Recession Emerges as Formidable Foe for College Sports Athletic Departments Make Winning Decisions and Lose out in the Downturn
DeSchriver, Tim, Phi Kappa Phi Forum
On Feb. 8, the North Carolina State University men's basketball team boarded a bus for a game against Division I conference foe Virginia Tech in Blacksburg, Va.
While this may not seem important, it was a sign of the effect of the recession on intercollegiate athletics.
It had been years since N.C. State took a bus to go the 200-plus miles to Virginia; traditionally, the Wolfpack had chartered a flight to play the Hokies. Even though the $25,000 savings in travel expenses proved a relatively small amount from the N.C. State athletic department's annual operating budget of about $36 million, the belt-tightening made the use of ground transportation worthwhile. (1)
Austerity measures have been much more serious at other institutions. A wide range of schools across the divisions, such as University of Washington (Division I), Kutztown University (Division II) and Massachusetts Institute of Technology (Division III), have taken the draconian step of eliminating sports teams entirely.
Cost cutting is being seen throughout college athletics as programs face an uncertain financial future due to the economic downturn.
The money across the divisions
Before understanding the impact of the recession on college athletics, one must first understand the basics of how college sports are organized and financed.
The National Collegiate Athletic Association (NCAA), the largest governing body for American college sports, is comprised of three levels: Divisions I, II, and III, based on the number of sports offerings, athletic scholarships, and money spent.
Most college sports fans are familiar with the 300-plus institutions that compete at the Division I level, the largest in reference to dollars. Programs like University of Michigan, Penn State University, and University of Tennessee receive the most media attention and attract more than 100.000 spectators for home football games, in examples from the most popular and lucrative of college sports programs: the gridiron. These powerhouse universities each generate as much as $5 million in revenue from a single football home contest and have total annual football revenues in excess of $40 million. (2)
Division I contains two subdivisions specifically and only for football: Football Bowl Subdivision (FBS), with about 130 schools, and Football Championship Subdivision (FCS), with more than 120 schools. These classifications are generally based on stadium size and the number of scholarships offered. (3) Programs like University of Michigan and University of Tennessee are examples of the FBS and University of Delaware and University of Montana of the FCS. The median annual operating revenue for FBS programs was S35.4 million in 2006 and for FCS programs $9.6 million in 2003, (4) in the most recent data available. These institutions compete at the same level (Division I) in all other sports.
The average annual operating revenue for smaller Division II institutions, 276 programs, was only $2.6 million apiece for all sports per school in 2003, the last year such data was reported. (5) Division II program revenues are lower due to the inability, in contrast to Division I, to generate significant dollars from ticket sales, TV rights fees, corporate sponsorship, and fundraising (boosters/donors).
Revenue data for Division III are not kept by the NCAA.
The level of revenue for athletic programs is important for many reasons. Well-funded programs have the ability to pay head coaches high salaries, especially in the biggest draws of football and men's basketball. (For example, Division I schools like University of Florida, University of Texas at Austin and The Ohio State University pay their football and men's basketball head coaches in excess of $2 million annually.)
Therefore, these programs land marquee names for coaches, who then can sign the best players, who in turn help fill the stands with fans, who correspondingly become boosters/donors. …