Economics of the Valley

[Rlh04d]

I've always been very interested in the money side of sports ... probably why I studied economics. So I wanted to look at what the real economic numbers regarding Valley teams are, and how the NCAA tournament, as the Valley's big money maker, has played out for the conference.

According to Forbes, this year every NCAA share was worth $245,514 per year, or $1,473,084 overall. It gets a lot more complicated than that if you get overly into it, with the number changing every year and things being averaged out over time, but that's an easy number to just play off of. As each tournament share is divided up over six years, here are the numbers for what is currently on the books for the Valley as far as how much money we're going to earn next year:

	2008	2009	2010	2011	2012	2013	Total	Value
Wichita State					1	5	6	$1,473,084
*Creighton					2	2	4	$982,056
Northern Iowa		1	3				4	$982,056
Drake	1						1	$245,514
Indiana State				1			1	$245,514
Bradley							0	$0.00
Evansville							0	$0.00
Illinois State							0	$0.00
Missouri State							0	$0.00
SIU							0	$0.00
*Loyola							0	$0.00
							Total:	$3,928,224
							Per Team:	$392,822

*I've included Creighton as their shares still pay out to the Valley rather than following them, and I've included Loyola for comparison's sake.

So next year, every team in the Valley will make about $393k from NCAA tournament payouts. Of the ten teams in the Valley next year who will "earn" this money, only Wichita State and UNI have brought in more money to the conference than they're taking.

Interestingly, at least with those four straight 1 bid years, the Valley has no opportunity to reduce NCAA shares for the next two years. So there's that.

And for a bigger picture (and to be kinder to SIU), we can look at how the finances of the Valley have been over the last decade:

	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	Overall	Value
Wichita State			3						1	5	9	$13,257,756
SIU	1	2	1	3							7	$10,311,588
Northern Iowa	1	1	1			1	3				7	$10,311,588
*Creighton		1		1					2	2	6	$8,838,504
Bradley			3								3	$4,419,252
Indiana State								1			1	$1,473,084
Drake					1						1	$1,473,084
Missouri State											0	$0.00
Illinois State											0	$0.00
Evansville											0	$0.00
*Loyola											0	$0.00
											Total:	$50,084,856
											Per team:	$5,008,485

I dropped off the year-by-year numbers, since this doesn't calculate how much we're making in the future. So in total, our conference has earned a bit over $5 million per year. Creighton, as "the most consistent team in the Valley" over this stretch, is fourth in money they've contributed to the Valley.

It's probably also worth noting that the Valley (and, by extension, Wichita State) made more money in 2005-06 than with our Final Four run.

[pogo]

Thanks for breaking it down like that.

[Rlh04d]

Also, a look on NCAA tournament shares payout over that last decade as well:

Year	Shares (Last 6 years)	Value Per team (2013)
2004	19	$466,477
2005	18	$441,925
2006	24	$589,234
2007	25	$613,785
2008	21	$515,579
2009	20	$491,028
2010	21	$515,579
2011	18	$441,925
2012	13	$319,168
2013	16	$392,822

If we had lost in the first round of the tournament this year, Valley teams would have lost more than $300k a year in 2013 terms from the Valley's height in 2007.

I looked at the budgets of all the Valley schools recently. Here's what these numbers look like compared to the basketball budgets of Valley teams in 2011:

School	2011 Revenue	NCAA Share %	The $300k as a %
Bradley University	$2,316,273	19.08%	12.95%
Creighton University	$4,771,088	9.26%	6.29%
Drake University	$2,026,579	21.81%	14.80%
Illinois State University	$1,991,617	22.19%	15.06%
Indiana State University	$1,445,143	30.58%	20.76%
Missouri State University	$2,300,602	19.21%	13.04%
Southern Illinois University Carbondale	$2,047,844	21.58%	14.65%
University of Evansville	$2,047,005	21.59%	14.66%
University of Northern Iowa	$2,208,478	20.01%	13.58%
Wichita State University	$5,157,481	8.57%	5.82%

The second column are the budgets of Valley schools in 2011 (http://www.bizjournals.com/memphis/n...ng-doesnt.html). Third column is the percentage of their 2011 budget that came from NCAA shares in that year (18 shares). The last column is the decline in the men's basketball budgets that would have taken place since 2007 if we had lost in the first round.

It doesn't seem like the fall in tournament revenue has been particularly huge to WSU, since so little of our budget is actually due to tournament revenue. But a lot of Valley schools, especially Indiana State, look like they're barely keeping afloat and are desperately reliant on that revenue.

[Rlh04d]

And here are the budgets of the Valley schools over the last three years:

2009

School	Revenue	Expenses	Profit	Profit Margin
Bradley University	$2,759,506	$2,937,206	-$177,700	-6.05%
Creighton University	$4,886,660	$5,032,173	-$145,513	-2.89%
Drake University	$1,950,495	$2,053,256	-$102,761	-5.00%
Illinois State University	$1,887,713	$1,887,713	$0	0.00%
Indiana State University	$1,627,591	$1,340,015	$287,576	21.46%
Missouri State University	$2,152,519	$1,872,907	$279,612	14.93%
Southern Illinois University Carbondale	$1,423,765	$2,168,174	-$744,409	-34.33%
University of Evansville	$1,885,565	$1,885,565	$0	0.00%
University of Northern Iowa	$2,188,149	$1,973,250	$214,899	10.89%
Wichita State University	$4,166,873	$3,220,886	$945,987	29.37%

2010

School	Revenue	Expenses	Profit	Profit Margin
Bradley University	$2,316,273	$2,931,281	-$615,008	-20.98%
Creighton University	$4,771,088	$4,771,088	$0	0.00%
Drake University	$2,026,579	$2,067,844	-$41,265	-2.00%
Illinois State University	$1,991,617	$1,991,617	$0	0.00%
Indiana State University	$1,445,143	$1,445,143	$0	0.00%
Missouri State University-Springfield	$2,300,602	$1,683,601	$617,001	36.65%
Southern Illinois University Carbondale	$2,047,844	$2,047,843	$1	0.00%
University of Evansville	$2,047,005	$2,047,005	$0	0.00%
University of Northern Iowa	$2,208,478	$2,138,770	$69,708	3.26%
Wichita State University	$5,157,481	$3,798,648	$1,358,833	35.77%

2011

School	Revenue	Expenses	Profit	Profit Margin
Bradley University	$3,871,835	$3,846,345	$25,490	0.66%
Creighton University	$5,152,031	$4,404,350	$747,681	16.98%
Drake University	$2,122,856	$2,226,291	-$103,435	-4.65%
Illinois State University	$2,183,876	$2,183,876	$0	0.00%
Indiana State University	$1,704,707	$1,704,707	$0	0.00%
Missouri State University-Springfield	$1,926,274	$1,899,281	$26,993	1.42%
Southern Illinois University Carbondale	$2,063,684	$2,063,684	$0	0.00%
University of Evansville	$2,133,520	$2,133,520	$0	0.00%
University of Northern Iowa	$2,449,710	$2,449,710	$0	0.00%
Wichita State University	$5,071,471	$4,644,724	$426,747	9.19%

Notes:
* Valley schools are getting better about manipulating their basketball accounting.
** General note: Athletic budgets are notoriously hard to read or believe. Schools transfer money around between programs, some schools charge for sports tickets as part of tuition and some don't, etc.

Only three schools in the Valley are consistently turning a profit: Wichita State, UNI, and Missouri State. I'm not sure about Creighton, although they certainly will be next season.

We're turning a pretty significant profit that could be used for facility renovations and salary raises, even before further donations are made. I believe the jump in expenses in that last year was due to the $500k bonus HCGM was owed and renegotiating his contract? I think that's the right year.

I'm assuming there's going to be a BIG spike in WSU's revenue from this year.

*Edit: I didn't trust the 2009 data, so I went back and re-did all of the numbers directly from the Department of Education website: http://ope.ed.gov/athletics/

[The Mad Hatter]

Given what I have heard about both UNI and MSU's budgets, I would be very surprised if either of those programs was actually turning a profit rather than moving money around to make things look good. As noted, it is hard to believe these numbers, especially since schools can count bailouts from the university budget as revenue for the athletic department.

[Rlh04d]

Given what I have heard about both UNI and MSU's budgets, I would be very surprised if either of those programs was actually turning a profit rather than moving money around to make things look good. As noted, it is hard to believe these numbers, especially since schools can count bailouts from the university budget as revenue for the athletic department.

Tough to say for sure. I think most of the schools that are showing a $0 in profit are making up athletic budget shortfalls with outside cash, likely from the academic budget. I've never seen schools show a profit when doing that, though. They usually pull over just enough to balance the budget and no more.

Interestingly, according to these numbers, the private universities are more likely to have honest accounting numbers than the public universities. Evansville is the only private university that I don't buy the numbers for.

[shox1989]

I've always been very interested in the money side of sports ... probably why I studied economics. So I wanted to look at what the real economic numbers regarding Valley teams are, and how the NCAA tournament, as the Valley's big money maker, has played out for the conference.

According to Forbes, this year every NCAA share was worth $245,514 per year, or $1,473,084 overall. It gets a lot more complicated than that if you get overly into it, with the number changing every year and things being averaged out over time, but that's an easy number to just play off of. As each tournament share is divided up over six years, here are the numbers for what is currently on the books for the Valley as far as how much money we're going to earn next year:

	2008	2009	2010	2011	2012	2013	Total	Value
Wichita State					1	5	6	$1,473,084
*Creighton					2	2	4	$982,056
Northern Iowa		1	3				4	$982,056
Drake	1						1	$245,514
Indiana State				1			1	$245,514
Bradley							0	$0.00
Evansville							0	$0.00
Illinois State							0	$0.00
Missouri State							0	$0.00
SIU							0	$0.00
*Loyola							0	$0.00
							Total:	$3,928,224
							Per Team:	$392,822

*I've included Creighton as their shares still pay out to the Valley rather than following them, and I've included Loyola for comparison's sake.

So next year, every team in the Valley will make about $393k from NCAA tournament payouts. Of the ten teams in the Valley next year who will "earn" this money, only Wichita State and UNI have brought in more money to the conference than they're taking.

Interestingly, at least with those four straight 1 bid years, the Valley has no opportunity to reduce NCAA shares for the next two years. So there's that.

And for a bigger picture (and to be kinder to SIU), we can look at how the finances of the Valley have been over the last decade:

	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	Overall	Value
Wichita State			3						1	5	9	$13,257,756
SIU	1	2	1	3							7	$10,311,588
Northern Iowa	1	1	1			1	3				7	$10,311,588
*Creighton		1		1					2	2	6	$8,838,504
Bradley			3								3	$4,419,252
Indiana State								1			1	$1,473,084
Drake					1						1	$1,473,084
Missouri State											0	$0.00
Illinois State											0	$0.00
Evansville											0	$0.00
*Loyola											0	$0.00
											Total:	$50,084,856
											Per team:	$5,008,485

I dropped off the year-by-year numbers, since this doesn't calculate how much we're making in the future. So in total, our conference has earned a bit over $5 million per year. Creighton, as "the most consistent team in the Valley" over this stretch, is fourth in money they've contributed to the Valley.

It's probably also worth noting that the Valley (and, by extension, Wichita State) made more money in 2005-06 than with our Final Four run.

That shows the importance of getting multiple bids. In 2006 the Valley got 4 bids. 2 of those teams didn't get a win, but the other 2 made it to the sweet 16. That produced a total of 8 shares.

This year the Valley got 2 bids with Cu winning a game and WSU getting to the Final 4. Yet the total produced is just 7 shares.

Consistently getting 3 or more bids a year would be a big revenue booster to this conference. The MWC and A-10 each got 5 bids this year and even though their teams didn't do very well, both will get more money from this years tourney than the Valley (even with the Shockers final 4 run).

[Rlh04d]

Might as well keep going ... TV Money!

As I understand it, the Valley had several aspects of TV-related economics:
-- The ESPN contract, which allows some games to be broadcast on ESPN affiliates and most to be carried on ESPN3 (formerly exclusive, negotiated out of exclusivity)
-- Advertising revenue from the ESPN contract, which the Valley gets very little of
-- The Fox contract, which carries games on local Fox affiliates
-- The CBS contract, which carries the Arch Madness Championship Game on CBS (until they can cut out of the last five minutes for regular season B1G action)
-- Advertising revenue from the games on Fox, which I believe the Valley gets most of

Another unsealed contract was the Missouri Valley Conference's six-year agreement through 2010-11 with ESPN. The network paid $200,000 a year for media rights to the Missouri Valley, mainly through at least eight men's basketball games in most seasons. However, the contract called for the Missouri Valley to pay a $300,000 production fee annually to ESPN to defray costs for programs televised on ESPNU.

ESPN also provided three minutes of national commercial time per hour on ESPNU for the Missouri Valley to sell to advertisers and sponsors approved by ESPN. And the Missouri Valley received two 30-second public service announcements in each ESPNU game.

Source: http://www.al.com/sports/index.ssf/2012/08/ed_obannon_lawsuit_offers_peek.html

Compare this to the deal the Missouri Valley Conference has with ESPN and with Fox. The ESPN deal is about $190,000 per year.

Source: http://gatewayjr.org/2012/04/06/the-...evision-money/

That advertising is now generating $1.5 million annually, providing an excellent revenue stream for the conference as well as significant exposure for its 10 member schools.

Source: http://sportsvideo.org/main/blog/2010/07/22/missouri-valley-conference-scores-with-home-grown-tv-network/
(This is advertising money for the Valley's games on Fox affiliates)

Now, notice how I included the CBS contract up there? I forgot that we don't actually have a contract with CBS. CBS licensed the championship game from ESPN, and thus I'm fairly certain they don't actually pay us anything ... ESPN already had the right to it, and CBS bought it from them: http://fangsbites.com/2012/05/cbs-to-sublicense-acc-big-12-pac-12-basketball-games-from-espn/

I can't find the value of the contract with Fox for those games. However, I can't imagine it's more than just a large percentage of the advertising that's covered. Regardless, I'll ignore that for the time being.

I haven't seen the numbers for the updated ESPN contract (the second source re: ESPN implies that the contract's value actually declined when we resigned -- not surprising considering it was first signed after our four bid year, and renegotiated after four straight one bid years), but as far as I can tell ESPN pays us $200k a year for the Valley's TV contract ... and then charges us $300k a year to produce the games, and of those that's apparently only the games shown on television. Unless "three minutes of national commercial time per hour on ESPNU" amounts to $100k, we lose money on our ESPN deal. We essentially pay ESPN for exposure.

The deal with Fox is different. As far as I can tell, none of the games on ESPN3 are covered by the deal with ESPN as far as production costs go, so that's likely a part of the deal with Fox as well. We probably make a small profit concerning the advertising revenue, but I can't find sources to document anything else regarding deals with Fox.

Anyone know what our contract with Cox is like?

[Rlh04d]

Consistently getting 3 or more bids a year would be a big revenue booster to this conference. The MWC and A-10 each got 5 bids this year and even though their teams didn't do very well, both will get more money from this years tourney than the Valley (even with the Shockers final 4 run).

Exactly.

While the Final Four run is massive for us, and even for the conference's prestige, financially speaking, a conference producing a Gonzaga or a Butler isn't a good strategy for maximizing tournament revenue. Having 5 okay teams is better than having 1 excellent team.

However, to be fair, I would guess that the extra benefits to our Final Four run MORE than make up for the gap between NCAA shares: Increased merchandise sales, better nonconference opponents, increased value of Valley television contract whenever it's up for renegotiation, impact on enrollment, etc. Only the possibility of the TV deal would benefit the conference as a whole, though, and the FF run would be four years out by the time it was renegotiated anyway.

I think we made significantly more money this last season than we did in 2005-06, but the conference didn't. We'll be enjoying spin-off financial benefits for a decade.

[Jamar Howard 4 President]

Outstanding work Rlh04d!!!!!