Big Ten Football

College Athletic Departments Are Swimming in Debt but It’s Not The End Of The World

I’m not telling you anything that you didn’t already know when I say that college athletics is a business. As much as we the fans enjoy gameday and seeing our team win, there is a wheeling and dealing undercurrent that makes it all possible.

It’s nice to believe that college athletic departments are swimming in money. But what’s the definition of “swimming in money?” If we’re talking about top-line growth, sure, college athletic directors are managing a substantial block of business. But what about the bottom-line? That’s often times a different story.

Of all the newly hired head college football coaches, the University of Minnesota is betting on perhaps the largest ROI. The Gophers hired the much-coveted coach from Western Michigan when P.J. Fleck bolted Kalamazoo for Minneapolis. But coaching changes come with a price and that price is most often funded via expectations. Fleck will be expected to run a chaos-free program that wins and sells tickets. Oh, and a program that people will want to watch on television. Fleck is basically being asked to bring the entire marketing enchilada to Minnesota.

Minnesota A.D. Mark Coyle is now faced with a debt-ridden department that he, and the athletics department as a whole, inherited in large part from former A.D. Norwood Teague. Adding added context to the debt that Coyle is having to manage is the perceived uncertainty surrounding television contracts. Ticket revenue fell short of Coyle’s expectation so that places added importance on the revenue being generated from the television contract. As Coyle himself said, “I think everyone’s mindful of what’s happened across the country with cord-cutting. I think we’re foolish if we don’t think there will be an impact on us, so how do we prepare for that?”

The truth of the matter is that athletic departments aren’t swimming in profit. For many departments, the top-line looks phenomenal but the bottom-line is buried at least ten feet deep. But you know what they say. To make money you must spend money and carrying debt in the business world isn’t the end of the world. This is particularly true when the ever-expanding payout from college football television contracts are taken into consideration.

I agree with Coyle when he talks about being mindful of cord-cutting. We’re also in agreement when he says that cord-cutting must be prepared for. I don’t, however, agree with his implication that cord-cutting will drain the pool of money that is being funneled to colleges from these television contracts. When it comes to the topic of cord-cutting and its potential impact on college sports, I’m in agreement with Adam Gajo.

Gajo highlights the growing number of options that are available to viewers. Are people cord-cutting? Absolutely. But to suggest that cord-cutting will pop a college sports market bubble on the potential horizon fails to acknowledge Gajo’s overall point. That point being that there is capacity in the market space for ESPN, Fox, ABC, CBS, NBC, Hulu, Amazon, and a myriad of other current and future broadcast platforms.

Not only is there capacity, but there is an expanding market for televised games. Once upon a time, college football was like cartoons. If you wanted to watch either, it had to be on Saturdays. But now college football games can be seen on Tuesdays, Thursdays, Fridays, and Saturdays. That increase in scheduled games helps create demand for more broadcast streams. And when broadcasting rights are negotiated, it’s not happening in a soft-market. The lowest price isn’t winning the business. The broadcast rights go to the highest bidder. Money talks. Especially when so many athletic departments are having to manage debt obligations.

All of this should hold true for any program that plays in a Power-5 conference. The teams in those conferences are ultimately the teams that create viewership. Perhaps if Minnesota wasn’t a member of the Big Ten then I would share Coyle’s apprehension about the future revenue stream created by broadcasting rights. Minnesota is not a blue-blood program. The Gophers aren’t Michigan or Ohio State. But what those three schools have in common is the strength and leverage that comes with being affiliated with a conference like the Big Ten.

Coyle is taking the conservative approach to his revenue forecast in relation to estimates of future expenses. That’s just smart business. I do, however, believe that he is underestimating the size of the future television market. The market has capacity due to increased demand coupled with the ease that internet based broadcast platforms provide.

E-mail Seth at seth [dot] merenbloom [at] campuspressbox [dot] com or follow him on Twitter @SethMerenbloom.

Photo: Flickr

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Seth is the Managing Editor of Campus Pressbox.