Money and March Madness

Big Bucks Bracket

Ever wonder about those exclusive all-sports sponsorships -- deals made between colleges and Nike, Adidas, etc.? They net schools anywhere from $500,000 to $6 million a year. Typical deal: Sponsor logo on all athletic department team/staff apparel, towels, shoes; premium game seats and parking for sponsor; logo placement at all televised games and on game videos; guaranteed promotional appearances by big money head coaches.

But what about the players? More »

Bracket

Recent All-Sports College Deals

Notre Dame’s 10-year deal with Adidas, reportedly $6 million+ a year

North Carolina’s 10-year/$3.4 million-a-year deal with Nike

Alabama’s 8-year deal with Nike, reportedly $3.75 million a year

UCLA’s reported $4.5 million-a-year deal with Adidas goes through 2011; it's the largest in the Pac-10 Conference

Highest Paid Coaches - 2010

John Calipari (Kentucky): $4 million

Tom Izzo (Michigan State): $3.4 million

Billy Donovan (Florida): $3.3 million

Bill Self (University of Kansas): $3 million

Top Basketball Team Earners – 2009-2010

  1. Duke: $26.6 million
  2. Louisville: $25.9 million
  3. North Carolina: $20.5 million
  4. Arizona: $19.3 million

Source: Forbes.com using financial data for the 2009-2010 academic year obtained from the U.S. Department of Education USA Today and The Oregonian

What All-Sports Sponsorships Deliver

  • Athletic departments get a generous supply of sponsor's products and apparel. For example, Nike’s allowance to supply Alabama is valued at $2.3 million per year.
  • Colleges get an average 10-12 percent royalty on sales of co-branded apparel and merchandise and local media and advertising
  • Perks. Michigan got a $6.5 million signing bonus from Adidas after being lured away in '07 from Nike. Teams and coaches get first class hotels/air travel, expensive club memberships, etc.
  • Performance bonuses. These can amount to millions a year for tournament wins, championship games, coach-of-the-year titles, etc.

 

Money In, Money Out

Athletic programs get most of their money from ticket sales, championship games -- plus tv rights to those games -- and student fees. Other sources: merchandise sales, sponsorships and local radio/TV advertising revenue. Student fees are the only primary revenue that's non-commercial. Despite these income streams, the average Football Bowl Subdivision (Division I FBS) athletic program in 2009 ended up more than $10 million in the hole. 2005 was the last year any Division I program without a football team turned a profit. Currently, according to an NCAA study, only 14 schools nationwide generate revenue.

What flows into a high profile athletic department quickly flows out through facilities' maintenance, travel, training, tutors, and coaches' salaries.

In 2009, the top 10 NCAA public schools that spent the most on athletics spent an average of $98 million.  By 2020, average spending by those ten college athletics departments is forecast to top $250 million a year, according to the Knight Commission on Intercollegiate Athletics, using NCAA data submitted by member schools over the past five years.

 

A New Trend

More schools are using aggressive third-party agencies to market and promote their teams. IMG College, Learfield Sports and others generate millions of dollars for athletics departments by selling merchandising and media rights to sponsors and broadcasters. IMG has become a powerhouse, exclusively representing more than 200 collegiate entities, with clients that include the NCAA, the Heisman Trophy and top sports schools like Duke, Notre Dame and UCLA.

In one of the larger campus contracts, IMG signed a $111 million/10-year contract with Ohio State in 2009 to sell in-stadium sponsorship, radio and TV spots, and other commercial deals according to information gathered by USA Today.

When the Collegiate Licensing Company (CLC), an IMG subsidiary that specializes in selling school logos on everything from coffee mugs to beach towels, released its last quarterly account of college merchandise sales, these campuses headed the list:

  1. The University of Texas at Austin
  2. The University of Alabama
  3. University of Florida
  4. The University of Michigan
  5. University of Georgia

After a school wins a major sporting title, royalties from merchandise sales can increase an average of $400,000 a year.

 

High Performance, Low Grades

Teams in the 2011 NCAA men’s basketball tournament that are graduating less than 50 percent of their players, according to NCAA data. Of the 16, five teams** have been penalized in the past five years for not keeping players on track to graduate -- see methodology below:

Akron University
No penalties, no APR below 925 last five years.

University of Arizona
Has had a graduation rate of less than 50% for five consecutive years without penalty.

**Alabama-Birmingham
Penalized last three seasons (schoarship reduction, public notice, practice reduction) for low APR scores of 858, 863, 825. Lost scholarships, practice time, given public notice.

University of Connecticut
No penalties for last five years for low APR, but was eligible for scholarship reductions in 2004-05 because of 889 APR .

University of Florida
Not penalized for three-year APR low of 903, 917, 919 from 04-07.

University of Georgia
No penalties, no APR below 925 last five years.

**Kansas State University
APR score at 925 or lower past five years: 924 (08-09), other years, 900, 880, 884, 870). Penalized one scholarship (in 06-07) and given a public notice even though it has not had an APR that met the minimum standard once in past five years.

University of Kentucky
APR lows of 922 (04-05) and 916 (05-06). Not penalized.

University of Michigan
No penalties last five years. APR low of 927 (06-07).

University of Missouri
No penalties, no APR below 925.

**Morehead State
Had four years with an APR in the 800s and one with a 906 but did not lose any scholarships. Penalized with “historical penalty” of public notice in 06-07.

**University of Southern California
No APR scores that met minimum requirement in past five years. Penalized two scholarships and a “historical penalty” of a public notice for 863 in 06-07.

Temple University
Unclear why 4-year APR run of 913 did not incur penalties like lost scholarships and practice time.

**University of Tennessee
Docked one scholarship back-to-back seasons (06-07, 07-08) for low APR (911, 924). Five year APR: 935 (08-09), 924, 911, 910, 918.

University of Texas
No penalties last five years. APR low of 861 (04-05).

University of Washington
Was eligible for scholarship reductions in 2004-05 because of APR score of 878.

 

Methodology: The NCAA compiles an Academic Progress Rate (APR) for Division I sports teams. Players get points for their academic performance, which combined as a team must reach a 925 APR (scale of 1000) -- a score that projects an NCAA Graduation Success Rate (GSR) of roughly 50 percent for the college. Scoring under 925 supposedly triggers penalties.

The NCAA says their student-athletes currently graduate at higher rates than the general student body . But the NCAA GSR shows basketball players in Division I graduating at far lower rates than athletes in other sports -- 66 v. 79 percent. While NCAA student-athletes overall have an APR of 967, basketball players show a 940.

The University of Central Florida's Institute for Diversity and Ethics in Sports (TIDES) also analyses graduation data from the NCAA, highlighting the disparity between graduation rates of black and white players on men's teams. While 91 percent of white NCAA players graduate, only 59 percent of black players do - a 32 percent gap. Find out about individual teams' academic performances in the 2011 Division I Men's Basketball Study.

 

Drawing the Line?

A Congressional Budget Office (CBO) report released in 2009 warned that the NCAA was endangering its tax-exempt status as a voluntary educational organization because of the exploding commercialization of NCAA Division I college sports. The CBO estimated that 60 to 80 percent of the money made through NCAA Division I football teams came from just commercial deals and crossed an educational line.

Sources: Knight Commission on Intercollegiate Athletics. (2010, June) Restoring the balance: Dollars, values, and the future of college sports. Miami, FL: John S. and James L. Knight Foundation; CNBC; Forbes.com; “Varsity Green” by Mark Yost; Inside Higher Ed; NCAA 2010 edition of Revenues and Expenses of Intercollegiate Athletics Programs; SEC filing/Nike Annual Report; The Oregonian; Congressional Budget Office: Tax Preferences for Collegiate Sports (May 2009);Institute for Diversity and Ethics in Sport; financial data for the 2009-2010 academic year obtained from the U.S. Department of Education; CLC; The Birmingham News; USA Today.

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Posted March 22, 2011

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