The Money Bowl

The picture at Iowa State, which made ends meet last year with just over $28 million, is much bleaker. "We haven't been competitive," admits athletic director Jamie Pollard. He says that while you don't have to be the biggest to be the best, Iowa State, which has the smallest athletic budget in the Big 12, is too far from the median. "We just have to try to be the best we can be with what we have," says Pollard. It's not easy. Iowa State still supports 18 varsity sports played by more than 450 student athletes. While the athletic program reported a $700,000 surplus for the 2004–05 academic year, it was far from self-sufficient. Data from the Indianapolis Star shows the school relied on $2.6 million of general university money and more than $1 million in student fees.

Smaller schools in big conferences are forced to make do with what they have or spend money they don't have to keep up. "We basically have two choices," says Dave Marmion, assistant athletic director for finance at Wake Forest University in Winston-Salem, North Carolina. "We can either spend out of control and go into the red, or spend smarter, which is what we try to do." Wake Forest, which competes in the Atlantic Coast Conference, doesn't release budget figures, but Marmion says larger conference rivals like Florida State and the University of Miami spend far more.

Pollard, former CFO of the University of Wisconsin athletic department, concedes that the spending race is "staggering" and "never ending." But he doesn't blame big schools for spending what they do. "To each his own," he says. "It's a competitive business." Pollard's view is that the race will continue as long as fans are willing to support it: "Until consumers stop investing in it, the market drives it."

Revenue Generators
Indeed, fans seem to have an insatiable appetite for college-sports tickets, television broadcasts, and apparel. The biggest schools seemingly can grow revenues at will — and in recent years have been less shy about doing so, pushing further into the realm of blatant commercialization.

Rather than rebuke colleges for any excesses, the NCAA — in more of an admission of reality than a change in policy — gave college athletics its blessing for running up the score on revenues. "Let us end the ambivalence and do the best job we can developing revenue for our athletics departments," NCAA president Myles Brand told athletic directors at a convention in January. "Athletics, like the university as a whole, seeks to maximize revenues. In this respect, it has an obligation to conduct its revenue-generating activities in a productive, sound, and businesslike manner." It was a sharp departure from Brand's earlier warnings for athletic departments to tone down the commercialization.

"There's no doubt that the brakes are off on efforts to increase revenues," says Stephen A. Greyser, a marketing professor at Harvard Business School who studies the business of sports.

While Henderson says Ohio State keeps tight controls on costs, the school is focused on developing additional sources of revenue. That goal is shared by universities around the country, and it's not just premium stadium seating they are pursuing. A common trend among athletic departments is to outsource the sales of broadcasting rights and sponsorships to professional sports-marketing companies. Last year, for example, Boston College handed over sponsorship sales to Fenway Sports Group, the marketing arm of the Boston Red Sox. T.J. Nelligan, who runs Nelligan Sports Marketing, says such agreements can increase broadcasting and sponsorship revenue exponentially. The University of Louisville, for example, credits its outsourcing deal with Nelligan for increasing its broadcasting and sponsorship revenue from $700,000 in 1996 to $7 million last year.

Borrowing another page from the professional-sports playbook, universities are also beginning to sell naming rights on their stadiums. Louisville is reportedly seeking $40 million for the naming rights to a new arena it is building on campus. (Such a deal would dwarf the $5 million Louisville received to name its football stadium, which opened in 1998, after a pizza chain: Papa John's Cardinal Stadium.) The University of Minnesota already sold the naming rights to its new football stadium, expected to be completed in 2009, to TCF Bank for $35 million. Elizabeth Eull, associate athletic director for administration and finance and CFO of the athletic department, says some on campus squawked over the deal, which will help fund the $248 million project. "There was some discontent, but it's a situations where you say, 'This isn't going to get done without [selling the naming rights],'" she says.

It doesn't stop there. In June, Big 10 officials announced plans to team with Fox Cable Networks to launch the Big 10 Channel, which will cover Big 10 sports 24 hours a day. If it's successful, other conferences will be sure to launch dedicated cable channels of their own. College-sports television contracts, even aside from the monster deals with the big-four broadcast networks and ESPN, can be wildly lucrative. An all-college-sports network, CSTV, was launched in 2003 and purchased by CBS in January for $325 million.

All told, Division I-A colleges increased revenues by 34 percent from 1999 to 2003 (the latest year for which data is available), when the average athletic program brought in $29.4 million.

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