American Athletic Conference

[The Mad Hatter]

One thing I know about making money is you usually don't have to run an elaborate study to figure out if you are making money if you really are making money...

If you can't tell, or if you think you might not be, you probably aren't.

Agreed. The big x-factor in all these kinds of studies is how you count subsidies to these programs. Most college football programs are highly subsidized by student fees and/or other institutional money. If you are willing to count this money as revenue, a lot more programs look like they are making money, but of course those subsidies are not exactly the same as revenue.

Here is the USA Today database of NCAA Institutional Subsidies: http://sports.usatoday.com/ncaa/finances/

UAB had 64% of it's sports revenue come from subsidy. Of the top 10 revenue making programs in the country, only #10 Tennessee had more than 5.27% subsidized, and 4 of the top 10 had no subsidy whatsoever.

The point is not so much whether subsidies are always a bad idea or even whether or not they sometimes do operate much like revenue (there may be student fees that people are willing to pay for sports that they wouldn't pay otherwise), but rather that how the accounting is done goes a long way in these studies. As a general rule, however, I'd say that if 50% or more of your revenue is coming from subsidies, it is a pretty big stretch to say that you are making money on your athletics programs.

[Kung Wu]

If a school plays FBS football even at the lowest level of FBS they seem to do okay financially, even without much home attendance. The media money for FBS football make it viable from a cost stand point. That is definitely not the case with FCS football. FCS football is nothing but a money drain. That is why schools like Missouri St and Illinois St are looking for ways to get into FBS football. It is also why conferences like CONFERENCE USA and the AMERICAN keep putting football first.

Football is first and foremost because FBS schools are specifically under pressure by the NCAA to have an average attendance of 15,000 fans per game. If their team sucks they still have to sell a lot of tickets to not get booted out of the FBS -- and no Athletic Director wants that to happen on their watch.

[Royals85]

One thing I know about making money is you usually don't have to run an elaborate study to figure out if you are making money if you really are making money...

If you can't tell, or if you think you might not be, you probably aren't.

College athletics is different than a traditional business. There is a huge disincentive to reporting a large "profit" or surplus. Most not-for-profit entities are very adept at finding expenses before fiscal year-end to offset any significant surplus. It's difficult to convince donors to increase contributions if they know the organization is already easily covering all of the costs.

Another reason to show very little surplus is it will help reduce appeals to give the athletes more money. If the impression amongst the public is that all of these athletic departments are making millions, then there would be even further demands to pay the athletes.

Here is an article that discusses some of these issues, focusing on the actual cost of athletic scholarships. From the link: "athletic departments are trying to walk a rhetorical tightrope. They want to hide their profits to make it easier to keep them away from other would-be claimants. They also want to avoid looking so poor that other stakeholders within academia use sports' apparent poverty to strip them of power. Rhetoric that turns a price into a cost, and a transfer of profit into a loss of money, helps play a role in confusing things enough that the moment in the magic trick where the profit is moved from one pocket to the other gets obscured."

[MoValley John]

College athletics is different than a traditional business. There is a huge disincentive to reporting a large "profit" or surplus. Most not-for-profit entities are very adept at finding expenses before fiscal year-end to offset any significant surplus. It's difficult to convince donors to increase contributions if they know the organization is already easily covering all of the costs.

Another reason to show very little surplus is it will help reduce appeals to give the athletes more money. If the impression amongst the public is that all of these athletic departments are making millions, then there would be even further demands to pay the athletes.

Here is an article that discusses some of these issues, focusing on the actual cost of athletic scholarships. From the link: "athletic departments are trying to walk a rhetorical tightrope. They want to hide their profits to make it easier to keep them away from other would-be claimants. They also want to avoid looking so poor that other stakeholders within academia use sports' apparent poverty to strip them of power. Rhetoric that turns a price into a cost, and a transfer of profit into a loss of money, helps play a role in confusing things enough that the moment in the magic trick where the profit is moved from one pocket to the other gets obscured."

Another factor not considered in evaluating the value of athletics, is the cash benefit athletics provides the academic side of the equation. While the average cost of educating 10,000 students may be $15,000 each, the marginal cost of adding another 250 athletes to the ranks would be less. Scholarships are awarded to athletes and paid to the academic side based on tuition rates, not the actual, marginal cost to the university. In accounting for athletics, this casts many programs in a more negative or dire light than is actually the case. Student fees are paid to the athletic department, which are used to fund the athletic department, which are then transfered right back to help bolster the bottom line of academics. Scholarships are paid at full tuition costs, not actual marginal cost to the university.

[Shocker-maniac]

Another factor not considered in evaluating the value of athletics, is the cash benefit athletics provides the academic side of the equation. While the average cost of educating 10,000 students may be $15,000 each, the marginal cost of adding another 250 athletes to the ranks would be less. Scholarships are awarded to athletes and paid to the academic side based on tuition rates, not the actual, marginal cost to the university. In accounting for athletics, this casts many programs in a more negative or dire light than is actually the case. Student fees are paid to the athletic department, which are used to fund the athletic department, which are then transfered right back to help bolster the bottom line of academics. Scholarships are paid at full tuition costs, not actual marginal cost to the university.

That is why at halftime when Sexton hands Bardo that huge check that is symbolic of all the tuition funded by SASO that Bardo has a huge, cheesy grin that he can't wipe off his face.

[im4wsu]

Another factor not considered in evaluating the value of athletics, is the cash benefit athletics provides the academic side of the equation. While the average cost of educating 10,000 students may be $15,000 each, the marginal cost of adding another 250 athletes to the ranks would be less. Scholarships are awarded to athletes and paid to the academic side based on tuition rates, not the actual, marginal cost to the university. In accounting for athletics, this casts many programs in a more negative or dire light than is actually the case. Student fees are paid to the athletic department, which are used to fund the athletic department, which are then transfered right back to help bolster the bottom line of academics. Scholarships are paid at full tuition costs, not actual marginal cost to the university.

The non-athlete student also pays the full tuition cost and not the marginal cost for adding one more student. If that were the case that marginal costs were charged, I'd sure hate to pay the cost of the first student.

[jdshock]

Another factor not considered in evaluating the value of athletics, is the cash benefit athletics provides the academic side of the equation. While the average cost of educating 10,000 students may be $15,000 each, the marginal cost of adding another 250 athletes to the ranks would be less. Scholarships are awarded to athletes and paid to the academic side based on tuition rates, not the actual, marginal cost to the university. In accounting for athletics, this casts many programs in a more negative or dire light than is actually the case. Student fees are paid to the athletic department, which are used to fund the athletic department, which are then transfered right back to help bolster the bottom line of academics. Scholarships are paid at full tuition costs, not actual marginal cost to the university.

@im4wsu is definitely right about the marginal cost, but there is still some wonkiness that occurs in scholarship reporting.

Most universities offer scholarships as a discount. The money just doesn't exist anywhere. If you get a scholarship to attend Wichita State, you are essentially presented with a coupon for a free education/discounted education. The exceptions to this rule are places like Princeton. At places like Princeton the coffers are so full of alumni money that the scholarship is actually getting paid for by some other means.

With athletics that's not the case, though. Because there are rules about which money goes toward scholarships, athletic programs have enough money to cover scholarships so players' scholarships are actually getting paid for with a check. The academic side benefits from an athlete with a scholarship in a way it does not from a non-athlete with an institutional scholarship.

[Shocker-maniac]

@im4wsu is definitely right about the marginal cost, but there is still some wonkiness that occurs in scholarship reporting.

Most universities offer scholarships as a discount. The money just doesn't exist anywhere. If you get a scholarship to attend Wichita State, you are essentially presented with a coupon for a free education/discounted education. The exceptions to this rule are places like Princeton. At places like Princeton the coffers are so full of alumni money that the scholarship is actually getting paid for by some other means.

With athletics that's not the case, though. Because there are rules about which money goes toward scholarships, athletic programs have enough money to cover scholarships so players' scholarships are actually getting paid for with a check. The academic side benefits from an athlete with a scholarship in a way it does not from a non-athlete with an institutional scholarship.

I see your point, but I'm pretty sure that many of the scholarships at WSU are funded by endowments or government money instead of the discount model that you describe.

[jdshock]

I see your point, but I'm pretty sure that many of the scholarships at WSU are funded by endowments or government money instead of the discount model that you describe.

You might be right, I don't know anything about the process at Wichita State specifically.

I've looked at it from the perspective of other schools and certainly all the costs are getting paid by endowments, but if some student gets a full-tuition scholarship the registrar's office doesn't get a check for the amount of tuition that says "For X Student's Tuition." They just have a total cost number and ensure that the tuition coming in plus the endowments/interest matches the total cost number they came up with.

I'm sure you are right about some of the big name scholarships at WSU. I wouldn't be surprised if the Gore Scholarship is paid out in full. A lot of students at WSU get scholarships like "academic leader" or something and it results in a $1,000/semester scholarship. Those are more likely to just be discounted tuition, I bet. Even though, as was stated, no student is paying the marginal cost, lots of scholarships are given out as "discounts" because the marginal cost is so low. It's just interesting to me that athletes' scholarships tend to be fully paid in real money. It's an interesting part of the budget debate I hadn't considered before.

[ShockBand]

You might be right, I don't know anything about the process at Wichita State specifically.

I've looked at it from the perspective of other schools and certainly all the costs are getting paid by endowments, but if some student gets a full-tuition scholarship the registrar's office doesn't get a check for the amount of tuition that says "For X Student's Tuition." They just have a total cost number and ensure that the tuition coming in plus the endowments/interest matches the total cost number they came up with.

I'm sure you are right about some of the big name scholarships at WSU. I wouldn't be surprised if the Gore Scholarship is paid out in full. A lot of students at WSU get scholarships like "academic leader" or something and it results in a $1,000/semester scholarship. Those are more likely to just be discounted tuition, I bet. Even though, as was stated, no student is paying the marginal cost, lots of scholarships are given out as "discounts" because the marginal cost is so low. It's just interesting to me that athletes' scholarships tend to be fully paid in real money. It's an interesting part of the budget debate I hadn't considered before.

I'm pretty sure big ones like the Gore are paid out in full, as part of the intent there is that the winners are expected to be heavily involved in campus life, and they want the winners to not have to worry about having to work a job to make ends meet. Now back in the 80s, when my music and academic scholarships exceeded tuition, I did get the balance back and used it for books and living expenses. I was quite blessed, as I never paid for one cent of my undergrad tuition out of my own pocket, I just had to work to pay for living expenses.

[MoValley John]

The non-athlete student also pays the full tuition cost and not the marginal cost for adding one more student. If that were the case that marginal costs were charged, I'd sure hate to pay the cost of the first student.

You are right, but the one big difference between the traditional student and the student athlete is this, if athletics are not offered, most, if not almost all of those 250 student athletes choose another school. While it is accurate to use an average cost to determine cost per student, when student athletes are involved, marginal cost is a much more accurate indicator of impact. Keep in mind, without athletics, they probably wouldn't be there.

[Shocker-maniac]

You might be right, I don't know anything about the process at Wichita State specifically.

I've looked at it from the perspective of other schools and certainly all the costs are getting paid by endowments, but if some student gets a full-tuition scholarship the registrar's office doesn't get a check for the amount of tuition that says "For X Student's Tuition." They just have a total cost number and ensure that the tuition coming in plus the endowments/interest matches the total cost number they came up with.

I'm sure you are right about some of the big name scholarships at WSU. I wouldn't be surprised if the Gore Scholarship is paid out in full. A lot of students at WSU get scholarships like "academic leader" or something and it results in a $1,000/semester scholarship. Those are more likely to just be discounted tuition, I bet. Even though, as was stated, no student is paying the marginal cost, lots of scholarships are given out as "discounts" because the marginal cost is so low. It's just interesting to me that athletes' scholarships tend to be fully paid in real money. It's an interesting part of the budget debate I hadn't considered before.

You are probably right that some of those type of scholarships are the discount type, basically a loss leader arrangement to get new students to enroll. I believe that SG students get a $2000 scholarship for their first 2 yrs, but I think that is funded by the County. I think that the County does that in place of having a community college. Someone correct me if I'm wrong.

[MoValley John]

[QUOTE=jdshock;574368]You might be right, I don't know anything about the process at Wichita State specifically.

I've looked at it from the perspective of other schools and certainly all the costs are getting paid by endowments, but if some student gets a full-tuition scholarship the registrar's office doesn't get a check for the amount of tuition that says "For X Student's Tuition." They just have a total cost number and ensure that the tuition coming in plus the endowments/interest matches the total cost number they came up with.

I'm sure you are right about some of the big name scholarships at WSU. I wouldn't be surprised if the Gore Scholarship is paid out in full. A lot of students at WSU get scholarships like "academic leader" or something and it results in a $1,000/semester scholarship. Those are more likely to just be discounted tuition, I bet. Even though, as was stated, no student is paying the marginal cost, lots of scholarships are given out as "discounts" because the marginal cost is so low. It's just interesting to me that athletes' scholarships tend to be fully paid in real money. It's an interesting part of the budget debate I hadn't considered before.[/QUOTE

Athletic scholarships are paid at the regular rate of tuition by NCAA rule. That is fair. What is unfair, is to not consider the marginal costs when evaluating if an athletic department is really losing a bunch of money and if it really is beneficial to cut programs. As an example, you have schools like UNI threatened to have athletics cut because they are "bleeding money" when in fact, the UNI athletic department really doesn't have near the negative economic impact as the numbers indicate. This gives fodder to the University of Iowa and Iowa State to attack UNI, overstate their losses and get politicians involved in threatening to cut UNI programs or drop them to D-2, when really, Iowa and Iowa State are really just intimidated by UNI and want the UNI athletic department moved down or eliminated.

There are also some in academia that despise athletics, and even though they are financially benefitting from athletics, want athletics eliminated. You will hear members of academia, berate athletics, point out how much money that athletics sucks away from academics and call for the elimination of athletics, when in fact, the exact opposite is often the case.

[jdshock]

Athletic scholarships are paid at the regular rate of tuition by NCAA rule. That is fair. What is unfair, is to not consider the marginal costs when evaluating if an athletic department is really losing a bunch of money and if it really is beneficial to cut programs. As an example, you have schools like UNI threatened to have athletics cut because they are "bleeding money" when in fact, the UNI athletic department really doesn't have near the negative economic impact as the numbers indicate. This gives fodder to the University of Iowa and Iowa State to attack UNI, overstate their losses and get politicians involved in threatening to cut UNI programs or drop them to D-2, when really, Iowa and Iowa State are really just intimidated by UNI and want the UNI athletic department moved down or eliminated.

There are also some in academia that despise athletics, and even though they are financially benefitting from athletics, want athletics eliminated. You will hear members of academia, berate athletics, point out how much money that athletics sucks away from academics and call for the elimination of athletics, when in fact, the exact opposite is often the case.

You won't get an argument from me on that. In fact, schools might actually still benefit from an athletic department that is losing money. It's simple game-theory stuff. Maybe a school loses $1 million a year to athletics, but without athletics loses far greater alumni support and potential students to the in-state schools that do have athletics. That extra money will funnel over to Iowa and Iowa State in your example. UNI loses out worse than it does even if it is losing money on athletics, and Iowa and Iowa State get extra money.

I wasn't trying to argue with your original point. I was agreeing with the premise that we shouldn't trust any of the numbers. Successful programs don't want to show a profit, so the expense has a higher cost per student for tuition than a typical academic scholarship. A school has the ability to discount the tuition and not show it as a 1:1 cost in the budget for academic scholarships. Yet, in athletics the cost is reported as full-tuition and it is paid for fully. Successful programs get the benefit of higher costs to prevent a profit. Programs in the red are worse for it because they don't have the ability to show marginal cost expenses like you explained. It's all misleading and meant to benefit the most successful programs.

[Shocker-maniac]

I think this might be true for the P5 schools. However, outside the P5 with very few exceptions the athletic programs are operating in the red, the net-net for the university is negative. Basically the only thing that the university is gaining are the intangibles such as alumni relations and the student experience of football in the fall.