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No football would cost $4B, alter college sports

Written by 
Published in Breaking News
Thursday, 21 May 2020 10:00

As more and more college athletic departments cut sports programs, the financial wreckage due to the coronavirus pandemic is becoming devastatingly clear -- and that's without factoring in a $4 billion loss if the 2020 football season is canceled, a development that would forever alter college-level sports.

University systems have suffered hundreds of millions of dollars in losses thus far, which could grow significantly as decisions are made about whether to return students to campuses this fall.

An array of cost-saving measures have been implemented 100 days from the scheduled start of the college football season: The Mid-American Conference announced multiple scheduling changes, including plans to eliminate conference tournaments in eight sports; Cincinnati dropped its men's soccer program; Old Dominion cut its wrestling program; Furman shut down baseball and men's lacrosse; Bowling Green cut baseball; Central Michigan terminated men's track and field; and Akron announced it is eliminating men's cross country, men's golf and women's tennis.

Athletic directors also are refunding tickets for spring sports and student fees for the spring semester while instituting hiring freezes, layoffs, mandatory furloughs and pay cuts, even for their most high-profile coaches. More than 20 FBS athletic departments, including Arizona, Colorado, Kansas, Louisville, Minnesota, USC and Washington State, have announced voluntary pay cuts and/or mandatory furloughs for coaches and athletic staffers.

For Power 5 schools, the possibility of a lost college football season looms even more significantly.

"If there's no football season, or if football season is interrupted or shortened, there will be a massive fallout," TCU athletic director Jeremiah Donati said. "There would have to be massive cutbacks. Could the department go on? Sure. It would probably look smaller. There would potentially be fewer sports and much less programming."

Patrick Rishe, director of the sports business program at Washington University in St. Louis, believes the upcoming football season will be played -- even if it's during the spring -- because of "astronomical financial implications" for athletic departments if it is canceled.

Quite simply, college athletics might not have a financial choice.

Rishe estimates that the 65 Power 5 schools would collectively lose more than $4 billion in football revenues, with at least $1.2 billion of that due to lost ticket revenue. Each Power 5 school would see at least an average loss of $62 million in football revenue, including at least $18.6 million in football ticket sales, he said.

Rishe's analysis for ESPN used publicly available data from the 2017 season from the Knight Commission on Intercollegiate Athletics and the 2018 Equity in Athletics Database from the U.S. Department of Education, along with conservative projections of increases in revenue over the past two years to arrive at 2020 estimates if the U.S. were not in the midst of a pandemic. Rishe's projected losses are actually conservative; they don't include potential losses in media revenue, conference distributions, donations and revenues from corporate partnerships.

Public school Power 5 athletic departments on average made nearly half of their total operating revenue from football, with about 14% coming from football ticket sales alone, according to an analysis of 2017-18 financial data provided to ESPN by Syracuse University's S.I. Newhouse School of Public Communications.

"Anywhere from 75 up to almost 85% of all revenues to our departments are derived directly or indirectly from football," Oregon State athletics director Scott Barnes said. "Indirectly, I mean sponsorship dollars, multimedia rights, and then you've got your gate, your donations and whatnot. The impact of not playing a season is devastating. It would rock the foundation of intercollegiate athletics the way we know it. Frankly, I'm not trying to solve for that because it would be such a devastating circumstance that we'd almost have to get a whiteboard out and start over."

About half of the public Power 5 athletic departments were self-sustaining in 2017-18, meaning revenue covered expenses without funding from student fees or university support. Take away football ticket revenue alone and only two schools still make the cut -- Georgia and Texas A&M -- according to the data from Syracuse University.

Even more remarkable: In a multibillion-dollar industry, fewer than half of FBS athletic departments have financial reserves in place that could be used during this type of crisis, according to a recent survey by Lead1 Association, the professional organization that represents athletic directors at 130 FBS schools. In the survey of more than 100 ADs, 41% of Power 5 and 26% of Group of 5 departments confirmed having such a reserve.

While there are no publicly available data that separate out fans' game-day spending (for example, food/beverage, merchandise, parking) at college football stadiums, Rishe's analysis shows Power 5 schools would collectively lose $303 million in revenue on game-day spending by fans (excluding tickets), or $4.7 million per school, if there were no football season. Further, collective game-day losses alone would be at least $1.5 billion, at least $23.3 million per school.

"Football is the elephant in the room," Ohio State athletic director Gene Smith said. "From that point of view, it's significant in funding all of our sports and everything we do for our student-athletes. It's also important to our community in a number of ways. Every contest has significant economic impact in central Ohio."

The 130 athletic departments that comprise the FBS level have varied economic models. Some earn a sizable portion of revenue through ticket sales and donations, while others are financed by TV and media rights, conference distributions, student fees and/or institutional support.

Of the 52 public Power 5 schools included in the Syracuse University data, 84.6% received their largest share of funding from NCAA and conference distributions, postseason football and media rights. About 11.5% got their largest share from donor contributions, and 3.8% generated the most money from ticket sales in 2017-18.

The financial ramifications could be even worse for programs in the Group of 5, which includes conferences such as the Mid-American and Sun Belt. Among the 56 public schools in the Group of 5, 62.5% get their largest share of funding from government and/or university support, 34% from student fees and 3.6% from donor contributions.

"Part of this is the broader context of universities," NCAA president Mark Emmert said. "There's not an athletic department in America that's not going to feel some problems even if they have a regular football season. If we have a football season that includes less games or less fans, which is entirely possible, then that's going to amplify it. It trickles down to all of the divisions."

No better illustration of the haves and have-nots in college sports exists than the media rights fees earned by Power 5 members -- hundreds of millions of dollars that does not end up at less-powerful conferences. The pandemic has put that largesse in jeopardy, too.

Industry executives told ESPN that media rights contracts with college conferences and professional leagues include force majeure clauses that may provide replacement games or other remedies for media companies if games are not played for reasons such as a pandemic. A spokesman for ESPN, a major rights holder, declined comment for this story.

According to its most recent tax filing for the fiscal year ending in June 2018, the SEC generated $432 million from TV and radio partners in 2017-18. The Pac-12 reported $339 million from TV, the ACC about $277 million and the Big 12 about $237 million. The Big Ten's most recent filing didn't specify revenue from TV, but its current media rights deals with ESPN, Fox and CBS were worth $2.64 billion over six years, or $440 million annually.

If a season is shortened, the TV executives said, networks would probably negotiate a prorated price with the conferences. The executives weren't sure what would happen if, for example, the college football season was moved out of its traditional spot in the fall to the spring.

Big 12 commissioner Bob Bowlsby told ESPN that the league received a full distribution check from the College Football Playoff for the 2019 season, and it expects to receive the full value of TV contracts from ESPN and Fox for 2019-20. He said the league expected to make its scheduled distributions to members.

Last year, the Big 12 distributed about 93% of the $418 million the league generated equally to its 10 member schools, at about $38.8 million each. Without football, that distribution wouldn't be nearly as big next year. Bowlsby said it was "too early to forecast" what might happen if the upcoming season is pushed back, but it would certainly affect the league's bottom line.

While media rights accounted for on average about 24% of Power 5 schools' revenue, it is significantly less among the Group of 5. Power 5 programs generated nearly $30 million on average from media rights, according to the Syracuse University data, while the Group of 5 schools on average earned about $842,500, or only 2% of total revenue.

"Our conference affiliation, the AAC, in all honesty, it's a very modest distribution," Navy athletic director Chet Gladchuk said. "We're not in the SEC or the ACC. We're not in the Big Ten, where they're all getting $30 [million] to $40 million distributions from the conference."

The Naval Academy Athletic Association, which supports 33 varsity sports teams for about 1,300 Midshipmen, is nearly self-sustaining, despite receiving only about 2% of its operating budget from the federal government, according to Gladchuk.

About 60% to 70% of Navy's athletics revenue is generated from football through ticket sales, corporate sponsorships, media rights, conference distributions, hospitality, concessions and donations, Gladchuk said.

"It's not a complaint, because when things are going well, we're a self-sustaining, break-even operation and we can make it work," Gladchuk said. "This isn't a call for funding in that context of institution support. It's worked, we make it work and we balance our budget, but it's reliant on significant revenues that come from football, which is the catalyst for everything."

The financial fallout would be more severe if a shortened season did not include Navy's opener against Notre Dame or a conference-only schedule prevented its game against Army. According to Gladchuk, the TV revenue, guarantees and ticket sales from those two rivalry games are even more significant than the American Athletic Conference distributions Navy receives each year.

The exact details of Navy's athletics budget aren't known. The Naval Academy Athletic Association is considered a private nonprofit organization and isn't subject to open records acts. The academy didn't provide its most recent NCAA financial report to ESPN.

A self-sustaining budget coupled with financial reserves places the University of Georgia in a better financial position than most FBS schools should there be a canceled, shortened or delayed football season this fall.

According to the UGA athletic department, it has more than $102 million in reserve funds, which includes 2019-20 reserves, long-term investments and general endowment funds.

"We never thought it would be at this level," UGA athletic director Greg McGarity said. "With a $153 million budget [for the 2019-20 fiscal year], we tried to stay in that three- to six-month period so we would be able to sustain our program."

Georgia's football program accounted for almost half of the athletic department's $174 million in revenue from ticket sales and contributions alone in the 2018-19 fiscal year, according to its most recent NCAA Membership Financial Report. The Bulldogs generated $34.6 million in football ticket sales and $44.3 million from donations, much of which is attached to those tickets.

"You can run all of the numbers and projections, but if you don't have that football part, it's just agonizing," McGarity said. "If you don't have football revenue, where does your revenue come from? It's a huge void that would create some dire situations on the operation of a program."

Georgia's athletic department has already taken some financial hits because of the coronavirus pandemic. McGarity estimates about $740,000 will be lost in SEC distributions because of smaller payouts from the NCAA, which cancelled its basketball tournaments and other championship events. The athletic department also had to refund about $800,000 in student athletic fees when on-campuses classes were moved online for spring semester.

But Georgia also saved money after the cancellation of spring sports, which reduced travel, lodging and meal costs, and because of an NCAA-mandated recruiting dead period, which prevents coaches from going on the road or recruits coming to campus. In 2018-19, each of those sports competing in the spring -- baseball, men's and women's golf, softball, men's and women's tennis, and men's and women's track and field -- lost money, combining to spend about $10.2 million more than they generated.

Men's basketball is the only other UGA program that earned more than it spent in 2018-19, with a surplus of about $2.9 million. Seven other non-revenue programs -- women's basketball, equestrian, gymnastics, women's soccer, women's volleyball, and men's and women's swimming -- combined to lose more than $12 million in 2018-19.

Once criticized for not spending enough in the SEC's seemingly never-ending arms race, the Bulldogs' reserves will enable them to make things work -- at least in the short term -- if they can't play football this fall or face a truncated, conference-only season.

A season involving only conference foes also would save bigger schools money in terms of payouts to smaller schools they typically owe for having them travel to campus. But the loss of those kinds of payment for smaller schools such as Georgia Southern would be significant.

In 2019, Georgia Southern received $1.75 million in payouts for playing road games at LSU ($925,000) and Minnesota ($825,000). This coming season, the Eagles are scheduled to receive $1.45 million for playing at Ole Miss.

"I think anytime you have guaranteed games in any sport, particularly in football, and for whatever reason they don't come to fruition, that's obviously a budgeted amount that's going to affect your bottom line," Georgia Southern athletic director Jared Benko said.

In March, Benko took over an athletic department with a $29.5 million operating budget that just about broke even in the 2018-19 fiscal year.

Georgia Southern has instituted a hiring freeze and moratorium on athletic department spending. Benko said his department also might save money by limiting the number of scholarship athletes attending summer school and bringing in freshman athletes in the fall, instead of for summer school as the Eagles have done in the past.

Sun Belt schools also are exploring how to reduce travel costs, particularly for baseball and other non-revenue sports, which might include playing road games closer to home to avoid commercial flights and multiple nights of lodging.

"You'll see a lot more regional scheduling going forward in a lot of sports," Benko said. "I think the days of taking cross-country trips are probably going to be mitigated."

As bad as the past three months have been, university administrators fear the worst is yet to come because of declining enrollment, stressed state budgets, smaller endowments and increased costs in public health and safety.

The California State University system, which announced that students won't be returning to its 23 campuses this fall, has already suffered $300 million in revenue losses. The University of Wisconsin System estimates $212 million in losses through the summer semester. Penn State expects a $260 million hit through the next fiscal year.

"The biggest miss right now around the college sports discussion is that the schools themselves, many schools, are in deep financial peril," Emmert said. "Not around the sports programs, just in general. There's enormous economic pressure on presidents right now. They know that if they don't have students on campus, they're not going to have tuition revenue potentially. They know that if they have a hospital and many do ... every college hospital in America is losing money massively right now. They've got all kinds of pressure on them, and sports is just another piece of that."

Rutgers president Robert Barchi called the pandemic the "greatest academic and operational challenge" in its history. Arizona president Robert C. Robbins described it as a "Category 5-plus hurricane that's hitting the middle of campus."

That's especially troubling for athletic departments like Arizona and Rutgers, which rely heavily on direct institutional support and student fees to fund athletics. According to an analysis of the data from Syracuse University, Rutgers is more reliant on revenue from the university's general support fund (not including student fees) than any other Power 5 program. In 2017-18, Rutgers received $15.2 million, about 15% of its $100.7 million operating budget, from direct institutional support.

Colorado (9.5%), Arizona (9.1%) and Arizona State (9.1%) were the next highest among Power 5 programs in 2017-18.

In April, Barchi told the board of governors that the university would lose $200 million in revenue through June 30 with more significant losses in the next fiscal year because of the coronavirus pandemic, not including losses in athletics. Rutgers has already refunded $50 million for room, board, parking and course fees, and the state froze about $73 million in anticipated appropriations.

The Scarlet Knights were already working with far fewer resources than their Big Ten counterparts. According to a university-commissioned study in the fall of 2018, Rutgers' athletic department had a projected expense budget of $93 million in fiscal year 2018-19. Big Ten powers Ohio State ($221 million) and Michigan ($185 million) were spending twice as much.

When Rutgers left the American Athletic Conference for the more prestigious Big Ten in 2014, it projected that it would make $200 million more over the next 12 years. It paid an $11.5 million exit fee to the AAC and agreed to reduced revenue shares between $8.6 million and $10.6 million from the Big Ten in its first six years in the league, 2015 to 2020.

Rutgers supplemented those payouts with advances from the Big Ten totaling $48 million against future distributions.

As a result of those loans, the Scarlet Knights aren't scheduled to receive a full Big Ten share until 2027. In 2020, Rutgers was scheduled to get $28.6 million, as compared to $53 million for the longest-standing Big Ten members.

Barchi announced a universitywide hiring freeze, pay reductions for senior leaders and other sweeping cost-cutting measures. Rutgers football coach Greg Schiano, men's basketball coach Steve Pikiell and women's basketball coach C. Vivian Stringer are taking 10% reductions for the next four months; athletic director Pat Hobbs will take a 5% cut.

"I'm sure we're going to need to do our part," Hobbs said. "It's a challenge. Even though our budget is a $105 million budget in a half-billion-dollar institution, saving in any area is going to help. At a time like this, there's going to be a great challenge for the university to continue to provide. So we're going to be creative, and we're going to have to be very cost-conscious."

That internal funding might no longer be available because of the economic downturn caused by the pandemic. While many Power 5 schools can likely survive without it -- Pac-12 schools had on average the highest percentage of direct institutional support among Power 5 leagues at 5.5% of their overall revenue in 2017-18 -- athletic departments in the Group of 5, FCS and lower NCAA divisions might struggle to do so.

According to the analysis of the Syracuse University data, on average FCS schools received 36.8% of their revenue from direct institutional support, and non-football Division I leagues got 32.5%.

Another concern among athletic directors, especially for those at non-Power 5 schools, is that students might not be back on campus this fall, which would eliminate or at least reduce mandatory athletics fees in many cases. Smaller enrollments also would result in less money from student fees.

While schools such as Arizona, Auburn, Oklahoma, Oregon, Purdue and others have already announced they're planning to have face-to-face instruction this fall, final decisions won't be made by those schools and others until later. The California State University schools that won't be back on campus include Fresno State, San Diego State and San Jose State.

Only three Power 5 schools -- Virginia (13.4%), Maryland (12.4%) and Rutgers (11.8%) -- received more than 10% of their overall revenue from mandatory student fees in 2017-18. According to the data, on average Power 5 programs received 2.4% and Group of 5 schools got 21.9% of their revenue from student fees that academic year.

"We have to have institutional support through student fees to survive," said East Carolina athletic director Jon Gilbert, whose department received $15.8 million, or 33.7%, of its revenue from student fees in 2017-18. "If we get into the fall and let's say there are no students on campus and all classes are still online, every Group of 5 school in the country is in trouble because virtually every bucket of revenue is going to be reduced."

Gilbert announced on Monday that ECU plans to eliminate one or more of the 20 sports it sponsors and would reduce athletics expenditures by 10% to 20% in an effort to make up a $10 million budget deficit.

In April, UCF athletic director Danny White was criticized for suggesting to the Orlando Sentinel that athletic departments might benefit from government bailouts to get them through the coronavirus pandemic.

The Knights are as reliant on revenue from student fees and direct institutional support as any FBS program in the country. In the fiscal year ending in 2019, UCF generated $23.7 million from student fees and received $7.5 million in direct institutional support, which accounted for nearly half of its $69.1 million in total revenue.

If students aren't on campus and the Knights can't play football this fall, UCF's athletic department might not be able to stay afloat without some government support.

"There is no answer," White told ESPN. "If college athletics is important to our society, and I think it is part of why our system of higher education is the best in the world, we may find ourselves in a situation where we ask ourselves as a society, 'Do we want college athletics or do we need to be creative about some loan program, whether it's UCF's $35 million problem or SEC schools' $135 million problem?'

"There isn't an answer, just like there isn't an answer in corporate America and there's help being provided to them. I would hate to see college athletics go away. But when posed with the question, 'What do we do if we lose a college football season,' financially there is no answer to that question."

Intercollegiate sports, and particularly football and men's basketball, have often been called a university's front porch because of the public relations and marketing opportunities they offer through media exposure. Winning teams have historically led directly to increases in admission applications and financial contributions from alumni and fans.

Will sports be as important to administrators in the post-coronavirus era of higher education?

"When this over, these schools that have been propping up their athletic departments with student fees and other money might no longer believe the front porch is as important when the rest of the house is crumbling," said one Power 5 athletic director.

Even for the most financially stable athletics programs, the days of $75 million coaching contracts, $55 million football facilities, bloated support staffs, multimillion-dollar buyouts for losing coaches and steak and lobster dinners for recruits might be over.

"I'm not saying it gives us the opportunity to hit a reset button, but I think it's definitely going to cause people to pause as they think about what they're doing with their capital projects, high-salary individuals, including athletic directors, and whether your institution has proper reserves in place," Louisville athletic director Vince Tyra said.

Andrea Adelson, Kyle Bonagura, Heather Dinich, Chris Low and Adam Rittenberg contributed to this report.

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