Commitment to Competition, Ignoring Cost Structure Has RU, UC Athletics Under Water

Rutgers_Uconn

The Rutgers athletics department released a “comprehensive plan to reach competitiveness [in the Big 10] in a fiscally responsible manner” following a year in which it fell $47.4 million short of its $99.2 million budget, but officials at the State University of New Jersey aren’t interested in hearing about the “long-term benefits of Big Ten membership”; faculty union president Deepa Kumar derided the plan saying it “robs from our educational mission” and “saddles [students] with greater debt to subsidize.” Kumar has called on President Robert Barchi to decrease spending from the school’s operating budget on sports and to “re-prioritize the academic mission.”

Incoming President Thomas Katsouleas will face similar financial woes at the University of Connecticut when he takes the reigns in August, but despite the athletic department’s $42 million shortfall on a $80.9 million budget last year (highest among P5 + AAC schools), the current EVP of the UVA has no intentions of eliminating football – the largest contributor ($8.7 million) to the deficit. Katsouleas believes that the program helps to position the school as a “major, broad-context University”, that it provides “ancillary value for the other sports and for fundraising overall.” The school’s non-revenue generating sports aren’t on as safe ground. Athletic director David Benedict stated that while the school will work to increase revenues and look to cut expenses, “sometimes there’s inevitabilities.”

Howie Long-Short: The conference realignment that occurred back in 2011-2012 has begun to bare financial winners (Texas A&M, Missouri) and losers (Rutgers, UConn). While Rutgers’ shortfall can be attributed to their step up in competition (AAC to Big Ten) – and the expenses incurred while trying to keep up with the Joneses, Connecticut’s originates from its inability to find a home within a P5 conference (Big East to AAC) – and the subsequent decline in “conference and media licensing” revenues (think: media rights, bowl game payouts).

Ray Katz, a Columbia University Adjunct Professor and the COO/co-founder of Collegiate Sports Management Group, says that the absolute commitment to competition, rather than running a responsible business and competing at a reasonable and appropriate level, is what has UC and RU in this predicament. “Schools must start with a cost structure like any other business. They should be evaluating how much they can get their cost structure down while still achieving their goals, before figuring out what they would like to achieve, over-spending and only then trying to figure out how to elevate their revenue streams. Schools need to run their athletic departments as an integrated business and not as individual fiefdoms.”

Rutgers was ill prepared (from a resources and facilities standpoint) when it joined the Big Ten conference in 2014, but the 6 year wait for full financial distributions hasn’t helped RU to achieve competitive parity; since the school began Big Ten conference play in 2014-2015, the combined winning percentage for all school teams is a paltry .260. The school will receive +/-$27 million less than the 12 other Universities within the conference this year (note: Maryland came in with Rutgers, also receives partial share).

Connecticut’s AAC conference distribution was $7.1 million in 2017-2018, 82% less than teams in the SEC earned. That’s a hurdle Katsouleas is going to find impossible to overcome. Even if the conference increases its television contract (negotiations are ongoing) and the school manages to cut costs, there’s no way the athletic department can compete at a P5 level and operate self-sufficiently.

If that’s the case, I asked Ray why UConn should continue to fund collegiate athletics?

Ray: When schools compete at an appropriate level, it is a tremendous asset for the school, for the students, for faculty, for recruiting, for school spirit and for developing leaders. The problem is when schools compete outside of where they should be given the market they’re in, the nature of the University and the sources of funding.

Look at the University of Alabama. The athletic department makes money because they’re competing at the right level in the right venue. They know football is their athletics unique selling proposition – to use a marketing term. They’re not running out and spending $12 million annually on a coach in basketball. They’re using the money, the profits that the athletic department generates, to attract professors and to offer academic scholarships (to students with a 31 or 32 on their ACT), so their student body’s getting smarter, the school is becoming more desirable and moving up the ranks of state universities academically.  

At different levels, Butler, Tufts and countless others have used sports to elevate the university in total. Ray explained, “schools that are not well known or elite state or private schools need to market themselves. They can market themselves by putting billboards on I-95, sending out a million direct mailings or buying 30 second commercials on local or national television. The alternative is to view sports as desirable branded content and to build a strategy around them – to use a 3-hour football game as an infomercial for the University. If you think of sports as branded content for the University, then you would ask yourself, are we getting more out of the last 5 million dollars [spent] in sports then we could from 25 tenured professors that are out of touch with the vertical in which they teach, and/or are mailing it in because they have absolute job security?”

Fan MarinoAs the resource gap between the P5 conferences and everyone else continues to grow, it’s worth wondering if there’s a future for the other +/- 300 D1 programs. Ray says fans of mid (or low) major programs have no need to worry. “If everyone else wants to abide by the initial mission of student of athletics – and not try to be professional sports –  the college game can provide for a great learning experience for the athletes and great entertainment for students and alumni alike. The schools would do better [financially] too if they were smart with their media rights, if they were thoughtful and strategic with what they do with their content and wisely utilize their sports content to intelligently market the school to all key stakeholders regionally, locally, regionally, domestically and globally.”

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Author: John Wall Street

At the intersection of sports & finance.

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