Tuesday, October 27, 2009
Is Cal's Football Program Really Losing Money?
Business / Education / Media / People / Sports Robert Gammon — Tue, Oct 27, 2009 at 2:21 PM
Some UC Berkeley faculty are upset that the university spends millions each year to subsidize its athletic department at a time of academic cutbacks and rising student fees, according to the Chron. Some point to Cal football coach Jeff Tedford's $2.3 million annual salary as an example of an over-the-top expenditure. But their anger may be misdirected, because it's not at all clear whether Cal's football program requires an operating subsidy from the university, takes money away from professor salaries, or forces students to pay higher fees.
The Chron story paraphrases William "Brit" Kirwan, chancellor of the University System of Maryland, and co-chairman of the Knight Commission, which released a report yesterday on college sports finances, as saying that only 24 of the 120 top college football teams operate in the black, with deficits averaging $10 million per school. But according to Amy Perko, executive director of the Knight Commission, that's not entirely accurate.
Perko said in an interview today with the Express that 54 percent of the top 119 college football programs reported being profitable from 2004 to 2006 - the most recent data available from the NCAA. That is, they brought in more revenues in the form of ticket and merchandise sales than they spent on operating expenses, such as coach's salaries. She also said that when you add in the unprofitable, lesser-known sports, that lose a lot of money, then only 25 of the top 119 colleges operated in the black.
The confusion may have been created by how the Knight Commission report categorizes the biggest schools. It puts them in something called, "the Football Bowl Subdivision," even though the category refers to all sports programs at the universities, not just football. It's also not clear from the report whether the rising salaries of football and basketball coaches are the main causes of sports programs being less profitable or whether schools are losing money by subsidizing lesser-known sports that generate virtually no income.
The Knight Commission report, however, does note that many women's sports, required under Title IX, are unprofitable. "Virtually no women's teams attract enough fans to make money, and few have the kind of marketing deals from corporate sponsors that enable men's teams to generate net operating revenue," the report states.
Perko also said that the Knight Commission report didn't analyze the profitability of individual schools, or individual sports programs, so there is no way to know whether Cal football is a money loser. Also, there is no way to know from the report whether Tedford's salary is worth it, although there are indications that it might be. The report notes that the biggest schools make more money from bowl game appearances. And under Tedford, Cal has had its most successful football team in years.
In other words, if the UC Berkeley faculty wants to get angry about the university's athletic department, then it needs to do a bit of homework to find out precisely which of the school's sports programs are actually requiring a subsidy each year.
Comments (6)
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Ms. Perko,
There is no way to tell from the Chronicle story whether Mr. Kirwan got it wrong or the Chronicle reporter did. But here is the exact paraphrase from the story:
“Only 24 of the 120 top teams operate in the black, with deficits averaging $10 million per school, he said.”
That specifically implies that only 24 of the major football teams operate in the black.
But as you're now acknowledging and as you acknowledged in our interview, that's not the case. It's 24 or 25 athletic programs that operate in the black. That's a big difference, and it's helped lead to the misunderstanding that Cal's football team is unprofitable, when there is no evidence in the Knight report or the NCAA report that it is.
As for the Football Bowl Subdivision. What I said in the post is that this terminology may be at the heart of the confusion, because it implies that it’s only referring to football, when in fact it refers to all sports programs at the major universities -- as you, again, acknowledge.
-- Robert Gammon
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Oh, and Cal athletic director Sandy Barbour responded to the Chron article today on KNBR.
You can listen here:
http://www.knbr.com/common/global_audio/201/13685.mp3
1. The football team ISN'T losing money. In fact, it and the basketball team make a HUGE PROFIT that subsidizes the other Cal athletic teams.
The problem with the Chron article is it misleads you into thinking the football team is losing money by including three photos from Cal football, plus a photo of Cal football player Jahvid Best on SFGate.com.
2. Taxpayers only pay about $225,000 of Tedford's salary. The rest comes from donations from private individuals and corporations like Nike.
Read this Chronicle article:
http://www.sfgate.com/cgi-bin/article.cgi?f=/chronicle/archive/2007/03/14/SPG0TOKTT71.DTL
So taxpayers are only forking over about $225,000 to Tedford for a PROFITABLE CAL FOOTBALL PROGRAM that subsidizes other athletic departments.
Now you can argue that $2.3 million sounds excessive, but it's the market rate for a coach of Tedford's caliber -- and keep in mind that nearly all that money wouldn't be available for another coach.
Tedford has a record of 64 wins and 32 losses.
His predecessor had a record 12 wins and 43 losses.
And winning coach like Tedford is going to put butts in seats, which means alums are more likely to come to campus and spend money on the campus community.
All for $225,000 of taxpayers' money.
Robert Gammon's story above has a couple of inaccuracies that stem from a basic misunderstanding on the part of the reporter. The NCAA uses the terminology "Football Bowl Subdivision" to describe the classification of the entire athletics program for the 120 schools that have football programs competing at a specific level. This terminology is used by the Knight Commission since it is the official terminology used by the NCAA to describe this subset of schools. This division was formally referred to as Division IA. The other Division I subdivisions are the Football Championship Subdivision and Division I without football. NCAA financial reports use these classifications to describe the finances of the entire athletics program for each subset of schools. Chancellor Kirwan's statement about the most recent NCAA report was accurate as he was talking about the results for the entire athletics program, using the NCAA subdivision terminology, not specifically football programs. Mr. Gammon asked me specifically about the data related to net operating revenue of football programs and I provided that information, which is available in the Knight Commission's College Sports 101 report at www.knightcommission.org. This report provides a factual overview of the business of college sports with easy-to-read graphs.
The chart includes more than just football. It shows the revenues and expenses for the athletic department, including lesser-known, unprofitable sports.
-- Robert Gammon
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