Why do colleges have athletics programs?

$12.50 per semester. That’s the stadium fee at the University of Minnesota that all students are forced to pay.

TCF Bank Stadium was completed in 2009. As a student of the university at the time, the $300 million stadium was hard to swallow. Typical, I thought, of the greedy administrators to spend lavishly on athletics while the rest of the students got shafted by increasing tuition. This I thought to myself while going to class in the then-decrepit Amundson Hall.

Why should colleges even have varsity athletics? Shouldn’t they focus on academics and research? Do they do it for the money, the tradition, the community? What’s really driving the massive, sprawling, growing entertainment machine that is college sports?

Certainly, money plays a role. The real story of college athletics financing, both at Minnesota and around the country, is complex. Traditions come into the mix as well–some sports programs have been around for over 100 years. Community backlash was fierce when University of Alabama at Birmingham cancelled its football program. There are also other, harder-to-quantify effects on things like applications and alumni donations. In total, all these factors have an effect.

Money

One angle on college athletics is that they’re a resource sink, they run at a loss and need to be subsidized by the university general fund. This report from the American Council on Education takes that stance.

Another take is that they generate massive profits. One CNNMoney article from 2010 claimed that college sports make an overall profit of $1.1 billion.

Why this dicrepancy? Well, first of all, “Not all data is created equal”. According to Kristi Dosh, founder of BusinessOfCollege.com. There are two different sources of data, the Department of Education and the NCAA. The NCAA data is more thorough, according to Dosh, but is only available for public universities, and must be requested individually.

Second, each group has different incentives when it comes to spinning the story of college athletics finances. The NCAA uses slim profit margins as a justification for not paying student athletes. The athletics programs themselves don’t want to appear too profitable, or too expensive as put brilliantly by Andy Schwarz on Deadspin:

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.

An in-depth report in the Washington Post shows that athletics programs are close to break-even on the whole. A handful report big profits, and a handful report losses.

washpost

Revenues and spending by the biggest athletics departments at public colleges in 2004. More profits and more losses. Close to break-even according to an analysis by Washington Post. Data from NCAA.

The report highlights some spending in athletics programs that looks irresponsible. One example is at Auburn University. A stadium expansion that included the largest jumbotron in college football–190 feet wide and 57 feet tall–at Auburn costed $13.9 million. In that year, according to the Washington Post analysis, the Auburn athletics program ran a deficit of $17 million.

Still, there are reasons to be skeptical that this is the full picture of the finances. The details are complex and vary from college to college. One case study is the University of Alabama-Birmingham. UAB stopped its football program. Some claimed the football program was costing $17 million per year. An outside accounting firm was hired to audit the program in the aftermath of the closure. In a 156-page report, they found that the program would actually make $500,000.

Why is it so tricky? For one thing, future revenues and donations are uncertain. When the shutdown was imminent, donors pulled together and raised $10 million in an attempt to save the program. Additionally, according to Kristi Dosh, sources of athletics revenue like merchandising and donations are not fully reflected on athletics departments’ financial statements. Further, the true cost of scholarships granted to student athletes is an issue of some debate.

In reality, most programs are probably revenue neutral to slightly positive. On the extremes, some programs make big profits or suffer big losses, but these are the exceptions.

Why colleges may want high-spending athletics departments

Athletics programs are probably happy to spend every dollar they bring in. Certainly, the programs don’t exactly have an incentive to be penny pinchers. They won’t be able to hold on to any profits they earn anyways. Why might college administration be OK with this high spending?

In good times, colleges might be able to run athletics programs at a tidy profit if they were to keep a tight rein on spending. But at public colleges, any profits made by athletics will cause the state to reduce its funding package. Lower state funding would be hard to increase in the future.

Additionally, when harder times do hit, the relatively plush budgets can be cut. In this way, the athletics budget gives schools a bit of wiggle room or ballast to play with to counteract economic and budget cycles.

Intangibles

Money is likely not the only motivating factor for college athletics. More important is the impact of successful athletics on attitudes on-campus and in the community. Athletic success gets a college’s name out there in a positive light. Students on a campus with a winning athletic program have more school spirit and may be more likely to donate in the future. Colleges with winning programs may also get more applications. In one sense, these impacts are ultimately financial, but they’re harder to measure and less immediate.

So how big of an impact does athletic success have? Well, when University of Kentucky won the Final Four basketball final in April 2012, the applications to the school increased markedly in the Fall of 2013.

UKY

Applications at University of Kentucky. Applications greatly increased in the years after their final four win. Analysis: Sharp Data Insight. Source: IPEDS.

The number of applications increased about 30% from about 15,000 to 20,000 in one year. While applications were increasing beforehand, they increased much more quickly after the win, then decreased two years after back to the previous trend. Together, this indicates a temporary spike in applications caused by the final four win.

But you don’t have to take my word for it. There’s a lot of published research into the impact of winning athletics programs. Work from Harvard Business School looked at athletics programs and showed that winning football teams had a temporary advertising effect on applications. When a team from “mediocre” to “great”, it had an expected effect of increasing applications by 18%. This effect was largest in students with lower academic achievement.

There is some difficulty in estimating the causal impact of athletics’ on other areas because the direction of causality is hard to determine. Skilled college management might increase success across the board. Further, donations to athletics programs might cause increased success rather than the other way around.

One inventive approach researchers at UC Berkeley used was to incorporate bookkeeper odds as a predictor. In other words, it’s not just victory, but unexpected victory that was being assessed. The researchers found a strong impact of victory (conditioning on bookkeeper odds) on donations, in-state-enrollment, academic reputation and acceptance rate. Notably, the effect was strongest in the “Power 5” conferences and only assessed for Division I football schools.

In light of these impacts, athletics are not merely about money, at least not in a calculated, short-term way. Applications, alumni pride and athletic success are all part of a more general excellence towards which college leaders strive.

History

(For this section I draw heavily from StateUniversity.com)

College athletics have a long history. In the early days (1850-1900), it was organized by students and either tolerated or even resisted by administrators. Intercollegiate competitions were held in several sports including rowing, tennis, football, baseball and ice hockey.

By the early 1900s, college football had already become a big spectator event. The Yale Bowl opened in 1914 with a spectator capacity of 70,000. In those days, college athletics were dominated by today’s elite academic institutions: Harvard, Yale and the University of Chicago for example.

In the 1910s and 1920s, college sports became more commercialized. Finances, player compensation and football violence all raised concerns. The Carnegie Foundation for the Advancement of Teaching released a report on college sports reform in 1929. Then, during the depression and World War 2, not much happened.

In the aftermath of World War 2, college sports faced competition from the NFL and NBA. Many smaller programs were forced to shut down in the 1950s.

ND1_FB_Closures

Number of college football programs shut down by decade, non-division 1. Data from Wikipedia. Analysis by Sharp Data Insight.

In the 60s, 70s and 80s, college sports were reformed by additional rules from NCAA as well as Title IX. Today, college sports are more commercialized than ever. Nowadays, college football is dominated by big, mostly public universities in the Midwest and South and on the West Coast.

It’s tempting to thing of college sports as unique to today’s corporate-minded universities, but sports have been there for a long time, alongside, and perhaps distracting from, colleges’ academic missions.

This history adds extra weight to these programs. While sports programs sometimes do close under financial strain, it’s difficult to be the one to break a chain that’s been going for so many years.

What’s Next?

For most big college football programs, the financial situation looks stable–at least for now.

D1_FB_Closures

Number of college football programs shut down by decade, Division I. Data from Wikipedia. Analysis by Sharp Data Insight.

In the 2010s, 11 D1 football programs closed, the most of any decade. University of Alabama-Birmingham closed its program in 2015, but reopened in 2017. The last D1 programs to ‘successfully’ close were Hoftsra and Northeastern in 2009.

Despite the closures, applications at these schools have continued to climb:

Thus, it appears that not all schools need a football program to attract applicants.

If I were to make a prediction–I would say that universities that are academically strong may begin closing athletics’ programs, particularly in the Ivy League. The sport of football has come under a lot of scrutiny for head injuries. At small elite institutions, admissions committees would be happy to get rid of athletically earmarked admission slots. Hardly anyone pays attention to football at Yale, Harvard, etc and they’re certainly not going to lose any prestige or national attention. Could The Ivy League, which historically had a leading role in the development of college sports, now begin to close it down? Perhaps, and perhaps not.

All in all, many factors contribute to the continuation of college athletics. Although big, well-funded athletics programs fit somewhat awkwardly with colleges’ academic missions, students, alums and the community certainly enjoy these sports. It’s hard to see the overall structure of college sports going away anytime soon.

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