Rodney Fort's Sports Economics

Rodney Fort's Sports Economics
Chapter 13 College Sports

Figure 13-1 Demand Functions for Men’s and Women’s Basketball Season Tickets (Typical class size = 100) Legend: (From Chapter 2) A simple classroom experiment chooses a subset of the class and asks, “How many season tickets to men’s or women’s basketball would you buy at various prices?” Plotting price against their response gives two different demand functions for the two sports. For example, 70 students are willing to buy a men’s ticket at a price of $20. But the price would have to fall to $10 before 70 students would buy a women’s ticket.

Table 13-1 Revenues and Expenses of FBS Athletic Departments (2009 dollars) (slide 1 of 2)
Year Average Total Revenue a Average Total Expenditures Average Net Percent Showing Profit Maximum Total Revenue Total Revenue RatioB Maximum Total Expenditures Total Expenditures RatioC With institutional support 1985 $13,804,000 $14,007,000 N/A 42% $36,134,000 2.6 $33,495,000 2.4 1989 $17,248,000 $17,072,000 80% $39,952,000 2.3 $38,896,000 1993 $20,536,000 $19,630,000 -$302,000 69% $45,602,000 2.2 $42,280,000 1995 $22,165,000 $20,449,000 -$286,000 65% $56,199,000 2.5 $46,046,000 1997 $24,208,000 $23,528,000 -$1,088,000 71% $64,736,000 2.7 $64,872,000 2.8 1999 $28,689,000 $26,200,000 $0 67% $95,652,270 3.3 $83,437,830 3.2 2001 $30,873,000 $28,536,000 -$738,000 $97,908,000 $64,083,000 2003 $34,986,000 $32,368,000 -$714,000 66% $104,482,000 3.0 $79,849,000 2004 $32,728,240 $33,629,560 $121,800 $120,490,360 3.7 $104,502,080 3.1 2005 $36,790,880 $34,863,360 $135,520 $100,465,120 $100,329,600 2.9

Table 13-1 Revenues and Expenses of FBS Athletic Departments (2009 dollars) (slide 2 of 2)
Without institutional support $19,328,000 $19,630,000 -$302,000 51% $20,163,000 $20,449,000 -$286,000 46% $22,440,000 $23,528,000 -$1,088,000 43% $26,200,000 $0 $27,798,000 $28,536,000 -$738,000 35% $31,654,000 $32,368,000 -$714,000 40% AAverages were reported to After that medians were reported. BTotal Revenue Ratio = Maximum Total Revenue/Average Total Revenue. CTotal Expenditures Ratio = Maximum Total Expenditures/Average Total Expenditures. Note: The source lists data for 2006 that are not shown here due a suspected error in the report.Source: Author’s calculations from tables in Fulks (2003, 2008).

Average Total Expenditures
Table 13.2 Revenue and Expenses of Men’s and Women’s Programs in FBS Athletic Departments ($2009) (slide 1 of 2) Men's Women's Year Average Total Revenue Average Total Expenditures Average Net 1993 14,194,000 10,570,000 3,775,000 755,000 2,718,000 -1,963,000 1995 14,014,000 10,582,000 3,432,000 858,000 3,289,000 -2,431,000 1997 15,776,000 11,288,000 4,488,000 1,224,000 4,216,000 -3,128,000 1999 17,685,000 12,445,000 5,240,000 1,965,000 5,109,000 -3,144,000 2001 19,434,000 13,407,000 6,027,000 1,722,000 5,658,000 -3,936,000 2003 22,134,000 14,875,000 7,259,000 2,142,000 6,426,000 -4,284,000 2004 17,317,640 15,257,480 1,758,560 1,796,840 6,085,360 -3,857,000 2005 19,233,760 14,940,800 2,142,560 1,820,000 6,478,080 -4,021,920 2006 20,329,920 16,411,680 1,305,720 1,838,160 6,634,440 -4,355,640

Table 13.2 Revenue and Expenses of Men’s and Women’s Programs in FBS Athletic Departments ($2009) (slide 2 of 2) Note: Averages were reported prior to 2004; medians after that. Only years from 1993 on are used because the data are consistent with respect to values specific to men’s and women’s programs. The data include institutional support directly from the university to its athletic department, if any.

Figure 13.2 Non-BCS and BCS Average Payouts, 1981-82 to 2008-09 (2009 dollars).
Legend: At the average, BCS bowl payouts have always dwarfed non-BCS bowl payouts. In addition, while non-BCS average payouts have been steady over time, average BCS bowl payouts have grown in leaps and bounds, although they have fallen a bit in the last few years.

Table 13-3 2006 Revenue and Expenditure Distribution Percentages by Sport for FBS College Athletics
Men Women Sport Percent Total Revenues Percent Total Expenditures Football 63% 42% — Basketball 24% 15% 22% 13% Other sports 12% 41% 77% 86% Unrelated to particular sport 1% 2% Notes: The data are for generated revenues and expenses, that is, earned by the athletic department and do not include allocated revenues (e.g., institutional support directly from the university to its athletic department, if any).

Figure 13-3 The University and the Athletic Department
Legend: All major elements of the university, inside the triangle, produce outputs (Research, Teaching and Service) that generate money and political support for the university. The university supports those elements best that provide money and political support the best.

Figure 13-3 The Business College Org Chart
Legend: At the bottom, chairs of academic departments are responsible to their Dean. The line of responsibility and oversight moves upward through the Provost, the Board of Regents and, ultimately, to the Governor.

Table 13-4 Naming Rights in College Sports
Facility College Total Paid ($Millions) Duration of Rights (in Years) End Year Save Mart Center Fresno State 40 23 2022 Comcast Center University of Maryland 20 25 2026 Jones Stadium Texas Tech 2019 United Spirit Center 10 2015 Value City Arena Ohio State 12.5 Indefinite Cox Arena San Diego State 12 Bank of America Washington 5.1 2008 Colonial Center Arena University of South Carolina 5.5 Cox Pavilion University of Nevada Las Vegas 5 2009 Wells Fargo Arena Arizona State Papa John’s Cardinal Stadium Louisville 15 2012 Movie Gallery Veterans Stadium Troy State University Coors Events Center Colorado Carrier Dome Syracuse 2.75 Alltel Arena Virginia Commonwealth University 2 Cessna Stadium Wichita State 0.3

Figure 13-4 The Athletic Department Org Chart
Legend: At the bottom, individual team coaches are responsible to their Athletic Director (the equivalent of the Dean for academic departments). The line of responsibility and oversight moves upward through the President (typically, not the Provost as in academic departments), the Board of Regents and, ultimately, to the Governor.

Table 13-5 Annual Values of College Football TV Contracts (slide 1 of 3)
Conference Network Duration Ends Amount ACC ABC/ESPN 7 2010 $258 million Big 12 FSN 12 2011 $214 million Big East $200 million *Notre Dame CBS 5 $45 million **Pac-10 10 2006 $169 million $153 million Basketball Raycom 2010–11 $300 million 4 n/a ***Pac-10 9 2005–06 $52.5 million

Combined Conference Network Duration Ends Amount Big 12 ABC/ESPN 7 $500 million Big East $200 million Big Ten 10 2018 $1 billion Big Ten Network 20 2028 $2.8 billion C-USA ESPN 8 2008–09 $80 million MAC 5 2007–08 $3 million Mountain West CSTV $82 million SEC 15 2024 $2.2 billion CBS $800 million Sun Belt n/a WAC 6 $8 million

*6 home games per year. **The newest Pac 10 contract values have not been reported. Not available is denoted “n/a.”

Table 13-6 2008-09 Bowl Sponsors and Payouts to Teams (slide 1 of 3)
Alamo $2,225,000 Armed Forces Bell Helicopter $750,000 BCS Championship $18,000,000 Capital One $4,250,000 Champs Sports $2,130,000 Chick-Fil-A Chik-Fil-A $3,250,000 ACC $2,400,000 SEC Cotton AT&T $3,000,000 EagleBank $1,000,000 Emerald Diamond Foods $750,000 ACC $825,000 Pac 10 Fiesta (BCS) Tostitos Gator Toyota $2,750,000 GMAC Hawaii Sheraton Holiday Pacific Life $2,200,000 Humanitarian

Insight Insight.com $1,250,000 Independence PetroSun $1,100,000 International $750,000 Las Vegas Pioneer PureVision $1,000,000 Liberty AutoZone $1,700,000 Meineke Car Care Motor City Music City Gaylord Hotels $1,600,000 New Mexico New Orleans R+L Carriers $325,000 Orange (BCS) FedEx $18,000,000 Outback $3,100,000 Papajohns.com $300,000 Pointsettia San Diego Credit Union

Rose (BCS) $18,000,000 St. Petersburg $1,000,000 Sugar (BCS) AllState Sun Brut $1,900,000 Texas $612,500 Notes: When a second team from a conference, in addition to the conference champion, appears in a BCS game, the payout falls to $4.5 million for that second team. Utah 's appearance in the Sugar Bowl generated nearly $18 million to be split among their own Mountain West Conference, but also with C-USA , the MAC, Sun Belt Conference, and the WAC.

Figure 13-6 Disproportionate Revenue Sharing
Legend: When revenues are shared disproportionately, competitive balance is harmed. If the proportion of revenues kept by larger revenue colleges is greater than that kept by smaller revenue schools, as when a > b, the result is that MRL shifts down by less than MRS. The result is an even higher winning percent for the larger revenue college in the presence of disproportionate sharing than there would be without any sharing!

Table 13-7 2007-2008 FBS Conference TV and Postseason Revenues
All Conference TV NCAA Distribution Total Bowl Payouts Total Big Ten $240,000,000 $32,675,726 $47,700,000 $320,375,726 Southeastern $200,000,000 $25,149,625 $51,700,000 $276,849,625 Big 12 $89,261,905 $29,743,405 $46,075,000 $165,080,309 Atlantic Coast $66,857,143 $30,798,392 $28,125,000 $125,780,535 Pacific-10 $38,033,333 $6,454,167 $23,725,000 $68,212,501 Big East $22,000,000 $31,355,275 $3,700,000 $57,055,275 Conference USA $10,000,000 $19,135,016 $4,375,000 $33,510,016 Western Athletic $1,333,333 $12,363,932 $19,250,000 $32,947,265 Mountain West $6,857,143 $10,129,601 $4,000,000 $20,986,744 Mid-American $600,000 $11,860,368 $2,250,000 $14,710,368 Sun Belt n/a $5,477,803 $325,000 $5,802,803 Notes: Annual conference TV values and bowl payouts by conference all calculated by the author. Not available is denoted by “n/a.”

Figure 13.7 The Expected Value of Cheating. New Figure.
Legend: The expected value of cheating, EV, depends on the probability of getting caught, P. For P < PBE, EV > 0. But if P > PBE, the chances of getting caught are such that EVS < 0 and cheating simply will not pay. Since monitoring is costly, it is most likely that P < PBE. If the lost value L declines, or the gaing G increases then EV shifts upward.

Table 13-8 Budgets at Washington State University (slide 1 of 2)
Revenues Difference Booster Club Scholarship Contributions/Endowment $1,968,286 $2,451,854 $483,568 Corporate Support $314,476 $302,739 -$11,737 Football Away Guarantees $1,102,150 $1,344,020 $241,870 Football Tickets $928,230 $1,502,620 $574,390 Men’s Basketball $898,643 $1,312,020 $413,377 NCAA & Conference $349,224 $447,081 $97,857 Other $361,144 $432,316 $71,172 Radio/Sports Video $539,105 $472,114 -$66,991 Student Fees and Tickets $1,408,431 $1,557,302 $148,871 TV- Football Conference $2,589,232 $3,178,349 $589,117 University Support/Tuition Waivers $3,042,047 $2,941,530 -$100,517 Royalties $490,000 Concessions/Merchandise $277,810 Carry Forward $419,269 $111,197 -$308,072 Total Revenue $13,920,237 $16,820,952 $2,900,715

Table 13-8 Budgets at Washington State University (slide 2 of 2)
Expenses Capitalized Equipment $234,795 $733,373 $498,578 Employee Benefits $551,972 $1,054,600 $502,628 Goods and Services $2,799,511 $3,814,930 $1,015,419 Recruiting/Professional Development $617,401 $586,998 -$30,403 Salaries $4,140,899 $4,067,257 -$73,642 Scholarships $3,192,773 $2,425,524 -$767,249 Student and Other Wages $629,740 $1,118,885 $489,145 Team Travel $1,310,911 $2,328,934 $1,018,023 University Overhead $437,505 $563,375 $125,870 Total Expenses $13,915,507 $16,693,876 $2,778,369 Net Operating Revenue $4,730 $127,076 $122,346

Figure 13-8 The Value of Immobilizing College Talent
Legend: In a competitive equilibrium, the price of college talent would be determined by P = MRS = MRL and winning percents are= 1 – . The value of immobilizing college talent comes from reducing alternatives and lowering the going price of talent to the level of college athletes’ next best alternative, N. Each college then reduces spending on talent. The reduction for the larger market college is (P – N)* while the reduction for the smaller market college is (P – N)* .

Table 13-9 Operating Revenues and Expenses, Washington State University and the University of Washington, (slide 1 of 2) WSU Revenues Men's Teams Women's Teams Ratio Total Basketball $2,148,239 $316,975 6.8 $2,465,214 Football $12,630,209 Other sports $418,866 $1,422,675 0.3 $1,841,541 Not allocated by gender $13,538,665 Grand total $15,197,314 $1,739,650 8.7 $30,475,629 Expenses $1,653,650 $1,253,920 1.3 $2,907,570 $7,668,687 $1,710,020 $4,275,601 0.4 $5,985,621 $12,951,738 $11,032,357 $5,529,521 2.0 $29,513,616 Net before amortization $962,013

Table 13-9 Operating Revenues and Expenses, Washington State University and the University of Washington, (slide 2 of 2) UW Revenues Men's Teams Women's Teams Total Basketball $4,235,886 $1,083,993 3.9 $5,319,879 Football $28,569,263 Other sports $675,941 $1,811,108 0.4 $2,487,049 Not allocated by gender $6,175,329 Grand total $33,481,090 $2,895,101 11.6 $42,551,520 Expenses $2,492,670 $1,661,035 1.5 $4,153,705 $12,640,090 $3,970,979 $5,875,726 0.7 $9,846,705 $14,749,393 $19,103,739 $7,536,761 2.5 $41,389,893 Net before amortization $1,161,627

Figure 13-9 Play for Pay and Coaching/Administrative Services
Legend: When athletes are not paid, what would have been their payment accrues to coaches and administrators. The higher MRP represents this case since it includes extraction of value from athletes. If players were paid, that extra value no longer goes to coaches and administrators. The MRP of coaches and administrators falls to the lower function. The level of their services hired, and their wages, would follow the arrows.

Table 13-10 College Games and Rights Fees
Year # Games Total Contract ($Millions) Per Game ($Millions) 1952 12 $0.99 ($7.97) $0.08 ($0.66) 1978 23 $31.37 ($102.58) $1.36 ($4.46) 1979 $28.43 ($83.59) $1.24 ($3.63) 1980 24 $31.00 ($80.30) $1.29 ($3.35) 1981 $32.64 ($76.70) ($3.20) 1982 28 $58.41 ($129.08) $2.09 ($4.61) 1983 $63.79 ($136.50) $2.28 ($4.88) 1984 36 $21.81 ($44.72) $0.61 ($1.24) 1985 42 $26.79 ($53.04) $0.64 ($1.26) 1986 $28.74 ($56.05) $0.68 ($1.33) 1987 $27.70 ($52.08) $0.66 1988 43 $27.93 ($50.27) $0.65 ($1.17) 1989 $27.91 ($48.01) ($1.12) 1990 $27.69 ($45.13) ($1.05) 1991 71 $57.43 ($90.16) $0.81 ($1.27) 1992 $59.27 ($90.10) $0.83 1993 $60.09 ($88.94) $0.85 ($1.25) 1994 $60.13 ($86.59) ($1.22) 1995 $61.72 ($86.41) $0.87

Table Standard Deviation Ration of Winning Percents and Conference Champions, Pac-10 and Big Ten, (slide 1 of 4) Pac-10 Big Ten Year Ratio Champs 1970 1.37 Stanford 1.94 OSU 1971 1.13 1.61 Michigan 1972 1.46 SC 1.64 Michigan/OSU 1973 1.81 1.96 1974 1.67 1.72 1975 1.74 Cal/UCLA 1.53 1976 1.71 1977 1.62 Washington 1978 1.44 1.86 Michigan/MSU 1979 1.35 1.85 1970s Ave.

Table Standard Deviation Ration of Winning Percents and Conference Champions, Pac-10 and Big Ten, (slide 2 of 4) 1980 1.41 Washington 1.89 Michigan 1981 1.63 1.44 Iowa/OSU 1982 1.45 UCLA 1.81 1983 1.28 1.98 Illinois 1984 1.66 SC OSU 1985 1.20 Iowa 1986 1.37 ASU 1.46 Michigan/OSU 1987 1.58 SC/UCLA 1.55 MSU 1988 1.50 1.72 1989 2.00 1980s Ave. 1.43 1.69

Table Standard Deviation Ration of Winning Percents and Conference Champions, Pac-10 and Big Ten, (slide 3 of 4) 1990 1.30 Washington 1.83 Illinois/Iowa/MSU/Michigan 1991 1.80 1.66 Michigan 1992 1.31 Stanford/Washington 1.13 1993 1.34 Arizona/SC/UCLA 1.92 OSU/Wisconsin 1994 1.49 Oregon 1.60 PSU 1995 1.70 SC/Washington 1.94 NWU 1996 1.67 ASU 2.03 NWU/OSU 1997 1.86 UCLA/WSU 2.10 1998 2.02 UCLA Michigan/OSU/Wisconsin 1999 1.54 Stanford 1.78 Wisconsin 1990s Ave. 1.81

Table Standard Deviation Ration of Winning Percents and Conference Champions, Pac-10 and Big Ten, (slide 4 of 4) 2000 1.71 Oregon/OSU/Washington 1.34 Michigan/NWU/Purdue 2001 1.90 Oregon 1.22 Illinois 2002 1.48 SC/WSU 2.00 Iowa/OSU 2003 1.31 SC 1.84 Michigan 2004 1.70 Iowa/Michigan 2005 1.61 OSU/PS 2006 1.23 Cal/SC 1.79 OSU 2007 1.19 ASU/SC 1.38 2008 1.76 OSU/PSU 2000s Ave. 1.57 1.60

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