Is College Football Profitable for Universities?

by Ben Mangrum
27 March 2014

There’s a standard narrative fueling the big business of college football.  Many of its advocates put it like this:  football programs generate so much revenue for the university, while also supporting “non-revenue” sports like golf and swimming from its own budgetary excess, that college football is its own justification for the large team budgets and coaches’ salaries.  Because alumni are much more generous during years when football teams win, academic programming benefits as well.  Indeed, so this standard narrative goes, both the jump in admissions applications and the wider “public relations” effect that accompanies a football program cause munificent ripples throughout a university’s stream of income. Many even maintain that football helps to subsidize the obscure and non-remunerative activities of colleges—research into the reproductive biology of ducks and eighteenth-century German poetry, for example.  Without a football program, scholarship money would plummet and applicants would flock elsewhere in search of universities with better “student life” opportunities.

navyLike most standard narratives, this one’s built upon a series of half-truths.  Yet many sports media outlets make it difficult to get the full picture about college football.  In reality, the top tier of revenue-generating football teams (about 8% of them) presents a drastically different picture than the middle-of-the-road teams (about 12%), and certainly a combined top- and middle-tier picture is completely inapplicable to the lower tier of revenue among football programs (the remaining 80%).  When Forbes or ESPN discuss this issue, they tend to do so based upon the top 8% of teams—a top tier that virtually never expands.

Let’s leave aside the vast majority of American college football programs and focus for a moment on the profitability of this top tier.  The so-called top tier is comprised of just over 120 teams in the NCAA Division 1-A, now known more commonly as the Football Bowl Series (FBS) programs.  While there is supposedly astronomical revenue to be made for universities in this tier, the idea of “profitability” among these programs is actually very muddy.  Take the University of Alabama’s football team, for example, which had the third highest revenue during the 2011-2012 season, generating $110 million.  While a typical SEC program spends around $27 million on its football team each year, Alabama reported about $41.5 million of operational expenses.  Those expenses do not include the athletic department’s debt service payments, which would have added about $13 million more to its overall expenses.  There was also $37 million of the athletic department’s budget not allocated to any particular sport or gender of athlete, and it’s not clear how much of that piece of the pie football received.

The information recorded by the U.S. Department of Education shows that Alabama football did indeed subsidize almost all other sports at the university.  Basketball was the only other team in the black, bringing in $12 million while its expenses were only $6 million.  The deficit for all women’s teams combined, for example, was just under $9 million. While these allocations also show that a good portion of Alabama football’s $110 million goes toward offsetting the costs of having a big-time athletic department, the data also shows that some top-tier football programs do in fact use a significant portion of its revenue to provide for the expenses of most of the athletic department. Yet that’s actually a rarity. For example, at Marshall University—a smaller top-tier program with a storied history—the expenses of the football team ($7,083,399) nearly wash out their revenue ($7,760,381).  The remaining “football” revenue only marginally supports the expenses of other sports.  Or, at Texas State University-San Marcos, a far less competitive football program at a university with enrollment numbers comparable to the University of Alabama, the revenue and expenses were both reported as exactly $5,633,155.  The point is that once you get out of the upper echelon of the top tier—let’s call it the football 1%—the sport is hardly profitable for itself, much less for universities.

The standard narrative about the profitability of football for non-athletic arenas of the university is also a series of half-truths.  Back to Alabama football.  Of the $110 million of football revenue, less than $6.5 million went to the university to pay for scholarships, faculty support, and the Acts of Kindness fund.  In other words, 5.9% of the football program’s revenue goes toward “academic programming.” However, even that percentage of the revenue given to academics isn’t entirely divorced from athletics, because universities often fold a portion of those funds back into athletic scholarships.  The football program at the University of Florida, for example, contributed $7.2 million to academic programing, while only $1.5 million of that revenue was earmarked for non-athletic scholarships. The muddled—perhaps diluted—contribution of revenue from football is particularly dubious when athletics received a $2 million dollar increase in their budget at the same time as the University eliminated its Computer Science Department in 2012 to save $1.4 million.  Furthermore, when the University’s “education and general” expenditures amount to $524.6 million, the $7.2 million of revenue generated by the football team is far from a critical source of funds. While there’s certainly truth to the idea of non-athletic “profitability” among certain top-tier football schools, it’s a slim and muddied percentage of the program’s actual revenue.  In fact, the real money to be made by big-time college football is actually found outside the university. (But that’s an issue for another post…)

What’s more, there’s actually a kind of hierarchy among the top-tier football programs.  According to Jeff Benedict and Armen Keteyian, authors of The System: The Glory and Scandal of Big-Time College Football (2013), figures from the 2010-11 academic year show that only 22 of the 120 top-tier football programs broke even or made a profit.  That means that while these big-time teams generate millions of dollars of revenue, the cost of running such programs usually exceeds that revenue.  To put that more starkly, even within the so-called top tier, 82% of college football teams actually take away money from the university’s budget, rather than generate net revenue.  (The NCAA’s figures are, perhaps predictably, less damning with just over half the teams generating profit.) Benedict and Keteyian’s figures suggest that the overwhelming majority of top-tier athletic departments require their universities to allocate funds from elsewhere in the school’s budget for the sake of football.  Thus, the myth that college football generates revenue for universities is a lie 82% of the time among the highest grossing “tier” of teams.

It’s true that a recent study from researchers at the University of Pennsylvania and Virginia Tech demonstrates that there’s a kind of cyclical relationship in which major success (not just a 7-5 season) corresponds to a bump in enrollment and, consequently, a bump in ticket revenue the following year.  Yet in order for universities to feel this bump, their football team had to finish in the AP Top 20—that is, only 16% of the FBS schools.  What’s more, this bump is hardly noticeable in smaller schools outside the FBS that have successful seasons.  Instead, it’s confined to a relatively static coterie of the NCAA Division 1 “football” universities.  Only a few schools see this bump each year, while the vast majority will go years—even decades—with unsuccessful seasons. That translates into years upon years of unprofitable athletic expenditures, requiring money from elsewhere in the university’s budget to subsidize football.  (If that’s the picture among the top-tier teams, the picture outside NCAA Division 1 schools is not just muddy—it’s outright bleak.  It’s quite rare for teams outside the FBS to be profitable, and they are virtually never consistently profitable.)

The only other way in which the standard narrative does seem to hold water is that state legislators tend to appropriate more funds for universities with winning football programs.  For reasons that I’ll restrain myself from speculating about, legislators think that public universities need more money when they win at football.  However, this bump in state funding is not reliable from year to year due to the vicissitudes of each season, and it’s often the case that universities will go years (during which their athletic departments are possibly in the red) without experiencing the benevolence of football-loving state legislators.

But what about alumni?  Surely wealthy donors give more to the university when a football team is successful? Actually, the bump in alumni giving—at best a 1% increase during especially successful years—doesn’t appear to offset the expenditures of a major college football program.  You have to spend more to get more.  And the majority of the revenue from success is absorbed back into the football program itself.  In other words, research into big-time collegiate sports demonstrates that a horrible football team doesn’t hurt alumni giving, even if it has a negative effect upon a university’s budget.  There’s yet to be a longitudinal study on the economic vicissitudes of winning and losing seasons, but the studies we do have so far tend to suggest that the rare jumps in revenue don’t offset the losing, average, or slightly above average seasons that mark college football history for the vast majority of teams.  The justification for the current system of college football cannot be the revenue it creates for universities.  That’s only true for the football 1%.  Why do the rest of our schools accede to the system?

On the other hand, it’s perhaps worth asking:  Is the fact that football isn’t profitable—or only for a rare and nearly unchanging few—necessarily a bad thing?  Large portions of the student body love football, right?  Even if this whole “student body” argument were true—and it’s probably not—Benedict and Keteyian put the problem in the following stark terms:

Football Bowl Subdivision (FBS) schools spent more than $91,000 per athlete compared with just over $13,000 per student.  Yet students across the country faced steep tuition hikes and increased fees.

 Football student-athletes receive the lion’s share of a university’s funds, while only rarely do football teams generate revenue that supports non-athletic students.  Usually, as recent reports suggest is the case at Berkeley, football is housed within the university at the expense of academics.  Students pay more tuition while administrators feel caught in the double bind of a “spending race” with other schools.  The truth is that diminishing research budgets, the administrative erosion of the tenure system, the economic efficiency of adjunct labor, and rising tuition costs all subsidize the American college football system.

 

Ben Mangrum is a doctoral candidate in English at the University of North Carolina at Chapel Hill. In addition to editing Ethos, Ben also writes for the project on politics, the business of sports, contemporary novels, and the academy.  His academic work mostly involves twentieth-century literature, philosophy, and religion.

10 Comments

  1. Pingback: Football (16 September 2014) | Carleton University Board of Governors

  2. Written by a doctoral candidate at UNC CH, that might explain the baldly biased presentation of the numbers, misleading ‘analysis’ and an overall lack reference or citation. And no mention of multiple streams of revenue that don’t go through the athletic department. EX. Miss State this year cleared around 7.4M, after all revenue and all athletic expenses (USA Today). They did receive a 3M subsidy. What they don’t tell you are things like Starkville has a 2% sales tax on F&B and last year it totaled $5,842,015.55 (MDR), months with football games generate more, exception is DEC (need I say why), and 20% is given back to the University. This year, most successful in history, applications have skyrocketed, donations are up (they were climbing before), and local economy is profiting. That is just one example, and guess what, that haven’t tabulated bowl revenue, yet. Of Course, there is the other end, like Rutgers whose athletic budget gets nearly 47M this year (apparently the school just picks up the expense), with an endowment of under $800M and a budget of over 3.5B, they might want to revamp their athletic management. Chicago State spends less than their subsidy, but I don’t think they play football. Here’s on for you, Air Force receives over 25M in subsidies to their Athletic dept. But wait, every single cadet is involved in the athletic program, and yes, there is a football team that will share in bowl revenue. As far as I’m concerned, when it comes to active military schools, we should foot the bill anyway and not at the state level. Just some fat to chew on while your thinking up new ways to disown the Tarheel athletic program.

    • You raise an excellent point about the industry and taxes surrounding football (e.g., the way that Starkville, MS, benefits in taxes is a good example). But as my title suggests, the question I’m interested in is how the *university* profits from college football. But more to the point, I think it’s fair to count MSU, who was ranked #1 for several weeks and went to a major bowl, among what I’m describing as the “football %1,” for whom a big-time program is indeed profitable. (But even then, is it integral to the finances of the university?) The point that I’m trying to make in this piece is that the profits for the “football %1” are not representative of the entire college football system, where more often than not big-time spending hurts universities financially, rather than helps them. The recent decision by UAB to shut down their football program (who is not part of the “football %1” but still made it to a bowl this year) illustrates the disparities rife throughout our system of collegiate athletics. Even moderately successful teams in the middle and lower rungs of the football hierarchy are not profitable and seemingly even hurt the academic missions of universities.

      • UAB may still be hurt if they would’ve kept football but the schools largest donor & another top donor have stated they will no longer donate to the University since they’ve shut down football and were not consulted during the decision making process. Which leads me to believe UAB wasn’t aware they would lose donations from these individuals when they made the decision if they never talked to them.

  3. Ben, great job de-bunking a widely accepted myth. In any case, the financial question about college sports is a red herring. The central issue is this: College is for scholarship, not for a bunch of morons scampering around on the football field, and thousands of idiots screaming themselves hoarse in the bleachers.

    Don’t get me wrong; I played football as a kid, and loved the game.

    It simply has nothing to do with higher education.

  4. How can you do a true profitability analysis of college athletics without addressing the FACT that college sports are partially a marketting expense. Games come with the hours of school plugging goodness, they drive sales of merchandise (walking billboards), and they keep your name relevant where kids know who you are and want to go there. So the money athletic departments “lose” is not actually a loss, so much as it is an expense that almost every business there is much engage on some level for people to klnow they are there. I was talking to a young girl recently that just picked her college. When she was explaining her selection process, the final and most important factor to her ended up being that she wanted “to go to a Big 12 school.” That is telling considering the Big 12 is an athletic body and the young lady does not play sports.

    • I just went about the college selection process for my 2. One used the sailing team as a swing vote and the other used the water polo team. A big football program was deemed as a negative for both.

  5. To my opinion, if the football teams have some great players, then college football can definitely be profitable for Universities. It is easy to promote such sports in your local area, as here are great lovers of football available everywhere under the Sun.

  6. “Football Bowl Subdivision (FBS) schools spent more than $91,000 per athlete compared with just over $13,000 per student. Yet students across the country faced steep tuition hikes and increased fees.” _ well, says it all.

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