist, 1999). These benefits include revenue streams generated by ticket sales, concessions sold at the events, as well as the sale of logo apparel and souvenirs. Perhaps the most important and lucrative benefit is the revenue derived from television appearances. For example, the Southeastern Conference's current 15-year contracts with ESPN and CBS for the broadcast rights to SEC football will generate approximately $3.1 billion (Mandel, July 24, 2009), while the Big Ten will receive $212 million annually from ABC, ESPN, and the Big Ten Network (Mandel, December 15, 2009).
In spite of the rapid growth of these revenues over the past two decades, only a small percentage of the largest and best-known college athletics programs are profitable (Frank, 2004, Sheehan, 1996). The 2009 NCAA report on revenues and expenses authored by Daniel Fulks covering the period from 2004-2008, reports that only 25 athletic programs of the 119 schools in the Bowl Championship Series division of the NCAA generated positive net revenues, while the remaining 302 schools in Division I struggled to break even and most had negative net revenues (Fulks 2009). Most collegiate athletics programs thus generate significant economic losses and, as a result, many universities must subsidize their athletic programs. Consequently, those who favor continuing the subsidization of college athletics have now claimed that college sports programs also generate external benefits that accrue to the overall university community. These alleged external benefits include attracting additional and better applicants, encouraging donations to the general academic fund, and "arousing legislative largesse among sports-crazed representatives" (Zimbalist, 1999, p. 152).
Does athletic success translate into "legislative largesse from sports-crazed representatives?" There are some who, it seems, believe that there may be something to this claim. Roger Noll, for instance, argues that "Division I-A football and basketball are big business generating hundreds of millions in contributions to university athletic departments and leading to favorable budgetary decisions in state legislatures" (Noll, 1991, p. …