As Big Ten and Pac-12 cancel their football seasons because of COVID-19, college sports programs are facing a financial apocalypse

As Big Ten and Pac-12 cancel their football seasons because of COVID-19, college sports programs are facing a financial apocalypse

While millions of fans are lamenting the looming disappearance of college sports this fall, the coronavirus pandemic is also exposing financial fau

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While millions of fans are lamenting the looming disappearance of college sports this fall, the coronavirus pandemic is also exposing financial fault lines and a broken governance model that may trigger an opportunity to irrevocably transform big-dollar college athletic programs.

COVID-19 has cast a harsh spotlight on some painful truths about high-revenue college football in particular—notably, that the billions generated by lucrative media contracts and conference-owned networks have warped the mission and incentives in this educational not-for-profit model, resulting in years of overspending on coaching salaries and gilded sports facilities.

The absence of significant reserve funds to cover these costs, due to a “spend what we make” mentality, is evident in the painstaking and   splintered decision-making process on whether to play football in the fall and keep the TV money flowing.

These big-revenue programs are part of the NCAA’s Division I Football Bowl Subdivision (FBS) — 130 football teams in all, whose athletics department budgets ranged from $16 million to $207 million in 2018. This 10-conference subdivision includes the only college football teams that still might play this fall — a number that dwindles by the day, with news Tuesday that the Big Ten and the Pac-12 conferences have cancelled the fall season.

The disjointed decision-making, with emergency
meetings of each conference’s governing board of university presidents, may
leave the viability of fall football in limbo for days or weeks. That muddle stands
in contrast to the Division I Football Championship Subdivision, and all of
Division II and III, whose 600-plus colleges and universities have already
cancelled their fall championships, including football.

The Big Ten and Pac-12, along with the ACC, Big
12 and SEC, are members of the TV-revenue
rich “Power 5” conferences that ultimately control the decisions for FBS college
football.


The Power 5 would collectively lose more than $4 billion in football revenues from a mass cancellation, with each of its 65 programs losing an average of $62 million.

Adding to the turmoil, Power
5 football players are split about playing this fall. Hundreds of players from the
Pac-12 and Big 10 are demanding that their conferences meet
their safety and other concerns, while others have started their own campaign
to support playing this fall.

Black athletes account for more than half of football players in the Power 5 conferences, and hospitalization rates from COVID-19 are roughly five times higher among Black Americans than white Americans. Given the disparate impact of the pandemic and emerging questions about the potential long-term health complications of COVID-19, athletes are raising critical questions about the priority of racial equity, health and safety.

The lack of unifying
leadership in making decisions about a fall season underscores college
football’s broken and fragmented governance system. Unlike the NCAA’s March
Madness basketball tournament, the FBS’s 10 conferences manage their lucrative postseason championship—the
College Football Playoff—independent of the NCAA
.

Last spring, the NCAA canceled
March Madness in one board meeting. By contrast, the presidents and
commissioners of each of the Power 5 conferences are making the call on fall
football on their own.  

Outside of the Power 5
conferences, the vast majority of 1,200 non-profit educational institutions in
the NCAA’s three divisions do not view athletics programs as money-makers. Colleges
and universities fund athletics as enhancements to student life, much like providing
opportunities for students to participate in dance, theater, debate, or other
development and civic engagement activities. At the more than 400 schools in
Division III, one
out of every six students participates in varsity sports.

While the absence of fall
sports at most NCAA institutions will not result in significant revenue
shortfalls in ticket sales or media contracts, the impact may be seen
in reduced tuition revenues for many small colleges that depend on athletics as
an enrollment tool for recruiting students.

At the other end of the
spectrum, the Power 5 football programs have created a financial structure that is “too big to fail.” The pandemic
should propel a radically reorganized way of doing business.

Twisted
incentives in FBS football

A crude sense of the
financial apocalypse that could result from cancelling football for all of the Power
5 conferences (as opposed to postponing football to the spring) can be gleaned
from institutionally-reported data collected for the Knight
Commission on Intercollegiate Athletics
, an independent group on which we serve that
has a legacy of influencing NCAA policy change.

Patrick Rishe, director of
the sports business program at Washington University in St. Louis, used our
database and other sources to project that the Power 5 would collectively lose more
than $4 billion in football revenues from a mass cancellation, with each of its
65 programs losing an average of $62 million.

Looking at fixed expenses, our database shows
that 54
of the public Power 5 institutions (data for private institutions is not available) hold $7.4
billion in total athletics debt for which they pay a combined $578 million in
annual debt service
.

These same institutions also have contracts with highly paid
coaches that, in many cases, don’t have “force majeure” clauses allowing for
reductions during a crisis, such as a pandemic. In 2018, these same 54
institutions spent more
than $2.4 billion
in coaching, administrative and staff salaries.

The other half of the FBS conferences outside the Power 5 have programs that face different financial realities. Two funding sources under severe strain during the pandemic—student fees and institutional support—make up 56% of these programs’ budgets.

Adding to their financial woes is the cancellation of early season non-conference road games against Power 5 football teams. In past seasons, these games have provided guaranteed million-dollar payouts, often accounting for 10% of the budgeted revenues for the entire athletics department of these lower-resourced programs.

With
important meetings to come, it is not yet clear if any FBS football games will
be played this fall or spring, but what is clear is a new model for college
sports should emerge.

For too long, Division I and its FBS football
model have been shaped by distorted non-educational incentives to simply win
games and boost television market share. At this moment of crisis, Division I
college presidents have an opportunity to demonstrate bold leadership. A
post-pandemic model for college sports should address excessive spending and
promote fiscal sanity, while creating incentives and new governance structures
that do more to prioritize college athletes’ education, health, safety and
success.

Nancy Zimpher is chancellor emeritus for the State University of New York and Jonathan Mariner is the former executive vice president and CFO of Major League Baseball. Both are board members of the Knight Commission on Intercollegiate Athletics.



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